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Real Estate Appraisal
Fundamentals Champions
Mortgage, deed of trust - parties - ✔✔A Deed of Trust is a type of secured real-estate transaction that some states use instead of mortgages. A deed of trust involves three parties: a lender, a borrower, and a trustee. The lender gives the borrower money. In exchange, the borrower gives the lender one or more promissory notes. Government Survey System - ✔✔A legal description of land using base lines, meridians, townships, sections, and ranges - also called the Rectangular Survey System 1 Square Mile = 640 Acres. land survey that divides a district into 24-square mile quadrangles from the meridian (north- south line) and the baseline (east-west line); the tracts are divided into 6-mile-square parts called townships, which are in turn divided into 36 tracts, each 1 mile square, called sections. insulation- terminology and measurements - ✔✔batt "blanket"- purchased in standard widths and is designed to fit neatly bt studs and joists rigid- nailed to the outside walls and often has a reflective foil covering blown- loose fill sprayed out of a hoose w air pressure, usually in attics R value- An insulating material's resistance to conductive heat flow is measured or rated in terms of its thermal resistance or R-value -- the higher the R-value, the greater the insulating effectiveness. Highest and Best Use - ✔✔The possible use of a property that would produce the greatest net income and thereby develop the highest value.
cost approach terminology - ✔✔The cost approach is a real estate valuation method that estimates the price a buyer should pay for a piece of property is equal the cost to build an equivalent building. In the cost approach, the property's value is equal to the cost of land, plus total costs of construction, less depreciation. Licensed vs certified apprasier - ✔✔The Licensed Residential Appraiser may appraise non- complex 1-4 residential units having a transaction value less than $1,000,000 and complex 1- 4 residential units having a transaction value less than $250,000. This classification does not include the appraisal of subdivision Certified Residential Appraiser is authorized for the appraisal of 1-4 unit residential properties without regard to transaction value or complexity of the appraisal for federally related transactions and non-federally related transactions. Lease Terminology - ✔✔?? determining total room count - ✔✔Generally, it is agreed that bedrooms, living rooms, dens, kitchens, and dining rooms are counted as rooms. However, if the dining "room" is a space in a larger living room with a table chandelier, it may not count as a separate room. Laundry rooms are not considered rooms. bathroom and basement dont count Encroachment Easement - ✔✔Encroachment- refers to a situation in real estate where a property owner violates the property rights of his neighbor by building on or extending a structure to the neighbor's land or property intentionally or otherwise. Easement- A property easement is a legal situation in which the title to a specific piece land remains with the landowner, but another person or organization is given the right to use that land for a distinct purpose life cycle stages - ✔✔1. Recovery- upward trend- market coming out of the last down turn
Certified Appraiser (price limits) - ✔✔The Certified Residential Appraiser may appraise 1- 4 residential units without regard to transaction value or complexity. This classification does not include the appraisal of subdivisions. Sales Comparison Approach - ✔✔The process of estimating the value of a property by examining and comparing actual sales of comparable properties. Principal sources of data for generating the sales comparison are tax records, title records, and the local multiple listing service. The appraiser adjusts the sale prices of the comparables to account for competitive differences with the subject property. Physical Life Age Life Half- life Economic Life - ✔✔Physical Life-Physical life is the period of time that an asset remains functional. This time period may be substantially longer than the useful life of an asset, since a functional asset may still be replaced by a more productive asset. Age Life- Effective age is the age of a property based upon its condition, not its actual age. If an appraiser examines a building that is 25 years old, but because of superior upkeep has the condition of an 11-year-old building, the appraiser may use the 11 - year-old age as the effective age of the property. Half- life- A mortgage's half-life is when the borrower has paid back half the principal. The principal of a loan is the original amount the lender lent to the borrower. A mortgage is a loan in which the borrower's real estate property serves as security. Economic Life-Economic life is the expected period of time during which an asset remains useful to the average owner. When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life. license
entitlement - ✔✔License-A licence is usually a short-term right to occupy a property for a particular purpose, and it does not give any right to exclusive occupation. ... Lease agreements may include rights of renewal, and provisions for reviewing the rent over the term of the lease. Entitlements are legal rights conveyed by approvals from governmental entities to develop a property for a certain use, intensity, building type or building placement. Types of depreciation and examples Physical Functional Economic - ✔✔Physical deterioration refers to the loss in value of a real estate property due to the physical wearing out of a building. It can also describe the normal wear and tear that buildings experience as they age. For example, the heating and cooling systems wear out at some point in the future. Functional- Can potentially be fixed "the impairment of functional capacity of a property according to market tastes and standards." In simpler terms, that definition essentially means that there is a reduction in the property's desirability, typically because of an outdated feature that cannot easily be altered or changed. EX: roads/ mismatched beds to baths Eco-BEYOND CONTROL OF PROP OWNER loss of value of a real estate property that is caused by factors that are external to the property. Such a form of obsolescence is usually incurable and the owners cannot fix the specific cause of depreciation. EX: change in aircraft patterns, BUSY HIGHWAYS, crime, loss of job Elements of a highest and best use study - ✔✔A property must be appraised in terms of its highest and best use. The definition of highest and best use is as follows: The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
The appraisal principle of change regards property values changing due to outside circumstances like economical, political and social forces. Highest and Best Use The principle of highest and best use states that the value of the property being appraised should be calculated based on what the most productive use of the property could be. Regression and Progression The principle of regression states that when a superior property is placed in an area of properties that are of lower quality, the superior property's value is diminished.The principle of progression states that when a low quality property is placed in an area of properties that are superior, the low quality property's value is enhanced. Types of age Useful Actual Origional Effective - ✔✔Useful (effective)- Effective Age: age based on the remaining useful life, not actual years. Actual-Actual Life: amount of time a property will remain standing.Econmic Life: the amount of time a property is expected to remain useful/profitable. Origional- metes and bounds- government survey- lot and block- - ✔✔metes and bounds-are the boundaries of a parcel of real estate that identified by its natural landmarks. Metes and Bounds landmarks are often used in a "legal description" of a land. ... Natural monuments and artificial monuments can both be used as metes and bounds.
