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Finance 353:

Real Estate ValuationA Short Course in the Valuation

of Residential and CommercialReal Estate

Wayne Foss, MBA, MAI, CRE

Foss Consulting Grou

Email! "foss#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 oals Instructor Introduction

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Course Syllabus !"#ectives

$o develop an analytical approach to

identifying and solving real estate pro"lems

%ourse %overage techni&ues of appraisal analysis

development of appraisal theories

recent regulatory changes 

'rere&uisites Fin ()* or e&uivalent

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Course Syllabus, con’t... Re&uired $ext"oo+

$he Appraisal of Real Estate *,th Edition

$he Appraisal Institute

%ourse 'ro#ect  Appraisal of a Single Family Residence

roup 'ro#ect -( to . students to a group/

'roperty of your choice

length approximately (0 to )0 pages including

exhi"its

presentation of findings in class

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Course Syllabus, con’t...

Examinations

$ype )01 2ultiple %hoice or $rue False

3   Closed  4oo+5 Closed  Notes

)01 Short Ans6er or 'ro"lems

3   Open 4oo+5 Open Notes

No 'artial %redit

%alculators are permitted5 computers are not 

2a+e7up examinations are not  permitted 8nless there an extraordinary circumstance

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  )

Course Syllabus, con’t...

Final rade Weighting 'olicy

2id7term (01

Final Exam ()1 %ourse 'ro#ect (01

%lass 'articipation )1

$otal9 *001

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Course Syllabus, con’t...

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6he Final Course Grade "ill 7e 7ased on the

follo"ing Scale!

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Class Schedule

DATE TOPIC ASSIGNMENT

 Aug: ,) Introduction 7

Sept: * Nature of ;alue5 Foundations5 2ar+ets %h *7(

  < $he valuation process5 Appraisal Reports %h .5 ,=

  *) Fee Simple and 'artial Interest %h ) >ata %ollectionNeigh"orhoods %h @7<

,, Land4uilding >escription %h 7*0

  , 2idterm 7

!ct: = Special Assignment  ** Bighest and 4est 8se Analysis5 Land ;aluation %h **7*,

  ,0 Bighest and 4est 8se Analysis5 Land ;aluation %h **7*,

  ,@ %ost Approach C >epreciation %h *(7*=

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Class ScheduleDATE TOPIC ASSIGNMENT

Nov ( Sales %omparison Approach %h *@7*

*0 Sales %omparison Approach %h *@7*

*@ Income Approach %h ,07,,

,. Fall Recess

>ec: * Dield %apitaliation and >%F %h ,(5 ,.

Reconciliation %h ,)

  < %ase 'resentations

 *) Final Examination

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  11

Nature of !!raisals, Value and 

Real Estate "ar#ets Nature of Appraisals

>efinitions

'urpose and Intended 8se

>istinctions "et6een real estate5 realproperty and personal property

Nature of ;alue

'rice versus %ost

$ypes of ;alue

Economic 'rinciples Real Estate 2ar+ets

%haracteristics

2ar+et Analysis

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$he %aluation !rocess and 

!!raisal Re!orts $he ;aluation 'rocess

 A systematic procedure employed to provide

the ans6er to a clients &uestions a"out thevalue of real property

 Appraisal Reports

%omplete or Limited

Self7contained5 Summary or Restricted

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Identification

of real estate

Identification

of roertyrights to 7e

9se of

araisal

4efinition of

Value

4ate of

8alueestimate

4escrition

of scoe ofaraisal

:ther

limitingconditions

Reconciliation of Value Indications and Final Value Estimate

Report of Defined Value

6he Su7;ect Mar<etSu7;ect and Comara7lesRegion, City, =eigh7orhood

Highest and Best Use Analysis

5and as though 8acant +roerty as imro8ed

Sales Comarison Income Caitali>ationCost

Application of the Three Approaches

Land Value Estimate

Definition of the ro!lem

The Valuation rocess

General Secific Cometiti8e Suly and 4emand

reliminary Analysis and Data "election and #ollection

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Fee Si&!le and 'artial Interests,

(ata Collection and  Nei)hborhoods Fee Simple and 'artial Interests

$ypes of Estates Lease Interests Easements

>ata %ollection and Analysis eneral >ata Specific >ata

Neigh"orhoods and >istricts

 A Neigh"orhood is 7  A group of complementary land uses

 A >istrict is 7 %haracteried "y homogeneous land

uses

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*and and +uildin) (escri!tions

Land >escription

$ypes of Legal >escriptions

Site analysis

Sources of >ata

4uilding >escription

 Architecture

Inspection Improvement Analysis

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i)hest and +est -se nalysis,*and Valuation

Bighest and 4est 8se Analysis

Land or Site as though vacant

'roperty as Improved

Systematic Approach to analysis Legally 'ermissi"ility5 'hysically 'ossi"le5

Financial Feasi"ility5 2aximally 'roductive

Land ;aluation

 Approaches

Sales %omparison  Allocation and A"straction

Income %apitaliation

8nits of %omparison

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$he Cost !!roach

4uilding %ost Estimates

Reproduction %ost

Replacement %ost

>epreciation

'hysical >eterioration

Functional !"solescence

External !"solescence %ura"le or Incura"le

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$he Sales Co&!arison !!roach

$he Sales %omparison Approach

Five Step 2odel Research

>ata verification 8nits of comparison

%ompare 6ith sale property 6ith the su"#ect

Reconciliation

$he identification and measurement of

ad#ustments

$ypes of ad#ustments

 Ad#ustment 'rocess

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$he Inco&e !!roach

!6nership Interests

2ar+et ;alue versus Investment ;alue

Five Step 2odel

Research

>ata verification

Reconstructed !perating Statement

Selection of the Appropriate %apitaliation

method-s/ and the %apitaliation of Income Reconciliation

>erivation of Rates

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ield Ca!itali/ation, (iscounted CashFlo0 and Reconciliation

Dield %apitaliation5 >iscounted %ash

Flo6

$ime %oncept

>ata Re&uirements  Applications

Reconciliation of ;alue Indications

 A Revie6  Appropriateness of the Approaches

$he Final ;alue !pinion  A Range or a 'oint Estimate?

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Case 'resentations and the!!raisal Re!ort

%ase 'resentations

( to . students to a group

*) to ,0 minute presentation of

findings

$he Appraisal Report

%omplete Self7%ontained Format

(0 to )0 pages

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So That’s 

 An Introduction to Real Estate Valuation

Wayne Foss, MBA, MAI, CRE, Fullerton, CA 9SA

+hone! ?*1'@ 3*10&(3( Fa! ?*1'@ 3*1031%&

Email! "foss#fossconsult$com