Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright ©...
-
Upload
mervyn-lawrence -
Category
Documents
-
view
223 -
download
0
Transcript of Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright ©...
![Page 1: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/1.jpg)
Chapter 7
Valuation Using the Sales Comparison and Cost Approaches
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
![Page 2: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/2.jpg)
7-2
Valuation calculations are required when a: property acquisition is contemplated structure is
modernized renovated abandoned demolished
site is developed property is used as collateral for a loan
Decision Making in Commercial Real Estate Centers Around Valuation
![Page 3: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/3.jpg)
7-3
Value Concepts
Market value: Most probable selling price, assuming “normal” sale
conditions. Value for the “typical” market participant.
Investment value: Value to a particular individual (investor).
Transaction price: Price actually paid for a specific property.
![Page 4: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/4.jpg)
7-4
Who Uses Market Value Appraisals? Buyers Sellers Corporate acquisitions, mergers or dissolutions Courts
Divorces Eminent domain cases Settlement of estates Bankruptcy
Mortgage Lenders
![Page 5: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/5.jpg)
7-5
Why Do We Have To Estimate Market Value? In markets with perfect competition & investment
value revelation, all transactions take place at true market value
In such markets, no need for buyers & sellers to search for “true” market value of an asset; it is continuously revealed by transaction prices of
perfect substitutes. Simon Property Group (SPG) example in book….. (
http://finance.yahoo.com/)
![Page 6: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/6.jpg)
7-6
Why Do We Have To Estimate Market Value? Moreover, the heterogeneous investment
motivations of buyers & sellers & their negotiation abilities have no role in the price formation process We are all price takers!
![Page 7: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/7.jpg)
7-7
What About Real Estate Markets?
Every property is unique Unique location Many & varied attributes
These heterogeneous assets trade in illiquid, highly segmented & informationally inefficient local markets
Search costs associated with matching buyers & sellers are significant
![Page 8: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/8.jpg)
7-8
Implications?
Even the few transactions of comparable properties that we do observe may not be indicative of the value of the “subject” property
Thus…..we need an army of “fee appraisers” to estimate the market value of real estate assets
![Page 9: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/9.jpg)
7-9
Uniform Standards of Appraisal Practice (USPAP) In 1987, nine leading appraisal groups jointly
put forth uniform appraisal standards Maintained by the Appraisal Foundation, the
Uniform Standards of Professional Appraisal Practice (USPAP) are required & followed by all states and federal regulatory agencies
To comply with USPAP, appraisers must follow the following framework or process…
![Page 10: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/10.jpg)
7-10
Uniform Standards of Appraisal Practice (USPAP)
1. Identify the appraisal problem Client & intended uses of appraisal Intended use of appraisal Date of valuation Purpose of assignment (market, insurance, or taxable
value) Date of valuation Important assumptions or conditions
![Page 11: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/11.jpg)
7-11
Uniform Standards of Appraisal Practice (USPAP)
2. Determine the required scope of work Time & personal requirements Outline of proposed appraisal report Data & procedures used to complete required tasks
![Page 12: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/12.jpg)
7-12
Uniform Standards of Appraisal Practice (USPAP)
3.Collect data and describe property Market area data
Characteristics of region, city, and neighborhood Subject property data
Site, building, & locational characteristics Comparable property data
![Page 13: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/13.jpg)
7-13
USPAP (continued)
4. Perform data analysis Market analysis
Demand, supply, and marketability studies Highest & best use:
as though vacant; considers any possible use as improved; must consider any cost of demolition
![Page 14: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/14.jpg)
7-14
USPAP (continued)
5. Determine value of land Important to value separately from improvements
![Page 15: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/15.jpg)
7-15
USPAP (continued)
6. Apply 3 approaches to valuation Sales comparison approach Cost approach Income approach
7.Reconcile indicated values from 3 approaches Weight based on relative reliability of the three
approaches
![Page 16: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/16.jpg)
7-16
USPAP (continued)
8. Report final value estimate Report writing is an extremely important function Must meet requirements of 1 of 3 reporting options
Self-contained report Contains full detail and information. Usually takes a full
narrative approach Summary report
Majority of data and analysis kept in appraiser’s work file Restricted report
Provides minimal info & discussion Client does not intend to provide appraisal to anyone else
![Page 17: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/17.jpg)
7-17
Three Approaches to Estimating Market Value Sales comparison approach Cost approach Income approach
![Page 18: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/18.jpg)
7-18
Sales Comparison Approach
Basic Idea: Value of RE can be determined by analyzing
the sale prices of similar properties Why?