government survey-means a survey made by a governmental entity of tracts of land including townships, sections and quarter sections of land. A government survey when conducted by the federal government is called a congressional survey. lot and block-lot and block legal description is created by filing a subdivision survey in the land records. This survey is called a plat and creates the subdivision name (e.g. Minneapolis Addition). The plat most often uses metes and bounds descriptions to identify the perimeter of the platted land -- - ✔✔-- -- - ✔✔=- Income Approach - ✔✔A method of computing GDP that measures the income-wages, rents, interest, and profits-received by all factors of production in producing final goods and services. income approach, sometimes referred to as the income capitalization approach, is a type of real estate appraisal method that allows investors to estimate the value of a property based on the income the property generates. elements of a sales comparision approach - ✔✔The first step in the comparative analysis is to identify the elements of comparison.An element of comparison is any aspect of a real estate transaction that may affect the sales price, including the terms and conditions of the sale and the characteristics of the property itself.Don't confuse elements of comparison with units of comparison.A unit of comparison is simply a unit of measurement; an element of comparison is one of the key considerations that contributes to differences in the prices paid for properties.Ex. An appraiser knows that the number of baths in a house has an effect on its sales price, so the number of baths is identified as an element of comparison for the appraisal. If the subject property has two baths, but the comparable property has only one, the appraiser will adjust the sales price of the comparable property to account for the difference in this element of comparison.The elements of comparison for a typical residential appraisal include:1. Real property rights conveyed (fee simple or other interest)2. Financing terms3. Conditions of sale (the motivation of the buyer and the seller)4. Expenditures needed after the sale5. Market conditions (date of sale)6. Location7. Physical characteristics (size, quality, etc.)8. Factors affecting use (zoning, water rights, etc.)9. Non-realty items included in the saleNote that the
One of the main advantages of this type of ownership is that it offers rights of survivorship. If either the wife or husband dies, the title is transferred to the surviving spouse in its Adjustment in the sales comparison approach - ✔✔Those sales prices are adjusted to reflect the time, conditions, and differences between the comparable properties and the subject property. The result of the adjustments is a subject value estimate cubic feet - ✔✔Cubic feet represents the total usable space within the building footprint (length by width by height). This is found by multiplying your usable square feet by the height of the building stages in the life cycle of property - ✔✔Phase I: Acquisition The Acquisition phase occurs during the requisition/purchase order process. Phase II: In-Service The In-Service phase occurs throughout the performance period of the asset. At this time, the equipment is installed, used, moved, and inventoried. Phase III: Excess The excess phase begins when the asset is no longer needed. Common ways property is excessed are: Re-Use or transfer Disposal Sold to Surplus property sale Trade-In toward new purchase types of deeds and features of each - ✔✔1. Quitclaim Deed A quitclaim deed is used to transfer property between familiar parties, such as family members or even divorced spouses. That's because unlike other types of deeds, a quitclaim deed offers little legal protection to the grantee (the recipient of the transfer).
- Deed of Trust A deed of trust transfers the title of an asset from a trustor to the trustee for the benefit of a third party, known as the beneficiary.
- Warranty Deed Different types of warranty deeds are used to offer various legal protections to the grantor, in the event there's a problem or defect with the title once it's been transferred. General Warranty Deed Typically used in residential real estate transactions, a general warranty deed guarantees that the seller has the full legal right to sell the property, and that the property is completely free and clear of debts, liens, or other encumbrances. Special Warranty Deed A special warranty deed protects a grantee against any issues or claims that might have arisen during the time the grantor owned the property entirely. It doesn't apply to the entire history of the property, as the property's whole history isn't likely known by the current owner.
- Grant Deed A grant deed is a specific deed type that transfers the interest in a property from the seller to the buyer in exchange for a previously agreed upon price.
