Real Estate Appraisal report

Katep50

SampleFile.pdf

Home >Business & Finance homework help >Real Estate Appraisal report

FIN 181 ruumUer,Ll3

Grading Matrix

Mark Massie Appraisal Gomparison

Points Earned Points AvailableItem

3D 30

lntroduction: ./ o Title pagey , ./ o Letter of Transmittal-/ . Table of ContentsV ,, . Executive Summ ary /

?to t0

isal problem and scope,øfwork: Who was the clienf/ ,/ ., lntended use and usáV t-/ Subject property and the propertyÏghts conveyed \/ Effective date of the appraisal

Appra

40Analysis of data: o Market analysis and marke tability¿ ./ . Híghest and best use then and now t'/ o Three approaches to value then and now . Reconciliation and final value opinion

/\ /-/

ùa

Quality of report: . EasV to read and understand o No spelling, grammar, or punctuation

errors Use of visual maps Sources

a "¡M o

ch as pictures and

14\ 100Total

Running Head: REAL ESTATE APPRAISAL COMPARISON PROJECT

Real Estate Appraisal Comparison Project

Appraisal Hl: 1225 E. Santa Ana Ave. Fresno, California

Evan Streeter #43

California State University, Fresno

REAL ESTATE APPRAISAL COMPARISON PROJECT

Letter of Transmittal:

Dr. Jacquelin Curry California State University, Fresno 5421 N. Maple Ave. Fresnoo California

Dear Dr. Curry

Submitted herewith is the appraisal that you requested on the property located on 1225 E. Santa

Ana Ave

The purpose of this appraisal is to estimate the current market value of the above property which

will be used as a basis for a possible sale. The value arrived at in this appraisal is which can be

expected if the property is properly merchandised, allowing usual terms and time to find a buyer.

After making a personal inspection and considering the market influences affecting the property,

it is my opinion that the current market value, as of the date of last inspection, May 5, 2018 is:

TWO HTINDRED SEVENTY THOUSAND SEVEN HTINDRED FIFTY-FIVE DOLLARS

(s270,755)

The evidence is considered in support of the above value is summarizedinthe following pages.

Sincerely yours,

â,*lÅffi Evan Streeter

- ¡ Hø-o\.r o.o^*

REAL ESTATE APPRAISAL COMPARISON PROJECT

Table of Contents:

Title Page

Letter of Transmittal

Table of Contents

Executive Summary

Who Was the Client

Intended Use and Users

Subject Property and Rights Conveyed

Effective Date of Appraisal

Market Analysis and Marketability

Highest and Best Use

Three Approaches Then and Now

Sales Comparison Approach

Income Approach

Cost Approach

Reconciliation and Final Value of Opinion

Sources

5-6

7-8

8-9

9-10

10-1 1

REAL ESTATE APPRAISAL COMPARISON PROJECT 4

Executive Summary:

This paper is a response to Mark Massie's 1962 Appraisal of the subject property on 1225 E.

Santa Ana Avenue in Fresno, California. I discuss in the paper the client, the intended use, and

details about the property amongst other things. I've attached images to further explain the topics

at hand as well. Instead of discussing every little thing I've included in the paper I will just

discuss the most important thing about the appraisal and how I created a new appraisal. Mark

Massie originally only used the Sales Comparison approach in his analysis of what the property

was worth on the market. This is easily the most important approach in calculating the market

value of the subject property. I also included the income approach and cost approach to this new

appraisal to discuss further opinions of value and then discussed them. After this I weighted the

values of each approach based on their relevancy and determined a final value of opinion of this

property. I feel as though it is slightly over-valued in the market today, but the housing market is

expecting a slight appreciation in the upcoming few years, so this could drive this value higher,

but is not guaranteed. This single-family home is operating and has been operating at its highest

and best use and this property is likely towards the end of its effective life. Mark Massie did a

great job at appraising this property for the time in 7962,but I feel that it is important to use

other approaches as well to see how close you are in your valuation taking other things into

consideration in order to have a higher probability of correctness. It is wildly impressive how

different the valuation of a home is over a span of about 60 years, this home originally was

valued at $62,000 and today it is worth at least four to five times more, you have to take into

consideration things such as wages and inflation, but this property has appreciated significantly

over time, but it is also depreciating over time based on efficiency.

REAL ESTATE APPRAISAL COMPARISON PROJECT

Who was the client:

For Mark Massie's original appraisal, the clients of the property were John P. and Elsie A.

Lamborn back in 1962. Today the house is not on the market and the property itself was built in

1951. Today and then, this property was an R-1, single family residential property. The scope of

the work is that the property is very old and likely has a lot of improvements that must be done in

order to keep the property efficient. There is also no available information as to who currently

owns it, and it is not currently for sale.

