Basic Appraisal Procedures Mckissock
advisory opinion 22 - ANSThe scope of work decision includes determining which analysis
methods and techniques are required and which data are required to correctly complete the
analysis. The basis for determining which of the property's characteristics are relevant to the
assignment is provided by advisory opinions 22 of the USPAP - ANSAccomplishing the first
four action steps (SR 1-2(a) through (d)). allocation - ANSland to value ratios based on
improved sales comparables
allocation method: ANSestimating land value, in which sales of improved properties are
looked at to find a typical ratio of land value to total property value and then applied to the
property being appraised or the comparable sale being looked at applicable approaches to
value - ANScost, sales comp, income and capitalization appraoches
The Evaluation Procedure - ANS1 Define the issue 2. Determine the work's scope. 3.
Gather Record & verify dat
4. determine highest and best use
5. compute the value of the land 6. est. value by all three approaches
7. Convert the initial value into the final value 8. report the final opinion
Appraisers are cautioned to - ANSidentify the exact definition of market value and its
authority applicable in each appraisal completed for the purpose of market value
Arm's-length transaction - ANStransaction between unrelated parties who are each acting in
his or her own best interest
brownfield - ANSreal property for which the presence of environmental contamination that
must be remedied to standards may make the expansion or redevelopment of the property
challenging buydowns - ANSlump-sum payment to the lender that reduces the interest
payments of the borrower
capitalization rate(R) - ANSratio of an asset's value to its annual net operating income
common sources of specific data: - ANSdeeds, location maps, tax maps, flood maps,
assessors records, title companies, zoning, MLS
concurrent ownership - ANSOwnership by two or more persons at the same time
Conditions of sale - ANSelement of comparison in the sales comparison approach;
comparable properties can be adjusted for differences in the motivations of either the buyer
or a seller in a transactio
Contract rent - ANSThe actual rental income specified in a lease
conventional loans - ANSmortgage neither insured nor guaranteed by an agency although it
may be privately insured
cost approach - ANSset of procedures through which a value indication is derived for the
fee simple estate by estimating the current cost to construct a reproduction of the existing
structure
cost formula - ANSreproduction cost new-accrued depreciation+site value=property value
Curable depreciation - ANSItems of physical deterioration or functional obsolescence that
are economically feasible to cure
deed will provide - ANSThe legal description of the property
The owners of record
Easements of record
, Deed restrictions
Chain of title
Deficit rent is the difference between the contract rent and market rent at the time of the
appraisal. defining problem - ANSIdentification and location of the real estate
Identification of the property rights
What is meant by value? Purpose and intended use of the appraisal
Effective date of the opinion of value
Any special limiting conditions
Depreciation - ANSappraising, a loss in property value from any cause
depreciation (age life) - ANS (effective age divided by total economic life) * total cost
determine scope of work - ANSthe type and extent of research and analysis or appraisal
review assignment
Direct capitalization - ANSmethod used to convert an estimate of a single year's income
expectancy into an indication of value in one direct step, either by dividing the net income
estimate by an appropriate capitalization rate or by multiplying the income estimate by an
appropriate factor
direct cost - ANSexpenditures for the labor and materials used in the construction of
improvements
Discounted cash flow analysis - ANSprocedure in which a discount rate is applied to a set of
projected income streams and a reversion
district - ANSneighborhood characterized by homogeneous land use, e.g., apartment,
commercial, industrial, agricultura
economic life - ANSperiod over which improvements to real estate contribute to value
Effective gross income (EGI - ANSanticipated income from all operations of the real estate
after an allowance is made for vacancy and collection losses and an addition is made for any
other income.
Effective gross income (EGI) - ANSanticipated income from all operations of the real estate
after an allowance is made for vacancy and collection losses and an addition is made for any
other income
Effective rent - ANSTotal base rent, or minimum rent stipulated in a lease, over the specified
lease term minus rent concessions
entrepreneurial incentive - ANSamount an entrepreneur expects to receive for his or her
contribution to a project
entrepreneurial profit - ANSfigure that represents the amount an entrepreneur receives for
his risk; what they actually get
Excess rent - ANSThe amount by which contract rent exceeds market rent at the time of the
appraisal
expenditures made immediately after purchas - ANSelement of comparison in the sales
comparison approach; comparable properties can be adjusted for any additional investment
that the buyer needed to make immediately after purchase for the properties to have similar
utility to the subject property being valued
External Obsolescence - ANStype of depreciation; a diminution in value caused by negative
external influences and generally incurable on the part of the owner, landlord, or tenant
extraction - ANSsubtracts estimated improvement value to arrive at land value
extraction method - ANSestimating land value in which the depreciated cost of the
improvements on an improved property is calculated and deducted from the total sale price
to arrive at an estimated sale price for the land
advisory opinion 22 - ANSThe scope of work decision includes determining which analysis
methods and techniques are required and which data are required to correctly complete the
analysis. The basis for determining which of the property's characteristics are relevant to the
assignment is provided by advisory opinions 22 of the USPAP - ANSAccomplishing the first
four action steps (SR 1-2(a) through (d)). allocation - ANSland to value ratios based on
improved sales comparables
allocation method: ANSestimating land value, in which sales of improved properties are
looked at to find a typical ratio of land value to total property value and then applied to the
property being appraised or the comparable sale being looked at applicable approaches to
value - ANScost, sales comp, income and capitalization appraoches
The Evaluation Procedure - ANS1 Define the issue 2. Determine the work's scope. 3.
