Basic Appraisal For Real Estate Broker

BASIC APPRAISAL FOR
REAL ESTATE BROKERS
CREASAR, GCR REALTY & EDUCATION CENTER Engr. Chrysler B. Acebu, CPV
REAL ESTATE APPRAISAL
Module 1) INTRODUCTION TO PROPERTY APPRAISAL
- DEFINITION OF APPRAISAL; DEFINITION OF TERMS (per RESA/RA 9646)
- OBJECTIVES OF APPRAISAL
- USES OF APPRAISAL
- PRICE, COST & VALUE
- FAIR MARKET VALUE
- FACTORS THAT CREATE VALUE
- FORCES AFFECTING VALUE
- VALUATION PRINCIPLES
Module 2) LEGAL CONSIDERATIONS IN APPRAISAL
Module 3) APPRAISAL PROCESS (METHODOLOGY)

- STUDY PERTINENT DOCUMENTS
- LOCATION PINPOINTING
- TITLE VERIFICATION
- INSPECTION OF PROPERTY/IES
- APPLY APPROACHES TO VALUE
- CORRELATE VALUES & FINAL ESTIMATE
- REPORT WRITING
REAL ESTATE APPRAISAL
Module 4) APPROACHES TO VALUE
- MARKET DATA APPROACH
- COST APPROACH
- INCOME APPROACH
Module 5) VALUATION FACTORS AND CHARACTERISTICS
Module 6) REAL ESTATE FINANCE & ECONOMICS
MODULE 1
INTRODUCTION TO
PROPERTY APPRAISAL
DEFINITION OF APPRAISAL
APPRAISAL or VALUATION – an estimate or opinion of value concerning real

estate or other property.
- an estimate of the monetary value of a property.
- process of developing an estimate of value of an adequately
identified and described property as of specified date, supported by
logical presentation of factual & relevant data primarily based on
personal inspection of the property.
Important notes on Appraisal:

- It is not a guess. Value is determined only after
thorough observation, investigation, & analysis.
- Usually presented in written form. With complete description
so as not to confuse it with other assets.
- Value of property today may not be the same
tomorrow.
DEFINITION OF TERMS
THE REAL ESTATE SERVICE ACT (RESA) OF 2009 – RA 9646
“Appraiser” – also known as Valuer, refers to a person who conducts valuation/ appraisal;
specifically one who possesses the necessary qualifications, license, ability and experience
to execute or direct valuation of real property.
“Assessor” – refers to an official in the local government unit, who performs appraisal &
assessment of real properties, including plants, equipment, and machinery essentially for
taxation purposes. Includes assistant assessors.
“Real Estate” – refers to land and all those items which are attached to the land. It is physical,
tangible entity, together with all the additions or improvements on, above or below the
ground.
“Real estate development project”- means development of land for residential, commercial,
industrial, agricultural, institutional or recreational purposes or any combination of such
including, but not limited to, tourist resorts, reclamation projects, building or housing
projects whether for individual or condominium ownership, memorial parks and other of
similar nature.
“Real estate developer”- refers to any natural or juridical person engaged in the business of
developing real estate development project for his/her or its own account and offering
them for sale or lease.
“Real property”- includes rights, interests and benefits related to the ownership of real estate.
“Real Estate Service Practitioners” shall refer to:
Real Estate Consultant – duly registered and licensed natural person who, for a professional
fee, compensation or other valuable consideration, offers or renders professional advice
and judgment on: acquisition; enhancement, preservation, utilization or disposition of
lands or improvements thereon and conception, planning, management and development
of real estate projects.
Real Estate Appraiser – duly registered and licensed natural person who, for a professional fee,
compensation or other valuable consideration, performs or renders or offers to perform
services in estimating and arriving at an opinion of or acts as an expert on real estate
values, such services of which shall be finally rendered by the preparation of report in
acceptable written form.
Real Estate Assessor – a duly registered and licensed natural person who works in a local
government unit, who performs appraisal & assessment of real properties, including
plants, equipment, and machinery essentially for taxation purposes.
Real Estate Broker - duly registered and licensed natural person who, for a professional fee,
commission or other valuable consideration, acts as an agent in a party in real estate
transaction to offer, advertise, solicit, list, promote, mediate, negotiate or effect the
meeting of the minds on the sale, purchase, exchange, mortgage, lease, joint venture or
other similar transactions on real estate or any interest therein.
Real Estate Salesperson - duly registered and licensed natural person who performs service for
& in behalf of a duly licensed real estate broker for or expectation of a share in
commission, professional fee, compensation or other valuable consideration.
OBJECTIVES OF APPRAISAL
PRIMARY PURPOSE OF PROPERTY APPRAISAL FOR BANKS/FINANCIAL INSTITUTIONS:
1) To establish a FAIR MARKET VALUE for the collateral offered in order to arrive at
a sound credit decision.
2) To ensure a satisfactory return to the bank in the event of foreclosure and sale of
acquired asset.
OTHER PURPOSES:
1) Sale & Disposition
2) Taxation
3) Condemnation Proceedings
4) Basis for Insurance
5) Accounting & Property records
PRICE, COST and VALUE
PRICE
- Actual amount paid in a particular transaction
- Term used for the amount asked, offered, or paid for a good or service
- Generally an indication of a relative value placed upon goods or services.
COST
- Actual amount spent to build or put a property into being.
- The total cost of the property includes all direct & indirect costs of its production
- The amount of money required to create or produce the good or service.
VALUE
- A relationship between a thing desired and a potential purchaser.
- An economic concept referring to price most likely to be concluded by the buyers & sellers
- Is a hypothetical price, and the hypothesis on which the value is estimated determined by the
valuation basis adopted.
Price and Cost are factual figures and considered as indicators of value.
Anything that is desired for financial, economic or sentimental

reason has value.
FAIR MARKET VALUE
 HIGHEST PRICE IN TERMS OF MONEY WHICH A PROPERTY WILL
BRING IF EXPOSED FOR SALE IN THE OPEN MARKET, ALLOWING
REASONABLE TIME TO FIND A PURCHASER WHO BUYS WITH
KNOWLEDGE OF ALL THE USES TO WHICH IT IS ADAPTED OR
CAPABLE OF BEING USED.
 A PRICE THAT A WILLING SELLER WOULD SELL AND A WILLING

BUYER WOULD BUY, NEITHER BEING UNDER ABNORMAL
PRESSURE.
Sellers are pressured to sell under the following circumstances:

a) Expropriation
b) Foreclosure
FACTORS THAT CREATE VALUE (DUST)
1) DESIRABILITY
- Property must arouse the desire of potential buyer.
- Desirability to be effective must be supported by purchasing
power.
2) UTILITY
- A thing must be useful to have value.
3) SCARCITY
- An object must have limited supply in order to arouse desire in an individual.
4) TRANSFERABILITY
- Ownership of an object must be transferrable.
FORCES THAT AFFECT VALUE (SEPP)
1) SOCIAL - Factors emerging from man’s social instincts and
yearnings. Such as:
> Population growth & decline
> Changes in family size
2) ECONOMIC – Factors which have direct or indirect effect upon

purchasing power.
> Availability of money and credit
> Price levels, interest rates and tax burdens
> Employment and wage levels
3) POLITICAL – Government regulations

