Real Estate Appraisal
Topic One - The Appraisal Profession
The Appraisal Profession
Real estate appraiser estimates value of real
estate (land and/or buildings)
• Client can be individual, company, public
agency, or real estate broker
• Purpose of appraisal determines type of
value sought by appraiser
• Appraiser’s estimate of value made in
letter or longer appraisal report
Appraiser’s Qualifications
Education can include:
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Math/accounting
Computer skills
Statistics
Geography
Urban sociology
Economics
Real estate
Building construction
Experience gained by:
• Internship
• Trainee position
• Related real estate
occupation, such as sales
agent, property inspector,
contractor, or builder.
Appraisal Assignments
Available
• Determine seller’s asking
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price
Estate valuation
Value in trade
Business property
valuation in merger,
acquisition, liquidation, or
bankruptcy
Mortgage loan value
• Insurance value
• Damages from
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construction defects or
natural disaster
Property, gift, or
inheritance tax
Marital dissolution
Arbitration
Most profitable use
Condemnation
Employment Opportunities
Sole practitioner (with/without support staff) or
Staff appraiser for:
• Appraisal company
• Business that acquires land/buildings
• Government agency
Compensation based on time/expertise
required and competition for appraisal
services.
Licensing and Certification
FIRREA—Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
• Defined transactions that would require
state-licensed or certified appraiser
• Licensing/certification required as of
January 1, 1993
Appraisal Foundation
• Appraiser
Qualifications
Board sets minimum
qualifications for
appraiser licensing
and certification
• Appraisal
Standards Board
defines appraisal
terms and sets
minimum
requirements for
appraisal reports
USPAP
Uniform Standards of Professional
Appraisal Practice (USPAP)
www.appraisalfoundation.org
Published by the Appraisal Standards
Board of the Appraisal Foundation
Professional Societies
• Appraisal Institute,
formed by merger of
American Institute of
Real Estate Appraisers
and Society of Real
Estate Appraisers,
awards MAI and SRA
designations
• International
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Association of
Assessing Officers
International Right of
Way Association
National Association
of Independent Fee
Appraisers, Inc.
www.appraisalinstitute.org
Modern Appraisal Office
Requires knowledge of:
• Hardware, including computer, digital camera,
scanner, printer, and high-speed Internet access
• Appraiser-specific software that meets
requirements of lender, Fannie Mae, other clients
• Internet for research and communication
End of Chapter One
Real Estate and Its Appraisal
USPAP definition of appraisal:
• The act or process of developing an
opinion of value (USPAP Standard 1)
• An opinion of value (USPAP Standard 2)
Real Estate and Real Property
Real estate includes:
• Land
• Fixtures (attachments) to land
• Things incidental or appurtenant to land
(easements, etc.)
• Anything else considered immovable
Real property means same as real estate, or the
“bundle of rights” of ownership, depending on
the state where located.
Tests for Determining a
Fixture
• Method of attachment
• Modification or customization for property
• Relationship of parties ??
• Intention of person in placing item on land
• Agreement of parties
What about trade fixtures?
Restrictions on Real Estate
Public restrictions
Private restrictions
• Taxation
• Lien
• Eminent domain
• Subdivision CC&Rs:
• Police power to
conditions,
establish:
covenants, and
zoning ordinances,
restrictions
building codes, health
codes, etc.
Legal Descriptions
See book for examples
Lot and Block System
Also called
lot, block and tract system and
subdivision system
• Individual parcels are referred to by the tract,
block and lot number by which they are
identified in the subdivision map filed in the
county recorder’s office
• City, county, book and page number, and date
map recorded are also in the description
Metes and Bounds System
• Used primarily in eastern states
• Starts at point of beginning
• Follows natural or artificial boundaries
called bounds
• For measured distances called metes
• May also reference individual
monuments or markers
U.S. Government Survey
System
Also called
section and township system and
rectangular survey system
• Land area divided into townships measured
and numbered from intersection of base line
(east/west) and meridian (north/south)
• Township = 36 sections
• Section = one square mile = 640 acres
Legal Rights and Interests in Real Estate
Freehold estates
• Fee simple estate, highest form of ownership
• Life estate
Remainderman takes property on termination of
life estate
Reversion returns property to original owner
Nonfreehold estates
• Leasehold estate owned by lessee (tenant)
• Leased fee estate owned by lessor (landlord)
Other Interests in Real
Estate
• Easement
Easement appurtenant runs with the land
Easement in gross does not run with the land
• License is a temporary right
• Encroachment occurs when improvement
extends to adjoining property
Forms of Property
Ownership
Individual ownership
• Separate ownership or ownership in severalty
Co-ownership
• Tenancy in common
• Joint tenancy
• Marital property
– Community property
– Tenancy by the entirety
• Tenancy in partnership
Other Forms of Ownership
• Corporation
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– For profit--owned by shareholders
– Nonprofit--owned by members
Limited liability company (LLC)
Trust
– Land trust
– Living trust
– Real estate investment trust (REIT)
Special Forms of Ownership
• Condominium
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Exclusive ownership of specified airspace and interest in
common
Cooperative
Owners are shareholders in stock cooperative project,
with right to exclusive occupancy of part of property
Planned unit development
Type of development and zoning designation with
individually owner parcels and shared common areas
Types of Deeds
Valid deed must be in writing and describe the parties
and property. Grantor(s) must be legally capable of
executing the deed and there must be a granting
clause. Finally, the deed must be signed by grantor(s)
and delivered to and accepted by the grantee.
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Grant deed
Quitclaim deed
Warranty deed
Bargain and sale deed
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Trust deed
Reconveyance deed
Sheriff’s deed
Tax deed
Recordation
• Acknowledgment of the grantor’s
signature entitles document to recording
• Recording of document serves as notice
to the world of the transfer of title