|
Real Estate
Value - Real Estate Appraisal, property valuation
or land valuation is the process of valuing
real property.
The value usually sought is the property's
Market Value.
Appraisals are needed because compared to, say, corporate
stock, real estate transactions occur very infrequently. Not
only that, but every property is different from the next, a
factor that doesn't affect assets like corporate stock.
Furthermore, all properties differ from each other in their
location - which is an important factor in their value. The
appraiser usually provides a written report on this value to
his or her client. These reports are used as the basis for
mortgage
loans, for settling estates and divorces, for tax matters,
and so on. Sometimes the appraisal report is used by both
parties to set the sale price of the property appraised.
Real Estate Value -
Market value is the price at which an asset would trade
in a competitive auction setting. Market value is often used
interchangeably with open market value,
fair value
or fair market value, although these terms have
distinct definitions in different standards, and may differ
in some circumstances.
Real Estate Value
- Types of
value
There are several
types and definitions of value sought by a real estate
appraisal. Some of the most common are:
-
-
Market value is the estimated amount for which a
property should exchange on the date of valuation
between an educated buyer and a reasonably motivated
seller in an arms-length transaction after proper
marketing wherein the parties had each acted
knowledgeably, prudently, and without undue
influence.
- Real Estate
Value -
Value-in-use
– The net present value (NPV) of a cash flow that an
asset generates for a specific owner under a specific
use. Value-in-use is the value to one particular user,
and may be above or below the market value of a
property.
- Real Estate
Value -
Investment value
- is the value to one particular investor, and is
usually higher than the market value of a property.
- Real Estate
Value -
Liquidation value
- may be analyzed as either a forced liquidation
or an orderly liquidation and is a commonly
sought standard of value in bankruptcy proceedings. It
assumes a seller who is compelled to sell after an
exposure period which is less than the market-normal
time-frame.
Real Estate
Value - Cost approach
In
real estate appraisal,
the cost approach is one of three basic valuation
methods. The others are
market, or sale comparison, and income. The fundamental
premise of the cost approach is that a potential user of
real estate
won't, or shouldn't, pay more for a property than it
would cost to build an equivalent. The cost of
construction minus depreciation, plus land, therefore is
a limit, or at least a metric, of market value.
Real
Estate Value -
The sales comparison approach
(SCA), also referred to as "CMA" Comparative Market
Analysis or "Comps", is one of the three major groupings
of valuation methods, called the three approaches to
value, commonly used in
real estate appraisal.
This approach compares a subject
property's
characteristics with those of comparable properties
which have recently sold in similar transactions. The
process uses one of several techniques to adjust the
prices of the comparable transactions according to the
presence, absence, or degree of characteristics which
influence value. As such, all sales comparison approach
methods are variations on hedonic-type measurements,
which determine the value of something as the sum of the
value of the various components which contribute
utility.
Real
Estate Value -
The Income Approach is one of
three major groups of methodologies, called valuation
approaches, used by appraisers. It is particularly
common in commercial
real estate appraisal
and in business appraisal. The fundamental math is similar
to the methods used for financial valuation, securities
analysis, or bond pricing. However, there are some
significant and important modifications when used in real
estate or
business valuation.
While there are
quite a few acceptable methods under the rubric of the
income approach, most of these methods fall into three
categories: direct capitalization, discounted cash flow, and
gross income multiplier.
From Wikipedia.
FOR INFORMATIION
VIDEO CLICK HERE |
