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Member / Affiliate:

NAR - USA
 COMPREHENSIVE REAL ESTATE SEMINAR & REVIEW
(CRESAR) for PRC Licensure Exam
Phela Grande Hotel, General Santos City
April 5, 2015

PRC Visiting Lecturer:

Realtor ARTURO M. LAWA
Certified Property Valuer
RE Appraiser PRC Reg. No. 0000248
RE Broker PRC Reg. No. 0002007
Mobile Nos.: 0919-6757777; 0932-8222822
Email: [email protected]

Member / Affiliate:

NAR - USA
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 INTRODUCTION

Real Estate Brokers are being confronted with the

following vital issues upon acceptance of Listing
Agreements that end up to make or unmake their
closing of sale transactions:

1. Determining the exact location of the property listed.

2. Interpretation of technical descriptions.
3. Which property value is the logical offering price to the
buyer?
a. Value insisted by landowners- take it or leave it
attitude; or
b. Value heard from the neighborhood; or
c. Value referred by salespersons and other brokers.
4. Motivation to earn fat commissions, will he offer his own
self-determined valuation?

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 INTRODUCTION

Some Facts in the Professional Practice:

-Opinion of Value are determined by professional RE Appraisers.
However, it takes a longer time to fully implement RA 9646.

-RE Brokers and salespersons often compile records from the

marketplace, primarily similar properties that have been sold,
known as competitive market analysis (CMA) . Though not a
formal appraisal but it can be a reasonable value range as basis
of price offering.

-RE Brokers who has the knowledge of basic principles of

valuation can derive a better offer price not unless a formal
Appraisal Report is required by the buyer as basis of decision
which is to be rendered by licensed and competent RE appraisers.

-Working knowledge of basic valuation principles will train the RE

Broker to the next ladder in the profession as an associate RE
Appraiser.

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 Definition of Terms
(IVS/PVS)

Real Estate is defined as the physical land and

improvements that are permanently attached or affixed to
land. A tangible thing that can be seen and touch, above
or below the ground.

Real Property the land and improvements

including all the rights, interests and benefits related to
the ownership of real estate, normally demonstrated by
evidence of ownership, e.g., title deed.

Personal Property refers to ownership of interest

in items other than real estate. It can be intangible
(patents & debts) & tangible (chattels) not permanently
affixed to real estate and generally characterized by their
movability. Legally recognized as personalty in
distinction to realty.
Real Property has two (2)
inseparable components:
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2. Juridical - the rights of ownership, interests
Definition of Terms (IVS/PVS)

Appraisal is an estimate or opinion of value based

on supportable evidence and approved
methods. (GAVP)

Valuation is a determination of the monetary values

at some specified date of the property rights
encompassing its ownership.

Appraiser also known as Valuer, refers to a

person who conducts valuation/appraisal;
specifically, one who possesses the necessary
qualifications, license, ability and experience to
execute or direct the valuation/appraisal of real
property. (IVS/PVS/RA 9646)

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 Definition of Terms

Internal Appraiser is an appraiser under the

employ of the entity owning the real property or
the firm that prepares the appraisal report.

External Appraiser is an appraiser in the private

practice offering services for a fee to the general
public who are owners of real property.

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 Comparison of:
Cost Estimation an estimate of the amount of money that
would be required at some specified date, to construct,
produce, replace or reproduce some tangible and/or
intangible thing, without regard to its ownership. (Ex.
Quantity surveying)

Earnings Forecast an estimate or forecast of the future

net monetary returns, derivable from something owned or
considered as being owned. (Ex. Investments &
Income Appraisal)

Appraisal is an estimate or opinion of value, where an

estimate is:
a. Not a Statement of Value
b. Not a Determination of Value
c. Not a Fixing of Value
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 Types of Appraisal

1. Informal Appraisal - Done by almost everyone. They are

usually based on a combination of knowledge, experience
and intuition, i.e. pricing merchandise for sale, making
analysis as by a real estate broker or a salesperson
taking a property listing.

