Real estate appraisal - Wikipedia, the free encyclopedia. Real estate appraisal, property valuation or land valuation is the process of developing an opinion of value for real property (usually market value). Real estate transactions often require appraisals because they occur infrequently and every property is unique (especially their location, a key factor in valuation), unlike corporate stocks, which are traded daily and are identical (thus a centralized Walrasian auction like a stock exchange is unrealistic). Appraisal reports form the basis for mortgage loans, settling estates and divorces, taxation, and so on. Sometimes an appraisal report is used to establish a sale price for a property. Most, but not all, countries require appraisers to be Licensed or Certified. For Real Estate Valuation software look to Cougar Software. Accurately value your assets. Download our fact sheet to learn what Cougar Software can do for you. The Master of Valuation and Property Development (Professional) provides a wide range of skills that can be applied to global property markets.The Appraisal Institute Is A Global Membership Association Of Professional Real Estate Appraisers Throughout The World. Equip you with the core skills required by the industry embracing valuation. If you aim to join the graduate entry programme of the major UK real estate employers and take the RICS Assessment of Professional Competence. Appraisers are often known as . If the appraiser's opinion is based on market value, then it must also be based on the highest and best use of the real property. The Master of Valuation and Property Development provides a wide range of skills that can be applied to global property markets. Income from investment-related property is at a historical high, pointing to increasing revenue from renting real estate. But before investing in property rentals, how does one go about valuing real estate rentals. Conduct development feasibility and real estate valuations. EstateMaster provide industry standard property software for all property professionals. Program Detail; Program Name: MS in Real Estate Valuation View Program Website: Program Overview: Areas of Study: Real Estate; Joint Degree Offered: No Delivery Format: Classroom GMAT Score: GMAT Accepted Tuition & Fees. Software that enables the real estate appraiser to easily complete the income approach using either the lease by lease method or a capitalization rate. In the United States, mortgage valuations of improved residential properties are generally reported on a standardized form like the Uniform Residential Appraisal Report. Some of the most common are: Market value . Value- in- use is the value to one particular user, and may be above or below the market value of a property. Investment value . Differences between the investment value of an asset and its market value provide the motivation for buyers or sellers to enter the marketplace. International Valuation Standards (IVS) define: Investment value . Generally it does not include the site value. Liquidation value . It assumes a seller who is compelled to sell after an exposure period which is less than the market- normal time- frame. Price vs value. A price paid might not represent that property's market value. Sometimes, special considerations may have been present, such as a special relationship between the buyer and the seller where one party had control or significant influence over the other party. In other cases, the transaction may have been just one of several properties sold or traded between two parties. In such cases, the price paid for any particular piece is not its market . One specific example of this is an owner of a neighboring property who, by combining his own property with the subject property, could obtain economies- of- scale. Similar situations sometimes happen in corporate finance. For example, this can occur when a merger or acquisition happens at a price which is higher than the value represented by the price of the underlying stock. The usual explanation for these types of mergers and acquisitions is that . This is something that purchasers will sometimes pay a high price for. This situation can happen in real estate purchases too. But the most common reason for value differing from price is that either the buyer or the seller is uninformed as to what a property's market value is but nevertheless agrees on a contract at a certain price which is either too expensive or too cheap. This is unfortunate for one of the two parties. It is the obligation of a real property appraiser to estimate the true market value of a property and not its market price. Market value definitions in the United States. The most commonly used definition of value is Market Value. While Uniform Standards of Professional Appraisal Practice (USPAP) does not define Market Value, it provides general guidance for how Market Value should be defined: A type of value, stated as an opinion, that presumes the transfer of a property (i. Thus, the definition of value used in an appraisal or Current Market Analysis (CMA) analysis and report is a set of assumptions about the market in which the subject property may transact. It affects the choice of comparable data for use in the analysis. It can also affect the method used to value the property. For example, tree value can contribute up to 2. These are usually referred to as the . One or two of these approaches will usually be most applicable, with the other approach or approaches usually being less useful. The appraiser has to think about the . No overarching statement can be made that one approach or another is always better than one of the other approaches. The appraiser