Lecture 1 Chapter 1

1
Lecture 1/ Chapter 1

• Real Property and Its Appraisal

2
Land Concepts

• Governmental and Legal
• Mandated Use of Land
• Easements, access regulations, use restrictions,
  recording and conveyance of titles
• Economic
• Land is a source of wealth
• Value Theory
• Social
• Restrictions, ordinances, etc. to promote public
  safety
• Geographic and Environmental
• Location, location, location
• Physical characteristics of land

3
Real Estate vs. Real Property

• Real Estate Physical land and improvements
  affixed to the land
• Land, natural improvements (trees, minerals,
  etc.), man-made improvements (buildings, site
  improvements)
• Real Property All interests, benefits, and
  rights inherent in real estate ownership
• Use, Possession, Disposition, Exclusion
• Real Estate Real Property Bundle of Rights

4
Personal Property v. Trade Fixtures

• Personal Property Moveable items not
  permanently affixed to real estate
• Refrigerators, freestanding shelves, etc.
• Trade Fixtures Personal property, regardless
  of method of affixation. Also known as chattel
  fixtures
• Restaurant booths and related equipment, gas
  station pumps, fitness equipment in a health
  club, etc.

5
Uses of Appraisal Practice

• 1. Appraisal
• Developing an Opinion of Value
• 2. Appraisal Consulting
• Process of developing an analysis,
  recommendation, or opinion to solve a problem.
• 3. Appraisal Review
• Developing and communicating an opinion about the
  quality of work of another appraisers work

6
Lecture 1/ Chapter 2

• The Nature of Value

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Price, Cost, and Value in Real Estate

• Price Amount a buyer and seller agree upon
  to transact on real estate
• Meeting of the Minds
• Cost Dollar expenditure of improvements and
  land
• Value Monetary worth of real estate to buyers
  and sellers at a given time present worth of
  the future benefits that accrue to real
  property ownership

8
Types of Value

• Market Value
• The most probable price, as of a specified date,
  in cash, or terms equivalent to cash, or in other
  precisely reveled terms, for which the specified
  property rights should sell after reasonable
  exposure in a competitive market under all
  conditions requisite to a fair sale, with the
  buyer and seller each acting prudently,
  knowledgeably, and for self-interest, and
  assuming that neither is under undue duress.

9
Types of Value

• Use Value
• Value of real estate in its current use
• Investment Value
• Value of real estate to a specific investor
• Going Concern Value
• Market value of all tangible and intangible
  assets of an established and operating business,
  as if sold in aggregate (tangible intangible
  property)
• Assessed Value
• Valuation for ad valorem taxation purposes

10
Factors of Value

• Utility
• Ability to satisfy a human want, need, or desire
• Specific demands for specific amenities
• Scarcity
• Undersupply of an item relative to its demand
• Desire
• Buyers wish for an item to satisfy human needs
• Effective Purchasing Power
• Ability of an individual or group to participate
  in a market with cash or its equivalent
• Can Buyers afford available goods / services?

11
Lecture 1/ Chapter 3

• Foundations of Appraisal

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Anticipation and Change

• Anticipation Perception that value is
  created by the expectation of benefits to be
  derived in the future
• Change Result of the cause and effect
  relationship among the forces that influence
  property value

13
Supply and Demand

• Supply Quantity of an available good
• Demand Desire and ability to purchase or
  lease goods and services

14
Substitution and Balance

• Substitution When several similar
  commodities or goods are available, the goods
  with the lowest price will attract the greatest
  market demand
• Balance Value is created and sustained when
  contrasting, opposing, or interacting elements
  are in a state of equilibrium
• Laws of increasing and decreasing returns
• Contribution, conformity

15
Externalities

• Externalities Factors external to a property
  that cause positive or negative effects on value

16
Forces Influencing Real Property Values

• Social Trends
• Population characteristics
• Human activities and lifestyles
• Economic Circumstances
• Relationships between current and anticipated
  supply and demand
• Employment, wage levels, price levels,
  construction costs, etc.
• Governmental Controls
• Public services, zoning and planning, tax laws,
  environmental legislation, etc.
• Environmental Conditions
• Natural and man-made
• Climatic conditions, topography, transportation
  systems, linkage