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Real Estate Appraisal. Front Cover · Joseph F. Schram. Rockwell Publishing, - Real property - pages. 0 Reviews. Fundamentals of Real Estate Appraisal, 8th Edition contains all the tools you need to understand today's ever-changing appraisal marketplace. The book. This section contains all of our current collection of books & ebooks. The Student Handbook to The Appraisal of Real Estate, 14th Edition. Price: $
It can also affect the method used to value the property.
These are usually referred to as the "three approaches to value" which are generally independent of each other: The sales comparison approach comparing a property's characteristics with those of comparable properties that have recently sold in similar transactions. The cost approach the buyer will not pay more for a property than it would cost to build an equivalent.
The income approach similar to the methods used for financial valuation, securities analysis or bond pricing. However, the recent trend of the business tends to be toward the use of a scientific methodology of appraisal which relies on the foundation of quantitative-data,  risk, and geographical based approaches. 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 "scope of work", the type of value, the property itself, and the quality and quantity of data available for each approach.
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. 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 the 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[ edit ] The sales comparison approach is based primarily on the principle of substitution. 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 "comparables". 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.
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 a 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.
The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. 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[ edit ] Main article: Income approach The income capitalization Approach often referred to simply as the "income approach" is used to value commercial and investment properties.
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. Usually, an NOI has been stabilized so as not to place too much weight on a very recent event.
An example of this is an unleased building which, technically, has no NOI. This book was written to help current and future homeowners understand what appraisers are looking for when they determine home valuations. Although it is for a general audience, there are plenty of valuable insights for professionals available in this source.
This in-depth guide provides information into the history of the appraisal profession. Of particular interest are the fascinating historical overviews of the development of appraisal safety standards and building codes. This tome centers on both best practices for professional appraisers and property owners who are getting ready for an appraisal inspection.
While most appraisers have moved to digital technology to create accurate estimates, very few are fully aware of all of the benefits this new tech has to offer. Mobile Appraising shows appraisal professionals how to leverage new tools and technology to improve their estimates and appraisals.
While most appraisers have moved to digital technology to create accurate estimates, very few are fully aware of all of the benefits this new tech has to offer. This book presents real-world case studies that appraisers can use to learn about potential issues and challenges before they have to face them in the field. This collection is a phenomenal way to introduce new scenarios in a classroom or study group situation and should be used as a supplement to more comprehensive guides.
Did we miss any must-have appraisal books? What do you think are the best books for appraisers? Let us know. Join the conversation on Facebook or Twitter. For top-notch insights into the professional appraisal industry, subscribe to our blog. McKissock offers the best courses I've taken. They're easy to understand and concise. I feel like I'm leaving the course moving forward in my career.