> Rent controls
> Building codes
> Police & fire regulations
4) PHYSICAL - Forces created by man or nature
> Climate and topography
> Mineral resources
> Flood control
> Community factors such as transportation,
schools, parks & recreation areas.
VALUATION PRINCIPLES
1) ANTICIPATION – Value tends to be set by the present worth of the future benefits or income that
may be derived from the ownership of the property.
Example:
When an office building has a net income expectancy of P 100,000 per annum. Rate of return is @
12%. Its value today or its present worth based on future benefits or future income is derived
from the formula for capitalization
V = I/R
Thus, V= P 100,000
12%
= P 833,333.00 – This amount represents what a buyer
is justified to pay for the investment of
the property TODAY.
2) CHANGE – Value of property is influenced by the constant changes occurring in the environment.
Value of today may not be the same tomorrow.
- Today evolved out of yesterday & is the shadow of
tomorrow.
Example:
A decade ago, real properties along Pasay Road were exclusively used for residential purposes.
Presently however, the area is experiencing a rapid transition from residential to commercial land
use. In effect, values of real estate within the vicinity tend to increase due to change.
3) COMPETITION – The principle stems from the fact that profit creates competition.
Excessive competition dissipate profit. In real estate, profit is the monetary
incentive for investment.
Example:
Office condominiums made large profits when they were first introduced in Legaspi
Village, Makati. This potential influenced the construction of similar structures in
the area which led to a great degree of competition. In the process, condominium
markets slowed down and their values stagnated. Meanwhile, the profit which was
initially shared by a few is now shared by a few is now shared by many.
4) CONFORMITY – Most satisfactory use of land is realized when it conforms to the

standards governing the area where it is located. The principle holds that
maximum value of a property is realized when a reasonable degree of sociological,
architectural and economic homogeneity is present.
Example:
BF Homes Paranaque is a residential subd. Inhabited by middle-income family
groups where improvements are mostly bungalows ranging from P 600,000 to P
800,000 construction cost. If a property within the subdivision were to be improved
with a multi-million peso 3-storey structure, there will be a conspicuous lack of
conformity between the property and its environment.
5) CONTRIBUTION – The principle states that the land and building is a single
economic enterprise therefore, the value of land is dependent on the amount of
net returns on investment on the building.:
Example:
The expenditure of P 50,000 needed to convert a basement into an apartment, or to
add a recreation room to a home, is justified only if the result is the production of
additional value, in excess of the amount spent. Similarly, the installation of
modern elevators in place of the old one should increase the net income by either
a reduction in operating expense or an increase in rentals.
6) HIGHEST and BEST USE (HABU) – The priciple states that the most profitable use of
the property will yield the highest land value. Land has no value unless man can use
it, but the amount of the value of land depends on how it is used. Because real
estate owner wishes to reap the greatest possible net returns from his property.
Example:
Velez St. in Cagayan de Oro City is a commercial strip forming part of the city’s
business district. If a
3-storey commercial building is constructed on a lot along this span, the
improvement represents the HABU as it gives the most profitable use of land,
hence, maximizes its value.
7) SUBSTITUTION – The principle states that no prudent buyer will pay more than
what it will cost him to buy or build an equally desirable substitute property. When
several properties or services with substantially the same utility are available, the
one with the lowest price attracts the greater demand and the widest distribution.
Example:
Mr. Roxas decided to put up a boutique selling local and imported clothes; shoes
and other accessories along the southeast side of Nicanor Reyes St. within the
University Belt. He has to choose between the following spaces for rent:
Store Space 1
Floor Area – 80 sq.m.
Rental Rate – P 6,000/month
Characteristics: good condition; newly renovated
Store Space 2
Floor Area – 83 sq.m.
Rental Rate – P 8,500/month
Characteristics: good condition; newly renovated
Since the two (2) spaces offer almost the same features, utility and desirability, Mr.
Roxas decided to occupy/rent Store Space 1.
8) SUPPLY AND DEMAND – The principle involves the interplay of economic forces
affecting market value. Changes in the proportionate relationship between supply
and demand tend to affect the price obtainble in the market. It also states that
scarcity influences supply and desire influences demand. Demand of for a
commodity is created by its usefulness ad the scarcity of supply.
Example:
There is an oversupply of office buildings in Makati, like in Salcedo and Legaspi
Villages. Some of this buildings do not get maximum occupancy because the
demand is less.
To compete in the market, owners have no option but to offer their
buildings/condominiums for rent or for sale at the lower side of the price
gamut/range prevailing in the area.
MODULE 2
LEGAL CONSIDERATIONS
IN APPRAISAL
LEGAL CONSIDERATION IN APPRAISAL
INTRODUCTION
Ownership of real estate is a direct function of constitutional guarantees.
Focuses on the various legal considerations involved in the ownership of

real property that a professional appraiser must understand.
Six legal considerations:

• Fundamental definitions of legal interests
• Limitations on ownership of real estate
• Forms of legal interests
• Property ownership forms
• Four types of legal descriptions
• Types of real estate transfers
FUNDAMENTAL DEFINITIONS OF LEGAL INTERESTS
 PROPERTY
All things which are, or may be the object of appropriation.
Res nullius are those physical things which "have not or have
never had" an owner. Res nullius is a category of "things."(1)
Those things have not been reduced to "property" because
they are not, or more accurately cannot, be appropriated by
individuals. Light, for example, is res nullius.
Res Alicujus - Things owned by someone - a particular
person or group of persons
Res Alienae - Things belonging to others
Res Communes - The property status of such a thing while it

remains in a wild, unappropriated, state is "res communes," or
a "thing common to all“. Unlike a res nullius which cannot be
owned, res communes can be owned, and are owned, by the
state, though a state may permit anyone to appropriate,
 REAL ESTATE
 Real estate relates to the land and all improvements
permanently attached to the land, either by nature or by
people.
 Real estate has the following five unique characteristics that
distinguish it from other asset types:
 1.Unique in location
 2. Unique in composition
 3. Durable
 4. Finite in supply
 5. Useful
 These five unique characteristics all relate to the physical
attributes of land and/or improvements.
 REAL PROPERTY
 Real property relates to the interests, benefits, and rights
inherent in the ownership of real estate.
 Based on this distinction between real estate and real
property, those involved in the valuation of real estate are
technically real property appraisers as opposed to real estate
appraisers.
 Consistent with the concept of real property is the bundle of
rights concept, a view of real property ownership suggesting
that the rights inherent in the ownership of a parcel of real
estate can be compared to a bundle of sticks whereby each
stick represents a separate and distinct right in the ownership
of that real estate.
Bundle of Rights
Rights generally inherent in the ownership of real estate include but
are not limited to the following:
1. The right to use (Jus Utendi)
2. The right to its fruits (Jus Fruendi)
3. The right to dispose (Jus Disponendi)
4. The right to recover (Jus Vindicandi)
5. The right to abuse (Jus Abutendi)
The bundle of rights can be divided through various instruments
including leases, easements, and mortgages.
Through these instruments, one party owns or controls certain rights
whereby another party owns or controls other rights.
For example, in a lease arrangement, the person leasing the property

