BASIC APPRAISAL PROCEDURES FINAL EXAM QUESTIONS
WITH COMPLETE SOLUTION
Site
Land that is improved so that it is ready to be used for a specific purpose
Separate Site Valuations
Cost approach
Assessments and taxation
Condemnation appraisals
Certain income capitalization methods
Highest and best use analysis
Cost Approach (summation approach)
Site Value + Depreciation
Depreciation
Cost New
SALES COMPARISON
Comparison with recent sales--Most Commonly Used--Most Accurate--Must have
adequate market data--adjustments to the comparable sales may be made either on a
quantitative or qualitative basis--Quantitative adjustments are usually made on a
percentage or dollar basis.
EXTRACTION
Subtracts estimated improvement value to arrive at land value
ALLOCATION
Uses land-to-value ratios based on improved sale comparables
SUBDIVISION DEVELOPMENT
Subtracts estimated development costs from discounted sale proceeds
LAND RESIDUAL
Divides up and capitalizes the income between land and improvements
GROUND RENT CAPITALIZATION
Capitalizes income from leased land
PAIED DATA ANALYSIS
Quantitative adjustments
usually made on a percentage or dollar basis
Percentage Adjustments and Market Conditions
Units of Comparison
Price per square foot
Price per acre
Price per front foot
Price per lot
Price per buildable unit
Price per animal unit
Price Per Square Foot (Suburban/Urban)
Sales Price/Total SF= $/1SF
Price Per Acre (Rural Ares/Large Lots)
, Sales Price/Total Acres= $/Acre
Price per Front Foot (Waterfront/Commercial Roadway)
Sales Price/ FF= $ FF
Mass appraisals
1. The application of computer technology and statistical techniques to the solution of
appraisal problems; used in assessment administration to derive value indications in the
cost and sales comparison approaches and to perform other functions, e.g.,
assessment ratio analysis.
2. A system of appraising property, usually only certain types of real property, that
incorporates statistical analyses such as multiple regression analysis and adaptive
estimation procedure to assist the appraiser in estimating value. (IAAO)
Extraction Method (Abstraction Method)
Rural Areas--Large Lots-Less Sales
Old Urban Areas--
TOTAL - IMPROVEMENTS = LAND VALUE
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.
EXTRACTION METHOD EXAMPLE 1
REPRODUCTION COST * REMAINING ECONOMIC LIFE= IMPROVEMENT VALUE
SALES $ - IMPROVEMENT VALUE = LAND VALUE
EXTRACTION METHOD EXAMPLE 2
REPRODUCTION COST * REL = IMPROVEMENT VALUE
SALE $ - IMPROVEMENT VALUE = LAND VALUE
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
Allocation Method EXAMPLE 1
TOTAL $ * RATIO = LAND $
Support for Allocation Method
--Support must be in workfile, not report
--Verbage "site value obtained by allocation method"
Mass appraisals
Observed patterns
Consultations with developers on their costs
An appraiser's files
Published studies
Allocation Method Example 2 (Mass Appraisal)
Sales$/Lot $ = Ratio (%)
Subdivision Development Method (Most Complex)
--should only be used in a specific situation - when the highest and best use of
the land is for subdivision and development
WITH COMPLETE SOLUTION
Site
Land that is improved so that it is ready to be used for a specific purpose
Separate Site Valuations
Cost approach
Assessments and taxation
Condemnation appraisals
Certain income capitalization methods
Highest and best use analysis
Cost Approach (summation approach)
Site Value + Depreciation
Depreciation
Cost New
SALES COMPARISON
Comparison with recent sales--Most Commonly Used--Most Accurate--Must have
adequate market data--adjustments to the comparable sales may be made either on a
quantitative or qualitative basis--Quantitative adjustments are usually made on a
percentage or dollar basis.
EXTRACTION
Subtracts estimated improvement value to arrive at land value
ALLOCATION
Uses land-to-value ratios based on improved sale comparables
SUBDIVISION DEVELOPMENT
Subtracts estimated development costs from discounted sale proceeds
LAND RESIDUAL
Divides up and capitalizes the income between land and improvements
GROUND RENT CAPITALIZATION
Capitalizes income from leased land
PAIED DATA ANALYSIS
Quantitative adjustments
usually made on a percentage or dollar basis
Percentage Adjustments and Market Conditions
Units of Comparison
Price per square foot
Price per acre
Price per front foot
Price per lot
Price per buildable unit
Price per animal unit
Price Per Square Foot (Suburban/Urban)
Sales Price/Total SF= $/1SF
Price Per Acre (Rural Ares/Large Lots)
, Sales Price/Total Acres= $/Acre
Price per Front Foot (Waterfront/Commercial Roadway)
Sales Price/ FF= $ FF
Mass appraisals
1. The application of computer technology and statistical techniques to the solution of
appraisal problems; used in assessment administration to derive value indications in the
cost and sales comparison approaches and to perform other functions, e.g.,
assessment ratio analysis.
2. A system of appraising property, usually only certain types of real property, that
incorporates statistical analyses such as multiple regression analysis and adaptive
estimation procedure to assist the appraiser in estimating value. (IAAO)
Extraction Method (Abstraction Method)
Rural Areas--Large Lots-Less Sales
Old Urban Areas--
TOTAL - IMPROVEMENTS = LAND VALUE
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.
EXTRACTION METHOD EXAMPLE 1
REPRODUCTION COST * REMAINING ECONOMIC LIFE= IMPROVEMENT VALUE
SALES $ - IMPROVEMENT VALUE = LAND VALUE
EXTRACTION METHOD EXAMPLE 2
REPRODUCTION COST * REL = IMPROVEMENT VALUE
SALE $ - IMPROVEMENT VALUE = LAND VALUE
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
Allocation Method EXAMPLE 1
TOTAL $ * RATIO = LAND $
Support for Allocation Method
--Support must be in workfile, not report
--Verbage "site value obtained by allocation method"
Mass appraisals
Observed patterns
Consultations with developers on their costs
An appraiser's files
Published studies
Allocation Method Example 2 (Mass Appraisal)
Sales$/Lot $ = Ratio (%)
Subdivision Development Method (Most Complex)
--should only be used in a specific situation - when the highest and best use of
the land is for subdivision and development
