Step 1Definition of the Problem

Step 2 Scope of Work

Step 3 Data Collection and Property Description

Step 4 Data Analysis

Step 5 Land Value Opinion

Step 6 Application of the Approches to Value

Step 7 Reconciliation of Value Indications & 

          Final Opinion of Value

Step 8 Report of Defined Value

Part 1-5

A systematic procdure employed to provide the answer to a client's question about the value of real property.

Part 1-6

What is the first step in the valuation process and the areas it encompasses?

It includes the following areas:

• Identify client and inteded users
• Identify the intended use
• Identify the purpose of the assignment
• Effective Date of the opinion
• Identify the relevant characteristics of the property
• Assignment Conditions: extraordinary assumption & Hypothetical Conditions

Part 1-5

True or False...

The fist step in hte valuation process is to define the client's problem which is considered to be an exercise in judgment to produce credible assignment results.

true

part 1-6

Steps 1-2 in the valuation process are considered an exercise in judgment.  Steps 3 - 8 in the valuation process are considered to be an _______ ___ ______.

Why are they designed this way?

Excercise in execution

To be sure competency and decisions of judgement are required throughout the remaining steps, but the analytical paths have been largely predetermined by the scope of work.

Part1-6

1. The valutaion process is the blueprint used in forming an opinion of market value, as well as other types of value.

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2. It provides a model for performing market research, analyzing data, and applying appraisal techniques, and integrating all of these into a vlaue of opinion.

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3. The process provides a checklist for both appraisers and user's of appraisal services-and covers the requiremnts of an appraisal that complies with the Uniform Standards of Professional Appraisal Practice (USPAP).

Part 1-6

The party or parties who engage an appraiser (by employment or contract) in a specific assignment.

Part 1-8

The client and any of other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.

Part 1-8

True or False...

The client and intended user must be identified at the beginning and clearly stated in the appraisal.

True

Part 1-8

True or False....

You can not use the URAR from for anyhting other than lending purposes.

Identify the role the following parties play in an appraisal assignment for a bank with the intened use securitizing a mortgage...

1. Bank & Its representatives
2. Mortgage Broker
3. Appraisal Management Company
4. Borrower

1. Client/ Intended User
2. May not be intended User
3. Not an intended User
4. Not an intended User

Part 1-8

Idetify the roles these parties play in an eminent domain assignment wehre the appraiser has been retained by the property owner, and the condemning authority is the state highway department.

1. The State
2. Property Owner
3. Law firm representing the owner

1. Not an intended user
2. Client/Intended User
3. Intended User

Part 1-8

The client, which is why it is important to communicate with the client.

Part 1-9

The use or uses of an appraiser's reported appraisal, appraisal review, or appraisal consulting assignmnet opinions and conclusions, as identified by the appraiser based on communication with teh client at the time of the assignment.

Part1-9

How the clinet intends to use the results of the assignemtn provide the basis for deciding how much information and analysis the appraiser should include in the development and reporting processes of the assignment.

Part 1-9

What are the three types of effectice dates? What will the majority of the assignments we get as appraisers be?

Current, Retrospective, and Prospective.

This is an assumption directly related to a specific assignment which if found to be false could alter the appraiser's opinions or conclusions.  Extraordinary assumptions presume as fact otherwise uncertain information about...the property.

Part 1-12

True or False....

Scope of work serves as a planning tool for appraisers.

True

Part 1-14

What does the term Specific Data mean?

What is Highest And Best Use?

What are the four criteria it must meat?

 The reasonably probable and legal use of vacant land or an improved property, which is phycally possible, appropriately supported, financially feasible, and that results in the highest value.

1. legally permissable
2. physically possible
3. financially possible
4. maximum productivity

What is Highest and Best Use as though vacant?

The subject is compared to comps.

Necessary to deriving and opinion of value for land

identifies the ideal improvement and use that maximizes the income to the land.

Take maximim advantage of the site's potential to satisfy market demand.

Conform to current market standards and the character of the area.