(lessee) generally acquires the right to use and occupy the premises
for a certain reason, for a certain period of time, usually at a specified
rental rate.
The owner of the property (lessor) retains the right to receive rent for
giving up the use of the property but also retains the right to the
reversion, or the right to get the property back after the lease has
ended.
PERSONAL PROPERTY
• Personal property is an item that is not real property.
• It usually falls outside the subject of an appraisal.
• Three examples of personal property that may appear to be
related to the real estate are the following:
• A portable microwave oven
• A window air-conditioning unit
• Furniture
FIXTURE
• A fixture is an item that was once personal property that has

become part of the real estate.
• When a dishwasher has been delivered to a construction site and
is awaiting installation, it is personal property. When installed,
however, it becomes a fixture and is considered part of the real
estate.
• Following are examples of fixtures:
• Light fixtures
• Stoves
• Basketball goals (permanently installed)
LIMITATIONS ON OWNERSHIP OF REAL ESTATE
• The purest and most complete form of real estate ownership is fee
simple. Yet, even though an individual may own a parcel of real
estate in fee simple with no mortgage encumbrance, he or she does
not have exclusive use of that property.
• There can be private restrictions placed on the property by the
previous owner or the developer. Such restrictions may require a
minimum floor area, architectural controls, and placement of
improvements.
• There can also be governmental controls. When purchasing real
estate, one should recognize that the purchase is being made
subject to these restrictions which are inherent in the ownership of
the property.
PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP
• There are four public or governmental restrictions known as the

four powers of government.
• These limit the ownership of all real property.
• The four powers are as follows:
• Police power
• Eminent domain
• Escheat
• Taxation
Police Power
• Police power is the right of government to regulate land use for the
public good. There are numerous examples of police power, but the
most obvious ones are zoning and building codes.
• Zoning is intended to promote orderly development of land. Zoning
may allow commercial development along a major highway but may
restrict adjoining land to residential usage. By promoting orderly
development, zoning generally tends to maximize and maintain an
individual parcel’s value.
Police Power
• Building codes are intended to protect the consumer from

inappropriate or faulty construction.
• The requirement of sprinkler systems in office buildings over four
stories high may have a significant impact on construction costs and
rental rates.
• The requirement to reinforce foundation footings may insure the
viability of a residential structure for years to come whereas the
average consumer may be unaware of its importance.
Eminent Domain
• Eminent domain is the right of governments to acquire private

property for public use, such as a road widening.
• The process of acquiring private property for public use is called
condemnation, whereas the right of government to acquire the
property is eminent domain.
• Whether we agree or disagree with this right as individuals, it is
inherent in the Constitution.

Eminent Domain
• Laws recognize the power of eminent domain but go on to state

that just compensation must be paid to the owner.
• Examples in which the power of eminent domain is employed may
include the following:
• Highway construction
• Parks
• Governmental building sites
• Airport expansion
• Reservoirs
• Utility construction

Escheat
• Escheat actually means going to the state.
• If a person dies without a will, that person is said to have died
intestate, and that person’s property transfers to the state.
Taxation
• Governments are granted the right of taxation, that is, they are
allowed to levy taxes on properties.
• In many communities, property taxes are the primary funding basis
for local operations including schools.
• If property taxes are not paid, governments have the right to
acquire the properties, although proper legal procedures must be
followed.
PRIVATE RESTRICTIONS ON REAL ESTATE OWNERSHIP
• In addition to governmental restrictions, individuals may place

private limitations on property, and these restrictions may or may
not transfer with the property when it sells.
• Following are examples of private restrictions:
• Deed restrictions
• Easements
• Leases
• Mortgages
• Liens
Deed Restrictions
• A deed restriction is a limitation on the use of real estate through a

written legal document that is usually recorded.
• The recording document is usually referred to or stated in the
transfer agreement such as a deed.
• While a zoning restriction usually applies to many parcels, a deed
restriction usually relates to a specific parcel or even a defined
subdivision or planned use development.
• When deed restrictions are in conflict with zoning, usually the more
restrictive prevails.
Deed Restrictions
• One of the most common deed restrictions is a subdivision restrictive

covenant. A subdivision deed restriction may state that the minimum
size of a house must be 200 square meters, even though zoning may
only require a minimum of 150 square meters.
• Another common restriction, particularly in first-class residential
subdivisions, would be state that the minimum cost of the house to be
constructed on a parcel of land is P5,000,000.
• Usually deed restrictions have time limitations, but under certain
circumstances, they can be extended. Example: Bel-Air Subdivision in
Makati City
Easements
• An easement conveys the right to use part of the land for a specific
purpose. Easements thus divide the bundle of rights.
• Utility companies have to acquire easements to extend utility lines
through property.
• In order to widen an existing highway, a governmental authority may
have to acquire a temporary easement alongside the highway for
construction purposes.
Easements
• An easement typically does not convey ownership of the majority of

the rights in the bundle of rights; easements relate to specifically
identified rights usually identifying a temporary or perpetual use.
• An easement that runs with the land and can be conveyed from a
seller to a buyer is called an easement appurtenant.
• An easement that serves only one person that cannot be conveyed
from a seller to a buyer is called an easement in gross.
Leases
• A lease is a contractual agreement between a property owner

(lessor) and a tenant (lessee). It specifies the use of a property for
an identified period of time. The tenant acquires the right to occupy
and use a property. The owner usually receives the right to collect
rent from the tenant and also has the right of reversion, that is, the
right to get the property back at the end of the lease. Usually, sales
of property do not nullify leases.
• This concept is particularly important when valuing properties that
are subject to leases.
Mortgages
• When real estate is purchased, there are usually some borrowed

funds involved as part of the purchase price. When part or all of this
money is borrowed from a lending institution, a mortgage instrument
is usually created.
• A mortgage is a loan or promissory note that is secured by the real
estate. If the loan is not paid back according to the agreed upon
terms and conditions, the lending institution providing the funds can
acquire title to the property through foreclosure.
Liens
• A charge against a property in which the property is security for

payment of a debt is called a lien. There are many forms of liens, or
liens which may be placed on a property through a condominium
association for nonpayment of mandatory association fees.
• All mortgages are liens, but all liens are not mortgages (mechanic’s
lien).
Encroachments
• An encroachment is a trespass on another’s land. If a fence has

been installed over the property line onto the adjacent property,
an encroachment has been created.
• A house that extends over a property line is also an example of an
encroachment. In most cases, the person doing the encroaching
can be forced to correct the encroachment.
Adverse Possession
• Adverse possession is a method of acquiring ownership through

possession. If a person utilizes another person’s property openly for
an extended period of time, that property may be transferred as to
ownership.
• Several requirements are necessary for one to acquire title through
adverse possession. Possession must involve all of the following:
• Be apparent (open and visible)
• Be continuous and uninterrupted for a certain period of time
• Be exclusive
• Be claimed, i.e., the person who has the apparent possession
must make a claim to that possession
• Be hostile with denial or opposition to the original owner’s title
FORMS OF LEGAL INTEREST
Several forms of ownership of real property exist, varying from state to
state. As noted previously, because appraisers are technically
appraising real property rather than real estate, they must have a clear
understanding of the ownership interest being appraised.
FEE SIMPLE ESTATE
• The most complete form of ownership is a fee simple estate.
• Although the purest form of ownership without any claims by heirs
or private restrictions, a fee simple estate is limited by the four
powers of government.
• Usually, an appraisal of any interest less than fee simple begins with
an analysis of the fee simple value.
PARTIAL INTERESTS
• Any interest less than a fee simple interest is known as a partial
interest. Several forms of partial interests are discussed in the
following paragraphs.
PARTIAL INTERESTS
Leased Fee Estate
• A landlord’s (lessor’s) interest in a property when there is a lease

encumbering the property is called a leased fee estate.
• The lease document or lease contract itself has divided the bundle
of rights.
• The landlord usually retains the right to receive rent in exchange for
giving up use of the property for a specified period of time; the
landlord also retains the right to get the property back at the end of
the lease (reversion).
• In such an arrangement, the obligations accruing to the landlord and
the obligations accruing to the tenant are usually specified by the
lease.
PARTIAL INTERESTS
Leasehold Estate
• In contrast to the leased fee estate, the tenant’s (lessee’s) interest in

a leased property is called a leasehold estate.
• The tenant usually obtains the right to use and occupy the property
but assumes the obligation to pay rent.
• A leasehold estate can have a positive value (tenant has an
advantage) if the contract rent (rent specified in the lease) is less
than economic or market rent (rent which could be achieved in an
open market).
• A leasehold interest can have a negative value (tenant is at a
disadvantage) if the contract rent is more than the economic or
market rent.
PARTIAL INTERESTS
Air Rights
• Air rights are particularly important in urban areas. In many cases,

buildings are constructed within an identified air space.
• Air rights do not extend indefinitely. There are height limitations
imposed by the restrictions, either public or private, related to air
space.
PARTIAL INTERESTS
Surface/Subsurface Rights
• Surface/subsurface rights also come into play more in urban areas.

• A government agency may acquire (through eminent domain)
subsurface rights for the construction of an underground sewerage
system.
• An owner of a parcel of land may retain the surface rights for use as
parking and sell the air rights for an overhead walkway connecting to
adjacent buildings.
PROPERTY OWNERSHIP FORMS
• As appraisers, we are concerned with the valuation of an ownership
interest (real property) in specified real estate.
• The bundle of rights relates to real property and can be divided.
• In addition to understanding rights, an appraiser should also
understand the various types of ownership.
INDIVIDUAL (SEVERALTY)
• This is the most common form of ownership where one person or

corporation owns the entire bundle of rights, still subject to
governmental and private restrictions.
TENANCIES
• Tenancy is created when the bundle of rights is divided, and in real

estate generally has the following two meanings:
• The possession of title or other ownership form
• The right to use and occupy property
• As discussed, the second meaning relates to leased property in which
the lessee has the right to use and occupy the property, and the
landlord has the right to receive rent and get the property back at
lease termination.
UNDIVIDED INTERESTS
• Related to the ownership of real property, there are several

important ownership forms that warrant explanation.
• They relate to an “undivided interest” in the real property. The
undivided interest concept is difficult for many people to
comprehend.
• What this means is that the property itself cannot be divided, only
the ownership interest.
SPECIAL FORMS OF OWNERSHIP
The following three special types of ownership evolved in recent years

as the bundle of rights separated in more creative ways:
• Condominium
• Cooperative
• Time-share
Condominium
•The term condominium describes a type of ownership, not a type of

building.
•This is a form of ownership in which an owner has an interest
(usually fee simple) in a certain unit defined such as the space
between the interior walls, the ceiling, and the floor of that unit;
•the owner also owns a pro-rata share of the common areas (drives,
grounds, recreational amenities, etc.) within the development.
Cooperative
•A cooperative is a form of ownership in which a corporation owns the

land and improvements, and the residents own stock in the corporation.
Then, the corporation signs an exclusive lease with the tenant-
stockholder.
•Cooperatives are common in certain regions of the country. This type
of ownership allows tenant-stockholders to select their neighbors,
voting on whether to allow or deny a prospective buyer to be allowed
into the corporation, and thus occupancy of a unit in the building.
Time-Share
•A time-share is a partial form of ownership in which other time-share

owners (tenants in common) purchase the right of use/occupancy for a
specified period of time, say one week per year.
•Typically, 50 weeks per year are sold, with the other two weeks
reserved for maintenance. Thus, an owner who buys one week will
have a 2 percent ownership (1⁄₅₀) in the unit, but his
ownership/occupancy may be restricted to a certain period or week of
the year.
•A Baguio time-share week is likely more expensive in April and May
than is a week in February; hence, a buyer cannot purchase an
inexpensive week in February and expect to use it during a more
expensive week in April.
FORMS OF LEGAL DESCRIPTIONS
• Legal descriptions are methods of describing real estate so that

each property can be recognized from all other properties,
recognizing its unique characteristics with regard to location.
• Because land is a unique commodity in that it is immobile, it must
be described specifically.
• Following are the four types of legal land descriptions:
• Metes-and-bounds description
• Government (rectangular) survey system
• Lot-and-block system
• Monuments system
METES-AND-BOUNDS DESCRIPTION
•A metes-and-bounds description begins at a point of beginning (POB),

and the terms metes and bounds relate to distance and direction. From
the POB, the reader of the legal description is walked around the
perimeter of the parcel using angles and distances, eventually returning
to the POB.
•A basic understanding of plane geometry is needed in this system
because of the emphasis on angles and distances. In addition to defining
the geometric shape, a metes-and-bounds description also makes
reference to a specific land lot, within a district/barangay, within a
city/municipality. Generally, all city/municipality are divided into several
districts/barangays for identification purposes.
LOT-AND-BLOCK SYSTEM
•Under the lot-and-block system, a certain plot of land is subdivided.