2. Formal Appraisal These are usually undertaken by

professionals on this specialized field, who meet the rigorous
test of education, training, competence and demonstrated
skills, and exhibits, maintain and follow the Code of Conduct
and Standards of Professional Practice and
Generally Accepted Valuation Principles (GAVP).

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 Kinds of Formal Appraisal

1. Appraisal in business and finance -

Sale, lease or purchase of property
Forming new corp., merger & consolidation, exchanges
Mortgages, debenture, stock financing and sale-leaseback

2. Appraisal in litigation -
Condemnation proceedings
Fraud cases
Damage cases
Division of estate cases

3. Appraisal for taxation -

Property tax purposes
Inheritance and gift tax purposes
4. Appraisal for insurance -
Fire insurance coverage
Theft and loss insurance coverage

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 Accuracy of Appraisal Report

- Appraisal is only one persons opinion of

value. Different Appraisers may arrive at
different estimates due to different
assumptions.
- The accuracy and usefulness of the value
estimate depends on appraisers skills,
experience and judgment. -(IVS/PVS)

Factors Affecting Accuracy of Appraisal:

1. Competence of the Appraiser.
2. Integrity of the Appraiser.
3. Soundness of the procedure used in
the appraisal work.
4. Access to relevant data and information.
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 What is VALUE

Value means the worth, usefulness or

utility of an object to someone for some purpose
at a future time.
To have value in the real estate market is to
have monetary worth based on desirability.

Characteristics of a Property to have a Value:

1. Demand the need or desire for possession or ownership
backed by the financial means to satisfy that need;
2. Utility the ability of the property to satisfy human
need;
3. Scarcity land is not scarce, its use for which it is
intended or actually established is becoming
unique;
4. Transferability the relative ease with which ownership
rights are transferred from one person to another.

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 Factors Affecting VALUE

1. Social forces relating to population growth, birth

control measures and migration;
2. Political related to efficiency of govt. in the
maintenance of peace and order providing
primary services and legislation;
3. Economic relating to the nature of basic
industry and business activity in the
neighborhood, employment, income, housing,
etc.;
4. Physical forces that refer to the location and
age of the neighborhood, size, area, shape,
topography, improvements, trends.

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 Distinction of VALUE
Value in Use Refers to the value of a thing or
property to the holder which includes the
amenities, benefits and income derived from its
ownership, all of which are estimated in terms of
money. This is subjective value.

Value in Exchange indicates the value of the

property traded in the open market for profit. This is
synonymous to objective value or market value.

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 VALUE, PRICE & COST
compared
Value is an economic concept referring to the price
most likely to be concluded by the buyers and sellers of
a good or services that is available for purchase.
Price is a term used for the amount asked, offered,
or paid for a good or service. Because of financial
capabilities, motivations or special interest of a given
buyer and/or seller, the price paid may or may not have
any relation to the VALUE.
Cost - is the amount required to create or
produce the good or services. Once that good or
service has been completed, its cost is an historical
fact. The PRICE paid for a good or service becomes its
COST to the buyer. Normally, Cost is less than Price.
The difference is Profit.

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 MARKET VALUE
defined

Market Value means the estimated amount for which

a property should exchange on the date of valuation between
a willing buyer and a willing seller in an arms-length
transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently, and without
compulsion. (IVS/PVS)
Elements: a) Estimated amount as of date
b) Willingness of both parties
c) Substantive knowledge and sound judgment by both
parties
d) Known in the open market
e) Under no pressure

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 Other Meanings of Value

1. Plottage Value when one or more parcels are

consolidated so that its increment in value as a
whole is much more than the total sum of the
value of each parcel of land separately owned.

2. Rental Value refers to the price fixed for the

right to use a certain property for a specific
period of time.

3. Cash Value is the value of the property in all-

out sale. It is synonymous to market value.

