Basic Appraisal Procedures - McKissock Study guide with
complete solution
Valuation process
A systematic procedure used in the valuation of real property.
Client
The party or parties who engage, by employment or contract, an appraiser in a specific
assignment.
Steps in Defining the problem
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
The interests, benefits, and rights inherent in the ownership of real estate.
Market Value
A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a
right of ownership or a bundle of such rights), as of a certain date, under specific
conditions set forth in the definition of the term identified by the appraiser as applicable
in an appraisal.
Intended Use
The use or uses of an appraiser's reported appraisal or appraisal review assignment
opinions and conclusions, as identified by the appraiser based on communication with
the client at the time of the assignment.
Intended User
The client and any other party as identified, by name or type, as users of the appraisal
or appraisal review report by the appraiser on the basis of communication with the client
at the time of the assignment.
Effective Date of the Value
The ____________ can be a past (retrospective), current or future (prospective) date.
This decision will be made in concert with the client's needs.
Extraordinary assumption
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.
Hypothetical Condition
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.
Scope of work
The type and extent of research and analyses in an assignment.
Workfile
Documentation necessary to support an appraiser's analyses, opinions, and
conclusions
Steps in the Valuation Process
, 1. Define the problem 2. Determine scope of work 3. Gather, record, and verify the data
4. Determine the highest and best use 5. Estimate the land value 6. Estimate value by
each of the three approaches (if applicable) 7. Reconcile the estimated values into the
final opinion of value 8. Report the final opinion of value
Highest and Best Use Criteria (in order)
1. Legally permissible 2. Physically possible. 3. Financially feasible. 4. Maximally
productive
General data
Items of information on value influences that derive from social, economic,
governmental, and environmental forces and originate outside the property being
appraised.
Specific data
Details about the property being appraised, comparable sale and rental properties, and
relevant local market characteristics.
U.S. Bureau of the Census
The largest repository of demographics
Professional or trade associations offering general data
National Association of Homebuilders; National Association of Realtors; Appraisal
Institute
Sources of Specific Data
Deeds; Location maps; Tax maps; Flood maps; Assessor's records; Title companies;
Zoning ordinances; Multiple listing services
Special Flood Hazard Area Designation
FEMA Zones A or V
Information in Deed
The legal description of the property; The owners of record; Easements of record; Deed
restrictions; Chain of title (when the property was purchased and from whom)
Primary intended user for MLS information
Agents and Brokers
Land
The earth's surface, both land and water, and anything that is attached to it whether by
the course of nature or human hands; all natural resources in their original state, e.g.,
mineral deposits, wildlife, timber, fish, water, coal deposits, soil.
Site
Land that is improved so that it is ready to be used for a specific purpose.
Brownfield
An industrial or commercial site that is abandoned or underused because it suffers from
real or perceived continuing contamination.
Site Valuation Methods
SALES COMPARISON; EXTRACTION; ALLOCATION; SUBDIVISION
DEVELOPMENT; LAND RESIDUAL; GROUND RENT CAPITALIZATION
Extraction Method
A method of estimating land value in which the depreciated cost of the improvements on
the improved property is estimated and deducted from the total sale price to arrive at an
estimated sale price for the land; most effective when the improvements contribute little
to the total sale price of the property.
complete solution
Valuation process
A systematic procedure used in the valuation of real property.
Client
The party or parties who engage, by employment or contract, an appraiser in a specific
assignment.
Steps in Defining the problem
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
The interests, benefits, and rights inherent in the ownership of real estate.
Market Value
A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a
right of ownership or a bundle of such rights), as of a certain date, under specific
conditions set forth in the definition of the term identified by the appraiser as applicable
in an appraisal.
Intended Use
The use or uses of an appraiser's reported appraisal or appraisal review assignment
opinions and conclusions, as identified by the appraiser based on communication with
the client at the time of the assignment.
Intended User
The client and any other party as identified, by name or type, as users of the appraisal
or appraisal review report by the appraiser on the basis of communication with the client
at the time of the assignment.
Effective Date of the Value
The ____________ can be a past (retrospective), current or future (prospective) date.
This decision will be made in concert with the client's needs.
Extraordinary assumption
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.
Hypothetical Condition
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.
Scope of work
The type and extent of research and analyses in an assignment.
Workfile
Documentation necessary to support an appraiser's analyses, opinions, and
conclusions
Steps in the Valuation Process
, 1. Define the problem 2. Determine scope of work 3. Gather, record, and verify the data
4. Determine the highest and best use 5. Estimate the land value 6. Estimate value by
each of the three approaches (if applicable) 7. Reconcile the estimated values into the
final opinion of value 8. Report the final opinion of value
Highest and Best Use Criteria (in order)
1. Legally permissible 2. Physically possible. 3. Financially feasible. 4. Maximally
productive
General data
Items of information on value influences that derive from social, economic,
governmental, and environmental forces and originate outside the property being
appraised.
Specific data
Details about the property being appraised, comparable sale and rental properties, and
relevant local market characteristics.
U.S. Bureau of the Census
The largest repository of demographics
Professional or trade associations offering general data
National Association of Homebuilders; National Association of Realtors; Appraisal
Institute
Sources of Specific Data
Deeds; Location maps; Tax maps; Flood maps; Assessor's records; Title companies;
Zoning ordinances; Multiple listing services
Special Flood Hazard Area Designation
FEMA Zones A or V
Information in Deed
The legal description of the property; The owners of record; Easements of record; Deed
restrictions; Chain of title (when the property was purchased and from whom)
Primary intended user for MLS information
Agents and Brokers
Land
The earth's surface, both land and water, and anything that is attached to it whether by
the course of nature or human hands; all natural resources in their original state, e.g.,
mineral deposits, wildlife, timber, fish, water, coal deposits, soil.
Site
Land that is improved so that it is ready to be used for a specific purpose.
Brownfield
An industrial or commercial site that is abandoned or underused because it suffers from
real or perceived continuing contamination.
Site Valuation Methods
SALES COMPARISON; EXTRACTION; ALLOCATION; SUBDIVISION
DEVELOPMENT; LAND RESIDUAL; GROUND RENT CAPITALIZATION
Extraction Method
A method of estimating land value in which the depreciated cost of the improvements on
the improved property is estimated and deducted from the total sale price to arrive at an
estimated sale price for the land; most effective when the improvements contribute little
to the total sale price of the property.