•The key is the recording of the subdivision plat into public records.
•Within each subdivision, the lots and blocks are identified, making
reference to the recorded plat.
REVIEW QUESTIONS
• Which of the following is NOT one of the three tests of when personal
property becomes a fixture and thus part of the real estate?
a. Cost of the item b. Manner of attachment
c. Intent of the parties d. Character of the item
• A fee simple interest in a property is an example of

a. real property b. real estate
c. personal property d. element.
• A window air conditioner that is permanently attached to a home and

built-in with caulked, side/top/bottom molding and screwed to the
window frame is an example of a(n)
a. trade fixture. b. fixture
c. personal property. d. encroachment.
REVIEW QUESTIONS
• Which of the following is NOT a form of a private limitation?

a. Lease b. Mortgage
c. Severalty d. Easement
• A tenant or lessee may most likely possess which type of interest?

a. Life estate b. Leased fee estate
c. Lien d. Leasehold estate
• Which of the following is NOT a form of an ownership limitation?

a. Lease b. Tenancy
c. Mortgage d. Easement
REVIEW QUESTIONS
• Which of the following is NOT a type of special ownership?

a. Escheat b. Condominium
c. Co-operative d. Time-share
• Which type of title transfer offers a guarantee of the title from the
seller to the buyer?
a. Quitclaim b. Title insurance
c. General warranty d. Adverse possession
• Real property is
a. the same as real estate. b. different than unreal property.
c. an intangible interest in real estate d. the bricks and mortar.
REVIEW QUESTIONS
• Real estate is
a. the tangible bricks and mortar and land.
b. different than unreal estate.
c. an intangible interest.
d. a microwave sitting on top of a kitchen counter.
• Which of the following is used in determining when personal

property becomes a fixture?
a. Weight of the item b. Size of the item
c. Cost of the item d. Manner of attachment
• A ceiling fan installed in a home is

a. personal property. b. a trade fixture.
c. a fixture that is now part of the real estate. d. real property.
REVIEW QUESTIONS
• Building codes and zoning represent which of the four powers of
government?
a. Police power b. Eminent domain
c. Escheat d. Taxation
• A lease and a mortgage are considered to be

a. deed restrictions. b. powers of government.
c. personal property. d. private restrictions.
• A toolshed that is partly on a neighbor’s lot is known as a(n)

a. lien. b. encroachment.
c. deed restriction. d. easement.
REVIEW QUESTIONS
• A leased-fee estate is an interest controlled by the

a. mortgagee. b. management company.
c. landlord. d. tenant.
• A leasehold estate is created by a(n)

a. mortgage. b. lease.
c. easement. d. life estate.
• Which is the most common form of ownership?

a. Severalty b. Joint tenants
c. Tenants by the entireties d. Tenancy in common
REVIEW QUESTIONS
• A condominium is known as
a. tenancy in common. b. partial ownership.
c. joint tenancy. d. a type of special ownership.
• Which is NOT a form of a legal description?

a. Metes-and-bounds method b. Special warranty deed
c. Monument system d. Government survey system
MODULE 3
APPRAISAL PROCESS
VALUATION PROCESS
1) Study Pertinent Documents
a) Copy of title
b) Geodetic Engineer’s Plan
c) Floor Plan of the building
d) Tax Declaration of land & building
e) Tax Receipts
2) Pinpoint Location
a) Appraiser’s Plotting
b) Cadastral Reference Maps
c) Geodetic Engineer’s Plan
d) Base Topographical Map (Bureau of Technical Maps)
3) Check/Verify Title/s
- Check for liens, encumbrances, authenticity and continuity
4) Inspect properties
a) Site Analysis (frontage, depth, elevation, condition of street)
b) Improvement (building features, age, condition)
c) Neighborhood (HABU Analysis)
5) Apply Approaches to Value
a) Market Data Approach
b) Cost Approach
c) Income Approach
6) Correlate Values and Make Final Estimate
7) Write Report
PROCESS FLOW
MODULE 4
APPROACHES TO VALUE
APPROACHES TO VALUE
1) MARKET DATA APPROACH
- Principle Underlying the Approach is the Principle of
Substitution
- Consist of gathering information concerning sales of
properties that are comparable to the property appraised.
a. Direct Comparison Method (Actual Sales)

i) Describe and classify subject property
ii) Establish time period
iii) Determine Market area
iv) Gather Sales data
v) Analyze & modify sales data gathered
vi) Compare and adjust for differences
vii) Distill a single figure from an array of indicated prices
b. Inferential/Rectification Method (Opinion Survey)
- Gather opinion of values from reliable sources such as Real
Estate Appraisers, Brokers, etc.
- Each source is given a corresponding weight depending
on the knowledge and familiarity of the area being
surveyed.
- Least reliable under market data approach
APPROACHES TO VALUE
c) Development Approach
- Valuation of rawland properties
For a property to be a rawland, it should have the ffg.
characteristics:
- Suitable for development (flat, economical to develop)
- Ripe for development (per capita income able to support selling price;
successful subdivision within the vicinity/locality
* Weakness of the approach : Availability of sales data
Rawland Valuation (Subdivision Development Approach)
Step 1 Analyze Gross Income
Gross Income = Total Cash Price
Total Cash Price = Selling Price of Developed Lot/Sq.M. x Saleable Area
Where:
Saleable area = 70% x Gross Land Area
Step 2 Analyze Expenses
a) Development Cost
b) Administrative Expenses
c) Sales Expenses (Brokers Commission, Advertising, etc)
d) Interest on Working Capital
e) Miscellaneous Expenses
f) Contractor's Profit
Step 3 Compute Ultimate Rawland Value (URV)
URV = Gross Income - Expenses
Step 4 Compute Rawland Value/Sq.M.

