Basic Appraisal Procedures – McKissock test questions with verified solutions 2024.

Valuation process A systematic procedure used in the valuation of real property. Steps: 1: Define the problem 2:Determine scope of work 3:Gather, record, and verify the data 4:Determine the highest and best use 5:Estimate the land value 6:Estimate value by each of the three approaches (if applicable) 7:Reconcile the estimated values into the final opinion of value 8:Report the final opinion of value Client The party or parties who engage, by employment or contract, an appraiser in a specific assignment. Brainpower Read More Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:00 Full screen Steps in Defining the problem Identification and location of the real estate; Identification of the property rights; Definition of value; Purpose and intended use of the appraisal; Effective date of the opinion of value; Any special limiting conditions Real property The interests, benefits, and rights inherent in the ownership of real estate. Market Value A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal. Intended Use The use or uses of an appraiser's reported appraisal or appraisal review assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment. Intended User The client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser on the basis of communication with the client at the time of the assignment. Effective Date of the Value The ____________ can be a past (retrospective), current or future (prospective) date. This decision will be made in concert with the client's needs. Extraordinary assumption An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions. Hypothetical Condition A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. Scope of work The type and extent of research and analyses in an assignment. Workfile Documentation necessary to support an appraiser's analyses, opinions, and conclusions USPAP: data, information, and documentation necessary to support the appraiser's opinions and conclusions and to show compliance with USPAP. Retain WF for 5 years or 2 years after final disposition of legal hearing Must be retrievable by the appraiser throughout the prescribed record retention period Must be made available when required by a state appraiser regulatory agency or due process of law Steps in the Valuation Process 1. Define the problem 2. Determine scope of work 3. Gather, record, and verify the data 4. Determine the highest and best use 5. Estimate the land value 6. Estimate value by each of the three approaches (if applicable) 7. Reconcile the estimated values into the final opinion of value 8. Report the final opinion of value Highest and Best Use Criteria (in order) 1. Legally permissible 2. Physically possible. 3. Financially feasible. 4. Maximally productive *there may be one highest and best use for the property if vacant, and another one for a property as it is presently improved. General data Data that relates to the four forces that affect real property values: l mic 3. governmental onmental forces This type of data is usually not specific to any particular property but is applicable in many assignments of similar types of properties. Also known as MACRO LEVEL DATA Specific data Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics. U.S. Bureau of the Census The largest repository of demographics Professional or trade associations offering general data National Association of Homebuilders; National Association of Realtors; Appraisal Institute Sources of Specific Data Deeds; Location maps; Tax maps; Flood maps; Assessor's records; Title companies; Zoning ordinances; Multiple listing services Special Flood Hazard Area Designation FEMA Zones A or V Information in Deed The legal description of the property; The owners of record; Easements of record; Deed restrictions; Chain of title (when the property was purchased and from whom) Primary intended user for MLS information Agents and Brokers Land The earth's surface, both land and water, and anything that is attached to it whether by the course of nature or human hands; all natural resources in their original state, e.g., mineral deposits, wildlife, timber, fish, water, coal deposits, soil. Site Land that is improved so that it is ready to be used for a specific purpose. Brownfield An industrial or commercial site that is abandoned or underused because it suffers from real or perceived continuing contamination. Site Valuation Methods SALES COMPARISON; EXTRACTION; ALLOCATION; SUBDIVISION DEVELOPMENT; LAND RESIDUAL; GROUND RENT CAPITALIZATION Extraction Method A method of estimating land value in which the depreciated cost of the improvements on the improved property is estimated and deducted from the total sale price to arrive at an estimated sale price for the land; most effective when the improvements contribute little to the total sale price of the property. Allocation Method A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed. Principle of Balance Real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. Principle of Conformity Real property value is created and sustained when the characteristics of a property conform to the demands of its market. Basic income capitalization formula Value = Income/Rate Summation Approach Another name for cost approach Manufactured Home A factory-built house manufactured under the Federal Manufactured Home Construction and Safety Standards Act of 1976, commonly known as the HUD Code. Modular Home A factory-built house built in compliance with a building code other than the HUD Code. This usually means that the home is constructed to the standards of the state or local building code used by the governmental unit where the house is to be located. Note that the California Factory-Built Housing Program uses the term factory-built housing (FBH) in place of the term modular home. Gross Living Area Total area of finished, above-grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. (Finished basements and attic areas are not generally included in total gross living area. Local practices, however, may differ). Gross Building Area Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the region. Monolithic slab-on-grade foundation One giant footing (slab) Wood Foundations Foundations that are more common in Canada Plywood or OSB Board (oriented strand board) Most common subflooring material Romex Type of wiring is most commonly found in new residential construction U-shaped traps Prevent sewer gases from venting back into the house Heat pump Essentially reversible air conditioner Voltage Electricity measured by pressure Amperage Electricity measured by volume Substitution The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based. Cost Approach Formula Reproduction or Replacement Cost New - Accrued Depreciation + Site Value = Property Value Cost Approach A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised. Fee Simple Estate (or Interest) Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Reproduction Cost The estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescence of the subject building. Replacement Cost The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout.