Chapter 16 Section 2

Question 1

step 1: define the problem

Answer 1

-the following information is required to define the appraisal problem:
-client and other intended users
-client’s intended use
-type and definition of value
-effective date of the opinion
-relevant characteristics of the property
-any assignment conditions and assumptions, laws and regulations, or other conditions that affect the scope of work

Question 2

step 2: determine the scope of work

Answer 2

-a preliminary analysis of the assignment is made to determine the type and extent of research and analyses required
-data falls into two types:
-general data
-specific data

Question 3

general data

Answer 3

-concerns the region, neighborhood, economy, and so on

Question 4

specific data

Answer 4

-information about the subject property and potential comparable properties to be used in the analysis

Question 5

step 3: perform data collection and analysis

Answer 5

-market analysis: includes supply, demand, and marketability studies
-highest and best use analysis: the property is analyzed to determine the highest and best use of the site as if vacant and the property as improved
-this assists in determining whether the present use is the best use, or if an alternative should be considered to maximize the value of the land and improvements of the property

Question 6

step 4: apply the three approaches to value

Answer 6

-appraisers can use three mathematical methods to estimate the value of a subject property
-three methods are:
-sales comparison method
-cost depreciation method
-income method

Question 7

step 5: reconcile the value indications and estimate final opinion of value

Answer 7

-after the three approached have been applied and each has resulted in a value estimate, the three estimates are compared
-the appraiser’s confidence in the data and the appropriateness of the approaches to the assignment are weighed
-greater weight is given to the approach that the appraiser feels best reflects the value of the subject and then a final value is estimated

Question 8

step 6: prepare a report of defined value opinions

Answer 8

-once the final value estimate has been estimated, the appraiser prepares a report that is to be delivered to the client

Question 9

form reports

Answer 9

-most primary lenders and secondary market require them
-this is the reporting preference for most residential appraisals

Question 10

narrative reports

Answer 10

-very comprehensive
-provide the client with the reasoning and conclusions of the appraiser in a detailed report that can contain as many as 50 to 300 pages

Question 11

oral reports

Answer 11

-generally given only in connection with court testimony
-appraisers who provide court testimony must follow the same procedures used to prepare written reports and must maintain files that support their conclusions and testimony