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Unformatted text preview: DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate and current information, UBC, their affiliates, authors, editors and staff (collectively, the "UBC Group") makes no claims, representations, or warranties as to accuracy, completeness, usefulness or adequacy of any of the information contained herein. Under no circumstances shall the UBC Group be liable for any losses or damages whatsoever, whether in contract, tort or otherwise, from the use of, or reliance on, the information contained herein. Further, the general principles and conclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases, and any revisions of the same. This publication is sold for educational purposes only and is not intended to provide, and does not constitute, legal, accounting, or other professional advice. Professional advice should be consulted regarding every specific circumstance before acting on the information presented in these materials. © Copyright: 2014 by the UBC Real Estate Division, Sauder School of Business, The University of British Columbia. Printed in Canada. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transcribed, modified, distributed, republished, or used in any form or by any means – graphic, electronic, or mechanical, including photocopying, recording, taping, web distribution, or used in any information storage and retrieval system – without the prior written permission of the publisher. CHAPTER 7 THE VALUATION PROCESS ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœȱ ’œȱ Šȱ œ¢œŽ–Š’Œȱ ™›˜ŒŽž›Žȱ Š—ȱ Š™™›Š’œŽ›ȱ ˜••˜ œȱ ˜ȱ ™›˜Ÿ’Žȱ Š—œ Ž›œȱ ˜ȱ Šȱ Œ•’Ž—ȇœȱ šžŽœ’˜—œȱ Š‹˜žȱ ›ŽŠ•ȱ ™›˜™Ž›¢ȱ ŸŠ•žŽǯȱ ȱ ’œȱ Šȱ –˜Ž•ȱ ‘Šȱ ŒŠ—ȱ ‹Žȱ ŠŠ™Žȱ ˜ȱ Šȱ ’Žȱ ŸŠ›’Ž¢ȱ ˜ȱ šžŽœ’˜—œȱ ‘Šȱ ›Ž•ŠŽȱ ˜ȱ ŸŠ•žŽǯȱ ȱ ŒŠ—ȱ Š•œ˜ȱ ‹Žȱ žœŽǰȱ ™Ž›‘Š™œȱ ’‘ȱœ˜–Žȱ–˜’ęŒŠ’˜—ǰȱ˜ȱŠ—œ Ž›ȱšžŽœ’˜—œȱ—˜ȱ’›ŽŒ•¢ȱ›Ž•ŠŽȱ˜ȱŸŠ•žŽǰȱŠœȱ ’—ȱ‘ŽȱŒŠœŽȱ˜ȱŠ™™›Š’œŠ•ȱ›ŽŸ’Ž ȱŠ—ȱ›ŽŠ•ȱ™›˜™Ž›¢ȱŒ˜—œž•’—ȱŠœœ’—–Ž—œǯ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœȱ ‹Ž’—œȱ ‘Ž—ȱ ‘Žȱ Š™™›Š’œŽ›ȱ Ž—Ž›œȱ ’—˜ȱ Š—ȱ Š›ŽŽ–Ž—ȱ ’‘ȱ Šȱ Œ•’Ž—ȱ ˜ȱ ™›˜Ÿ’Žȱ Šȱ ŸŠ•žŠ’˜—ȱ œŽ›Ÿ’ŒŽǯȱ Ž—Ž›Š••¢ǰȱ ‘Žȱ Ž›–œȱ ˜ȱ ‘Žȱ Š›ŽŽ–Ž—ȱ Š›Žȱ ž•ę••Žȱ ‘Ž—ȱ ‘Žȱ Š™™›Š’œŽ›ȱ Ž•’ŸŽ›œȱ ‘Žȱ Šœœ’—–Ž—ȱ ›Žœž•œȱ ǻ˜™’—’˜—œȱ Š—ȱ Œ˜—Œ•žȬ œ’˜—œǼȱ ˜ȱ ‘Žȱ Œ•’Ž—ǯȱ ‘Žȱ ˜‹“ŽŒ’ŸŽȱ ˜ȱ –˜œȱ Š™™›Š’œŠ•ȱ Šœœ’—–Ž—œȱ ’œȱ ˜ȱ ›Ž—Ž›ȱ Š—ȱ ˜™’—’˜—ȱ ˜ȱ –Š›”Žȱ ŸŠ•žŽǯȱ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœȱ Œ˜—Š’—œȱ Š••ȱ ‘Žȱ œŽ™œȱ Š™™›˜™›’ŠŽȱ ˜ȱ ‘’œȱ ¢™Žȱ ˜ȱ Šœœ’—–Ž—ǯȱ ‘Žȱ –˜Ž•ȱ Š•œ˜ȱ ™›˜Ÿ’Žœȱ ‘Žȱ ›Š–Ž ˜›”ȱ ˜›ȱ ŽŸŽ•˜™’—ȱ Š—ȱ ˜™’—’˜—ȱ˜ȱ˜‘Ž›ȱŽę—ŽȱŸŠ•žŽœǯ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœȱ ’œȱ ŠŒŒ˜–™•’œ‘Žȱ ‘›˜ž‘ȱ œ™ŽŒ’ęŒȱ œŽ™œǯȱ ‘Žȱ —ž–‹Ž›ȱ ˜ȱ œŽ™œȱ ˜••˜ Žȱ Ž™Ž—œȱ ˜—ȱ ‘Žȱ ’—Ž—Žȱ žœŽȱ ˜ȱ ‘Žȱ Šœœ’—–Ž—ȱ ›Žœž•œǰȱ ‘Žȱ —Šž›Žȱ ˜ȱ ‘Žȱ™›˜™Ž›¢ǰȱ‘ŽȱœŒ˜™Žȱ˜ȱ ˜›”ȱŽŽ–Žȱ™™›˜™›’ŠŽȱ The valuation process is a systematic ˜›ȱ ‘Žȱ Šœœ’—–Ž—ǰȱ Š—ȱ ‘Žȱ ŠŸŠ’•Š‹’•’¢ȱ ˜ȱ ŠŠǯȱ ‘Žȱ set of procedures an appraiser –˜Ž•ȱ ™›˜Ÿ’Žœȱ Šȱ ™ŠĴŽ›—ȱ ‘Šȱ ŒŠ—ȱ ‹Žȱ žœŽȱ ’—ȱ Š—¢ȱ follows to provide answers to a client's Š™™›Š’œŠ•ȱ Šœœ’—–Ž—ȱ ˜ȱ ™Ž›˜›–ȱ –Š›”Žȱ ›ŽœŽŠ›Œ‘ȱ questions about real property value. Š—ȱ ŠŠȱ Š—Š•¢œ’œǰȱ ˜ȱ Š™™•¢ȱ Š™™›Š’œŠ•ȱ ŽŒ‘—’šžŽœǰȱ Š—ȱ ˜ȱ ’—Ž›ŠŽȱ ‘Žȱ ›Žœž•œȱ ˜ȱ ‘ŽœŽȱ ŠŒ’Ÿ’’Žœȱ ’—˜ȱ Š—ȱ˜™’—’˜—ȱ˜ȱŽę—ŽȱŸŠ•žŽǯȱ —ȱŠ’’˜—ȱ˜ȱŠœœ’œ’—ȱŠ™™›Š’œŽ›œȱ’—ȱ‘Ž’›ȱ ˜›”ǰȱ–˜Ž•œȱ ‘ŠȱŠ™™•¢ȱ‘ŽȱŸŠ•žŠ’˜—ȱ™›˜ŒŽœœȱŠ›Žȱ›ŽŒ˜—’£Žȱ‹¢ȱ‘Žȱ–Š›”Žȱ˜ȱŠ™™›Š’œŠ•ȱžœŽ›œȱŠ—ȱ ŠŒ’•’ŠŽȱ‘Ž’›ȱž—Ž›œŠ—’—ȱ˜ȱŠ™™›Š’œŠ•ȱŒ˜—Œ•žœ’˜—œǯ ŽœŽŠ›Œ‘ȱ ‹Ž’—œȱ ŠŽ›ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ™›˜‹•Ž–ȱ ‘Šœȱ ‹ŽŽ—ȱ ’Ž—’ꮍȱ Š—ȱ ‘Žȱ œŒ˜™Žȱ ˜ȱ ˜›”ȱ ›Žšž’›Žȱ ˜ȱ œ˜•ŸŽȱ ‘Žȱ ™›˜‹•Ž–ȱ ‘Šœȱ ‹ŽŽ—ȱ ŽŽ›–’—Žǯȱ ‘Žȱ Š—Š•¢œ’œȱ ˜ȱ ŠŠȱ ›Ž•ŽŸŠ—ȱ˜ȱ‘Žȱ™›˜‹•Ž–ȱœŠ›œȱ ’‘ȱŠ—ȱ’—ŸŽœ’Š’˜—ȱ˜ȱ›Ž—œȱ˜‹œŽ›ŸŽȱŠȱ‘Žȱ–Š›”Žȱ •ŽŸŽ•DZȱ ’—Ž›—Š’˜—Š•ǰȱ —Š’˜—Š•ǰȱ ›Ž’˜—Š•ǰȱ ˜›ȱ —Ž’‘‹˜ž›‘˜˜ǯȱ ‘Žȱ –Š›”Žȱ Š—Š•¢œ’œȱ ‘Ž•™œȱ ‘Žȱ Š™™›Š’œŽ›ȱ ž—Ž›œŠ—ȱ ‘Žȱ ’—Ž››Ž•Š’˜—œ‘’™œȱ Š–˜—ȱ ‘Žȱ ™›’—Œ’™•Žœǰȱ ˜›ŒŽœǰȱ Š—ȱ ŠŒ˜›œȱ ‘Šȱ ŠěŽŒȱ ›ŽŠ•ȱ ™›˜™Ž›¢ȱ ŸŠ•žŽȱ ’—ȱ ‘Žȱ œ™ŽŒ’ęŒȱ –Š›”Žȱ Š›ŽŠǯȱ ŽœŽŠ›Œ‘ȱ Š•œ˜ȱ ™›˜Ÿ’Žœȱ ›Š ȱ ŠŠȱ ›˜–ȱ ‘’Œ‘ȱ ‘Žȱ Š™™›Š’œŽ›ȱ ŒŠ—ȱ Ž¡›ŠŒȱ šžŠ—’Š’ŸŽȱ ’—˜›–Š’˜—ȱ ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 1 10/4/2010 10:35:35 AM 7.2 The Appraisal of Real Estate – Third Canadian Edition Š—ȱ ˜‘Ž›ȱ ŽŸ’Ž—ŒŽȱ ˜ȱ –Š›”Žȱ ›Ž—œǯȱ žŒ‘ȱ ›Ž—œȱ –Š¢ȱ ’—Œ•žŽȱ ™˜œ’’ŸŽȱ ˜›ȱ —ŽŠ’ŸŽȱ ™Ž›ŒŽ—ŠŽȱ Œ‘Š—Žœȱ ’—ȱ ™›˜™Ž›¢ȱ ŸŠ•žŽȱ ˜ŸŽ›ȱ Šȱ —ž–‹Ž›ȱ ˜ȱ ¢ŽŠ›œǰȱ ‘Žȱ ™˜™ž•Š’˜—ȱ –˜ŸŽ–Ž—ȱ’—˜ȱŠ—ȱŠ›ŽŠǰȱŠ—ȱ‘Žȱ—ž–‹Ž›ȱ˜ȱŽ–™•˜¢–Ž—ȱ˜™™˜›ž—’’ŽœȱŠŸŠ’•Š‹•ŽȱŠ—ȱ ‘Ž’›ȱŽěŽŒȱ˜—ȱ‘Žȱ™ž›Œ‘Šœ’—ȱ™˜ Ž›ȱ˜ȱ™˜Ž—’Š•ȱ™›˜™Ž›¢ȱžœŽ›œǯ Figure 7.1 The Valuation Process STEP 1 Identification of the Problem Identify client and intended users Identify the intended use Identify the Identify the Identify the Assignment purpose of effective date relevant conditions the assignment of the opinion characteristics (type of value) of the property Extraordinary Hypothetical Assumptions Conditions