4. Investment Value is the present worth of

future benefit, or income of the property that the
owner or investor has acquired. Economists
consider this as the Economic Concept of value.
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 Other Meanings of Value

5. Book Value is the original cost of an asset or property

less accrued depreciation.
6. Going Concern Value is the value of the business in
operation, or property that will continue to be utilized. It
includes tangible property such as real estate, equipments
and machineries, fixtures and inventories plus intangible
assets such as franchises, patents and goodwill.
7. Liquidation Value when corporation under receivership
may sell its assets lower than its market value because
the owners are forced to sell, or due to their ignorance of
the real value of their assets
8. Taxable Value or Assessed Value is the value of land or
improvements for advalorem tax purposes. The assessed
value is multiplied by the tax rate to produce the amount
of tax due for payment.

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 Other Meanings of Value

9. Salvage Value is the amount that may be recovered

minus cost of disposal when the assets will be retired
or disposed of at a future time.
10. Loan Value is the maximum level of value, or
appraisal, against which a property may be mortgaged
to secure payment of the loan. A loan-to-value rate is
usually fixed by the bank.
11. Insurance Value is the cost of the insurance
coverage of a building or improvements to cover its
loss due to earthquake, fire or other calamity. This is
done by estimating the cost of replacing the entire
building or the portion thereof that has been damaged.
The value of the land is included in the estimate.

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 Other Meanings of Value

12. Scrap Value is the value of a depreciated

building or the materials recovered from it.
13. Condemnation Value is the estimated value of
a property that is the object of expropriation for
public use. Just compensation is the fair and full
equivalent in money, for the loss sustained.
14. Zonal Value is the mass appraisal value of land
in a specific zone or area established by govt.
(BIR).
15. Sentimental Value is value in owning a
cherished property where one is emotionally
attached with and most of the times unquantifiable.

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 Economic Principles affecting
Value

Whether or not an Appraiser observes them, there is always a

number of Economic Principles or Concepts at work that
affect the Value of Real Estate, such as:
1. Anticipation 8. Highest and Best Use
2. Balance 9. Increasing/Diminishing Returns
3. Change 10. Plottage (Assemblage)
4. Competition 11. Regression/Progression
5. Conformity 12. Supply and Demand
6. Contribution 13. Substitution
7. Consistent Use 14. Surplus Productivity

(Key word ABCCCCC HIPRSSS)

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 Economic Principles affecting
Economic Principles or Concepts affecting the value
Value
of real estate.

1. Anticipation value can increase or decrease in

anticipation
of some future benefit or detriment affecting the
property.
2. Balance All the agents of production must be equal
money, management, materials and methods.
3. Change No physical or economic condition remains
constant. Real estate is subject to natural phenomena
such as fires, earthquakes and routine wear and
tear
4. Competition is the interaction of supply and
demand. Excess profits tend to attract competition.
Excess competition ruins profits.

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 Economic Principles affecting
Value
5. Conformity value is created when a property is in
harmony with its surroundings.
6. Contribution the value of any part of a property is
measured by its effect on the value of the whole.
7. Highest and Best Use means the most probable use of
a property which is physically possible, appropriately
justified, legally permissible, financially feasible, and which
results in the highest value of the property being valued.
(IVS/PVS)
8. Increasing and Diminishing returns the addition of
more improvements to land and structures increases value
only to the assets maximum value. Beyond that point,
additional improvements no longer affect a propertys value.
9. Plottage the principle of merging and consolidating
adjacent lots into a single larger lot under a single land use
tend to produces a greater total land value than the sum of
two sites valued separately.. Process is called Assemblage.

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 Economic Principles affecting
Value
10. Regression and Progression the worth of a
better-quality property is adversely affected by
the presence of a lesser-quality property and vice-
versa.
11. Substitution the maximum value of a property
tends to be set by how much it would cost to
purchase an equally desirable and valuable
substitute property.
12. Supply and Demand the value of the property
depends on the number of properties available in
the marketplace the supply of the product. Other
factors include the prices of other properties; the
number of prospective purchasers; and the buying
price that buyers will pay.

