Introduction to Valuation Process

A systematic process used by appraisers to determine the value of real estate.

The most common appraisal assignment, focusing on the price a willing buyer would pay and a willing seller would accept in an open market.

The initial stage of the valuation process, where the appraiser gathers and analyzes information relevant to the property and its market.

The analysis of trends affecting property values at different levels, including international, national, regional, and neighborhood.

The principles, forces, and factors that influence the value of real estate.

The three methods used by appraisers to estimate value: sales comparison, cost, and income capitalization.

A valuation assignment where the appraiser determines the most probable price a buyer would pay for a property in a free and open market.

The final stage of the valuation process, where the appraiser presents their conclusions and findings to the client.

The date an appraiser provides an opinion of value, even if different from the letter's date.

An appraisal done for a past date, often needed for legal or financial purposes.

An appraisal done for a future date, considering potential changes in a property's value.

A prospective appraisal used for future planning or development.

The specific features of a property that influence its value.

Assumptions and conditions that aren't considered standard for an appraisal.

The most profitable use of a property, considering all legal and physical possibilities.

Analyzes the highest and best use of the land as if it were vacant, ignoring any existing structures.

Restrictions on a property's use, such as easements or leases, affecting its value.

Analyzes the highest and best use of the property as it currently exists, including any existing improvements.

The earth's surface, including both land and water, and anything attached to it.

Land that has been prepared for a specific purpose, such as building a house.

The value of the land as a separate component of a property. It is often determined by considering its highest and best use.

Estimating a property's value based on the cost to reproduce or replace it, minus depreciation, plus the land's value.

The process of estimating property value based on the cost to build a new, similar property.

Comparing the property to similar recently sold properties to determine its value.

A method of estimating property value based on recent sales of comparable properties in the market.

Calculating the property's value based on its ability to generate income.

The primary approach for valuing income-producing properties, assuming value is driven by future income potential.

Understanding the client's needs, the intended use of the appraisal, and the property's specific details is essential to ensure a relevant and accurate valuation.

The appraisal process begins before the client contacts the appraiser. This involves identifying the client and the intended users of the appraisal.

The intended use of the appraisal determines the type of value being sought, whether it's market value, liquidation value, or another type.

The appraisal date determines the point in time for which the value is being estimated.

Uses market research to determine the current cost of constructing similar improvements for a property.

A deduction made from the estimated cost of improvements to account for wear and tear, obsolescence, or damage.

Properties that are similar to the subject property and are used as a basis for comparison in the sales comparison approach.

Analyzing the degree of likeness or difference between the subject property and comparable sales by considering various factors.

A method where an appraiser translates the net operating income into a value for a property.

A valuation approach that considers the relationship between several years of stabilized income and the property's expected future value. It uses a yield rate, which reflects the returns anticipated from future income streams.

The most common application of yield capitalization. It involves predicting future income flows and discounting them back to their present value using a discount rate.

A variable used in direct capitalization to link income and value. Used to determine the present value of future income.

A variable used in direct capitalization to link income and value. It's the number of times an income stream goes into the property value. It represents the value of the property in terms of its annual income.

The final step in the valuation process, where the appraiser combines the values derived from different approaches into a single, concise, and defensible estimate of value.

The final opinion of value, usually expressed as a single figure, a range of potential values, or a comparison to a benchmark. It's the culmination of the appraiser's analysis.