Preliminary Analysis and Data Source Identification

A. Identifying Necessary Data:

• Data is classified into General Data and Specific Data.
  • General Data relates to property prices in the market, divided into:
    • Broad Market Trend Data: Includes economic indicators, interest rates, inflation rates, population growth, unemployment, and overall supply and demand in the real estate market.
    • Localized Competitive Supply and Demand Data: Includes the number of properties for sale, time on market, sales rates, rental rates, occupancy rates, and new construction permits in the property’s area.
  • Specific Data relates to the property being appraised and comparable properties.
    • Location Data: Includes geographic location, proximity to facilities and services, natural views, and the surrounding environment.
    • Physical Data: Includes land area, building area, number of rooms, quality of finishes, building condition, building age, and architectural design.
    • Legal Data: Includes type of ownership (freehold or leasehold), legal restrictions on property use (e.g., allowable heights), easements, mortgages, and property taxes.
    • Financial Data: Includes operating income (if the property is leased), operating expenses, net operating income, capitalization rate, and return on investment.
    • Transaction Data: Includes sales prices of comparable properties, sale dates, and sale conditions (e.g., financing or cash sale).

• Data is also classified into Primary Data and Secondary Data.

  • Primary Data is collected directly by the appraiser or other experts.
    • Personal Inspection of the Property: Examining the property and assessing its condition and specifications.
    • Interviews with Owners, Tenants, and Real Estate Agents: Gathering information about the property’s history and use, local market conditions, and future expectations.
    • Opinion Surveys: Gathering information about local residents’ opinions about properties and services in the area.
  • Secondary Data is collected and published by other sources.
    • Government Records: Land registration data, zoning maps, building permits, and property taxes.
    • Real Estate Databases: Sales price data, listings of properties for sale, and rental data.
    • Economic Reports: GDP data, inflation, unemployment, and interest rates.
    • Trade Publications: Real estate market data, price trends, and expert analyses.
      B. Identifying Data Sources:

• Potential sources include:

  1. Appraiser’s Files: Containing historical data on the local real estate market, construction costs, and information on comparable properties.
  2. Personal Inspection of the Property: Essential for gathering physical and legal data.
  3. Interviews: With owners, tenants, and real estate agents to gather information about the property’s history and use, local market conditions, and future expectations.
  4. Government Records: For land registration data, zoning maps, building permits, and property taxes.
  5. Real Estate Databases: For sales prices, listings, and rental data.
  6. Economic Reports: For GDP, inflation, unemployment, and interest rates.
  7. Trade Publications: For real estate market data, price trends, and expert analyses.
  8. Financial Institutions: For information on interest rates and financing terms.
  9. Professional Associations: Providing information on professional standards and best practices.
  10. Websites: Providing information on the real estate market and the local economy.

C. Preliminary Analysis:

• Involves reviewing available data and evaluating its adequacy and reliability.
  1. Assessing Existing Data: Determining the data the appraiser already possesses and its suitability for the valuation process.
  2. Identifying Data Gaps: Determining the data the appraiser needs but does not have.
  3. Identifying Potential Data Sources: Identifying sources for missing data.
  4. Assessing Data Reliability: Determining the reliability of available data by comparing it to other sources and verifying information accuracy.
  5. Determining Data Collection Costs and Time: Estimating the costs and time needed to collect missing data.

D. Developing an Action Plan:

• Based on the preliminary analysis, a detailed action plan should be developed.
  1. Identifying Tasks: All tasks needed to complete the valuation, such as data collection, data analysis, and report preparation.
  2. Assigning Responsibilities: Determining who is responsible for each task.
  3. Setting a Timeline: Determining start and end dates for each task.
  4. Allocating Resources: Allocating the necessary resources for each task, such as time, money, and personnel.
  5. Identifying Data Collection Methods: Such as personal inspection, interviews, and searches of government records.

E. Proposing Fees and Concluding the Contract:

• The contract should include:
  1. Identifying the Parties: Appraiser and Client.
  2. Identifying the Property: Clearly and in detail.
  3. Defining the Purpose of the Valuation: Such as obtaining a loan, selling, or insurance.
  4. Defining the Valuation Standards: Such as market value or insured value.
  5. Specifying the Valuation Date.
  6. Defining the Fees: And payment terms.
  7. Defining Liability: The appraiser’s liability in case of errors or omissions.
  8. Defining Confidentiality.