1. © 2015 OnCourse Learning Chapter 10 Property Valuation

2. IN THIS CHAPTER Appraising is not an exact science. The Appraisal Institute. Basic appraisal principles. Federal regulations for appraising.

3. MICHIGAN APPRAISAL LAW Defines appraisal as an opinion, conclusion, or analysis relating to the value of real property. Not included: 1.A market analysis performed by a person licensed under Article 25. 2. An assessment of the value of real property performed on behalf of a local unit of government when performed by a properly certified assessor.

4. Classification of Appraisers 1. Limited Real Estate Appraiser 2. State Licensed Appraiser 3. Certified Residential Real Estate Appraiser 4. Certified General Real Estate Appraiser

5. APPRAISAL An appraisal is an estimate or opinion of value, based upon factual data of a particular property, at a particular time, for a particular purpose.

6. Valuation Establishes an opinion of value utilizing a totally objective approach.

7. Market Value The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

8. Types of Value Assessed value Insurance value Mortgage loan value Condemnation value Book value

9. A competitive market analysis (CMA) is an analysis of the competition in the marketplace that a property will face upon sale attempts. This procedure is not an appraisal.

10. Characteristics of Real Property 1. Demand 2. Utility 3. Scarcity 4. Transferability

11. Factors Affecting Value 1. Physical 2. Economic 3. Social 4. Governmental

12. ECONOMIC VALUATION PRINCIPLES Highest and Best Use Substitution Supply and Demand Conformity Anticipation

13. additional ECONOMIC VALUATION PRINCIPLES Contribution Increasing Returns/Diminishing Returns Competition Change Depreciation Age

14. APPRAISAL PROCESS 1. Define the appraisal problem. 2. Obtain description of the property. 3.Inspect the area & the property. 4.Collect the data. 5. Analyze the data. 6. Correlate and reconcile the results 7. Prepare the appraisal report.

15. APPROACHES TO VALUE MARKET INCOME COST

16.  anticipation  appraisal  appraisal report  appraiser  assessed value  book value  capitalization formula  change  chronological age  comparables  comparison approach  competition  condemnation value  conformity  contribution  cost approach  cubic-foot method  depreciation  economic obsolescence  effective age  effective demand CHAPTER TERMINOLOGY REVIEW  evaluation  functional obsolescence  gross income multiplier (GIM)  gross rent multiplier (GRM)  income approach  insurance value  market data method  market value  mortgage loan value  narrative report  overimprovement  replacement cost  reproduction cost  scarcity  square-foot method  substitution  supply and demand  transferability  underimprovement  utility  valuation