Intended use and user:

The highest and best use at the time and now is to remain as a single family residential property

and home. The property is in a residential neighborhood and is not close enough to busy streets

so the opportunity to turn commercial or become a business is extremely unlikely. This property

has and very likely will remain a single family residential property. Therefore, I am assuming

that this property is already existing within its highest and best use.

Subject Properfy and the Property Right Conveyed:

This property is an R-l single family residential property that was built in 1951. According to

Zillow.com, the property is a single family and single-story home. It is still existing there to this

day. It has approximately 2,231 square feet, 3 bedrooms, 2.5 bathrooms and a 360 square foot

single car gatage. The property itself sits on a 0.28-acre lot. The home seems to be well kept

despite being very old, and the pool also includes an underground L-shaped pool. Below or on

the next page are pictures of the property as of today. They try to match the photos taken in the

original appraisal but are slightly off. Included is a street view of the property, and eagle eye

view of the property from Google Earth and a map view of the site from Google Maps.

REAL ESTATE APPRAISAL COMPARISON PROJECT 6

l:,:-ì (.; ir{l{''r 'y'r'l;¡¡-¡i' !ì'tt'i¡:ìt¡ì :l I.í''ìlt'f

99 l¡v'¡:;!+. I rr¡,ti-; l\¡l.l Vi -..1r¿tr'r

^," a

i1/ !l h ¡ v. ¡'¡'.' r:

f 11.'lVili¡.rt; ¡...-

MÐp dãttrÞ2O18 Googúe

l.':'lr.i.r7 ¡,ç. [ ::; La !r.' /'\ v É'

1 ¡j

F- ñ-tf i .,t-' J-L¡ ¿'1 vt'

REAL ESTATE APPRAISAL COMPARISON PROJECT

Effective Date of Appraisal:

The elfective date of Mark Massie's appraisal was on March 16,1962.May 7.2018 is when this

property is being appraised today. In the original appraisal Massie only used the Comparable

Sales approach and the summation of appraisal items to come up with an opinion of value of the

property. He then reconciled the approaches by just solely using the weight of the comparable

sales approach. This likely means that these types of neighborhoods have homes of similar sizes

and often sell based on how other houses in the same market are being valued at. Massie only

used the Sales Comparison Approach, but I will be using this approach, as well as the Income

and Cost Approach.

Market Analysis and Marketability:

s440K

5l rBX

3 bd, 2.5 ba 2,23,l sqft

5532X

s282Xs293X

s4 50K

s279X 1288 Ks lo9t(

s4 l0K o

ct ¿ ro z

sl07K32 l4K

r29lK s401K s39 5K

3387K 3209K

Ave

3315K

f40lK ll13x

.........-F

û Ctlo õ z

t2 30K

I 3497K

-ììr.

saslK ¡

s386K

REAL ESTATE APPRAISAL COMPARISON PROJECT

Market analysis is the portion of the valuation process in which the appraiser develops an

opinion about the current and near future supply and demand factors that affect the market for

the subject property. The above image shows the house in white in the area of homes and their

approximate values based on Zillow. This an older neighborhood and there aren't a lot of

construction or new developments in the area, so the supply and demand should remain

relatively stable. The marketability should also remain stable as the markets seem to be

somewhat stable for the next few years, but a recession and declining housing market may occur

in the not so distant future.

Highest and best use then and now:

As mentioned previously in the intended use portion of the paper, the highest and best use for

this property back in 1962 was to be a single family residential property, and this still remains

true today. This neighborhood is filled solely with single family residential properties. It isn't a

big enough lot to have apartment housing and not a busy enough location to host businesses,

therefore it remains the most beneficial for highest and best use to be a single family residential

property, then, now and in the future.

Three approaches to value then and now:

Back in 1962 Mark Massie only used the sales comparison approach to determine the value of

the property. Today I will be calculating my opinion of value based on the following three

approaches: Sales comparison, Cost Approach and Income Approach. First let's start with

estimate the value of the property using the sales comparison approach as in mine and Massie's

opinion it is the most relevant for valuation of this type of property.

REAL ESTATE APPRAISAL COMPARISON PROJECT 9

,::

l-r¡'.t..t tvl.lri't-- /trr,e --;

I l.ttr lìì,.-¡,'r .il'r'F

- ri.l,i," i !r ,i..: r

'ì:!lrl,: ^'¡.1

J'\r'¡

o s44 0K

L i-,1 f'l ¡1 '¡ I ¡"q¡

s.l 3 ûK 3275K rtl'r lt'i't A"':-

5l9OK: f': ¡lt'r 'r""

s33CIK S329K

Sales Comparison Approach:

Above is an image of nearby properties that were recently sold. The properties I will be using in

the sales comparison approach is the three properties I feel are most closely related to this

property in the area as far as size and value. The properties I will be using have the same size as

the subject property, 3 bedrooms and2 bathrooms, are similar square footage, and have been

sold recently. These properties are the following addresses and the associated prices they were

purchased for. 1415 E. Santa Ana Ave sold for $275,000. 4686 N. Del Mar Ave. sold for

$330,000. The property on734 E. Fairmont Ave. sold for $335,000. These properties all sold for

a decent amount of money because these properties are much newer and nicer than the subject

property, so taking into account the age of the home it is not valued as highly as these properties.

