real estate finance - full book (500 pgs)

In addition the lender determines whether to proceed

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Unformatted text preview: ge constant: The total annual payment of principal and interest on a mortgage with level payment amortization, expressed as a percentage of the initial principal amount of the loan.) RECONCILIATION The appraiser must correlate and reconcile the estimated values for the final value estimate and decide what conclusions can be drawn from the volume of collected facts. The appraiser never simply averages differing value estimates. The most relevant approach, based on analysis and judgment, receives the greatest weight in determining the estimate that most accurately reflects the value sought. RELATIONSHIP OF APPROACHES The three approaches to real estate appraisal require different kinds of information, which may include data on comparable nearby property sales (sales comparison approach), building cost (cost approach), and investment return (income capitalization approach). The information available will help determine which of the appraisal methods will be given the most validity in the appraiser’s final estimate of the market value of the subject property. As a general rule, the sales comparison approach is the most reliable approach with single–family residences; the cost approach is most reliable with non–income– producing property having a limited market or with special purpose properties; and the income capitalization approach is most reliable with income–producing property. Most appraisals will require the use of more than one approach, especially when land value must be distinguished from building value. This is true when the cost approach is used to find building value. There are other instances when land value must be separated from building value, such as for tax valuation purposes. These will be discussed later in this book. The next step in the appraisal process is to analyze the value indications from the three approaches to arrive at the best and most supportable opinion of value. This can be either a single dollar figure or a range into which...
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