Aids the appraiser in identifying comps and whether the property should be maintained, modified, or demolished.

Part 1-17

• Use
• Timing for the Use
• Typical market participants for the use.

Which Highest and best use analyzes the ideal improvement for the property?

True or False...

The client and intender are never the same.

Potential Gross Income (PGI)

Effective Gross Income (EGI)

Net Operating Income (NOI)

Pre-Tax Cash Flow (PTCF)

Income Tax

Reversion

1. A method used to convert an estimate of a single year's income expectancy into an indicaiton of value in one direct step, wither by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor.
2. A capitalization technique that emplys capitalization rates and multipliers extracted from sales.  Only the first year's inocme is considered.  Yield and value change are implied, but not identified.

PGI - 124,800

Vacancy     -   6240 (5%)

        118,560

      Operting Expense     - 40,000

NOI     78,560

78,560 /  8.25 = 952,242.42

50,400 x 8.75 = 441,000

Hint: When a multiplier is given use VIF

   ____V___

     I    F

PGI   55,000

Vacancy      - 3300 (6%)

         51,700

OER               -24816 (48%)

28,435

28,435 / 8.5 = 316,282

Lease

Gross Lease- Landlord pays

Net Lease- Tennant pays

Explicit Lease- everything is written

Implied- it is an understood agreement

date of lease (beginning and end)

reference information

legal description

name of lessor

name of lessee

lease term

occupancy date

commencement date for rent repayment

rent amount

rent concessions

landlord's covenenants

tenant's covenants

right of assignment

option to renew

option to purchase

escape clauses

escalation clauses

continued occupancy clauses

security deposits

casualty loss

lessee's improvements

condemnation rights

revaluation clauses

A lease with a specicified level of rent that continues throughout the lease term; also called level payment lease.

a lease that provides for specified changes in rent at one or more points during the lease term

can either step-up or step-down

a lease that provides for periodic rent adjustments based on a revaluation of teh real estate under prevailing market rental condiditons.  This si sometime accomplished through appraisal or abitration.

Fairly Common & Good for both parties.

a lease in which the rent or some portion of the rent represents a specified percentage of the volume of business, productivity or use achieved by the tennant. This type of lease is frequently used for retail.  Most leasees will specify a garuanteed minimum rent with overages possible.

*** Landlord is almost a silent partner bc they benefit from success/loose in failure.

the most probable rent that a property shoudl bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudetnly and knowledgeably, and assuming consummation of a lease contract as of a specified date and the pssing of the leasehold from lessor to lesee under conditions whereby:

lessee and lessor are typically motivated

all parties well informed, advised, acting in thier best interest

a resonable exposure time

payment made in US Dollars

rent anaffected by special fees or concessions granted by anyone associated with the transaction

How far back should you obtain the subjects income and expense history.

• Income & Expense of competitive properties
• Recently signed leases, proposed leases, and asking rents fo rthe subject property
• Actual vacancy levels for the subject and competitive properties.
• Manageent expenses for the subject and competitive properties.
• Published operating data (IREM or BOMA)
• Market depreciations
• Tax assessment policies and proected changed in utility rates.

As of your date of value PGI is what the subject could bring on its best day.

It includes...

1. scheduled rent
2. escalation income
3. market rent
4. other income. Income generated by the operation of the real property not directly related derived fom rental of space. (i.e. parking fees, coin operated machines, and antenna connections.)

part 5-82

True of False......

Vacancy and collection loss is usually estimated on a property-specific basis as part of the reconstructured operating statement in the income capitalization approach.

True or False...

The vacancy and collection loss figure is commonly estimated as a percentage and when subtracted from the PGI results in the ner operating income.

False.

When subtracted from the PGI it results in the effective gross income (EGI).

Operating Expenses

Foundation

Framing

Roofing

Plumbing

Electrical Wiring

Heating, Ventilation and air conditioning (HVAC)

1. Slab

monolithic or slab on perimeter wall

2.Pier

3.Wall

crawl space and basement

1 story

1.5 story

2 story

split-level

contemporary

specialized