Rawland Value/Sq.M. = URV x Annuity Factor
No. of Years x Gross Area
Compute Annuity Factor (if not given):

Annuity Factor = 1 - (1+r)-n
r
r = interest rate
n = no. of years
MARKET DATA APPROACH – Direct Comparison
SUBJECT OF APPRAISAL Residential Lot with an area of 240 sq.m.
LOCATION Corner Abby & Kensington Sts., Hillsborough Pointe, Cagayan de Oro City
CHARACTERSTICS Corner lot; regular lot, flat, level with road
DATE OF APPRAISAL October 8, 2014
MARKET DATA ANALYSIS
TYPE OF DATA Sale Sale Offer Offer
DATE OF DATA 1 year ago Current Current Current
SOURCE RE Broker Legaspi RE Broker Santos Buy & Sell Magazine Mr. Castro, Resident
LOCATION Kensington Street, Abby Street,
Abby Street, Hillsborough Islington St. cor. Roman Hillsborough Pointe, HillsboroughPointe,CDOC
Pointe, CDOC St., H. Pointe, CDOC CDOC
SIZE (Lot Area - Sq.M.) 320 250 240 236
PHYSICAL Corner Lot, Regular Lot
CHARACTERISTICS Regular Lot Irregular shape Regular Lot
PRICE per Sq.M. P 5,200 P 6,000 P 6,500 P 7,000
ELEMENTS OF
COMPARISON
Time +5% 0% 0% 0%
Bargaining Allowance 0% 0% -20% -30%
Location 0% 0% 0% 0%
Size +10% 0% 0% 0%
Shape 0% +10% 0% 0%
Terrain 0% 0% 0% 0%
Elevation 0% 0% 0% 0%
Corner Influence +10% 0% +10% +10%
TOTAL ADJUSTMENTS +25% +10% -10% -20%
ADJUSTED VALUE 1,300 600 - 650 -1,400
WEIGHT 30% 30% 20% 20%
WEIGHTED VALUE P 1,950.00 P 1,980.00 P 1,170.00 P 1,120.00

CONCLUDED VALUE P 6,220.00
ROUNDED TO P 6,200 per Sq.M
MARKET DATA APPROACH – Opinion Survey
SUBJECT OF APPRAISAL Residential Lot with an area of 240 sq.m.
LOCATION Corner Abby & Kensington Sts., Hillsborough Pointe, Cagayan de Oro City
CHARACTERISTICS Corner lot; regular lot, flat, level with road
DATE OF APPRAISAL October 8, 2014
OPINION OF VALUE SURVEY

SOURCE VALUE RANGE AVERAGE WEIGHT WEIGHTED AVERAGE
Jojo Flores, Bank Appraiser P 5,000 – 6,000/sqm P 5,500/sqm 30% P 1,650/sqm
Tony Bencalo, REB P 6,000 – 6,500/sqm P 6,250/sqm 35% P 2,187.50/sqm
Robert Balandra, REA P 6,000 – 7,000/sqm P 6,500/sqm 35% P 2,275/sqm
P 6,112.50/sqm
Adjustment/Rectification:
Corner influence: +10% P 611.25/sqm
P 6,723.50/sqm
Say, P 6,700/sqm
CORRELATION OF VALUES
DIRECT COMPARISON P 6,200/sqm x 60% = P 3,720/sqm
OPINION SURVEY P 6,700/sqm x 40% = P 2,680/sqm
Appraised Value, P 6,400/sqm
RAWLAND VALUATION
Example:
Mr. A offers his 10.0 hectare rawland in Lumbia, Cagayan de Oro City. Prices of developed lots in
Lumbia is at P 3,500/sq.m. Subdivision developers disclose a development cost of P 800/sq.m.
of the Gross Area; Admin., Sales & other expenses is estimated at P 21,000,000. At how much
should you buy the property given a 5 year development & sales period of 5 years?
Annuity based on a 12% interest rate is 3.60477.
a) Analyze Gross Income
Total Cash Price = Selling Price of Developed Lot/Sq.M. x Saleable Area
TCP = P 3,500/Sq.M. x 10 has x 10,000Sq.M./hectare x 70%
TCP = Php245,000,000.00
b) Analyze Expenses
Total Expense = Development Cost + Other Expenses = Php800/sq.m. x 100,000 sq.m. + Php21,000,000
Total Expense = Php101,000,000.00
c) Ultimate Rawland Value = Gross Income - Total Expenses =Php245,000,000 - Php101,000,000
= Php144,000,000.00
d) Compute Rawland Value/Sq.M.
Rawland Value/Sq.M. = URV x Annuity Factor
No. of Years x Gross Area
RV/Sq.M. = Php144,000,000.00 x 3.60477
5 x 100,000 Php519,043,680.00000
RV/Sq.M. = Php 1,038.09/Sq.M. Php1,038.09
APPROACHES TO VALUE
2) COST APPROACH
Substitution
- Value of Improvement is estimated as follows:
> Estimate Replacement cost New (RCN)
> Arrive at the depreciated value of improvement using
straight-line method of depreciation and cost-to-cure
technique.
> Depreciated value of improvement is added to the Value of
Land.
Different Methods in estimating Cost:
a. Quantity Survey Method – includes a detailed inventory of all
materials, labor including indirect costs. Used by Engineers
& Architects.
b. Unit-Cost-in-Place – It is the mathematical compression of
Quantity Survey Technique. Use of installed prices of various
building materials.
c. Cost per Sq. Meter – is a product of Quantity Survey & Unit
Cost in Place methods. Established cost per area is
multiplied to the total floor area.
COST APPROACH – Sample Problem
Subject Property House and Lot

Location Pine Street, P.N. Roa Valley Subd., Cagayan de Oro City
Land Area (Sq.M.) 182
Building Single-storey residential house; High cost; Year built - 2007, well-maintained
Floor Area (Sq.M.) 146
Appraisal Date October 8, 2014
MARKET VALUE
LAND: 182 Sq.M. @ P 1,500 per Sq.M. P 273,000.00
IMPROVEMENT: (Residential Building)
Reproduction Cost, New 146 Sq.M. @ P 15,000 per Sq.M. = P 2,190,000.00
Less: a) Physical Deterioration - Straight Line Method (SLM) - 6/40 x 100% ( 328,500.00 )
b) Functional Obsolesence - -5% ( 109,500.00 )
c) Economic Obsolesence - 0% ( 0.00 )
P 1,752,000.00 P 1,752,000.00
TOTAL PROPERTY VALUE P 2,025,000.00
Rounded to P 2,020,000.00
APPROACHES TO VALUE
3) INCOME CAPITALIZATION APPROACH
Anticipation
- Value is arrived by capitalizing Income.
- Used in the valuation of income generating properties, such
as: Retail store properties, apartments, shopping centers,
office buildings, hotels, leased commercial & industrial
buildings
a) DIRECT CAPITALIZATION
b) YIELD CAPITALIZATION (DISCOUNTED CASH-FLOW)
* Weakness of the approach : Selection of rates
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION
 It applies an overall rate, or all risks yield, which when

divided into a single year’s or stabilized net operating
income, produces a value indication.
 Used in particularly, well-evidenced markets.
Basic Formula: Income/ Capitalization Rate
Example 1:
Income per year is P 3,000,000.00; Capitalization rate is 6%
Value = P 3,000,000.00/6% = P 50,000,000.00
DIRECT CAPITALIZATION
FORMULA:
VALUE = INCOME
RATE
V = I/R
Direct Capitalization Method
Subject Property Commercial Building
Location Pabayo Street, Poblacion, Cagayan de Oro City
Land Area (Sq.M.) 220

