Principals of Apprasial
Terms
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- 5 reasons/purpose of appraisal
- 1.Transfer of ownership 2. Extension of credit 3. Compensation for damages or loss 4. Taxation 5. Land use studies or feasibility studies
- What is Fee Simple
- highest esate or absolute right in real property. Most rights and fewest limitations. Right to sell, lease, enter, give away, or refrain from any of thoes rights in regard to property). subject to various restrictions imposed by laws of governing bodies
- Peliminary work in preparation of appraisal... 5 things to be done
- 1. When the subject property last sold or was listed for sale. 2. The properties tax assessment. 3. The Highest and Best Use of subject property 4. Demand and Supply of properties that are close to subject. 5. Comp Sales and listings you may use in the value assignment.
- Name 4 Features of a Trend
- TIME DIRECTION CAUSE EFFECT
- Name 3 types of neighborhood boundaries
- 1. Natural (lakes, rivers, hills, mountains and ravines) 2. Political (municipal boundaries, city limits, land use or zoning changes, and school areas. 3. Man-Made *railroad tracks, major highways or roads, rights of way for public utilites
- Name 4 neighbourhood factors that affect value:
- 1. Physical - location in relation to services and ammenities 2. Economic - stability of uses, property values, vacancies and sale price trends 3. Political - legislative impact such as taxation, local improvements and official plans 4. Social - Population growth/decline, crime rates and age groupings
- Name 5 examples of TRENDS:
- 1. Changes in floorplans-kit/fam room and kit/dining room combinations 2. Smaller families-less need for the larger homes 3. aging population-movement away from single-family homes into condos 4. Lower mortgage rates-increased demand for homes 5. High unemployment-less demand for homes
- What are the 4 life cycle stages of a neigbourhood?
- 1.Growth 2.Stability 3.Declining 4.Renewal
- Define: GROWTH PHASE in Life cycle stages of neighborhood
- the period duting which a neighbourhood is being developed. it is becoming popular and building construction is replacing much of the vacant land. New construct. includes not only res housing, but the development of a full range of amenities such as schools, plazas, parks, etc. which has either just been completed or is ongoing
- Define: STABILITY PHASE in Life cycle stages of neighborhood
- the period duing which the neighbourhood has been completely built up, has reached the height of its popularity and values are at their highest in comparison to other similar neighbourhoods. A full range of amenities would be present for the population
- Define: DECLINING PHASE in Life cycle stages of neighborhood
- period during which a fully developed neighbourhood is losing its appeal and popularity. Properties tend to look less well-maintained. Retail/commercial business are either closing or moving away, leaving higher than usual vacancies. Property values tend to decline as compared to other silimar hoods. This phase may be caused by the growth of other hoods
- Define: RENEWAL PHASE in Life cycle stages of neighborhood
- period during which a hood is rebounding from a period of neglect or decline and fining itself popular and in demand again. New construct, property renovation and a renewed interest from retail/commercial enterprises is evident. eg: high profile retail moves back into area
- Nae 5 places you can collect information regarding factors and forces at work within a neighbourhood:
- 1. Stats Canada 2. Municipal offices - prop assessment, planed construct, housing starts. 3. Real Estate boards - Sales info, price levels, sup and demand 4. Newspapers - economy, local developments and trends, pos or neg in nature 5. CMHC - economy, mort rates, consumer expenditure
- The effect of surrounding properties being lower quality and/or smaller
- REGRESSION/CONFORMITY lowers value
- Give an example of REGRESSION/CONFORMITY
- Largest/best quality house on the block where rest of homes are smaller/lower quality
- In trying to establish life cycle of a neighborhood is in, what information would you be looking for?
- -maintenance of homes in area/level of construction/renovation is or is not taking place -income levels of residents -changing level of owner or tenant occupation -price levels and length of time needed for marketting-stable,improving,or declining? in comp to similar neighborhoods
- What are the 3 basic components to a property?
- 1. The Site 2. Improvements to the Site 3. Improvements on the site
- Name 4 factors that affect the value of a site:
- 1.Location 2.Legal-Governmental Factors 3.Physical Factors 4. Economic Factors
- 4 major locational factors:
- 1. Land use Pettern in Area 2. Access 3. Corner influence 4 Hazards and nuisances
- Define ASSEMBLAGE
- combining of 2 or more abutting parcels into one ownership for the purpose of greater utility.
