8 Steps in the Valuation Process
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1) Define the problem
2) Determine scope of work
3) Gather, record and verify the data
4) Determine the
... [Show More] highest and best use
5) Estimate the land value
6) Estimate value by each of the 3 approaches (if applicable)
7) Reconcile the estimated values into the final opinion of value
8) Report the final opinion of value
Defining the Problem: 6 Sub-steps within
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-Identification and location of the real estate
-Identification of the property rights
-Definition of value
-Purpose and intended use of the appraisal
-Effective date of the opinion of value
-Any special limiting conditions
Real Property
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*the interests, benefits and rights inherent in the ownership of real estate
-partial estates: life estate, easement & encroachment
-specialized form of ownership: condo, coop, PUD, & timeshare
Effective Date of the Value Opinion
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-two dates are essential to an appraisal report
-the effective date of value can be a past (retrospective), current or future (prospective) date, in many cases it's the date the appraiser inspects the property; the decision will be made in concert with the client's needs
-the date of the report is the date you sign and issue the final report
Any Special Limiting Conditions
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-two common types are: extraordinary assumption & hypothetical condition
Extraordinary Assumption
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*an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which if found to be false, could alter the appraiser's opinions or conclusions
-it presumes as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis
Hypothetical Condition
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*a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis
-it is contrary to known facts about physical, legal or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis
-this type of appraisal could be significantly misleading to intended users if the use of the hypothetical condition were not properly disclosed
Scope of Work
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*the type and extent of research and analyses in an assignment
-understanding which analyses, methods and techniques are necessary and what data are necessary to correctly complete the analyses is an integral part of the scope-of-work decision
-the Scope of Work Rule was added to the 2006 edition of USPAP
-applies to appraisal reviews assignments as well as appraisals
-scope of work includes:
-the extent to which the property is identified
-the extent to which tangible property is inspected
-the type and extent of data researched
-the type and extent of analyses applied to arrive at
opinions or conclusions [Show Less]