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Navigable Slide Index
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Topics Covered
- Comparative market analysis (CMA)
- Estate tax
- Market comparison
- Income capitalization
- Cost less depreciation
- Net operating income
- Market conditions
Talk Citation
McDonald, J.F. (2024, August 29). Appraisal of real estate [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved October 11, 2024, from https://doi.org/10.69645/USTK7951.Export Citation (RIS)
Publication History
Other Talks in the Series: Key Concepts: Real Estate Economics
Transcript
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0:00
Welcome again to Real
Estate Economics.
This is talk number
6 in the series and
the third talk under
the general topic of
real estate markets.
I'm John McDonald,
Emeritus Professor of Economics
at the University of Illinois
Chicago and Emeritus
Professor of
Real Estate at
Roosevelt University.
This talk is about the
appraisal of real estate.
0:32
Appraisal. The idea is to
provide a formal estimate of
market value of a property
and then appraisal is done
by a professional appraiser.
The property is
assumed to be sold by
a normal seller to
a normal buyer under
normal market conditions.
In other words, it's not
parents selling a property to
a child or not an arm's
length transaction.
You've got normal
market conditions.
That's a formal appraisal,
and we'll go into the
details of how that is done.
In addition, however,
there's what's
called a comparative
market analysis or
CMA, which is an
informal valuation
done by anyone, including you.
I'm going to suggest later
that you actually do one.
1:29
The appraisal of a piece
of real estate has
several different uses.
These include for the seller -
determine a reasonable
asking price.
You want to sell your property,
have an appraiser
figure out, well,
how much is it worth?
You can also just use
a comparative market analysis on
your own or your
brother-in-law can do one.
You can also use it to
determine how much insurance to
carry if you are the owner,
you want to insure
your property.
How much do you want
to insure it for?
For damages and so on.
Local government, of course,
is very interested in knowing
how much your property
is worth, because
they're going to tax it.
The property tax is based on
an appraisal of the property.
Also, upon the
death of an owner,
we want to know how much
tax is owed for the estate,
all of these uses.
For the buyer,
they can use an appraisal or
a CMA to determine how much
they are going to offer.
Both sides of the
transaction can use
an appraisal or comparative
market analysis
as part of their process of
hitting on a sale price.
Finally, for the lender, and
there usually is a lender
involved, how much to
lend the buyer? What should
the size of the loan be?
Indeed, lenders usually will
require the formal appraisal.
They will hire an
appraiser and they may
even have one on staff who does
an official appraisal
of the property,
and what the idea
is, they want to
make sure that the property is
worth more than the
size of the loan.