English
Real Property Identification, Rights, and Valuation.
property❓ Identification
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Geographic Location: The geographic location is crucial for determining the surrounding area, accessibility, and factors influencing value, such as proximity to amenities. Map references should use a known map or guide, with the version stated in the report (e.g., “[Atlas Name], Edition [Number]”). Census tract information can be obtained online to understand demographics and socioeconomics.
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Physical Description: This includes area, land dimensions, building type (residential, commercial, industrial), number of floors, number of rooms, building condition, and any improvements.
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Current Occupancy: The occupancy status must be identified (owner-occupied, tenant-occupied, or vacant) at the valuation date. If there is an accessory unit, its status should also be specified.
- Tenant: Property is leased to someone other than the owner.
- Owner: The owner occupies the property.
- Vacant: The property is unoccupied.
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Special Taxes and Fees: Special assessments are one-time fees for improvements (e.g., lighting, road repair) and should be expressed as an annualized amount. If there are multiple special taxes, the total annual amount is entered. If there are no special taxes, enter zero (0).
- Formula:
Annualized Special Assessment = (Special Assessment Amount / Payment Frequency) * Number of Payments Per Year
- Formula:
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Planned Unit Development (PUD): If the property is in a PUD, determine if the developer still controls the Homeowners’ Association (HOA).
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Homeowners’ Association (HOA): All HOA fees associated with the property must be entered, specifying whether the amount is due annually or monthly. If the payment frequency is different, it must be converted to an annual or monthly value.
- Formula:
Annual HOA Fee = (HOA Fee Amount / Payment Frequency) * Number of Payments Per Year
- Formula:
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Personal Property: If the valuation includes personal property (e.g., equipment, furniture), these items must be listed in a separate report appendix.
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repairs❓ and New Construction: Any repairs, improvements, or new construction to be completed on the property must be identified. The repairs the assessor is assuming must be clearly defined in the valuation report as they affect the value estimate. In the case of new constructions, sufficient plans and specifications are required for the assessor to form a reasonable opinion on the value of the new improvements.
Identification of Real Property Interest
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Ownership Rights: The valuation must identify the ownership rights being assessed, such as:
- Fee Simple: Complete ownership with few restrictions.
- Leasehold Interest: Right to use property for a specific period under a lease.
- Mineral Rights: Rights to extract minerals.
- Water Rights: Rights to use water on or associated with the property.
- Easement Rights: Rights to use part of another property for a specific purpose.
- Co-owner Rights: Rights enjoyed by partners in the property.
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Restrictions: Any restrictions or obligations on the property must be identified, such as:
- Zoning Ordinances: Regulations governing land use in specific areas.
- Public and Private Easements: Allow others to use part of the property.
- Rights-of-Way: Allow public passage across the property.
- Private Deed Restrictions: Restrictions on property use specified in the deed.
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Property Taxes: Property taxes are a form of restriction on ownership rights. The assessor must identify the taxes levied on the property and analyze their impact on the value.
Standard of Value
The assessor must determine the standard of value required by the client (e.g., investment value, insurable value, value in use, or market value) and define the type of value in the report.
- Market Value: The most probable price a property should bring in a competitive open market, under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
- FHLMC/FNMA Definition: “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
- Formula:
Market Value = Most Probable Price
Effective Date of the Appraisal
The assessor must specify the effective date of the valuation and the client’s timeframe for report delivery. Value estimates are made as of a specific date (the effective date), because market conditions❓ and the physical condition of the property change over time and affect value.
Report Data Sources
All data sources used in the report must be named.
Chapter Summary
Introduction: The chapter focuses on accurately identifying the property❓, determining property rights, and their impact on the valuation process. Accurate identification is the foundation for a reliable and appropriate real estate appraisal.
Property Identification:
- Map Reference: The map reference used must be specified, including the edition, to ensure accurate location. Using a common atlas or directory in the area is necessary.
- Statistical Area: Information about the statistical area should be obtained from online service providers.
- Occupancy: Whether the property is occupied by the owner, tenant, or vacant on the valuation date must be identified. In the case of an additional unit, the status of the main unit must be determined.
- Special Assessments: Any special assessments (e.g., lighting costs or street repairs) should be indicated as an annual cost.
- Planned Unit Development (PUD): If there is a planned unit development, it should be determined whether the developer/builder controls the Homeowners Association (HOA).
- Homeowners Association (HOA) Fees: All HOA fees associated with the property must be entered, specifying whether they are paid annually or monthly. For condominiums, the condominium association fees should be included in the HOA fees.
Determination of Property Rights:
- Estimated Property Rights: The property rights to be evaluated must be specified. These may include fee simple, leasehold, or other rights such as mineral rights or water rights.
- Appurtenant Rights: The rights attached to the property that are transferred with it must be identified, such as rights in common facilities (pool, club), water rights, or even easements. These rights can significantly affect the property’s value.
- Restrictions: Any restrictions imposed on the property should be identified, such as zoning ordinances, public❓ and private easements, rights-of-way, and deed restrictions. These restrictions may increase or decrease the value of the property.
- Property Taxes: Property taxes are a form of restriction on property rights. The taxes applicable to the property must be identified and their impact on value analyzed.
Value Standard:
- Determining the Type of Value: The appraiser must determine the type of value required by the client (market value, investment value, insurance value, etc.). The type of value must be clearly defined in the appraisal report.
- Market Value: Market value is defined as “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
Valuation Date:
- Actual Date of Valuation: The actual date of valuation (valuation date) must be specified. This date is important because value changes over time due to market conditions and changes in the property’s condition.
Implications and Conclusions:
- Accurate identification of the property and property rights leads to a more accurate and reliable valuation.
- Understanding the restrictions and rights associated with the property is critical to determining its true value.
- There should be a clear agreement between the appraiser and the client regarding the value standard used in the valuation.
- The valuation date must be clearly stated because the value depends on the conditions prevailing on that date.
Conclusion: A comprehensive identification of the property and property rights is a fundamental step in the real estate appraisal process. By fully understanding these elements, the appraiser can provide an accurate and reliable assessment that reflects the true value of the property.
