Real Estate Appraisal

1
Real Estate Appraisal

• Jim Burton, Ph.D.
• Marketing Real Estate
• College of Business

2
Overview

• Appraisal Licensing
• What is Value?
• Some Appraisal Principles
• The Appraisal Process
• Sales Comparison Approach
• Cost Approach
• Income Approach
• Uniform Residential Report
• USPAP

3
Appraisal Licensing

• Registered Appraiser - 90 class hours, 15 hours
  Standards, 125.
• Licensed Appraiser - 90 class hours, 1 yr exp,
  pass exam, 190.
• Certified Residential - 120 class hours, 1 yr
  exp, pass exam, 190.
• Certified General - 180 class hours, 1 yr exp,
  pass exam, 190.

4
What is Value?

• Market Value
• Investment Value
• Price Vs. Market Value
• Cost Vs. Market Value
• Assessed Value
• Insurable Value

5
Some Appraisal Principles

• Anticipation
• Change
• Substitution
• Contribution
• Highest Best Use
• physically possible, financially feasible, legal,
  most likely

6
The Appraisal Process

• Define the Problem
• Collect Data
• Highest Best Use Analysis
• Apply 3 Approaches to Value
• Final Value Estimate
• Report of Defined Value

7
Sales Comparison Approach

• Collect Sales Data
• Verify Sales Data
• Adjust Sales Data date of sale, size, location,
  use, etc., p. 229.
• Unit of Comparison Price/SF, GRM, Price/Unit,
  etc.
• Value Conclusion

8
Cost Approach

• Estimate Replacement Costs
• Estimate Depreciation physical, functional,
  economic.
• Estimate Land Value
• Value Cost less Depreciation Land

9
Income Approach

• Estimate Gross Income, Vacancy Operating
  Expenses
• Estimate Net Operating Income
• Capitalize NOI to Value
• Direct cap, Mortgage-Equity
• Discounted Cash Flow, p. 236.

10
Residential Appraisal Form, p. 238

• Subject
• Neighborhood
• Site
• Improvements
• Cost Approach
• Sales Comparison Approach
• Final Value Opinion

11
Narrative Report

• Letter Summary
• Region, Area Neighborhood
• Describe Land Improvements
• Highest Best Use
• Three Approaches
• Final Value
• Addenda photos, plans, etc.

12
Uniform Standards of Professional Appraisal
Practice (USPAP)

• Only do appraisals that you are qualified to do.
• Give honest value opinion.
• Follow proper appraisal procedures.
• Avoid multiple reporting errors.
• Understand appraisal types Restricted, Summary,
  Self-contained.