Appraisal concepts

Concept of Land
Attributes;
Land is totally unique in many different ways,
location, type of asset, so forth
We just view land differently than anything else;
there is a real intrinsic value to it; people fight and
die over it
Land is useful and so its valuable
 Concepts of land
Geographic
Land represents a specific point on the earth. We
can narrow down the description to be very
precise
Geography determines the types of resources that
are available and they determine the value of the
land; both human and physical resource base will
determine the value
 Concepts of land
Legal concepts
Own the surface and whats above and below it**
Bundle of rights
Sometimes referred to as a bundle of sticks; each
right represents a stick in the bundle
Right to occupy and for private use
Right to convey the rights (lease, sell)
Right to bequest (give it away)
Right to do none of these, just sit
 Concepts of land
Limits on use rights for land
Public
Taxation
Eminent Domain
Police
Escheat
Private
Restrictive covenants in the deed
Easement
Reservation
 Social and economic
Land is limited resource to be shared by
everyone
Different points of view; when it comes to
land there are a thousand different
economies
Society has restraints on the use of land
Land is a fundamental resources
The economic concepts related to land form
the basis of appraisal
 Value concepts
Real estate; usually includes the buildings and
other permanent attachments
Real property; interest, benefits and rights in
ownership of real estate.
Fixtures; attachments; usually determined by
law whether or not it is something that can be
removed.
 Personal property tests
How is the property attached to the land
The intention of the one who made the
attachment
The nature of the item and the adaptation to
the real estate.
 Price/cost/market
Price; what a particular buyer agreed to pay
and a particular seller agreed to accept;
different circumstances will change the price.
Remember price and opinion of value
Cost; this is total expenditure including things
like architectural design, financing, and so
forth
 Market
Market Value: You must know how the market
value is determined and what it represents
The most probable price, which a property
should bring in a competitive and open
market under all conditions requisite to fair
sale, the buyer and seller each acting
prudently and knowledgeably, and assuming
the price is not affected by undue stimulus.
 Market
Assumes a specific date
Both parties are typically motivated and well
informed
Reasonable time for exposure to the market
Cash or terms of financing comparable to cash
Normal consideration; no special or creative
financing, no sales concessions
 Value fundamentals and types
Utility; satisfaction
Scarcity; Current or anticipated supply relative to
the demand
Desire;
Effective purchasing power (effective demand)
Do you have the money or resources
Use, investment, going concern, insurable,
assessed and liquidation are all other types of
values
 Partial interests in land
Fee simple; ownership without limitations or
restrictions. An appraisal is done as if it were
fee simple
Life estates; all of the rights, use and control
are limited to the lifetime of the designated
party; created by wills or deeds of conveyance
Life tenant- the one who holds the life estate
Remainderman- person who gets the property on
the death of the life tenant
 Partial interests in land
Tenancy;
Tenancy by entirety; husband and wife; both own
it together and cant do anything without the
other agreeing
Joint tenants; joint ownership with the right of
survivorship; you own it together but when you
die your share goes back to the other owners
Tenancy in common; there is an undivided interest
in the property; when you die your share goes to
your heirs
 Partial interests in land
Vertical interests; in the ground and the air
Easements; convey use but not the ownership
of the property
Condominiums, cooperatives, time shares are
other forms of ownership