Real Estate Industry

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Real Estate Industry

• M Sahni

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Real Estate Industry

• Organizations primarily engaged in renting or
  leasing real estate to others managing real
  estate for others selling, buying, or renting
  real estate for others and providing other real
  estate related services, such as appraisal
  services.

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Kinds of Businesses

• Appraisal - Professional valuation services
• Brokerages - Assisting buyers and sellers in
  transactions
• Development - Improving land for use by adding or
  replacing buildings
• Property management - Managing a property for its
  owner(s)
• Real Estate Marketing - Managing the sales side
  of the property business
• Relocation services - Relocating people or
  business to different state/country

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Real ESTATE APPRAISAL

• Value should be highest
• Value should be best use

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Types of Values

• MARKET VALUE 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, knowledgeably and assuming the price
  is not affected by undue stimulus. Implicit in
  this definition is the consummation of a sale as
  of a specified date and the passing of title from
  seller to buyer under conditions whereby (1)
  buyer and seller are typically motivated (2)
  both parties are well informed or well advised,
  and each acting in what he or she considers his
  or her own best interest (3) a reasonable time
  is allowed for exposure in the open market (4)
  payment is made in terms of cash or in terms of
  financial arrangements comparable thereto and
  (5) the price represents the normal consideration
  for the property sold unaffected by special or
  creative financing or sales concessions granted
  by anyone associated with the sale.

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Types of Values

• Value-in-use The net present value (NPV) of a
  cash flow that an asset generates for a specific
  owner under a specific use. Value-in-use is the
  value to one particular user, which may be above
  or below the market value of a property.

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Types of Values

• Investment value - is the value to one particular
  investor, which may be above or below the market
  value of a property
• Insurable value - is the value of real property
  covered by an insurance policy. Generally it does
  not include the site value.

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Three approaches to value

• Cost Approach
• Sales Comparison Approach
• Income Approach

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Cost Approach

• Value of property summing the land value(at Mkt
  price) and the depreciated value of any
  improvements
• Improvements RCNLDreproduction cost new less
  depreciation, or replacement cost new less
  deprecation

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Income Approach

• For commercial and investment properties
• Capitalizes a future income stream into a present
  value

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Valuation methods

• Five methods of valuation
• (1) Comparable method.
• (2) Investment/income method.
• (3) Accounts/profits method.
• (4) Development/residual method.
• (5) Contractor's/cost method.

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Valuation methods

• Five methods of valuation
• (1) Comparable method.
• (2) Investment/income method.
• (3) Accounts/profits method.
• (4) Development/residual method.
• (5) Contractor's/cost method.