Finance 353: Real Estate Valuation

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Finance 353 Real Estate Valuation

• A Short Course in the Valuation of Residential
  and Commercial Real Estate

Wayne Foss, MBA, MAI, CRE Foss Consulting
Group Email wfoss_at_fossconsult.com
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Introduction

• Student Introduction
• Name
• Academic Level
• Real Estate Experience
• What do you expect to get from this course?
• Future Goals
• Instructor Introduction

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Course Syllabus

• Objectives
• To develop an analytical approach to identifying
  and solving real estate problems
• Course Coverage
• techniques of appraisal analysis
• development of appraisal theories
• recent regulatory changes
• Prerequisites
• Fin 351 or equivalent

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Course Syllabus, cont...

• Required Textbook
• The Appraisal of Real Estate
• 12th Edition
• The Appraisal Institute
• Course Project
• Appraisal of a Single Family Residence
• Group Project (3 to 4 students to a group)
• Property of your choice
• length approximately 30 to 50 pages including
  exhibits
• presentation of findings in class

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Course Syllabus, cont...

• Examinations
• Type
• 50 Multiple Choice or True False
• Closed Book, Closed Notes
• 50 Short Answer or Problems
• Open Book, Open Notes
• No Partial Credit
• Calculators are permitted, computers are not
• Make-up examinations are not permitted
• Unless there an extraordinary circumstance

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Course Syllabus, cont...

• Final Grade Weighting Policy
• Mid-term 30
• Final Exam 35
• Course Project 30
• Class Participation 5
• Total 100

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Course Syllabus, cont...
The Final Course Grade will be based on the
following Scale
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Class Schedule

• DATE TOPIC ASSIGNMENT
• Aug. 25 Introduction -
• Sept. 1 Nature of Value, Foundations, Markets Ch
  1-3
• 8 The valuation process, Appraisal
  Reports Ch 4, 26
• 15 Fee Simple and Partial Interest Ch 5
• Data Collection/Neighborhoods Ch 7-8
• 22 Land/Building Description Ch 9-10
• 29 Midterm -
• Oct. 6 Special Assignment

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Class Schedule

• DATE TOPIC ASSIGNMENT
• Nov 3 Sales Comparison Approach Ch 17-19
• 10 Sales Comparison Approach Ch 17-19
• 17 Income Approach Ch 20-22
• 24 Fall Recess
• Dec. 1 Yield Capitalization and DCF Ch 23, 24
• Reconciliation Ch 25
• 8 Case Presentations
• 15 Final Examination

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Nature of Appraisals, Value andReal Estate
Markets

• Nature of Appraisals
• Definitions
• Purpose and Intended Use
• Distinctions between real estate, real property
  and personal property
• Nature of Value
• Price versus Cost
• Types of Value
• Economic Principles
• Real Estate Markets
• Characteristics
• Market Analysis

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The valuation process and Appraisal Reports

• The Valuation Process
• A systematic procedure employed to provide the
  answer to a clients questions about the value of
  real property
• Appraisal Reports
• Complete or Limited
• Self-contained, Summary or Restricted

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Fee Simple and Partial Interests,Data Collection
and Neighborhoods

• Fee Simple and Partial Interests
• Types of Estates
• Lease Interests
• Easements
• Data Collection and Analysis
• General Data
• Specific Data
• Neighborhoods and Districts
• A Neighborhood is -
• A group of complementary land uses
• A District is -
• Characterized by homogeneous land uses

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Land and Building Descriptions

• Land Description
• Types of Legal Descriptions
• Site analysis
• Sources of Data
• Building Description
• Architecture
• Inspection
• Improvement Analysis

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Highest and Best Use Analysis, Land Valuation

• Highest and Best Use Analysis
• Land or Site as though vacant
• Property as Improved
• Systematic Approach to analysis
• Legally Permissibility, Physically Possible,
  Financial Feasibility, Maximally Productive
• Land Valuation
• Approaches
• Sales Comparison
• Allocation and Abstraction
• Income Capitalization
• Units of Comparison

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The Cost Approach

• Building Cost Estimates
• Reproduction Cost
• Replacement Cost
• Depreciation
• Physical Deterioration
• Functional Obsolescence
• External Obsolescence
• Curable or Incurable

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The Sales Comparison Approach

• The Sales Comparison Approach
• Five Step Model
• Research
• Data verification
• Units of comparison
• Compare with sale property with the subject
• Reconciliation
• The identification and measurement of adjustments
• Types of adjustments
• Adjustment Process

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The Income Approach

• Ownership Interests
• Market Value versus Investment Value
• Five Step Model
• Research
• Data verification
• Reconstructed Operating Statement
• Selection of the Appropriate Capitalization
  method(s) and the Capitalization of Income
• Reconciliation
• Derivation of Rates

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Yield Capitalization, Discounted Cash Flow and
Reconciliation

• Yield Capitalization, Discounted Cash Flow
• Time Concept
• Data Requirements
• Applications
• Reconciliation of Value Indications
• A Review
• Appropriateness of the Approaches
• The Final Value Opinion
• A Range or a Point Estimate?

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Case Presentations and the Appraisal Report

• Case Presentations
• 3 to 4 students to a group
• 15 to 20 minute presentation of findings
• The Appraisal Report
• Complete Self-Contained Format
• 30 to 50 pages

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So Thats An Introduction to Real Estate
Valuation
Are there any Questions?
Wayne Foss, MBA, MAI, CRE, Fullerton, CA
USA Phone [phone] Fax [phone]
Email wfoss_at_fossconsult.com