STEP 2 Scope of Work Determination STEP 3 Data Collection and Property Description Market Area Data General characteristics of region, city, and neighborhood STEP 4 Subject Property Data Subject characteristics of land use and improvements, personal property, business assets, etc. Comparable Property Data Sales, listings, offerings vacancies, cost and depreciation, income and expenses, capitalization rates, etc. Data Analysis Market Analysis Demand studies Supply studies Marketability studies Highest and Best Use Analysis Site as though vacant Ideal improvement Property as improved STEP 5 Site Value Opinion STEP 6 Application of the Approaches to Value Direct Comparison Cost Income STEP 7 Reconciliation of Value Indications and Final Opinion of Value STEP 8 Report of Defined Value ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 2 10/4/2010 10:35:35 AM Chapter 7 – The Valuation Process 7.3 —ȱŠœœ’—–Ž—œȱ˜ȱŽŸŽ•˜™ȱŠ—ȱ˜™’—’˜—ȱ˜ȱ–Š›”ŽȱŸŠ•žŽǰȱ‘Žȱž•’–ŠŽȱ˜Š•ȱ˜ȱ‘ŽȱŸŠ•žȬ Š’˜—ȱ ™›˜ŒŽœœȱ ’œȱ Šȱ Ž••Ȭœž™™˜›Žȱ ŸŠ•žŽȱ Œ˜—Œ•žœ’˜—ȱ ‘Šȱ ›ŽĚŽŒœȱ Š••ȱ ˜ȱ ‘Žȱ ™Ž›’—Ž—ȱ ŠŒ˜›œȱ ‘Šȱ ’—ĚžŽ—ŒŽȱ ‘Žȱ –Š›”Žȱ ŸŠ•žŽȱ ˜ȱ ‘Žȱ ™›˜™Ž›¢ȱ ‹Ž’—ȱ Š™™›Š’œŽǯȱ ˜ȱ ŠŒ‘’ŽŸŽȱ ‘’œȱ˜Š•ǰȱŠ—ȱŠ™™›Š’œŽ›ȱœž’ŽœȱŠȱ™›˜™Ž›¢ȱ›˜–ȱ‘›ŽŽȱ’쎛Ž—ȱŸ’Ž ™˜’—œǰȱ ‘’Œ‘ȱŠ›Žȱ ›ŽŽ››Žȱ˜ȱŠœȱ‘ŽȱŠ™™›˜ŠŒ‘Žœȱ˜ȱŸŠ•žŽǯȱ‘Žȱ‘›ŽŽȱŠ™™›˜ŠŒ‘ŽœȱŠ›ŽȱŽœŒ›’‹Žȱ‹Ž•˜ DZ yȱ —ȱ ‘Žȱ Œ˜œȱ Š™™›˜ŠŒ‘ǰȱ ŸŠ•žŽȱ ’œȱ Žœ’–ŠŽȱ Šœȱ ‘Žȱ Œž››Ž—ȱ Œ˜œȱ ˜ȱ ›Ž™›˜žŒ’—ȱ ˜›ȱ ›Ž™•ŠŒ’—ȱ ‘Žȱ ’–™›˜ŸŽ–Ž—œȱ ǻ’—Œ•ž’—ȱ Š—ȱ Š™™›˜™›’ŠŽȱ Ž—›Ž™›Ž—Žž›’Š•ȱ ’—ŒŽ—’ŸŽȱ˜›ȱ™›˜ęǼȱ–’—žœȱ‘Žȱ•˜œœȱ’—ȱŸŠ•žŽȱ›˜–ȱŽ™›ŽŒ’Š’˜—ȱ™•žœȱ•Š—ȱ˜›ȱ œ’ŽȱŸŠ•žŽǯ yȱ —ȱ‘Žȱ’›ŽŒȱŒ˜–™Š›’œ˜—ȱŠ™™›˜ŠŒ‘ǰȱŸŠ•žŽȱ’œȱ’—’ŒŠŽȱ‹¢ȱ›ŽŒŽ—ȱœŠ•Žœȱ˜ȱŒ˜–™ŠȬ ›Š‹•Žȱ™›˜™Ž›’Žœȱ’—ȱ‘Žȱ–Š›”Žǯ yȱ —ȱ ‘Žȱ ’—Œ˜–Žȱ Š™™›˜ŠŒ‘ǰȱ ŸŠ•žŽȱ ’œȱ ’—’ŒŠŽȱ ‹¢ȱ Šȱ ™›˜™Ž›¢ȇœȱ ŽŠ›—’—ȱ ™˜ Ž›ǰȱ ‹ŠœŽȱ˜—ȱ‘ŽȱŒŠ™’Š•’£Š’˜—ȱ˜ȱ’—Œ˜–Žǯ ›Š’’˜—Š••¢ǰȱ œ™ŽŒ’ęŒȱ Š™™›Š’œŠ•ȱ ŽŒ‘—’šžŽœȱ Š›Žȱ Š™™•’Žȱ ’‘’—ȱ ‘Žȱ ‘›ŽŽȱ Š™™›˜ŠŒ‘Žœȱ ˜ȱŽ›’ŸŽȱ’—’ŒŠ’˜—œȱ˜ȱ›ŽŠ•ȱ™›˜™Ž›¢ȱŸŠ•žŽǯȱ—Žȱ˜›ȱ–˜›ŽȱŠ™™›˜ŠŒ‘Žœȱ˜ȱŸŠ•žŽȱ–Š¢ȱ‹Žȱ žœŽȱ Ž™Ž—’—ȱ ˜—ȱ ‘’Œ‘ȱ Š™™›˜ŠŒ‘Žœȱ Š›Žȱ —ŽŒŽœœŠ›¢ȱ ˜ȱ ™›˜žŒŽȱ Œ›Ž’‹•Žȱ Šœœ’—–Ž—ȱ ›Žœž•œǰȱ’ŸŽ—ȱ‘Žȱ’—Ž—ŽȱžœŽǯ ‘Žȱ ‘›ŽŽȱ Š™™›˜ŠŒ‘Žœȱ Š›Žȱ ’—Ž››Ž•ŠŽǯŗȱ ŠŒ‘ȱ ›Žšž’›Žœȱ ‘Žȱ Š‘Ž›’—ȱ Š—ȱ Š—Š•¢œ’œȱ ˜ȱ ŠŠȱ ‘Šȱ ™Ž›Š’—œȱ ˜ȱ ‘Žȱ ™›˜™Ž›¢ȱ ‹Ž’—ȱ Š™™›Š’œŽǯȱ ‘’œȱ Œ‘Š™Ž›ȱ ˜ž•’—Žœȱ ŽŠŒ‘ȱ Š™™›˜ŠŒ‘ȱ ‹›’ŽĚ¢ȱ Š—ȱ œž‹œŽšžŽ—ȱ œŽŒ’˜—œȱ ˜ȱ ‘Žȱ Ž¡‹˜˜”ȱ ’œŒžœœȱ ŽŠŒ‘ȱ Š™™›˜ŠŒ‘ȱ ’—ȱ ŽŠ’•ǯȱ ›˜–ȱ ‘Žȱ Š™™›˜ŠŒ‘Žœȱ Š™™•’Žǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ Ž›’ŸŽœȱ œŽ™Š›ŠŽȱ ’—’ŒŠ’˜—œȱ ˜ȱ ŸŠ•žŽȱ ˜›ȱ ‘Žȱ ™›˜™Ž›¢ȱ ‹Ž’—ȱ Š™™›Š’œŽǯȱ ˜ȱ Œ˜–™•ŽŽȱ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ’—Ž›ŠŽœȱ‘Žȱ’—˜›–Š’˜—ȱ›Š —ȱ›˜–ȱ–Š›”Žȱ›ŽœŽŠ›Œ‘ǰȱŠŠȱŠ—Š•¢œ’œǰȱŠ—ȱ ‘Žȱ Š™™•’ŒŠ’˜—ȱ ˜ȱ ‘Žȱ Š™™›˜ŠŒ‘Žœȱ ˜ȱ ˜›–ȱ Šȱ ŸŠ•žŽȱ Œ˜—Œ•žœ’˜—ǯȱ ‘’œȱ Œ˜—Œ•žœ’˜—ȱ –Š¢ȱ ‹Žȱ ™›ŽœŽ—Žȱ Šœȱ Šȱ œ’—•Žȱ ™˜’—ȱ Žœ’–ŠŽȱ ˜ȱ ŸŠ•Žȱ ˜›ǰȱ ’ȱ ‘Žȱ Šœœ’—–Ž—ȱ ™Ž›–’œǰȱ Šœȱ Šȱ ›Š—Žȱ ’‘’—ȱ ‘’Œ‘ȱ ‘Žȱ ŸŠ•žŽȱ –Š¢ȱ Š••ȱ ǻ˜›ȱ Šœȱ Šȱ ™˜’—ȱ ›ŽŽ›Ž—ŒŽȱ ›˜–ȱ Šȱ ‹Ž—Œ‘–Š›”Ǽǯȱ —ȱŽěŽŒ’ŸŽȱ’—Ž›Š’˜—ȱ˜ȱŠ••ȱ‘ŽȱŽ•Ž–Ž—œȱ’—ȱ‘Žȱ™›˜ŒŽœœȱŽ™Ž—œȱ˜—ȱ‘ŽȱŠ™™›Š’œŽ›ȇœȱ œ”’••ǰȱŽ¡™Ž›’Ž—ŒŽǰȱŠ—ȱ“ž–Ž—ǯ ‘ŽȱœŽ™œȱ’—ȱ‘ŽȱŸŠ•žŠ’˜—ȱ™›˜ŒŽœœȱŠ›ŽȱŽ™’ŒŽȱ’—ȱ’ž›Žȱŝǯŗǯ IDENTIFICATION OF THE APPRAISAL PROBLEM ‘Žȱ ꛜȱ œŽ™ȱ ’—ȱ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœȱ ’œȱ ‘Žȱ ŽŸŽ•˜™–Ž—ȱ ˜ȱ Šȱ Œ•ŽŠ›ȱ ž—Ž›œŠ—’—ȱ ˜ȱ ‘Žȱ ™›˜‹•Ž–ȱ ˜ȱ ‹Žȱ œ˜•ŸŽǯȱ ‘’œȱ œŽ™ȱ œŽœȱ ‘Žȱ ™Š›Š–ŽŽ›œȱ ˜›ȱ ‘Žȱ Šœœ’—–Ž—ǯȱ ˜ȱ œ˜•ŸŽȱŠ—¢ȱ™›˜‹•Ž–ǰȱŠ™™›Š’œŽ›œȱ–žœȱꛜȱ’Ž—’¢ȱ‘Žȱ™›˜‹•Ž–ȱŠ—ȱ˜—•¢ȱ‘Ž—ȱŒŠ—ȱ‘Žȱ ™›˜‹•Ž–ȱ‹Žȱœ˜•ŸŽȱ ’‘ȱŠ—ȱŠ™™›˜™›’ŠŽȱœ˜•ž’˜—ǯȱ —ȱŠ™™›Š’œŠ•ȱ™›ŠŒ’ŒŽǰȱ™›˜‹•Ž–ȱ’Ž—Ȭ ’ęŒŠ’˜—ȱ•˜’ŒŠ••¢ȱ™›ŽŒŽŽœȱœŒ˜™Žȱ˜ȱ ˜›”ȱŽŽ›–’—Š’˜—ǯ Ž—’ęŒŠ’˜—ȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱ™›˜‹•Ž–ȱ’—Ÿ˜•ŸŽœȱ’Ž—’¢’—ȱŽŠŒ‘ȱ˜ȱ‘Žȱ˜••˜ ’—DZ yȱ yȱ yȱ yȱ 1 •’Ž— —Ž—ŽȱžœŽ›œȱ’—ȱŠ’’˜—ȱ˜ȱ‘ŽȱŒ•’Ž— —Ž—ŽȱžœŽȱ˜ȱ‘ŽȱŠ™™›Š’œŠ• ¢™Žȱ˜ȱŸŠ•žŽȱŠ—ȱ’œȱŽę—’’˜— The direct comparison approach was once known as the "market approach". However, this is a misnomer because all three approaches to value are "market" approaches in that they rely on market data. ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 3 10/4/2010 10:35:35 AM 7.4 The Appraisal of Real Estate – Third Canadian Edition yȱ 쎌’ŸŽȱŠŽȱ˜ȱ‘ŽȱŠ—Š•¢œ’œǰȱ˜™’—’˜—œǰȱŠ—ȱŒ˜—Œ•žœ’˜—œ yȱ Ž—’ęŒŠ’˜—ȱ˜ȱ‘ŽȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ‘Žȱ™›˜™Ž›¢ȱ‘ŠȱŠ›Žȱ›Ž•ŽŸŠ—ȱ˜ȱ‘Žȱ ¢™ŽȱŠ—ȱŽę—’’˜—ȱ˜ȱŸŠ•žŽȱŠ—ȱ’—Ž—ŽȱžœŽȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱǻ’—Œ•ž’—ȱ’œȱ •˜ŒŠ’˜—ǰȱ‘Žȱ™›˜™Ž›¢ȱ›’‘œȱ˜ȱ‹ŽȱŸŠ•žŽǰȱŠ—ȱ˜‘Ž›ȱŽŠž›ŽœǼ yȱ œœ’—–Ž—ȱŒ˜—’’˜—œǰȱ’—Œ•ž’—ȱŽ¡›Š˜›’—Š›¢ȱŠœœž–™’˜—œǰȱ‘¢™˜‘Ž’ŒŠ•ȱ Œ˜—’’˜—œǰȱŠ—ȱŠ’’˜—Š•ȱ›Žšž’›Ž–Ž—œȱ˜ȱ‹Žȱ˜••˜ Ž Ž˜›Žȱ’Ž—’¢’—ȱ‘ŽȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ‘Žȱ™›˜™Ž›¢ȱŠ—ȱŠ—¢ȱŽ¡›Š˜›’—Š›¢ȱŠœœž–™Ȭ ’˜—œȱŠ—ȱ‘¢™˜‘Ž’ŒŠ•ȱŒ˜—’’˜—œȱ‘ŠȱŠ›Žȱ›Ž•ŽŸŠ—ȱ˜ȱ‘Žȱ™ž›™˜œŽȱ˜ȱ‘ŽȱŠœœ’—–Ž—ǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ –žœȱ Œ•ŽŠ›•¢ȱ ’Ž—’¢ȱ ‘Žȱ Œ•’Ž—ǰȱ ’—Ž—Žȱ žœŽ›œǰȱ ’—Ž—Žȱ žœŽȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǰȱ™ž›™˜œŽȱ˜ȱ‘ŽȱŠœœ’—–Ž—ǰȱŠ—ȱŽěŽŒ’ŸŽȱŠŽȱ˜ȱ‘Žȱ˜™’—’˜—ȱ˜ȱŸŠ•žŽǯȱ—ŒŽȱ ‘ŽȱŠ™™›Š’œŠ•ȱ™›˜‹•Ž–ȱ‘Šœȱ‹ŽŽ—ȱ’Ž—’ꮍǰȱ‘ŽȱŠ™™›Š’œŽ›ȱŒŠ—ȱŽŽ›–’—Žȱ‘ŽȱŠ™™›˜™›’Ȭ ŠŽȱœŒ˜™Žȱ˜ȱ ˜›”ȱ˜›ȱ‘ŽȱŠœœ’—–Ž—ǯ Client ‘Žȱ Œ•’Ž—ȱ ’œȱ ‘Žȱ ™Ž›œ˜—ȱ ‘˜ȱ Ž—ŠŽœȱ ‘Žȱ Š™™›Š’œŽ›ǯȱ ‘ȱ Œ•’Ž—ȱ ŒŠ—ȱ ‹Žȱ ˜—Žȱ ™Ž›œ˜—ȱ ǻœžŒ‘ȱ Šœȱ Š—ȱ ’—’Ÿ’žŠ•ȱ ’—ŸŽœ˜›Ǽǰȱ ˜—Žȱ Ž—’¢ȱ ǻœžŒ‘ȱ Šœȱ Šȱ ‹Š—”Ǽǰȱ ˜›ȱ Šȱ —ž–‹Ž›ȱ ˜ȱ ™Ž˜™•Žȱ ˜›ȱ Ž—’’Žœȱ ŠŒ’—ȱ ˜Ž‘Ž›ǯȱ ‘Žȱ Œ•’Ž—ȱ –Š¢ȱ ˜›ȱ –Š¢ȱ —˜ȱ ‹Žȱ ‘Žȱ ’—Ž—Žȱ žœŽ›ȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱœŽ›Ÿ’ŒŽǰȱŽǯǯǰȱ ‘Ž—ȱ‘ŽȱŒ•’Ž—ȱ’œȱŠŒ’—ȱŠœȱŠ—ȱŠŽ—ȱ˜ȱ‘Žȱ’—Ž—ŽȱžœŽ›ǯ Intended Users ‘Žȱ ’—Ž—Žȱ žœŽ›ȱ ’œȱ ‘Žȱ ™Ž›œ˜—ȱ ˜›ȱ Ž—’¢ȱ ‘˜ȱ ’••ȱ žœŽȱ ‘Žȱ ›Žœž•œȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ˜›ȱœ˜–Žȱ™ž›™˜œŽǯȱ‘ŽȱŒ•’Ž—ȱ–Š¢ȱ™›˜Ÿ’Žȱ‘ŽȱŠ™™›Š’œŽ›ȱ ’‘ȱ’—˜›–Š’˜—ȱŠ‹˜žȱ˜‘Ž›ȱ ™˜Ž—’Š•ȱ žœŽ›œȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǰȱ ‹žȱ ‘Žȱ Š™™›Š’œŽ›ȱ ž•’–ŠŽ•¢ȱ ŽŽ›–’—Žœȱ ‘˜ȱ ‘Žȱ Š™™›˜™›’ŠŽȱžœŽ›œȱŠ›Žȱ’ŸŽ—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ™›˜‹•Ž–ȱ˜ȱ‹Žȱœ˜•ŸŽǯȱ ȱ’œȱ—ŽŒŽœœŠ›¢ȱ˜›ȱ‘Žȱ Š™™›Š’œŽ›ȱ˜ȱ’Ž—’¢ȱ‘Žȱ’—Ž—ŽȱžœŽ›œȱœ˜ȱ‘Šȱ‘ŽȱŠ™™›Š’œŽ›ȱŒŠ—ȱ›Ž™˜›ȱ‘Žȱ˜™’—’˜—œȱ Š—ȱŒ˜—Œ•žœ’˜—œȱŽŸŽ•˜™Žȱ’—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ’—ȱŠȱ–Š——Ž›ȱ‘Šȱ’œȱŒ•ŽŠ›ȱŠ—ȱž—Ž›œŠ—Ȭ Š‹•Žȱ˜ȱ‘Žȱ’—Ž—ŽȱžœŽ›œǯ Š›’Žœȱ ‘˜ȱ›ŽŒŽ’ŸŽȱ˜›ȱ–’‘ȱ›ŽŒŽ’ŸŽȱŠȱŒ˜™¢ȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ȱŠ›Žȱ—˜ȱ—ŽŒŽœȬ œŠ›’•¢ȱ’—Ž—ŽȱžœŽ›œǯȱ‘ŽȱŠ™™›Š’œŽ›ȇœȱ›Žœ™˜—œ’‹’•’¢ȱ’œȱ˜ȱ‘Žȱ’—Ž—ŽȱžœŽ›ȱ’Ž—’ꮍȱ ’—ȱ‘Žȱ›Ž™˜›ǰȱ—˜ȱ˜ȱŠ••ȱ›ŽŠŽ›œȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ǯȱ‘ŽȱŒ•’Ž—ȱ–Š¢ȱ›ŽšžŽœȱ‘Šȱ‘Žȱ ’—Ž—Žȱ žœŽ›ȱ —˜ȱ ‹Žȱ ’Ž—’ꮍȱ ’—ȱ ‘Žȱ ›Ž™˜›ǰȱ ‹žȱ ‘Žȱ Š™™›Š’œŽ›ȱ –žœȱ œ’••ȱ ›ŽŠ’—ȱ ‘Šȱ ’—˜›–Š’˜—ȱ’—ȱ‘Žȱ ˜›”ę•ŽȱŠ—ȱ™›˜Ÿ’ŽȱŠȱ—˜’ŒŽȱ’—ȱ‘Žȱ›Ž™˜›ȱ‘Šȱ‘Žȱ’Ž—’¢ȱ˜ȱ‘Žȱ ’—Ž—ŽȱžœŽ›ȱ’œȱ‹Ž’—ȱ ’‘‘Ž•ȱž™˜—ȱ›ŽšžŽœǯ Intended Use ȱ ’œȱ ŽœœŽ—’Š•ȱ ‘Šȱ Š—ȱ Š™™›Š’œŽ›ȱ ’Ž—’ęŽœȱ ‘Žȱ ’—Ž—Žȱ žœŽ›ȱ Š—ȱ ’—Ž—Žȱ žœŽȱ ˜ȱ Š—ȱ Šœœ’—–Ž—ȱ ˜›ȱ ‘Žȱ ŽŽ›–’—Š’˜—ȱ ˜ȱ ‘Žȱ œŒ˜™Žȱ ˜ȱ ˜›”ǯȱ ‘Šȱ ’œǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ –žœȱ ’Ž—’¢ȱ ‘˜ȱ —ŽŽœȱ ‘Žȱ œŽ›Ÿ’ŒŽœȱ Š—ȱ ˜›ȱ ‘Šȱ ™ž›™˜œŽȱ ‘Šȱ ™Ž›œ˜—ȱ ˜›ȱ Ž—’¢ȱ ’••ȱ žœŽȱ ‘Žȱ’—˜›–Š’˜—ȱ‘ŽȱŠ™™›Š’œŽ›ȱ™›˜Ÿ’Žœǯ ˜–Žȱ’—Ž—ŽȱžœŽœȱ˜ȱŠ—ȱŠ™™›Š’œŠ•ȱ›Ž•ŠŽȱ˜ȱ‘Žȱ˜••˜ ’—DZ yȱ ’—Š—Œ’— yȱ ’’Š’˜— ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 4 10/4/2010 10:35:35 AM Chapter 7 – The Valuation Process yȱ yȱ yȱ yȱ yȱ yȱ yȱ yȱ yȱ yȱ 7.5 ˜—Ž–—Š’˜— ’Ÿ˜›ŒŽȱ™›˜ŒŽŽ’—œ ž¢ȦœŽ••ȱŽŒ’œ’˜—œ Š¡ȱ›Ž™˜›’— ˜›˜•’˜ȱŽŸŠ•žŠ’˜— ›‹’›Š’˜— Š›—Ž›œ‘’™ȱŸŠ•žŽ œŠŽȱŸŠ•žŽ ‘Š›’Š‹•Žȱ˜—Š’˜— Š•žŠ’˜—ȱ˜›ȱꗊ—Œ’Š•ȱ›Ž™˜›’— —ȱ Š’’˜—ȱ ˜ȱ ’œȱ Œ›’’ŒŠ•ȱ ›˜•Žȱ ’—ȱ Ž›–’—’—ȱ ‘Žȱ œŒ˜™Žȱ ˜ȱ ˜›”ǰȱ ‘Žȱ ’—Ž—Žȱ žœŽȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ‘Ž•™œȱ ‘Žȱ Š™™›Š’œŽ›ȱ ’Ž—’¢ȱ ‘Žȱ Š™™›˜™›’ŠŽȱ •ŽŸŽ•ȱ ˜ȱ ŽŠ’•ȱ ˜ȱ ™›˜Ÿ’Žȱ ˜ȱ ‘Žȱ ’—Ž—Žȱ žœŽ›ǯȱ ˜›ȱ Ž¡Š–™•Žǰȱ ‘Žȱ ’—Ž—Žȱ žœŽ›ȱ ˜ȱ Š—ȱ Š™™›Š’œŠ•ȱ ˜ȱ ‘Žȱ –Š›”Žȱ ŸŠ•žŽȱ ˜ȱ Šȱ ˜—ŽȬž—’ȱ ‘˜žœŽȱ intended use of the appraisal The appraiser's understanding ›ŽšžŽœŽȱ˜›ȱ•Ž—’—ȱ™ž›™˜œŽœȱ’œȱ—˜ȱ•’”Ž•¢ȱ˜ȱ—ŽŽȱ‘Žȱ of how the intended users will œŠ–Žȱ•ŽŸŽ•ȱ˜ȱŽŠ’•ȱ‘Šȱ ˜ž•ȱ•’”Ž•¢ȱ‹Žȱ›Žšž’›Žȱ‹¢ȱŠ—ȱ employ the information contained ’—ŸŽœ˜›ȱ ˜›Ž›’—ȱ Š—ȱ Š™™›Š’œŠ•ȱ ˜ȱ ‘Žȱ –Š›”Žȱ ŸŠ•žŽȱ ˜ȱ Šȱ in an appraisal report. œž‹ž›‹Š—ȱ˜ĜŒŽȱŒ˜–™•Ž¡ȱ˜ȱŠŒ’•’ŠŽȱŠȱ‹ž¢ȦœŽ••ȱŽŒ’œ’˜—ǯ Type of Value and its Definition ‘Žȱ¢™Žȱ˜ȱŸŠ•žŽȱǻŽǯǯǰȱ–Š›”ŽȱŸŠ•žŽǰȱ’—ŸŽœ–Ž—ȱŸŠ•žŽǰȱžœŽȱŸŠ•žŽǰȱŠ—ȱ˜‘Ž›œǼȱŠ™™›˜Ȭ ™›’ŠŽȱ ˜›ȱ Šȱ œ™ŽŒ’ęŒȱ Šœœ’—–Ž—ȱ Ž™Ž—œȱ ˜—ȱ ‘Žȱ —Šž›Žȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ™›˜‹•Ž–ǯȱ ’”Ž ’œŽǰȱ ‘Žȱ Žę—’’˜—ȱ ˜ȱ ‘Žȱ ¢™Žȱ ˜ȱ ŸŠ•žŽȱ žœŽȱ ’—ȱ ‘Žȱ Šœœ’—–Ž—ȱ –Š¢ȱ Ž™Ž—ȱ ˜—ȱ ‘Žȱ ’—Ž—Žȱ žœŽȱ Š—ȱ žœŽ›ǯȱ Š›”Žȱ ŸŠ•žŽȱ –Š¢ȱ ‹Žȱ Žę—Žȱ ’쎛Ž—•¢ȱ ‹¢ȱ ˜ŸŽ›—–Ž—ȱ ŠŽ—Œ’Žœǰȱ•Ž—Ž›œǰȱŠ—ȱ’—’Ÿ’žŠ•œǰȱœ˜ȱŠȱŒ•ŽŠ›ȱœŠŽ–Ž—ȱ˜ȱ‘ŽȱŽę—’’˜—ȱ˜ȱ‘Žȱ¢™Žȱ˜ȱ ŸŠ•žŽȱ‹Ž’—ȱŠ™™›Š’œŽȱ‘Ž•™œȱ‘Žȱ’—Ž—ŽȱžœŽ›ȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱ‹ŽĴŽ›ȱž—Ž›œŠ—ȱ‘Žȱ Š™™›Š’œŽ›ȇœȱŒ˜—Œ•žœ’˜—œǯ —ȱ Š™™›Š’œŠ•ȱ ›ŽŸ’Ž ȱ Š—ȱ Š™™›Š’œŠ•ȱ Œ˜—œž•’—ȱ Šœœ’—–Ž—œǰȱ ‘Ž›Žȱ ŽŸŽ•˜™’—ȱ Š—ȱ ˜™’—’˜—ȱ ˜ȱ ŸŠ•žŽȱ ’œȱ —˜ȱ ‘Žȱ ™ž›™˜œŽȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǰȱ Š—ȱ Š™™›Š’œŽ›ȱ œ’••ȱ –žœȱ ’Ž—’¢ȱ ‘Žȱ ¢™Žȱ ˜ȱ ˜™’—’˜—ȱ ‹Ž’—ȱ ŽŸŽ•˜™Žǯȱ —ȱ Š™™›Š’œŠ•ȱ ›ŽŸ’Ž ȱ –Š¢ȱ •ŽŠȱ ˜ȱ Š—ȱ ˜™’—’˜—ȱ ˜ȱ ‘Žȱ definition of value šžŠ•’¢ȱ ˜ȱ Š—˜‘Ž›ȱ Š™™›Š’œŽ›ȇœȱ ˜›”ǯȱ ȱ Œ˜—œž•’—ȱ A statement specifying the type Šœœ’—–Ž—ȱ –Š¢ȱ ™›˜žŒŽȱ ˜—Žȱ ˜ȱ Šȱ ‹›˜Šȱ ŸŠ›’Ž¢ȱ of value to be estimated; must be ˜ȱ Š—Š•¢œŽœǰȱ ›ŽŒ˜––Ž—Š’˜—œǰȱ ˜›ȱ Œ˜—Œ•žœ’˜—œȱ ‘Šȱ included in every appraisal report. –Š¢ȱ’—Ÿ˜•ŸŽȱŸŠ•žŽǯ Effective Date of the Opinion of Value Š›”Žȱ ˜›ŒŽœȱ Š›Žȱ ¢—Š–’Œǰȱ Š—ȱ ‘Žȱ Š™™›Š’œŽ›ȇœȱ ˜™’—’˜—œȱ Š—ȱ Œ˜—Œ•žœ’˜—œȱ ›ŽŽ›ȱ ˜ȱ Šȱ œ™ŽŒ’ęŒȱ™˜’—ȱ’—ȱ’–Žǯȱ ’ŸŽ—ȱ‘ŽȱŒ•’Ž—ȇœȱ—ŽŽœȱŠ—ȱ‘Žȱ—Šž›Žȱ˜ȱ‘ŽȱŠœœ’—–Ž—ǰȱ‘Žȱ Š™™›Š’œŽ›ȱ–žœȱ’Ž—’¢ȱ‘ŽȱŽ¡ŠŒȱŠŽȱ‘ŽȱŸŠ•žŽȱ˜™’—’˜—ȱ ˜ž•ȱ‹ŽȱŸŠ•’ǯȱ‘ŽȱŽěŽŒ’ŸŽȱ ŠŽȱ˜ȱ‘Žȱ˜™’—’˜—ȱ˜ȱŸŠ•žŽȱŒŠ—ȱ‹ŽȱŠȱŒž››Ž—ȱŠŽǰȱŠȱ›Ž›˜œ™ŽŒ’ŸŽȱǻ‘’œ˜›’ŒŠ•ǼȱŠŽǰȱ˜›ȱŠȱ ™›˜œ™ŽŒ’ŸŽȱǻžž›ŽǼȱŠŽǯ ‘Žȱ ŠŽȱ ˜ȱ ‘Žȱ ˜™’—’˜—ȱ ˜ȱ ŸŠ•žŽȱ œ‘˜ž•ȱ —˜ȱ ‹Žȱ Œ˜—žœŽȱ ’‘ȱ ‘Žȱ ŠŽȱ ‘Žȱ Š™™›Š’œŠ•ȱ ›Ž™˜›ȱ ˜›ȱ •ŽĴŽ›ȱ ˜ȱ ›Š—œ–’ĴŠ•ȱ ’œȱ œ’—Žǯȱ ‘Žȱ ŽěŽŒ’ŸŽȱ ŠŽȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 