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Unformatted text preview: raisals for loans where government insurance or guarantees are involved. The form shown in Form 12–1 is the standard used by Fannie Mae and Freddie Mac (and since its adoption by the agencies, most lenders have come to use it as well), with some exceptions that we need not go into here (e.g., lenders participating in FNMA's Desktop Underwriter program). The appraisal form is divided into three basic sections: first, neighborhood data, or characteristics; second, information on the property; and third, valuation, as illustrated in Form 12–1. Dynasty School (www.dynastySchool.com) 12-3 REAL ESTATE FINANCE ESTIMATE VALUE BY EACH OF THE APPRAISAL METHODS
There are three approaches used for appraisal, they are the sales comparison approach, the cost approach and the income approach. Occasionally only one approach will be appropriate, because only limited data will be available for some properties. SALES COMPARISON APPROACH / MARKET DATA APPROACH
In the sales comparison approach, the sales prices of recently sold comparable properties are adjusted to derive an estimate of value for the property under appraisal. The sales comparison or market data approach to appraising makes the most direct use of the principle of substitution. The appraiser finds three to five (or more) properties that have sold recently and are similar to the subject property. The appraiser notes any dissimilar features and makes an adjustment for each by using the following formula: Value of Subject Property = Sales Price of Comparable Property +/– Adjustments
The appraiser adds to the sales price of a comparable property the value of a feature present in the subject property but not in the comparable. The appraiser subtracts from the sales price of the comparable property the value of a feature present in the comparable but not in the subject property. Major types of adjustments include those made for physical (on–site) features, locational (off–site) influences, conditions of sale (buyer–seller motivati...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10