- Bargain and Sale Deed This type of real estate deed is used in the sale or transfer of residential real estate; however, it offers no guarantee that the property is free of debts or liens. It only states that the grantor is the title-holder, and little else.
- Mortgage Deed A mortgage deed is a document signed between a homeowner and a bank or lending institution, allowing said institution to put a lien on the property if the loan isn't repaid. This deed secures pr
Covered space Net living area Gross building area Gross living area - ✔✔Covered space-?? Net living area-The actual occupied area not including unoccupied accessory areas such as corridors, stairways, toilet rooms, mechanical rooms and closets. Gross building area-means the total enclosed area of a building exterior dimensions, excluding covered walkways or exterior fire escapes. Gross living area-Gross Living Area (GLA) - The total area of finished, above-grade residential space excluding unheated areas such as porches and balconies; the standard measure for determining the amount of space in residential properties. Conditional use illegal use nonconforming use - ✔✔Conditional use- A conditional use permit is a zoning exception that allows property owners to use land in such a way that is not typically permitted within the particular zoning district. illegal use-?? nonconforming use-A nonconforming use is a use of property that was allowed under the zoning regulations at the time the use was established but which, because of subsequent changes in those regulations, is no longer a permitted use -- - ✔✔-- area of a rectangler building - ✔✔To find the area of a rectangle, multiply its height by its width. For a square you only need to find the length of one of the sides (as each side is the same length) and then multiply this by itself to find the area.
GRM
GIM - ✔✔Gross Rent Multiplier = Property Price / Gross Annual Rental Income. Example: $500,000 Property Price / $42,000 Gross Annual Rents = 11.9 GRM GIM- A gross income multiplier is a rough measure of the value of an investment property. GIM is calculated by dividing the property's sale price by its gross annual rental income. est construction costs - ✔✔This method involves calculating the cost of construction by multiplying square footage of the structure by the construction cost for that particular building. With this method, you need to have done some preliminary research to understand the amount per square foot that you plan to spend. Income Approach - ✔✔A method of computing GDP that measures the income-wages, rents, interest, and profits-received by all factors of production in producing final goods and services. Conformity Substitution Supply and demand regression - ✔✔Conformity-refers to the similarity of properties within a neighborhood in terms of prevailing age, condition, size, style, and functional utilit Substitution-states that a buyer will pay no more for a property than the cost of an equally desirable (and comparable) alternative property. Supply and demand- refers to the relationship between the buyers and suppliers of a particular product. The housing market depends extensively on this dynamic, because generally speaking housing prices rise and fall in sync with supply and demand regression-is a term used by real estate appraisers stating that the value of high-end real estate may be diminished by having lower-end properties in the same vicinity. This principle is used frequently in writing zoning laws, which strive to keep business and residential areas separate.
slabs monolithic floating solid combo - ✔✔monolithic-"all in one pour" so the foundation is constructed in one single pour that is made up of a concrete slab with thicker areas under load bearing walls and all perimeter edges to take the place of footers. Because this Slab is poured all at once, it is much faster and keeps labor costs lo floating- consists of boxlike rigid structures set at such a depth below ground that the weight of the soil removed to place it equals the weight of the building; thus, once the building is completed, the soil under it will bear the same weight it bore before excavation was begun. solid-?? combo-wood?? Types of Fixtures - ✔✔stands platforms and elevations counters or showcases counter fixtures round racks t-stands four-way stands gondola etagere c-racks, 3 part racks, spiral costumers If an object is physically and permanently attached or fastened to the property, it's considered a fixture. This includes items that have been bolted, screwed, nailed, glued or cemented onto the walls, floors, ceilings or any other part of the home.
Types of Rent - ✔✔Residential real estate includes both new construction and resale homes. The most common category is single-family homes. There are also condominiums, co-ops, townhouses, duplexes, triple-deckers, quad lexes, high-value homes, multi-generational and vacation homes.
Commercial real estate includes shopping centers and strip malls, medical and educational buildings, hotels and offices. Apartment buildings are often considered commercial, even though they are used for residences. That's because they are owned to produce income.
Industrial real estate includes manufacturing buildings and property, as well as warehouses. The buildings can be used for research, production, storage, and distribution of goods. Some buildings that distribute goods are considered commercial real estate. The classification is important because the zoning, construction, and sales are handled differently.
- Land includes vacant land , working farms, and ranches. The subcategories within vacant land include undeveloped, early development or reuse, subdivision and site assembly. Ownership (freehold) vs Leased ( leasehold) - ✔✔freehold- ownership in property. To be considered a freehold estate, two criteria must be met: Immovable: The asset cannot be moved; therefore, it is either land or some sort of interest in that land. No fixed length of ownership: The property can be passed on forever if the right criteria are met. leasehold- A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. ... As lease is a legal estate, leasehold estate can be bought and sold on the open market. appraisal - ✔✔An estimate of the current value of the property.