Because in a competitive market close substitutes should sell for similar prices
![Page 19: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/19.jpg)
7-19
Sales Comparison Appraisal Approach
![Page 20: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/20.jpg)
7-20
Identify Elements of Comparability
Same subdivision? Same price range? Same size? Same style? Same vintage? Other?
![Page 21: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/21.jpg)
7-21
Selecting Comparables
Must be properties that prospective buyers would consider substitutes
Should be arms-length transactions Fairly negotiated prices that occurred under
“normal” conditions For example, not a distressed sale
Select to minimize required physical and locational adjustments
![Page 22: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/22.jpg)
7-22
Selecting Comparables
Data sources: Public records (e.g., county property tax assessor) Multiple listing service Private vendors (title companies, others) Others?
Importance of personal relationships
![Page 23: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/23.jpg)
7-23
Adjustments to Comparable Sale Prices Goal?
Convert characteristics of each comparable to an approximation of subject.
Why not adjust the characteristics of the subject? Sequence of adjustments
Transactional adjustments Property adjustments
![Page 24: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/24.jpg)
7-24
Adjustments to Comparable Sales Prices Transactional Adjustments
Property rights conveyed Financing terms Conditions of sale (arm’s length or not?) Expenditures made immediately after purchase Market conditions
![Page 25: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/25.jpg)
7-25
Adjustment to Comparable Sales Prices Property Adjustments
Location Physical characteristics Economic characteristics Use Non-realty items (personal property)
![Page 26: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/26.jpg)
7-26
Object of Adjustments
Subject
Comp 1 Comp 2
![Page 27: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/27.jpg)
7-27
Example of Sales Comparison Approach You are appraising a property located adjacent
to a high speed freeway Improvements consist of a one-story frame
dwelling with 8 rooms and 2 baths in a total area of $2,000 sq. ft.
Of average quality construction, home was in good condition at time of inspection
Floor plan & items of equipment are typical for this class of property
![Page 28: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/28.jpg)
7-28
Investigation disclosed the following transactions involving comparable properties in the neighborhood of the subject and in a similar value range as the subject
![Page 29: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/29.jpg)
7-29
Info on 4 Comparables(1) One year ago a 2,400 sq. ft. property not adjacent to freeway sold for $160,000. Improvements were nearly identical to subject dwelling in all but size.(2) This year a 2,400 sq. ft. property not adjacent to freeway sold for $150,500. This dwelling was highly similar to subject in all respects except for size.
(3) A 2,000 sq. ft. property not adjacent to the freeway sold 1 year ago for $150,000. These improvements are highly similar to subject.
(4) A 2,400 sq. ft. property sold this year for $140,300. Located adjacent to the freeway, it was very similar to subject except for size.
![Page 30: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/30.jpg)
7-30
Example (continued)
Problem:Develop an indication of the value of the subject, showing the source of each adjustment.
Indicated adjustments are for: time location relative to freeway size
![Page 31: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/31.jpg)
7-31
Adjustment Factors Time:Sale 1 (1 year ago) $ 160,000Sale 2 (current) 150,500
Difference $ -9,500 Location:Sale 2 (not adjacent to freeway) $ 150,500Sale 4 (adjacent to freeway) 140,300
Difference $ -10,200 Size:Sale 1 (2,400 sq. ft.) $ 160,000Sale 3 (2,000 sq. ft.) 150,000
Difference $ -10,000
![Page 32: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/32.jpg)
7-32
Example (continued)
Adjustments:
Sale Sale Price Time Location Size TotalAdj.
IndicatedValue
1 $160,000 -$9,500 -$10,200 -$10,000 -$29,700 $130,300
2 150,500 - 10,200 - 10,000 - 20,200 130,300
3 150,000 - 9,500 - 10,200 - 19,700 130,300
4 140,300 - 10,000 - 10,000 130,300
Estimated Market Value: $130,300
Note: Adjustments can be positive or negative. They are all negative here because subject property is inferior to the comparables in all ways that matter to the market
![Page 33: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/33.jpg)
7-33
In the Real World...