Building 2-storey commercial building; Average cost grade; Remaining Econ. Life – 40 years
Floor Area (Sq.M.) 352

Annual Rent (PhP) 1,270,000.00
Gross Annual Income P 1,270,000.00

Less: Allowance for vacancy & bad debts, say -10% (127,000.00)
Effective Gross Income (EGI) P 1,143,000.00
Less: Operating Expense - taxes, repairs, maintenance, say -20% (228,600.00)

Net Operating Income (NOI) P 914,400.00
Capitalization Rate = Rate of Return + Recapture Rate where: Recapture rate = 1 / Remaining Econ. Life
Capitalization Rate = 3% + 2.5% = 5.5% = 1/40
= .025 or 2.5%
Value = Net Effective Income / Capitalization Rate
Value = 914,400.00 ÷ 0.055 = P 16,625,454.55
Say, P 16,630,000.00
YIELD CAPITALIZATION
 It considers the time value of money, and is applied to a

series of net operating incomes for a period of years.
 A method called discounted cash flow analysis (DCF) is

an
example of yield capitalization.
Income, produces a value indication.
Discounted Cash Flow (DCF) Analysis

pwf x I1 1 2 3 4 5 n
NPV1 I1
+
pwf x I2
NPV2 I2
+
pwf x I3
NPV3 I3
+
pwf x I4
NPV4 I4
+ pwf x I5
I5
NPV5
+ pwf x In
In
NPVn
pwf x RV
+
RV Present Worth Factor = 1/(1 + r)n Reversion Value
(End of Period)
= Where: r = rate n = period (year)
MV
Discounted Cash Flow (DCF) Analysis
A 2-storey commercial building has a Net Operating Income per year of P 12,000,000 with an
increment of 10% per year. Compute the value of the property today assuming a 10 year cashflow.
Lot area is 3,000 sq.m. at P 12,000 per sq.m.
Building Value at 10th year is estimated at P 57,600,000. PV Rate = 12%
YEAR Net Operating Income (NOI) PW Factor Net Present Value

1 12,000,000.00 0.89286 10,714,285.71
2 13,200,000.00 0.79719 10,522,959.18
3 14,520,000.00 0.71178 10,335,049.20
4 15,972,000.00 0.63552 10,150,494.75
5 17,569,200.00 0.62092 10,909,090.91
6 19,326,120.00 0.50663 9,791,213.84
7 21,258,732.00 0.45235 9,616,370.74
8 23,384,605.20 0.40388 9,444,649.83
9 25,723,065.72 0.36061 9,275,995.37
10 28,295,372.29 0.32197 9,110,352.60
TOTAL PV (NOI) Php99,870,462.14
ADD:
VALUE OF LAND (Today) = 3,000 m2 x P 12,000/m2 x 0.32197 Php11,590,920.00
VALUE OF BUILDING (PV of Reversion)

=P 57,600,000 x 0.32197 Php18,545,472.00
VALUE OF PROPERTY Php130,006,854.14
Say, Php130,000,000.00
MODULE 5
VALUATION FACTORS &
CHARACTERISTICS
BUYER–SELLER CURVES
Fair Market Value
BUYER ‘S CURVE
Area of Market Feasibility

(+/- 20%-25%)
PRICE
SELLER ‘S CURVE
TIME
VALUE PARAMETERS
OVER APPRAISAL
HIGHEST POSSIBLE
MARKET VALUE
MARKET PRICE
FAIR MARKET VALUE
BIR ZONAL VALUATION

(Taxation Purposes)
ASSESSED VALUE
(Taxation Purposes)
UNDER VALUATION
VALUATION EMPIRICAL
FORMULAS
INTERSECTED LOT
(70% FMV)
VALUATION EMPIRICAL
FORMULAS
DELTA LOT
(60% FMV)
NABLA LOT
(40% FMV)
VALUATION EMPIRICAL
FORMULAS
IL KL CL CTL KTL TL
(+10%) (+20%) (+20%) (+10%)
LEGEND
CL – Corner lot
KL – Key lot
IL – Inner lot
CTL – Corner Thru lot
KTL – Key Thru lot
VALUATION EMPIRICAL
FORMULAS
3 <3m
100% 100%
m
FMV FMV
70% 50%
FMV FMV
VALUATION EMPIRICAL
FORMULAS
SUBDIVISION ROAD
cul-de-sac
(100% FMV)
MODULE 6
REAL ESTATE FINANCE &
ECONOMICS
 REAL ESTATE FINANCE AND ECONOMICS
 One of the factors that has impact on real estate value is the
availability of credit.
 The availability of debt money also influences real estate
development and consequently the value of real estate.
 When credit is plentiful, loans are easy to obtain, and the
availability of money results in an active market.
 When credit is scarce, illiquidity occurs, and prices often decline
because only a few people can pay cash or qualify to borrow or
find a bank to loan them money.
 Decrease or increase in interest rates; decline in interest rates
tends to expand the borrowing power of many people.
 REAL ESTATE FINANCE AND ECONOMICS
It is therefore, important that real property appraisers understand –

• the basic impact of monetary and fiscal policy that impact the price
and supply of money;
• understand and differentiate between money and capital markets;
• understand the basics of real estate finance including the basic terms,
types of loans, and various forms of mortgages
in order to efficiently proceed through the appraisal process.
REAL ESTATE FINANCE
 Real estate transfers usually involve the use of money as

opposed to other assets.
 Also, most real estate acquisitions involve both the buyer’s

investment in the property as well as the use of borrowed funds
for the balance.
 The buyer’s contribution is called equity, whereas the borrowed

money is called a mortgage.
 Mortgages are generally considered to be capital instruments

because payback periods are usually 10 years or more.
MORTGAGE FINANCING TERMS
Original Loan Amount

