What is TAF?
The Appraisal Foundation which is is a private, not-for-profit corporation, responsible for establishing, improving and promoting minimum uniform appraisal standards and appraiser qualifications criteria”
The Appraisal Foundation is formed of
The Appraiser Qualifications Board - establishes the qualification criteria for licensing
The Appraiser Standard Board - establishes the rules for developing an appraisal and reporting its results
The Appraisal Practices Board - responsible for identifying and issuing opinions on recognized valuation methods and techniques
There are three types of license appraisers
Registered Trainee Appraiser - 100 hours of FREAB course
Certified Residential Appraiser - 200 hours of FREAB courses
Certified General Appraiser - 300 hours of FREAB courses
Appraisers must provide certified reports which comply with user requirements and reports must:
be retained for up to 5 years after the appraisal or 2 years after a court appearance whichever is longer.
Real Estate professionals can appraise and leverage the following methods:
A comparative market analysis
A broker’s price opinion
The goal of the appraiser is to determine:
market value, insurance value, salvage value, and the tax value of a property
The appraiser’s compensation is based on
the appraiser’s time and effort not on the price of the property
What is the appraisal process?
- Appraiser understands why he or she was hired
- Gather, record and verify the necessary data
- Analyze and interpret neighborhood analysis
- Analyze and interpret site analysis
- Estimated land value
- Estimate the value of the property
What are the characteristics of value? DUST
Demand Utility Scarcity Transferability Situs
There are three approaches to value:
Sale Comparison Approach or Market Data Approach
The Cost Approach also called the Summation Approach - it is used primarily for buildings and relies on techniques such as Reproduction Cost and Replacement Cost
Cost can be determined by three methods:
Square foot cost
Unit in Place
Quantity Survey Method
Steps in the Cost Approach
- Estimate the value of the land alone as if vacant.
- Determine either the replacement or reproduction cost of the building,
- Deduct all accrued depreciation from the replacement cost.
- Add the estimated land value to the depreciated replacement or reproduction cost.
There are three types of depreciation:
- Physical Deterioration
- Functional Obsolescence
a. Curable
b. Incurable - Economic Obsolescence
Economic, Environmental, or External Obsolescence is
an Incurable Functional Obsolescence
Effective Age
Differs from the actual age by such a factors such as depreciation, quality of maintenance,
Chronological age
is the actual age
Value can be defined in several terms:
Physical Life
Economic Life
Economic Rent
Incurable vs. Curable
When a property has repairs or updating that is economically feasible, it said to be curable.
What are the steps involved in the cost approach?
- Estimate the value of the land alone as if vacant.
- Determine either the replacement or reproduction cost of the building.
- Deduct all accrued depreciation from the replacement cost.
- Add the estimated land value to the depreciated replacement or reproduction
Income Approach is as follows:
E (effective gross income) = P (potential gross income) less V (vacancy and collection losses)
N (net operating income) = E (effective gross income) less O (operating expenses)
Gross Rent Multiplier
Rent X Gross Rent Multiplier
