Chapter 18 Real Estate Appraisal Measurement is vital to the appraiser—not just physical...

Chapter 18Real Estate Appraisal

Measurement is vital to the appraiser—not just physical measurement in feet and inches, but measurement of value and cost.

2©2013 Kaplan, Inc.

18 Real Estate Appraisal

• Learning objectives– Identify the different types and basic principles of value– Describe the three basic valuation approaches used by

appraisers– Explain the steps in the appraisal process– Distinguish the four methods of determining

reproduction or replacement cost



• Regulation of appraisal activities• Competitive market analysis• In Georgia, real estate sales associates and

brokers cannot perform an appraisal unless they also have an appraiser’s license or certification



• Appraisal process1. State the problem2. List the data needed3. Gather, record, verify, and analyze data

• General data• Specific data• Data for each approach

4. Determine the highest and best use5. Estimate the land value6. Estimate value by each of the three approaches7. Reconcile the estimated values8. Report the final value estimate



• Value determinants– Demand– Utility– Scarcity– Transferability

• Value – Market value– Market value versus market price (the sales price)– Market value versus cost



• Basic principles of value– Anticipation– Change– Competition– Conformity– Contribution– Highest and best use



• Basic principles of value– Increasing and diminishing returns– Plottage– Regression and progression– Substitution– Supply and demand



• Sales comparison approach to value– Subject property versus comparable properties– Property rights– Financing concessions– Market conditions– Conditions of sale– Market conditions since date of sale– Location– Physical features and amenities



Cost approach to value• Estimate land value as if vacant and available for

its HBU• Estimate cost of construction• Estimate accrued depreciation• Deduct accrued depreciation from construction

cost as if new• Add the land value estimate



• Cost approach to value– Reproduction cost versus replacement cost new

• Square-foot method• Unit-in-place method• Quantity-survey method• Index method

– Depreciation• Physical deterioration• Functional obsolescence• External obsolescence



• Income approach to value– Annual potential gross income

• Less vacancy loss equals

• Effective gross income– Less Annual operating expenses equals– Net operating Income

• Divided by the Capitalization rate equals

– Market Value Estimate



• Income approach to value– Gross rent multiplier (GRM)– Gross income multiplier (GIM)

Reconciliation



• Georgia appraiser classifications– State registered real property appraiser

• Simplest set of requirements

– State-licensed real property appraiser (SLRPA)– State-certified residential real property appraiser

(SCRRPA)– State certified general real property appraiser

(SCGRPA)

Chapter 18 Real Estate Appraisal Measurement is vital to the appraiser—not just physical...

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