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 Highest And Best Use
analogy
Highest And Best Use (HABU)- is the most probable use of a
property which is physically possible, appropriately
justified, legally permissible, financially feasible, and which
results in the highest value of the property being valued.
(IVS/PVS)

Practical Rule of Thumb to established HABU

1. Consider the land as if vacant even if improved. To see if the vacant
land can be profitably used for a different use other than its
present use;
2. Consider only those uses allowed under current zoning laws,
regulatory restrictions and other constraint such as private
restrictions;
3. Consider only uses that are physically practical;
4. Consider only uses that are likely to be in demand and profitable in
that location to justify the capital investment.

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 Bundle of Rights*
Bundle of Legal Rights is the juridical component of rights
of ownership to real property, such as:
1. Right to possess and enjoy its use.
2. Right to destroy and improve
3. Right to profit from
4. Right to remove objects
5. Right to recover
6. Right to transfer rights during owners lifetime by sale or
gift.
7. Right to exclude others from enjoyment/disposal of its fruits.
8. Right to convey ownership by inheritance.
* An old English law during the middle ages, where a seller transfers
ownership to the buyer by giving a bundle of bound sticks or handful
of stones symbolic of these rights which can be separated and
individually transferred.

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 Specific Property Rights

Property Rights:
1. Surface Rights
2. Subsurface Rights
3. Air Rights
4. Subject to rights reserved by the State

Fee Simple - is defined as the absolute estate without

limitation to any particular class of heirs or
restrictions. It is the greatest interest one can have in
real property. An estate that is unqualified of indefinite
duration, freely transferable and inheritable.
Owner of a Fee Simple Title may do anything he wishes
with the land, provided that he does not use the land
as a nuisance

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 Restrictions on Property
Rights
a. Rights retained by the State:
1. Police Power
2. Eminent Domain
3. Taxation
4. Escheat
b. Restrictions imposed by Contracts:
1. Deed Restrictions in Contract to Sell
2. Lease
3. Easement
c. Restrictions imposed by Grantor:
1. By Will or Testament
2. Deed of Donation
d. Enroachment

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 How to conduct Appraisal or
Valuation
(REVIEW - SUMMARY)

We are already familiar with the following terms:

-Appraisal and Valuation theory
-Value - principles
- Its other meanings
-Highest and Best Use (HABU) Analysis
-Property Rights - bundle of rights
- restrictions

Q. How then is Appraisal being done?

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 Three Approaches to determine
VALUE

To arrive at an accurate estimate of value,

Appraisers
traditionally use Three (3) Basic Valuation
Approaches:

1. Market Data Approach

2. Cost Approach
3. Income Approach

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 MARKET DATA Approach

1. MARKET DATA APPROACH - an estimate of

value is obtained by comparing the property being
appraised (the subject property) with that of recently
sold comparable properties (properties similar to the
subject).

Since no two parcels are exactly alike, each

comparable property must be analyzed for
differences and similarities between it and
subject property.

