eBook - Real Estate Appraisal from A to Z

Verification through public records.

A. Public records should be checked to verify the following about the property being appraised:

1. Proper legal description.
2. Correct street address.
3. Size/dimensions of the lot.
4. Location of the lot with respect to the nearest cross street.
5. Any easements, restrictions or other reservations or interests affecting the property.
6. The assessed value and taxes of the property.
7. Any changes in zoning or street pattern.

B. Transfer of title of similar properties.

1. Sales of single family vacant lots should be obtained and verified.
2. Sales of improved single family residences within the same neighborhood should be recorded.

Inspection of comparable sales.

A. Vacant lots or improved similar properties should be inspected.

B. Similar or dissimilar features as compared to the subject property are recorded and the selling price, terms and reasons for sale or purchase must be verified by the seller or buyer.

Application of approaches to value.

A. Cost approach to value.

1. From the information gathered in the inspection and the size, quality and cost classification, an estimate of cost is made of all improvements on the land.
2. The land value is estimated from information gathered in the record search of vacant parcels.
3. In the majority of instances, if the improvements are new and the highest and best use of the land, the estimate of value by means of the cost approach is equal to land value plus the new improvement costs.

B. Sales Comparison or market approach to value.

1. The sales of similar type houses are compared to the subject as to time, location and physical characteristics.
2. Necessary adjustment must be made between the sales and the subject.
3. A preliminary estimate of value by means of the comparative approach is obtained.

C. Income approach to value.

1. The economic rent of the subject is estimated by means of experience and comparison.
2. Gross monthly multipliers of similar type properties are gathered and analyzed in order to arrive at one multiplier to apply to the subject.
3. DCF may be applied for such properties as new condominium projects, subdivisions or any property with a variable type income over the holding period of the investment.
4. A preliminary estimate of value by means of the income approach is obtained.

D. Reconciliation of the approaches.

1. Each approach is weighed and compared.
2. With a new property it will generally be found that the cost approach will carry the greatest weight in the correlation.
3. If the new subject property were located within a tract of similar type houses, market comparison would be given the most weight in the reconciliation.
4. After weighing all of the factors involved, one final value reconciliation for the property is set forth.

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