- Define: Plottage
- refers to value increment resulting from the assembly of 2 or more sites, when the combined utility is proportionately greater than the sum of the individual utilities. UTILITY ADDS VALUE, TOGETHER BOTH ARE WORTH MORE THAN INDIVIDUALLY
- Define: Excess Land
- A site that is larger than standard, where the additional size does not provide proportional utility or proportional increase in value.
- Environmental Audit - Phase 1
- Visual inspection combined with a review of owner documents, registry information, ministry/department records and certificates, and other relevant environmental records. Determines if reasons exist to believe that a property may have some form of environmental contamination.
- Environmental Audit - Phase 2
- More costly investigation involving various tests, hazardous waste assessment/analysis and soil/water sampling. Determines the scope of environmental problems, along with recommendations for remedial action.
- Environmental Audit - Phase 3
- Final phase involves detailed remedial steps and costs associated with circumstances identified in phase 2
- What are the 6 steps in the cost approach?
- 1. Est land/site value 2. Est cost of the building (including attached to built-in garage) 3. Est depreciation 4. Est the current value of the building (current val=cost new-depreciation) 5. Est the current value of other improvements (includes detached garage, landscaping) Current val= cost new - depreciation 6. Add the current value of the site to the current value(cost new-depreciation of all the improvements. ensure the indicated value by cost is appropriately rounded
- Name the 3 units of comparison in relation to the cost approach:
- 1. Bulk sales price 2. Price per front foot 3. Price per sq foot
- Reproduction cost new vs. Replacement cost new... differences
- Reproduction: is cost of construction at current prices of an exact duplicate or replica, using the same materials, construction stds, design, layout and quality, while embodying the deficiencies, superadequacies, and obscolescence of subj building. Replacement cost new: cost of construction, at current prices, of a building having utility equalavalent to the building being appraised, but built to modern stds, with modern material, accodring to mod design, layout, standards.
- Economic life = ?
- Economic life=Effective Age+Remaining Economic Life
- Effective age =
- Effective age = Economic life - Remaining Economic Life
- Remaining Economic Life =
- Economic Life - Effective age
- In the comparative sales method the selling prices of comparable residential sites are normally reduced to a price per front foot? T/F
- True. this makes it easier to compare sites with slightly differing frontages and avoids having to make adjustments for frontage differences.
- diff btween: Replacement Cost and Reproduction Cost
- Replacement uses new materials/design etc. Reproduction uses old building techniques/products ... exact replica
- List 7 items tha should be included in an appraisal report in order to support value:
- -Neighbourhood Map -Copies of MLS listings used as Comps -Photos -Survey -Site/building sketch -Additional information analysis -Additional assumptions/limiting conditions
- Words to watch out for on exam:
- -Listing Price/Selling Price -Subject property/Comp Property -adds.decreases value/less.more than cost -current value, depreciation
- The economic life of the building is 65 years and its remaining economic life is 42 years. What is the effective age of the building?
- 23 Years. Economic life - remaining economic life = effective age
- Questions to ask when property has something odd (easement, landfill nearby, slope (odd topography))
- -stigma -marketting time -threat of flooding -enjoyment of site affected -utility of site -is it common in area(conform) -%'s of land on easement -contamination, if yes is there stigma in area as a result -how does subj property compare to similar properties w/o these problems
- How do you arrive at time adjusted price? Given Avg price as of sale date, current avg price...
- get the difference (dollar value change) between the two, calculate the % change between thoes. Take comp sale and add/subtract % change to get time adjusted price
- What are 4 qualities of a good comparable property?
- -located within subj neighbourhood, preferable on same street or as close as possible -sale should be on, or as close to date of valuation -truly physically similar in value -comp should have occoured as result of an arms-length transaction under conditions that would meet def of market value (no bankruptcy sale, family sale)
- When making adjustments with comparable properties: If the comparable is superior is it a plus or minus?
- MINUS!!! If the comp is superior it is a MINUS(comp is better it takes away from price)
- When making adjustments with comparable properties: If the comparable is inferior is it a plus or minus?
- PLUS, subject property is better than comp, so it adds to subj properties value.
- Factors to consider when... considering a good comparable:
- Age Distance Lot size Condition Sq footage Bedrooms Baths Location Stigma Selling conditions (family, bank, etc)