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Miscellaneous Notes

I remember Dr. Scribner responding to a question in our appraisal class about whether or not the appraiser should know the sales price of the subject property. Let's say the sales price is $91,000 and your appraisal is coming in at $90,000. Then you can make the value $91,000 because no one can measure value that accurately and why create problems with the deal for a minor difference from the sales price. This is one reason why you should know the sales price, as long as you're not based by knowing it. Also, by knowing the sales price you can get some indication of the type of property and sales comparables you'll be evaluating ahead of time.

This is one reason you should know the sales price as long as you're not biased by knowing it. Also, by knowing the sales price you can get some indication of the type of property and sales comparables you'll be evaluating ahead of time.

Contract Rent is the rent that's being paid according to the lease. Leases should have a condemnation clause in them. This will help protect the landlord in case the building gets condemned at a time when the tenant has below market rent. If this happened, the tenant could take the landlord to court to be compensated for the difference between what the market rent is for the area and what their contract rent is in the lease. If this happened a judge can award the tenant money since there's no condemnation clause in their lease. As the landlord, you certainly don't want that to happen!

Urban Space is space in a building in an urban area. For example, space in an office building in a built-up and populated city. Floor Area Ratio, (FAR) - how many feet of building can you put on a lot. Loss Ratio - the square feet of a building that is lost rental due to hallways, common areas, utility rooms, etc. Sometimes entire floors are called "mechanical floors" because they hold the operating systems for part of the building. These all reduce the total rentable square feet in the building. The lower the Loss Ratio is, then the higher the efficiency of the building. The efficiency percentage is based upon the size of the building that you're dealing with. For example, a 15% loss ratio could be considered low and a 25% loss ratio could be considered high.

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