In "real life" situations, indicated values never line up identically as in above example
How many attributes of the homes should appraiser attempt to price? Take a look at Exhibits 7-8 & 7-12
![Page 34: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/34.jpg)
7-34
Using Repeat Sales to Adjust for Market Conditions
Note: It is often difficult to find a sufficient number of comparables that have sold twice. Thus, must often rely on publicly available house price indices to estimate price appreciation for a typical house in the subject’s neighborhood
![Page 35: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/35.jpg)
7-35
Adjusting for Market Conditions Using a Price Index Sources of Price indexes
Freddie Mac Freddie Mac: CMHPI Data Federal Housing Finance Agency (FHFA) http://
www.fhfa/gov S&P/Case-Shiller Home Price Indices
www.macromarkets.com/csi_housing/sp_caseshiller.asp National Association of Realtors
www.realtor.org/research/research/metroprice
Application: Derive monthly rates of change from most relevant series, & apply to comparables.
![Page 36: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/36.jpg)
7-36
Exhibit 7-6: Sequence of Adjustments
![Page 37: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/37.jpg)
7-37
Adjustment Grid for 2380 Appletree Ct
![Page 38: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/38.jpg)
7-38
Reconciliation of Adjusted Sale Prices
![Page 39: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/39.jpg)
7-39
Cost Approach
ProcedureEstimated reproduction cost of improvements
− Estimated accrued depreciation
= Depreciated cost of building improvements
+ Estimated value of site
= Indicated value by the cost approach
Major Assumption?:The cost of creating a good equals its value
![Page 40: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/40.jpg)
7-40
Cost Approach (continued)
Two concepts of cost: Replacement cost:
Cost to create something of equal utility (functionality) Reproduction cost:
Cost of an exact physical replica Complication in application?
![Page 41: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/41.jpg)
7-41
Cost Approach (continued)
Methods to estimate replacement cost Quantity survey methodCost per square foot or cubic footUnit in place
Sources R.S. Means www.rsmeans.com Marshall and Swift www.marshallswift.com
![Page 42: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/42.jpg)
7-42
Accrued Depreciation
Not tax depreciation Difference between replacement cost & market
value of improvements Types of accrued depreciation that must be
considered:1. Physical deterioration
2. Functional obsolescence
3. External (economic) obsolescence
![Page 43: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/43.jpg)
7-43
Types of Accrued Depreciation (continued)1. Physical deterioration:
Loss in market value due to aging, decay & ordinary use
2. Functional obsolescence: Loss in value due to changes in tastes,
preferences, technological innovations, or market standards
Examples?
![Page 44: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/44.jpg)
7-44
Types of Accrued Depreciation (continued)3. External (economic) obsolescence:
Loss in value due to changes beyond property boundaries (neighborhood effects)
Increased traffic congestion in area Conversion of residential neighborhood from owner-
occupied to rental Environmental issues Decline in desirability/demand fro neighborhood
![Page 45: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/45.jpg)
7-45
Appraisal Assignments Where Cost Approach is Heavily Weighted?1. New buildings
2. Insurance appraisals
3. Specialty buildings
![Page 46: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/46.jpg)
7-46
Uniform Residential Appraisal Report
![Page 47: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/47.jpg)
7-47
Uniform Residential Appraisal Report
![Page 48: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/48.jpg)
7-48
Uniform Residential Appraisal Report
![Page 49: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/49.jpg)
7-49
Revolution in Comparable Sales Appraisal: Automated Valuation Systems (AVMs) Example: Freddie Mac: Home Value Suite Based on model developed over millions of
sales Combines complex regression with repeat sales
and other statistical techniques Regression is used to predict/value the subject
property See INDUSTRY ISSUES 7-2 and EXPLORE
THE WEB on page 187
![Page 50: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/50.jpg)
7-50
Use One of These AVMs to Value a Relatives' Home http://www.smarthomebuy.com http://zillow.com
![Page 51: Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.](https://reader035.fdocuments.net/reader035/viewer/2022062314/56649e435503460f94b36846/html5/thumbnails/51.jpg)
End of Chapter 7