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 Adjustment Factors in
Comparing
The Market Data Approach has Principal Factor for
which adjustment must be made includes the
following:
1. Property Rights An adjustment must be made when
less than Fee Simple andthe full bundle of rights are
involved. This includes land lease, ground rents, life
estates, easements, deed restrictions and encroachments.
2. Financing concessions mortgages loan terms.
3. Conditions of Sale motivational factors that would
affect the sale, such as foreclosures, a sale among family
members or some non-monetary incentives.
4. Date of Sale adjustments if an economic change
occur between date of sale of comparable property and
date of appraisal.
5. Location similar properties might differ in price from
neighborhood to neighborhood or even locations within
the same neighborhood.
6. Physical features and amenities age, size and
condition of structures may require adjustments.
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MARKET DATA APPROACH ILLUSTRATION
Subject Property Property Property Property
FACTORS Property A B C _D_____
Sales Price ( ? ) P500,000 P550,000 P450,000 P600,000
Location good same poorer same same
+20,000
Age of Bldg. 10 yrs. same same same same
Size of Lot 12 x 10 same larger same larger
-10,000 -10,000
Landscaping good same same same same
Construction CHB same same same same
No. of Bedrooms 3 same same same same
No. of T/Baths 2 better same same same
-5,000
Floor Area 150 same same same same
Condition-Interior very good poorer same same better
+10,000 -10,000
Condition-Exterior good same same same same
Financing available same same same same
Date of Sale current 2 yrs. Ago same same
_____________________________________+30,000____________________________
Net Adjustment +5,000 +40,000 0 -20,000
Adjusted Value P505,000 P590,000 P450,000 * P580,000
______________________________________________________________________________
*Conclusion: Therefore, subject property is comparable
to Property C.

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 COST Approach

2. COST APPROACH is an estimate of

value
based on the Principle of Substitution which states
that the
maximum value of a property tends to be set by
the cost of
acquiring an equally desirable and valuable
substitute
property assuming that no costly delay is
encountered in
making the substitution.

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Two Ways to look at the Construction Cost of a
Buildingfor Appraisal purposes.

a. Reproduction Cost - is the construction cost at

current prices of an exact duplicate of the subject
improvement, including its benefits and drawbacks.

b. Replacement Cost New (RCN) - is the cost to

construct an improvement similar to the subject
property using current construction methods and
materials, but not necessarily an exact
duplicate.
Replacement Cost New is more frequently
used in appraising older structures
because it eliminates obsolete
features and takes advantage of current
construction materials costs and techniques.

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 DEPRECIATION defined
Depreciation - in a real estate appraisal, it is a loss in value
due to physical deterioration (wear and tear) or obsolescence
(functional or economic). It refers to a condition that adversely
affects that value of an improvement to real property.
Depreciation is considered to be curable and incurable,
depending on the contribution of the expenditures to the value of
the property.

Depreciation is divided into three classes, according to its cause:

1. Physical deterioration -
Curable - an item in need of repair, such as painting (deferred
maintenance), that is economically feasible and would result in an
increase in value equal to or exceeding the cost.
Incurable - a defect cause by physical wear and tear if its
correction would not be economically feasible or contribute a
comparable value to the building. The cost of a major repair may
not warrant the financial investment.

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 DEPRECIATION defined
2. Functional obsolescence -
Curable - outmoded or unacceptable physical or design
features that are no longer considered desirable by purchasers.
Example, an outmoded plumbing is usually replaced; bedroom
adjacent to a kitchen and converted to a family room.
Incurable - currently undesirable physical or design
features that could not be easily remedied because the cost of
cure would be greater than its resulting increase in value.
Example, an office building that cannot be economically air-
conditioned.
3. External obsolescence -
Incurable - caused by negative factors not on the subject
property, such as environmental, social or economic forces.
The loss in value cannot be reversed by spending money on
the property. Example, a proximity to a nuisance such as a
polluting factory or a deteriorating neighborhood, is one factor
that could not be cured by the property owner.

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 DEPRECIATION computed

Straight-Line Method Depreciation -

In real estate appraisal, depreciation can only be
easily but least precisely determined by a Straight-
line method, also called the economic age-life
method.
method
Depreciation is assumed to occur at an even rate
over a structures Estimated Economic Life (EEL),
the period within which it is expected to remain useful
for its original intended purpose.
The propertys Cost is divided by Number of
Years of its expected economic life to derive the
amount of Annual depreciation.