• The original loan amount is the face amount of the original
loan.
Equity
• Equity is the down payment or the cash paid by the buyer.
Amortization
• Amortization is the process of retiring a mortgage or debt over
a specified time period.
• An amortization usually calls for the systematic repayment of
principal plus interest at some specified rate.
Interest
• Interest represents the money earned for the right to use
capital. Mortgages are generally paid on a compound interest
method in which interest is paid each month on the
outstanding balance at the contractual interest rate.
Payment
• Payment is also known as debt service.
• A payment on an amortizing mortgage is comprised of both
interest and principal. Dividing the annual debt service by the
original loan amount equates to the mortgage constant. For
instance, if a mortgage payment is P13,000 per month, or
P156,000 per year, and if the original loan amount was
P2,000,000, the annual constant is .078 (P156,000 ÷
P2,000,000).
Loan-to-Value
• The loan-to-value (LTV) ratio is a percentage of the original or
proposed loan to the value of a property (loan amount ÷
property value).
• Mortgages are usually based on a loan-to-value concept that
protects the lender from loaning too much on a property.
• If a lender has a program that loans 70 percent LTV, and the
property value is P1,000,000, the maximum loan will be
P700,000. The remaining P300,000 is derived from a down
payment (equity) or some form of other financing.
• BSP regulation allows an LTV ratio up to a maximum of 80%.
MONETARY AND FISCAL POLICY
• When real property is sold, a defined interest in real estate is

exchanged for a defined amount of money.
• Usually, the money exchanged is free to float in an open market,
competing for other goods and services.
• Most of the time, a portion of the money used to acquire a real
property comes from borrowed funds, most often from banks or other
traditional lending institutions.
• Money should not be viewed as a fixed, static commodity, but rather
one that is constantly changing in its availability and cost.
MONETARY AND FISCAL POLICY
• The Philippines operates on a fractional reserve banking system in

which deposits are made to banks, and the banks lend from the
deposits.
• Although most of the deposits are loaned to various customers, the
banks are required to keep some of the deposits in reserve.
• Loans and reserves are directly influenced by monetary policy. The
supply and cost of money is significantly affected by the policies issued
by the Bangko Sentral ng Pilipinas (BSP).
CREDIT REGULATION DEVICES
Discount Rate
• The discount rate is the rate at which member banks can borrow funds
from the BSP to loan to other customers.
• Banks compete in the open market for deposits and must pay a certain
level of interest. Banks also must charge customers higher rates than the
rates being paid for deposits so that profit can be made.
• If the BSP lowers its discount rate, banks are allowed to pass the savings
onto customers through lower interest rates.
• This spurs economic demand since the cost of acquiring borrowed funds
has been lessened. Conversely, if the discount rate is increased, credit
tends to become tight, and economic activity declines.
• An economy that is expanding too rapidly may lead to inflationary
conditions. The BSP is constantly trying to maintain a balance between
economic growth through lowering rates and controlling inflation
through raising rates.
CREDIT REGULATION DEVICES
Reserve Requirement
•The reserve requirement is the percentage of deposits that must be
retained by banks.
•If the reserve requirement is increased, credit tends to tighten. Because
of the limited amount of available funds, interest rates tend to rise, and
economic activity decreases.
•If the reserve requirement is lowered, more funds are made available for
borrowers. Interest rates tend to come down, and economic expansion
occurs.
•Again, a balance between economic expansion and inflation control is the
ultimate goal of the BSP.
•Effective May 30, 2014, Reserve Requirement was adjusted as follows:
a)
Commercial/Universal Banks – 20% b)
Thrift Banks – 8%
c) Rural Banks – 5%
FISCAL POLICY
•The government’s management of revenues (taxes) and expenses

(appropriations) is called fiscal policy.
•The Philippines’ fiscal policy is managed by the Department of Budget

and Management (DBM).
•The budget management and fiscal spending also affect interest rates.
•Generally, the higher the amount of debt, the higher the inflation rate,
which means the higher the interest rate.
•Conversely, the lower the debt amount for the nation, the lower the
inflation rate and the lower the interest rate.
MONEY MARKETS
•Money markets are financial vehicles with traditional maturities or

investment periods of less than one year.
•Some examples of money market instruments are short-term

certificates of deposit (a bank’s CDs), Treasury bills (short term
government securities), and commercial paper (corporate promissory
notes).
•Money market instruments tend to influence short-term financing

rates, such as loans for construction and/or development of real estate.
CAPITAL MARKETS
•Capital markets include financial vehicles with usual maturities of more

than one year.
•Examples of capital market instruments include bonds, stocks,

mortgages, and deeds of trust.
•Capital market instruments tend to influence long-term financing rates,

as well as required rates of return on real estate investments.
THANK YOU.

Basic Appraisal For Real Estate Broker

Uploaded by

Copyright:

Available Formats

Basic Appraisal For Real Estate Broker

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Basic Appraisal For Real Estate Broker

Uploaded by

Copyright:

Available Formats

What are the main approaches to property appraisal discussed?

What are the main approaches to property appraisal discussed?

What factors affect property value according to the text?

What factors affect property value according to the text?

BASIC APPRAISAL FOR

REAL ESTATE BROKERS

Module 2) LEGAL CONSIDERATIONS IN APPRAISAL

Module 3) APPRAISAL PROCESS (METHODOLOGY)

Module 5) VALUATION FACTORS AND CHARACTERISTICS

Module 6) REAL ESTATE FINANCE & ECONOMICS

APPRAISAL or VALUATION – an estimate or opinion of value concerning real

Important notes on Appraisal:

Anything that is desired for financial, economic or sentimental

 A PRICE THAT A WILLING SELLER WOULD SELL AND A WILLING

Sellers are pressured to sell under the following circumstances:

2) ECONOMIC – Factors which have direct or indirect effect upon

3) POLITICAL – Government regulations

4) CONFORMITY – Most satisfactory use of land is realized when it conforms to the

Focuses on the various legal considerations involved in the ownership of

Six legal considerations:

Res Communes - The property status of such a thing while it

For example, in a lease arrangement, the person leasing the property

• A fixture is an item that was once personal property that has

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

• There are four public or governmental restrictions known as the

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

• Building codes are intended to protect the consumer from

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

• Eminent domain is the right of governments to acquire private

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

• Laws recognize the power of eminent domain but go on to state

PUBLIC (GOVERNMENT) RESTRICTIONS ON REAL ESTATE OWNERSHIP

PRIVATE RESTRICTIONS ON REAL ESTATE OWNERSHIP

• In addition to governmental restrictions, individuals may place

• A deed restriction is a limitation on the use of real estate through a

• One of the most common deed restrictions is a subdivision restrictive

• An easement typically does not convey ownership of the majority of

• A lease is a contractual agreement between a property owner

• When real estate is purchased, there are usually some borrowed

• A charge against a property in which the property is security for

• An encroachment is a trespass on another’s land. If a fence has

• Adverse possession is a method of acquiring ownership through

Leased Fee Estate

• A landlord’s (lessor’s) interest in a property when there is a lease

• In contrast to the leased fee estate, the tenant’s (lessee’s) interest in

• Air rights are particularly important in urban areas. In many cases,

• Surface/subsurface rights also come into play more in urban areas.

• This is the most common form of ownership where one person or

• Tenancy is created when the bundle of rights is divided, and in real

• Related to the ownership of real property, there are several

SPECIAL FORMS OF OWNERSHIP

The following three special types of ownership evolved in recent years

SPECIAL FORMS OF OWNERSHIP

•The term condominium describes a type of ownership, not a type of

SPECIAL FORMS OF OWNERSHIP

•A cooperative is a form of ownership in which a corporation owns the

•A time-share is a partial form of ownership in which other time-share