Gather Record & verify dat
4. determine highest and best use
5. compute the value of the land 6. est. value by all three approaches
7. Convert the initial value into the final value 8. report the final opinion
Appraisers are cautioned to - ANSidentify the exact definition of market value and its
authority applicable in each appraisal completed for the purpose of market value
Arm's-length transaction - ANStransaction between unrelated parties who are each acting in
his or her own best interest
brownfield - ANSreal property for which the presence of environmental contamination that
must be remedied to standards may make the expansion or redevelopment of the property
challenging buydowns - ANSlump-sum payment to the lender that reduces the interest
payments of the borrower
capitalization rate(R) - ANSratio of an asset's value to its annual net operating income
common sources of specific data: - ANSdeeds, location maps, tax maps, flood maps,
assessors records, title companies, zoning, MLS
concurrent ownership - ANSOwnership by two or more persons at the same time
Conditions of sale - ANSelement of comparison in the sales comparison approach;
comparable properties can be adjusted for differences in the motivations of either the buyer
or a seller in a transactio
Contract rent - ANSThe actual rental income specified in a lease
conventional loans - ANSmortgage neither insured nor guaranteed by an agency although it
may be privately insured
cost approach - ANSset of procedures through which a value indication is derived for the
fee simple estate by estimating the current cost to construct a reproduction of the existing
structure
cost formula - ANSreproduction cost new-accrued depreciation+site value=property value
Curable depreciation - ANSItems of physical deterioration or functional obsolescence that
are economically feasible to cure
deed will provide - ANSThe legal description of the property
The owners of record
Easements of record
, Deed restrictions
Chain of title
Deficit rent is the difference between the contract rent and market rent at the time of the
appraisal. defining problem - ANSIdentification and location of the real estate
Identification of the property rights
What is meant by value? Purpose and intended use of the appraisal
Effective date of the opinion of value
Any special limiting conditions
Depreciation - ANSappraising, a loss in property value from any cause
depreciation (age life) - ANS (effective age divided by total economic life) * total cost
determine scope of work - ANSthe type and extent of research and analysis or appraisal
review assignment
Direct capitalization - ANSmethod used to convert an estimate of a single year's income
expectancy into an indication of value in one direct step, either by dividing the net income
estimate by an appropriate capitalization rate or by multiplying the income estimate by an
appropriate factor
direct cost - ANSexpenditures for the labor and materials used in the construction of
improvements
Discounted cash flow analysis - ANSprocedure in which a discount rate is applied to a set of
projected income streams and a reversion
district - ANSneighborhood characterized by homogeneous land use, e.g., apartment,
commercial, industrial, agricultura
economic life - ANSperiod over which improvements to real estate contribute to value
Effective gross income (EGI - ANSanticipated income from all operations of the real estate
after an allowance is made for vacancy and collection losses and an addition is made for any
other income.
Effective gross income (EGI) - ANSanticipated income from all operations of the real estate
after an allowance is made for vacancy and collection losses and an addition is made for any
other income
Effective rent - ANSTotal base rent, or minimum rent stipulated in a lease, over the specified
lease term minus rent concessions
entrepreneurial incentive - ANSamount an entrepreneur expects to receive for his or her
contribution to a project
entrepreneurial profit - ANSfigure that represents the amount an entrepreneur receives for
his risk; what they actually get
Excess rent - ANSThe amount by which contract rent exceeds market rent at the time of the
appraisal
expenditures made immediately after purchas - ANSelement of comparison in the sales
comparison approach; comparable properties can be adjusted for any additional investment
that the buyer needed to make immediately after purchase for the properties to have similar
utility to the subject property being valued
External Obsolescence - ANStype of depreciation; a diminution in value caused by negative
external influences and generally incurable on the part of the owner, landlord, or tenant
extraction - ANSsubtracts estimated improvement value to arrive at land value
extraction method - ANSestimating land value in which the depreciated cost of the
improvements on an improved property is calculated and deducted from the total sale price
to arrive at an estimated sale price for the land