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 COST APPROACH computed

Cost Approach consists of five steps:

1. Estimate the value of the Land as if it is vacant and
available
to be put to its highest and best use;
2. Estimate the current construction cost of Buildings and
Improvements;
3. Estimate amount of accumulated depreciation resulting
from the propertys physical deterioration,
functional (internal) obsolescence and economic
(external) obsolescence; (curable/incurable)
4. Deduct the accumulated depreciation (Step 3) from
the construction costs (Step 2);
5. Add the estimated Land Value (Step 1) to the
depreciated cost of Building and
Improvements (Step 4) to arrive at the Total
Property Value.

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 COST APPROACH Illustration
Sample Problem:
A Land with frontage of 12 meters and a depth of 20
meters is valued at P2,000 per sq. meter and site
improvements such as driveway, walks, landscaping and
others were constructed at P20,000. A Building with 150 sq.
meter floor area was found on the lot with replacement cost of
P5,000 per sq. meter. Upon inspection, the following were
estimated:
Physical Depreciation
-curable (items of deferred
maintenance) exterior painting P 5,000
-incurable (structural wear & tear) 10,000
Functional Obsolescence(incurable-design)50,000
Locational Obsolescence (environs) 35,000
Total Depreciation - - - - - - - - P 100,000
Required: Compute the indicative Property Value by Cost
Approach.

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 Answer:

Land Valuation (12m x 20m = 240 sq. m. x P2,000) - P

480,000
Plus: Site Improvements: driveway, walks, landscaping, etc. -
20,000
P 500,000
Building Value: Replacement Cost New
150 sq. m. at P5,000 - - - - - - P 750,000
Less: Depreciation -
Physical Depreciation
-curable (items of deferred
maintenance) exterior painting P 5,000
-incurable (structural wear & tear) 10,000
Functional Obsolescence(incurable-design)50,000
Locational Obsolescence (environs) 35,000
Total Depreciation - - - - - - - - - - - - - 100,000
Depreciated Value of Building - - - - - - - - - - - - - - - - - - - 650,000
Indicative Property Value by Cost Approach . . . . . . . . P
1,150,000

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 INCOME Approach

3.INCOME APPROACH - is based on the Present

Value of the rights to Future Income. It assumes that
the income generated by a property will determine the
propertys value.

The Income Approach is used for valuation of

income- producing properties such as apartment
buildings, rental condominiums, office buildings
and shopping centers.

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 5 Steps of Estimating Value in
Income Approach

1. Estimate annual Potential Gross Income. An

estimate of economic rental income must be
made on market studies. Include other source such
as vending machine, parking fees and laundry
machines;

2. Deduct an appropriate Allowance for Vacancy and

Rent Loss, based on the appraisers experience, and
arrive at Effective Gross Income;

3. Deduct the annual Operating Expenses from the

effective gross income to arrive at the annual Net
Operating Income (NOI). Management costs are
always included, even if the current owner manages
the property. Mortgage payments (principal plus
interest) are Debt Service and not considered
operating expenses.
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 5 Steps of Estimating Value in
Income Approach

4. Estimate the price a typical investor would pay for

the income produced by this particular type or class
of property. This is done by estimating the Rate of
Return (or yield) that an investor will demand for the
investment of capital in this type of building. This rate
of return is called Capitalization Rate or Cap
Rate and is determined by comparing the
relationship of net operating income to the sales
prices of similar properties that have sold in the
current market.

5. Apply the capitalization rate to the propertys annual

net operating income to arrive at the estimate of the
propertys value. (See Example next slide)

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Example of Capitalization Rate:

Example.
A comparable property that is producing an
Annual Net Income of P15,000 is sold for P187,500.
The capitalization rate is P15,000 divided by
P187,500, or 8%.
If other comparable properties sold at prices that
yielded substantially the same rate, it may be
concluded that 8% is the rate that the Appraiser
should apply to the subject property.