5 10/4/2010 10:35:35 AM 7.6 The Appraisal of Real Estate – Third Canadian Edition date of the opinion of value The date for which an opinion of value is valid. The sale of a property might be negotiated months or even years before the closing or final disposition of the property. In this case, an adjustment for changes in market conditions between the date the contract is signed and the effective date of value may be appropriate. effective date The date at which the analyses, opinions, and advice in an appraisal, review, or consulting service apply.. ›ŽŽ›œȱ ˜ȱ ‘Žȱ ™˜’—ȱ ’—ȱ ’–Žȱ Šœȱ ˜ȱ ‘’Œ‘ȱ ‘Žȱ Š—Š•¢œŽœȱ Š—ȱ Œ˜—Œ•žœ’˜—œȱ Š›Žȱ ŽŸŽ•˜™Žȱ ˜›ȱ ‘Žȱ ’—Ž—Žȱ žœŽȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǰȱ —˜ȱ ‘Žȱ ŠŽȱ ˜—ȱ ‘’Œ‘ȱ ‘Žȱ ›Ž™˜›ȱ ’œȱ ™›Ž™Š›Žȱ˜›ȱŽ•’ŸŽ›Žȱ˜ȱ‘ŽȱŒ•’Ž—ǯ Relevant Property Characteristics ‘Žȱ œž‹“ŽŒȱ ™›˜™Ž›¢ȱ ’œȱ ‘Žȱ ˜Œžœȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ Šœœ’—–Ž—ǰȱŠ—ȱŠȱŒ•ŽŠ›ȱž—Ž›œŠ—’—ȱ˜ȱ‘Žȱ—Šž›Žȱ ˜ȱ‘Žȱ›ŽŠ•ȱ™›˜™Ž›¢ȱ’œȱŠȱ™›Ž›Žšž’œ’Žȱ˜›ȱ‘ŽȱŠ—Š•¢œŽœȱ ‘Šȱ˜••˜ ǯȱ‘ŽȱŠ—Š•¢œ’œȱ˜ȱ‘Žȱœž‹“ŽŒȱ™›˜™Ž›¢ȱ–žœȱ ŠŒŒ˜ž—ȱ ˜›ȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ ‘Šȱ ŠěŽŒȱ ŸŠ•žŽǰȱ ’ǯŽǯǰȱ ‘Žȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ ŠěŽŒ’—ȱ ‘Žȱ ž’•’¢ȱ ‘Šȱ ‘Žȱ •Š—ȱ Š—ȱ ’–™›˜ŸŽ–Ž—œȱ™›˜Ÿ’Žǯ ˜–Žȱ ˜ȱ ‘Žȱ –˜œȱ ’–™˜›Š—ȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ ›Ž•Š’—ȱ˜ȱŸŠ•žŽȱ’—Œ•žŽȱ‘Žȱ˜••˜ ’—DZ yȱ ‘Žȱ›ŽŠ•ȱ™›˜™Ž›¢ȱ›’‘œȱ‹Ž’—ȱŠ™™›Š’œŽǰȱŽǯǯǰȱ‘ŽȱŒ˜–™•ŽŽȱŽŽȱœ’–™•Žȱ˜›ȱŠȱ ™Š›’Š•ȱ’—Ž›Žœ yȱ ˜ŒŠ’˜— yȱ ‘Ž›ȱ™‘¢œ’ŒŠ•ȱŒ‘Š›ŠŒŽ›’œ’ŒœǰȱŽǯǯǰȱœ’£Žǰȱ•Š¢˜žǰȱšžŠ•’¢ȱ˜ȱŒ˜—œ›žŒ’˜— yȱ Œ˜—˜–’ŒȱŒ‘Š›ŠŒŽ›’œ’ŒœǰȱŽǯǯǰȱ›Ž—ǰȱꗊ—Œ’—ȱŽ›–œ Legal Characteristics ŽŠ•ȱ ‘Š›ŠŒŽ›’œ’Œœȱ ˜›ȱ ‘Žȱ œž‹“ŽŒȱ ™›˜™Ž›¢ȱ ’—Œ•žŽȱ •Š—ȱ žœŽȱ Š—ȱ £˜—’—ȱ ›Žž•ŠȬ ’˜—œǯȱ˜–Žȱ˜ȱ‘Žȱ›Ž•ŽŸŠ—ȱ’—˜›–Š’˜—ȱ ’••ȱ‹Žȱ™›˜Ÿ’Žȱ‹¢ȱ‘ŽȱŒ•’Ž—ǰȱŠ—ȱœ˜–Žȱ ’••ȱ ‹Žȱ›ŽœŽŠ›Œ‘Žȱ‹¢ȱ‘ŽȱŠ™™›Š’œŽ›ȱ‘›˜ž‘ȱ’—Ž›Ÿ’Ž œȱ ’‘ȱ™›˜™Ž›¢ȱ˜ —Ž›œȱŠ—ȱ–Š›”Žȱ ™Š›’Œ’™Š—œǰȱ ꛜ‘Š—ȱ ˜‹œŽ›ŸŠ’˜—ȱ ˜ȱ ‘Žȱ œž‹“ŽŒȱ ™›˜™Ž›¢ǰȱ Š—ȱ ˜‘Ž›ȱ ŠŒ’Ÿ’’Žœǯȱ ȱ Œ˜–™•ŽŽȱ•ŽŠ•ȱŽœŒ›’™’˜—ȱ’œȱŒ˜––˜—•¢ȱžœŽȱ˜ȱ’Ž—’¢ȱ‘Žȱœž‹“ŽŒȱ™›˜™Ž›¢ǯ Assignment Conditions œœ’—–Ž—ȱ Œ˜—’’˜—œȱ ’—Œ•žŽȱ Ž¡›Š˜›’—Š›¢ȱ Šœœž–™’˜—œǰȱ ‘¢™˜‘Ž’ŒŠ•ȱ Œ˜—’’˜—œǰȱ œž™™•Ž–Ž—Š•ȱ œŠ—Š›œǰȱ Š—ȱ “ž›’œ’Œ’˜—Š•ȱ Ž¡ŒŽ™’˜—œǯȱ ‘Žȱ —Šž›Žȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ™›˜‹•Ž–ȱŽŽ›–’—Žœȱ ‘Ž‘Ž›ȱŠ—¢ȱ˜ȱ‘Žȱœœž–™’˜—œȱ˜›ȱ•’–’’—ȱŒ˜—’’˜—œȱŠ™™•’Žœȱ˜ȱ ‘Žȱœ™ŽŒ’ęŒȱŠœœ’—–Ž—ǯȱ ȱ’œȱ˜ȱž™–˜œȱ’–™˜›Š—ŒŽȱ‘ŠȱŠ™™›Š’œŽ›œȱ’œŒ•˜œŽȱ’—˜›–ŠȬ ’˜—ȱŠ‹˜žȱŠœœž–™’˜—œȱŠ—ȱ•’–’’—ȱŒ˜—’’˜—œȱœ˜ȱ‘Šȱ‘ŽȱŒ•’Ž—ȱ’œȱ—˜ȱ–’œ•Žȱ‹¢ȱ‘Žȱ ˜–’œœ’˜—ȱ˜ȱŽœœŽ—’Š•ȱ’—˜›–Š’˜—ȱŠ‹˜žȱ‘ŽȱœŒ˜™Žȱ˜ȱ ˜›”ȱ˜ȱ‘ŽȱŠœœ’—–Ž—ǯ —ȱ Ž¡Š–™•Žȱ ˜ȱ Š—ȱ Ž¡›Š˜›’—Š›¢ȱ Šœœž–™’˜—ȱ ›ŽŽ›œȱ ˜ȱ Š—ȱ Š™™›Š’œŠ•ȱ ‹ŠœŽȱ ˜—ȱ ‘Žȱ ™›Ž–’œŽȱ‘Šȱ™›˜™˜œŽȱŒ˜—œ›žŒ’˜—ȱ ’••ȱ‹ŽȱŒ˜–™•ŽŽȱ˜—ȱ‘ŽȱŽěŽŒ’ŸŽȱŠŽȱ˜ȱŸŠ•žŽǰȱ ’ǯŽǯǰȱ Šȱ ™›˜œ™ŽŒ’ŸŽȱ ŠŽȱ ˜ȱ ŸŠ•žŽǯȱ ‘Žȱ Š™™›Š’œŽ›ȱ Šœœž–Žœȱ ‘Šȱ ‘Žȱ Œ˜—œ›žŒ’˜—ȱ ’••ȱ ‹Žȱ Œ˜–™•ŽŽȱ Šœȱ ™•Š——Žǰȱ ‹žȱ Šȱ ‘Žȱ ’–Žȱ ‘Žȱ Š™™›Š’œŠ•ȱ ’œȱ ™Ž›˜›–Žǰȱ ’ȱ ’œȱ —˜ȱ ”—˜ —ȱ ’ȱ ‘Šȱ ’••ȱ’—ŽŽȱŒ˜–Žȱ˜ȱ™Šœœǯ ¢™˜‘Ž’ŒŠ•ȱ Œ˜—’’˜—œȱ ŽŠ•ȱ ’‘ȱ ŠŒ˜›œȱ ‘Šȱ Š›Žȱ ”—˜ —ȱ ˜ȱ ‹Žȱ Š•œŽȱ ‹žȱ Š›Žȱ ™›Žœž–Žȱ ˜ȱ ‹Žȱ ›žŽȱ ˜›ȱ ‘Žȱ ™ž›™˜œŽœȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǯȱ ˜›ȱ Ž¡Š–™•Žǰȱ ’ȱ ‘Žȱ Œ•’Ž—ȱ ©Copyright: 2014 by the UBC Real Estate Division R1ARE10.indb 6 10/4/2010 10:35:35 AM Chapter 7 – The Valuation Process 7.7 Š—Žȱ ˜ȱ ”—˜ ȱ ‘Žȱ ŸŠ•žŽȱ ˜ȱ Šȱ ™›˜™˜œŽȱ ŽŸŽ•˜™–Ž—ȱ Šœȱ ’ȱ ’ȱ Ž›Žȱ Œ˜–™•ŽŽȱ Šȱ ‘Žȱ Œž››Ž—ȱ ’–Žǰȱ ‘Žȱ Š™™›Š’œŠ•ȱ Šœœ’—–Ž—ȱ Œ˜ž•ȱ ‹Žȱ ™Ž›˜›–Žȱ ž—Ž›ȱ ‘Žȱ ‘¢™˜‘Ž’ŒŠ•ȱ Œ˜—’’˜—ȱ‘Šȱ‘Žȱ—˜—Ž¡’œŽ—ȱ’–™›˜ŸŽ–Ž—œȱ Ž›ŽȱŠ•›ŽŠ¢ȱ’—ȱ™•ŠŒŽȱŠ—ȱ›ŽŠ¢ȱ˜›ȱžœŽȱ Šœȱ™›˜™˜œŽǯ —ȱ Š™™›Š’œŽ›ȱ –Š¢ȱ —˜ȱ ‹Žȱ Š‹•Žȱ ˜ȱ ’Ž—’¢ȱ Ž¡›Š˜›’—Š›¢ȱ Šœœž–™’˜—œȱ Š—ȱ ‘¢™˜Ȭ ‘Ž’ŒŠ•ȱ Œ˜—’’˜—œȱ ‘Šȱ ŠěŽŒȱ Š—ȱ Š™™›Š’œŠ•ȱ ž—’•ȱ ‘Žȱ Š—Š•¢œ’œȱ ‘Šœȱ ŠŒžŠ••¢ȱ ‹Žž—ǯȱ—ȱ Žě˜›ȱ œ‘˜ž•ȱ œ’••ȱ ‹Žȱ –ŠŽȱ ˜ȱ ’Ž—’¢ȱ ™˜œœ’‹•Žȱ ǻ˜›ȱ ™›˜‹Š‹•ŽǼȱ Ž¡›Š˜›’—Š›¢ȱ Šœœž–™Ȭ ’˜—œȱ Š—ȱ ‘¢™˜‘Ž’ŒŠ•ȱ Œ˜—’’˜—œȱ ŠěŽŒ’—ȱ ‘Žȱ Šœœ’—–Ž—ȱ ž›’—ȱ ‘Žȱ ™›Ž•’–’—Š›¢ȱ Œ˜—ŸŽ›œŠ’˜—œȱ ’‘ȱ‘ŽȱŒ•’Ž—ǯ ȱ œž™™•Ž–Ž—Š•ȱ œŠ—Š›ȱ ’œȱ Šȱ ›Žšž’›Ž–Ž—ȱ ‘Šȱ –’‘ȱ Š™™•¢ȱ ’—ȱ Šœœ’—–Ž—œȱ ˜›ȱ œ˜–ŽȱŽ—’’ŽœDzȱ˜›ȱŽ¡Š–™•ŽǰȱŠȱ˜ŸŽ›—–Ž—ȱŠŽ—Œ¢ȱŒ˜ž•ȱ‘ŠŸŽȱŠ’’˜—Š•ȱ›Žšž’›Ž–Ž—œȱ ‹Ž¢˜—ȱ ‘Žȱ ™›˜Žœœ’˜—Š•ȱ œŠ—Š›œȱ ˜ȱ ‘’Œ‘ȱ Š™™›Š’œŽ›œȱ –žœȱ Š‘Ž›Žǯȱ ž›’œ’Œ’˜—Š•ȱ Ž¡ŒŽ™’˜—œȱŠ›ŽȱŽŸŽ—ȱ›Š›Ž›ǰȱ‹žȱŒŠ—ȱŠěŽŒȱŠ—ȱŠ™™›Š’œŠ•ȱŠœœ’—–Ž—ȱ ‘Ž—ȱŠȱ›Ž•ŽŸŠ—ȱ•Š ȱ ˜›ȱ™ž‹•’Œȱ™˜•’Œ¢ȱŒ˜—›Š’Œœȱ™›˜Žœœ’˜—Š•ȱœŠ—Š›œǯȱ‘Ž›Žȱ‘Ž¢ȱŽ¡’œǰȱŠ™™›Š’œŽ›œȱ–žœȱ ’Ž—’¢ȱœž™™•Ž–Ž—Š•ȱœŠ—Š›œȱŠ—ȱ“ž›’œ’Œ’˜—Š•ȱŽ¡Ž™’˜—œȱŠȱ‘Žȱ‹Ž’——’—ȱ˜ȱŠ—ȱ Š™™›Š’œŠ•ȱŠœœ’—–Ž—ǰȱ—˜ȱŠŽ›ȱ‘ŽȱŠŒǯ SCOPE OF WORK DETERMINATION Œ˜™Žȱ˜ȱ ˜›”ȱ›ŽŽ›œȱ˜ȱ‘Žȱ¢™ŽȱŠ—ȱŽ¡Ž—ȱ˜ȱ›ŽœŽŠ›Œ‘ȱŠ—ȱŠ—Š•¢œ’œȱ’—ȱŠ—ȱŠœœ’—–Ž—ǯȱ ‘Žȱ œŒ˜™Žȱ ˜ȱ ˜›”ȱ Š™™•’Žȱ –žœȱ ‹Žȱ œžĜŒ’Ž—ȱ ˜ȱ ›Žœž•ȱ ’—ȱ ˜™’—’˜—œȱ Š—ȱ Œ˜—Œ•žœ’˜—œȱ ‘ŠȱŠ›ŽȱŒ›Ž’‹•Žȱ’—ȱ‘ŽȱŒ˜—Ž¡ȱ˜ȱ‘Žȱ’—Ž—ŽȱžœŽȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ǯȱ‘ŽȱŠ™™›Š’œŽ›ȱ‘Šœȱ ‘Žȱ‹ž›Ž—ȱ˜ȱ™›˜˜ȱ˜ȱœž™™˜›ȱ‘ŽȱœŒ˜™Žȱ˜ȱ ˜›”ȱŽŒ’œ’˜—ȱŠ—ȱ‘Žȱ•ŽŸŽ•ȱ˜ȱ’—˜›–ŠȬ ’˜—ȱ’—Œ•žŽȱ’—ȱŠȱ›Ž™˜›ǯȱ‘ŽȱŠ™™›Š’œŽ›ȱ’œȱ›Žœ™˜—œ’‹•Žȱ˜›ȱŽŽ›–’—’—ȱ‘ŽȱŠ™™›˜™›’Ȭ ŠŽȱ œŒ˜™Žȱ ˜...
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