To calculate this value, I will take the 3 selling prices of these homes and then multiply it by .9

because these homes are newer, and this should adjust to an amount that is likely for this

REAL ESTATE APPRAISAL COMPARISON PROJECT 10

property. So, by taking $275,000+330,000+335,000 I 3 * .9I came up with a value of $282,000.

ZiIlow estimated the value of this property at $31 8,346 but I feel like the house is so aged that it

wouldn't sell if it were listed at $318,000 despite having a pool.

Income Approach:

The income approach is calculated simply by taking the Net Operating Income and Dividing it

by the Capitalization rate. To find the Net Operating Income I took the rent zestimate from

Zillow which is $1600 monthly and multiplied it by 12 to get an annual amount. I then simply

divide it by the average capitalization rate for homes in Fresno built from 1950-1979 which in

this case is7.04o/o. So therefore, we get $1600* 12 I .074 which gives us an Income Approach

estimate for the sub.ject property a valuation of $259,460.

Cost Approach:

For the cost approach the market value of the property is equal to the cost of the land plus the

cost of construction, minus depreciation. It is most important when the property is new. Since

our property is so old this approach will likely not be very useful in our final estimate. As for

now let's estimate the value using this approach. To find the value of the land I took the price of

land that was 2.78 acres big on a property nearby on 130 W Barstow Ave. The land is worth

$894,500 for 2.78 acres of land so I will divide this dollar amount to find out how much the 0.28

acres of land should be worth. So, by taking 2.7810.28 and multiplying it by 894,500 it gives us

an amount of 9.928 taking the land value and dividing it by this ratio will give us a land value

approximation of $90,098. On Granville homes I found a brand-new property of similar size and

features to get the cost of new construction. Although the home isn't in the same neighborhood

REAL ESTATE APPRAISAL COMPARISON PROJECT TI

because there aren't many new homes in the subject properties neighborhood I used the

Granville home to estimate the value of the cost of construction which is $331,168. The value of

depreciation is difficult to calculate for this property because the home is 57 years old and I'm

unsure of how much effective life the home still has based on upkeep. The outside seems to be

kept up nicely but there's no way to know for sure how much the property has depreciated. I'm

going to assume the property has about23 years remaining in its useful life. That being said the

average house clepreciated 3.60/o of the cost annually, so I'd say the depreciation would be equal

to 57180 * .036 * 23 * 331,168 which gives us a cost approach depreciation of $195,372. So,

$33 1,168+90.098 - 195,372 gives us a cost approach valuation of 5225,894.

Reconciliation and fïnal value of opinion:

I am now going to take the values of the different approached and add weights to them and

average them to get a final value of opinion. I feel as though the Sales Comparison was the most

relevant to this type of property and it was the only approach that Mark Massie and I both used. I

will be giving this a weight of 650/o. The next valuation method in importance and accuracy in

my opinion is the income approach which I will give a weight of 25o/o and lastly, I will be giving

the cost approach a weight of 10o/o because it is only a good method if the house is newer. This

being said my final value of opinion is calculated in the following way: .65*282,000 +

.25*259,460 + .10*225,894 which equal a point estimate for my final value opinion of

$270,754.40, I would give this property a range of about $270,000-$280,000, which is a bit

lower thanZillow's estimate of $318,346.

REAL ESTATE APPRAISAL COMPARISON PROJECT

Sources:

2601 N. Whittier Ave., Fresno, CA 93727. (n.d.). Retrieved from

http://www.gvhomes.com/property 12601-n-whittier-ave-fresno-ca-937271

Current Cap Rates. (n.d.). Retrieved from https:llapartmentpropertyvaluation.com/cap-

ratelcounfyl

Staff, I. (2011, August 15). Sales Comparison Approach - SCA. Retrieved from

htçs ://www. investopedia. com/terms/s/sales-comparison-approach. asp

Staff, I. (2016, March 25). Income Approach. Retrieved from

https : //www. investopedia. com/terms/i/income-approach. asp

Staff, L (2011, July 12). Cost Approach. Retrieved from

https : //www. investopedia. com/terms/c/cost-approach. asp

Zillow,Inc. (n.d.). Real Estate - 33 Homes For Sale lZillow. Retrieved from

htþs://www.zillow.com/homes/for_sale/36.80791,-119.790851,36.801871,-

119.798576 rectllí zmll rsl