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INCOME APPROACH illustration 1:
Gross Annual Income estimate (potential rent income) - - P 120,000
Less: Vacancy and Loss of Rent (6% estimate) - - - - - - - - - 7,200
Effective Gross Income - - - - - - - - - - - - - - - - - - - - - - - P 112,800
Less: Operating Expenses
Real estate taxes - P 2,000
Insurance - 1,500
Repairs - 6,000
Maintenance - 4,000
Management - 5,500
Net Annual Operating Expenses - - - - - - - - - - - - - - - - - - 19,000
Annual Net Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . P 93,800
Capitalization Rate (Banks Interest rate): 8%
Capitalization of Annual Net Income = P93,800/.08
Indicated Property Value by Income Approach . . . . . . P 1,172,500
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With the appropriate capitalization rate and the projected annual net operating
income, the Appraiser can obtain the indicative of value by the Income Approach.

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 With the appropriate Capitalization Rate and the
INCOMEAnnual
Projected APPROACH illustration
Net Operating Income (NOI), 2: the
Appraiser can obtain the indication of value by the Income
Approach.

These formula graphically illustrated and its

variations are important in dealing
withIncome property:
Income / Rate = Value
I
Income / Value = Rate I
[

Value x Rate = Income RR VV

Net Operating Income / Capitalization rate =

Value
Example : P18,000 income / 9% cap rate =
P200,000 value
or P18,000 income / 8% cap rate =
P225,000
NOTE: The relationship between the rate
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 RECONCILIATION
RECONCILIATION is the art of analyzing and effectively
weighing thefindings from the Three Approaches. The process
of reconciliation is more complicated than simply taking the
average of the three estimates of value. This is not mere
setting the average of the three, but to ascertain which is
more reliable and applicable to the particular problem.
Example:
1. In appraising a home, the income approach is rarely valid,
and the cost approach is of limited value unless the home is
relatively new. Therefore, the sales comparison approach is
usually given greatest weight in valuing single-family
residences.
2. In the appraisal of income or investment property, the
income approach normally is given the greatest weight.
3. In the appraisal of churches, libraries, museums, schools
and other special-use properties where little or no income or
sales revenue is generated, the cost approach usually is
assigned the greatest weight.
 Types of Appraisal
Report

Oral made verbally, includes statement of facts,

assumptions, conditions and reasoning. All
notes, supporting data and analysis preserved
on files.
Certificate or Letter a letter only with Appraisers
opinion of value, without supporting data, analysis
and interpretation preserved on files.
Form Report a pre-designed report form that suits
certain requirement of the user.
Narrative Report - a comprehensive report providing
Appraisers the opportunity to support and
explain opinions and conclusions and to
convince readers to the soundness of the
estimates.

An IEC project
of:
 THE APPRAISAL
PROCESS
1. State the Problem
Identify the Property Property Rights
Purpose of Appraisal Function of Appra
Effective Date Type of Value (P/

2. List the Data needed and the Source

Data Needed Time Flow Schedule Chart
Data Source Service Contract/S
Personnel Needed Professional Fee

3. Gather, Record and Verify the necessary Data

General Data Specific Data Data for
-National -Subject site -Market (
-Regional/City -Improvements -Cost Data
-Neighborhood -Comparables -Income/E

4. Determine the Highest and Best Use

Land as if Vacant Land as Improved

IEC project of:

 THE APPRAISAL
PROCESS
5. Estimate the Land Value
Comparables Capitalization
Abstraction Residual Technique
Allocation Development
6. Estimate the Value applying the Three (3) Approaches
Cost Approach Market Approach Inco
Replacement Cost New Comparison Unit Proc
Depreciation Comparables Mu
Land Value Adjustments Direct
Reconciliation Yie

7. Reconcile the Estimated Values for the Final Value Estimate

8. Report the Final Value Estimate

Submission of either Oral, Certificate or Letter-type, Form or Na

An IEC project of:

References: - Modern Real Estate Practice, 14 th Edition,
Galaty, Allaway & Kyle
- PARA CREASAT and Review Materials, 2013
- ALAWA Realty IEC Project, CRESAR 2013

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