has to think about the way that most buyers usually buy a given type of property. What appraisal method do most buyers use for the type of property being valued? This generally guides the appraiser's thinking on the best valuation method, in conjunction with the available data. For instance, appraisals of properties that are typically purchased by investors (e. Income Approach. Buyers interested in purchasing single family residential property would rather compare price, in this case the Sales Comparison Approach (market analysis approach) would be more applicable. The third and final approach to value is the Cost Approach to value. The Cost Approach to value is most useful in determining insurable value, and cost to construct a new structure or building. For example, single apartment buildings of a given quality tend to sell at a particular price per apartment. In many of those cases, the sales comparison approach may be more applicable. On the other hand, a multiple- building apartment complex would usually be valued by the income approach, as that would follow how most buyers would value it. As another example, single- family houses are most commonly valued with greatest weighting to the sales comparison approach. However, if a single- family dwelling is in a neighborhood where all or most of the dwellings are rental units, then some variant of the income approach may be more useful. So the choice of valuation method can change depending upon the circumstances, even if the property being valued does not change much. The sales comparison approach. This approach assumes a prudent (or rational) individual will pay no more for a property than it would cost to purchase a comparable substitute property. The approach recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her wants and needs for the lowest cost. In developing the sales comparison approach, the appraiser attempts to interpret and measure the actions of parties involved in the marketplace, including buyers, sellers, and investors. Data collection methods and valuation process. Data is collected on recent sales of properties similar to the subject being valued, called . Only SOLD properties may be used in an appraisal and determination of a property's value, as they represent amounts actually paid or agreed upon for properties. Sources of comparable data include real estate publications, public records, buyers, sellers, real estate brokers and/or agents, appraisers, and so on. Important details of each comparable sale are described in the appraisal report. Since comparable sales are not identical to the subject property, adjustments may be made for date of sale, location, style, amenities, square footage, site size, etc. The main idea is to simulate the price that would have been paid if each comparable sale were identical to the subject property. If the comparable is superior to the subject in a factor or aspect, then a downward adjustment is needed for that factor. From the analysis of the group of adjusted sales prices of the comparable sales, the appraiser selects an indicator of value that is representative of the subject property. It is possible for various appraisers to choose different indicator of value which ultimately will provide different property value. Steps in the sales comparison approach. Research the market to obtain information pertaining to sales, and pending sales that are similar to the subject property. Investigate the market data to determine whether they are factually correct and accurate. Determine relevant units of comparison (e. Compare the subject and comparable sales according to the elements of comparison and adjust as appropriate. Reconcile the multiple value indications that result from the adjustment (upward or downward) of the comparable sales into a single value indication. The cost approach. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. The value of the improvements is often referred to by the abbreviation RCNLD (for . Reproduction refers to reproducing an exact replica; replacement cost refers to the cost of building a house or other improvement which has the same utility, but using modern design, workmanship and materials. In practice, appraisers almost always use replacement cost and then deduct a factor for any functional dis- utility associated with the age of the subject property. An exception to the general rule of using the replacement cost, is for some insurance value appraisals. In those cases, reproduction of the exact asset after a destructive event like a fire is the goal. In most instances when the cost approach is involved, the overall methodology is a hybrid of the cost and sales comparison approaches (representing both the suppliers' costs and the prices that customers are seeking). For example, the replacement cost to construct a building can be determined by adding the labor, material, and other costs. On the other hand, land values and depreciation must be derived from an analysis of comparable sales data. The cost approach is considered most reliable when used on newer structures, but the method tends to become less reliable for older properties. The cost approach is often the only reliable approach when dealing with special use properties (e. The income approach. Because it is intended to directly reflect or model the expectations and behaviors of typical market participants, this approach is generally considered the most applicable valuation technique for income- producing properties, where sufficient market data exists. In a commercial income- producing property this approach capitalizes an income stream into a value indication.
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