chap11.pdf - DISCLAIMER This publication is intended for EDUCATIONAL purposes only The information contained herein is subject to change with no notice

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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 11 IMPROVEMENT ANALYSIS —ȱ’–™˜›Š—ȱ™Š›ȱ˜ȱŽŸŽ›¢ȱŠ™™›Š’œŠ•ȱ’œȱ‘ŽȱŽœŒ›’™’˜—ȱ˜ȱ‘Žȱ¢™ŽǰȱšžŠ•’¢ǰȱŠ—ȱŒ˜—’Ȭ ’˜—ȱ˜ȱ‘Žȱ‹ž’•’—ȱ˜›ȱ‹ž’•’—œȱ˜—ȱ‘Žȱœ’ŽȱŠ—ȱ‘ŽȱŠ—Š•¢œ’œȱ˜ȱ‘Žȱœ›žŒž›ŽȇœȱŽœ’—ǯȱ ‘Žȱ™›˜ŒŽœœȱ˜ȱ’–™›˜ŸŽ–Ž—ȱŠ—Š•¢œ’œȱŽ—Œ˜–™ŠœœŽœȱ‘›ŽŽȱ’—Ž››Ž•ŠŽȱŠœ”œDZ ŗǯȱ ›˜™Ž›¢ȱ’—œ™ŽŒ’˜— Řǯȱ ž’•’—ȱŽœŒ›’™’˜— řǯȱ —Š•¢œ’œȱ˜ȱŠ›Œ‘’ŽŒž›Š•ȱœ¢•ŽȱŠ—ȱž—Œ’˜—Š•ȱž’•’¢ —ȱ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ Š‘Ž›œȱ –žŒ‘ȱ ˜ȱ ‘Žȱ ’—˜›–Š’˜—ȱ —ŽŽŽȱ ˜ȱ ŠŽšžŠŽ•¢ȱ ŽœŒ›’‹Žȱ Š—ȱ Š—Š•¢£Žȱ ‘Žȱ ’–™›˜ŸŽ–Ž—œȱ ’—ȱ ‘Žȱ ꛜ‘Š—ȱ ’—œ™ŽŒ’˜—ȱ ˜ȱ ‘Žȱ ›ŽŠ•ȱ ŽœŠŽǯȱ –™›˜™Ž›ȱ ˜›ȱ ’—ŠŽšžŠŽȱ ’—œ™ŽŒ’˜—ȱ ˜ȱ ‘Žȱ ™‘¢œ’ŒŠ•ȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ Š—ȱ ŽŠž›Žœȱ ˜ȱ ‘Žȱ œž‹“ŽŒȱ Š—ȱ Œ˜–™Š›Š‹•Žȱ ™›˜™Ž›’Žœȱ ŒŠ—ȱ Œ›ŽŠŽȱ ’ĜŒž•’Žœȱ ˜›ȱ Š—ȱ Š™™›Š’œŽ›ȱ ’—ȱ •ŠŽ›ȱ ™‘ŠœŽœȱ ˜ȱ ‘Žȱ Š™™›Š’œŠ•ǯȱ ˜›ȱ Ž¡Š–™•Žǰȱ Š—ȱ ˜ŸŽ›•˜˜”Žȱ œ›žŒž›Š•ȱ ™›˜‹•Ž–ȱŒ˜ž•ȱ–Š”Žȱ‘ŽȱŒ˜—Œ•žœ’˜—œȱ˜ȱ‘Žȱ‘›ŽŽȱŠ™™›˜ŠŒ‘Žœȱ˜ȱŸŠ•žŽȱ–ŽŠ—’—•Žœœǯ ŒŒž›ŠŽȱ ‹ž’•’—ȱ ŽœŒ›’™’˜—œȱ Š›Žȱ ŽœœŽ—’Š•ȱ ˜ȱ Š••ȱ ŸŠ•žŠ’˜—ȱ Šœœ’—–Ž—œǯȱ —ȱ ‘Žȱ ŽœŒ›’™’˜—ȱŠ—ȱŠ—Š•¢œ’œȱ˜ȱ‘Žȱœ’ŽȱŠ—ȱ’–™›˜ŸŽ–Ž—œǰȱ‘ŽȱŠ™™›Š’œŽ›ȱœ‘˜ž•ȱŠ›Žœœȱ Š••ȱ ™Ž›’—Ž—ȱ œ›Ž—‘œȱ Š—ȱ ŽŠ”—ŽœœŽœǰȱ Ž¡™Š—ȱ ˜—ȱ Š—¢ȱ ™›˜‹•Ž–ȱ Š›ŽŠœǰȱ Š—ȱ ’—Ž›™›Žȱ ‘Žȱœ’—’ęŒŠ—ŒŽȱ˜ȱ‘ŽȱŠŠȱ˜ȱ•Š¢ȱŠȱ˜ž—Š’˜—ȱ˜›ȱ‘Žȱ’œŒžœœ’˜—ȱ˜ȱ‘’‘ŽœȱŠ—ȱ‹Žœȱ žœŽǯȱ‘ŽȱŠ™™›Š’œŽ›ȱ—ŽŽœȱŠȱ‘˜›˜ž‘ȱž—Ž›œŠ—’—ȱ˜ȱ‘Žȱ™‘¢œ’ŒŠ•ȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ ‘Žȱœž‹“ŽŒȱ™›˜™Ž›¢ȱ˜ȱ’Ž—’¢ȱŠ—ȱœŽ•ŽŒȱœž’Š‹•ŽȱŒ˜–™Š›Š‹•Žœǯȱȱ‘˜›˜ž‘ȱ‹ž’•’—ȱ ŽœŒ›’™’˜—ȱ ‘Ž•™œȱ ‘Žȱ Š™™›Š’œŽ›ȱ ’Ž—’¢ȱ ‘Žȱ Ž¡Ž—ȱ Š—ȱ šžŠ•’¢ȱ ˜ȱ ‹ž’•’—ȱ ’–™›˜ŸŽȬ –Ž—œǰȱŒŠ•Œž•ŠŽȱ‘Ž’›ȱŒ˜œǰȱŠ—ȱŽŽ›–’—Žȱ–˜œȱ˜›–œȱ˜ȱŽ™›ŽŒ’Š’˜—ǯȱ‘Ž›Ž˜›Žǰȱ‘Žȱ ŠŒŒž›ŠŒ¢ȱ ˜ȱ ‹ž’•’—ȱ ŽœŒ›’™’˜—œȱ ’›ŽŒ•¢ȱ ŠěŽŒœȱ ‘Žȱ ˜™’—’˜—ȱ ˜ȱ ŸŠ•žŽȱ ™›˜žŒŽȱ ‹¢ȱ Š™™•¢’—ȱ‘Žȱ‘›ŽŽȱŠ™™›˜ŠŒ‘Žœȱ˜ȱŸŠ•žŽǯ ›Œ‘’ŽŒž›Š•ȱ œ¢•Žȱ Š—ȱ ž—Œ’˜—Š•ȱ ž’•’¢ȱ Š›Žȱ ’—Ž››Ž•ŠŽDzȱ Š™™›Š’œŽ›œȱ –žœȱ Š—Š•¢£Žȱ ‘Ž’›ȱ Œ˜–‹’—Žȱ ŽěŽŒȱ ˜—ȱ ™›˜™Ž›¢ȱ ŸŠ•žŽǯȱ ›Œ‘’ŽŒž›Š•ȱ œ¢•Žȱ ’œȱ ‘Žȱ Œ‘Š›ŠŒŽ›ȱ ˜ȱ Šȱ ‹ž’•’—ȇœȱ ˜›–ȱ Š—ȱ ˜›—Š–Ž—Š’˜—ǯȱ ž—Œ’˜—Š•ȱ ž’•’¢ȱ ’œȱ ‘Žȱ Š‹’•’¢ȱ ˜ȱ Šȱ ™›˜™Ž›¢ȱ ˜›ȱ ‹ž’•’—ȱ˜ȱ‹ŽȱžœŽž•ȱŠ—ȱ˜ȱ™Ž›˜›–ȱ‘Žȱž—Œ’˜—ȱ˜›ȱ ‘’Œ‘ȱ’ȱ’œȱ’—Ž—ŽǰȱŠŒŒ˜›’—ȱ ˜ȱŒž››Ž—ȱ–Š›”ŽȱŠœŽœȱŠ—ȱœŠ—Š›œǯȱž—Œ’˜—Š•ȱž’•’¢ȱŠ•œ˜ȱ›Ž•ŠŽœȱ˜ȱ‘ŽȱŽĜŒ’Ž—Œ¢ȱ ˜ȱ Šȱ ‹ž’•’—ȇœȱ žœŽȱ ’—ȱ Ž›–œȱ ˜ȱ Š›Œ‘’ŽŒž›Š•ȱ œ¢•Žǰȱ Žœ’—ȱ Š—ȱ •Š¢˜žǰȱ ›ŠĜŒȱ ™ŠĴŽ›—œǰȱ Š—ȱ ‘Žȱ œ’£Žȱ Š—ȱ ¢™Žȱ ˜ȱ ›˜˜–œǯȱ ˜‘ȱ Š›Œ‘’ŽŒž›Š•ȱ œ¢•Žȱ Š—ȱ ž—Œ’˜—Š•ȱ ž’•’¢ȱ ’—ĚžȬ Ž—ŒŽȱ‘ž–Š—ȱ•’ŸŽœȱ‹¢ȱ™›˜Ÿ’’—ȱ˜›ȱ ’‘‘˜•’—ȱ‹ŽŠž¢ǰȱŒ˜–˜›ǰȱœŽŒž›’¢ǰȱŒ˜—ŸŽ—’Ž—ŒŽǰȱ R1ARE10.indb 1 10/4/2010 10:35:51 AM 11.2 The Appraisal of Real Estate – Third Canadian Edition •’‘ǰȱ Š—ȱ Š’›ǯȱ ‘Ž¢ȱ –Š¢ȱ Š•œ˜ȱ Ž—œž›Žȱ ›ŽŠœ˜—Š‹•Žȱ –Š’—Ž—Š—ŒŽȱ Ž¡™Ž—’ž›Žœǰȱ ™›ŽœŽ›ŸŽȱ ŸŠ•žŠ‹•Žȱ›Š’’˜—œǰȱ˜›ȱ’—’ŒŠŽȱ‘Žȱ—ŽŽȱ˜›ȱŒ‘Š—Žǯ ˜—œ’Ž›Š’˜—œȱ ˜ȱ œ¢•Žȱ Š—ȱ ž—Œ’˜—Š•ȱ ž’•’¢ȱ Š›Žȱ ’—Ž›Š•ȱ ˜ȱ Š—ȱ Š™™›Š’œŠ•ǯȱ ‘Ž¢ȱ Š›Žȱ—˜ŽȱŠ•˜—ȱ ’‘ȱ˜‘Ž›ȱ™‘¢œ’ŒŠ•ȱŒ‘Š›ŠŒŽ›’œ’Œœȱž›’—ȱ™›˜™Ž›¢ȱ’—œ™ŽŒ’˜—ǯȱœ’—ȱ Œ˜–™Š›Š‹•ŽȱŠŠǰȱŠ—ȱŠ™™›Š’œŽ›ȱŒŠ—ȱŠ—Š•¢£Žȱ‘˜ ȱœ¢•ŽȱŠ—ȱž—Œ’˜—ȱ’—ĚžŽ—ŒŽȱŠȱ™›˜™Ž›Ȭ ¢ȇœȱ–Š›”ŽȱŸŠ•žŽǯȱ¢•ŽȱŠ—ȱž—Œ’˜—Š•ȱž’•’¢ȱŠ›ŽȱŽ¡Š–’—Žȱ’—ȱŽ›–œȱ˜ȱ‘Žȱ˜••˜ ’—DZ ŗǯȱ ‘ŽȱžœŽȱ˜›ȱ ‘’Œ‘ȱŠȱ™Š›’Œž•Š›ȱ’–™›˜ŸŽ–Ž—ȱ ŠœȱŽœ’—Ž Řǯȱ œȱŠŒžŠ•ȱ˜›ȱŒ˜—Ž–™•ŠŽȱžœŽ řǯȱ œȱ–˜œȱ™›˜žŒ’ŸŽȱžœŽ ‘ŽœŽȱ‘›ŽŽȱžœŽœȱ–Š¢ȱ˜›ȱ–Š¢ȱ—˜ȱ‹Žȱ‘ŽȱœŠ–Žǯ ‘Žȱž•’–ŠŽȱ˜Š•œȱ˜ȱ’–™›˜ŸŽ–Ž—ȱŠ—Š•¢œ’œȱŠ›Žȱ‘Žȱ˜••˜ ’—DZ y ȱ ›˜™Ž›ȱ ’Ž—’’ŒŠ’˜—ȱ ˜ȱ ‘Žȱ ’–™˜›Š—ȱ ‹ž’•’—ȱ Œ˜–™˜—Ž—œȱ ˜›ȱ Žȱ Š™™›Š’œŠ•ȱŠ—Š•¢œ’œ yȱ ˜ž—ȱ“ž–Ž—ȱ˜ȱ‘ŽȱšžŠ•’¢ȱŠ—ȱŒ˜—’’˜—ȱ˜ȱ’–™›˜ŸŽ–Ž—œȱŠ—ȱŒ˜–™˜—Ž—œ yȱ ˜—Ÿ’—Œ’—ȱœž™™˜›ȱ˜›ȱŒ˜—Œ•žœ’˜—œȱ’—ȱ‘Žȱ‘’‘ŽœȱŠ—ȱ‹ŽœȱžœŽȱŠ—Š•¢œ’œȱŠ—ȱ Š™™•’ŒŠ’˜—ȱ˜ȱ‘ŽȱŠ™™›˜ŠŒ‘Žœȱ˜ȱŸŠ•žŽ ‘’œȱ Œ‘Š™Ž›ȱ ˜ŒžœŽœȱ ˜—ȱ ‘Žȱ œ›žŒž›Š•ȱ Ž•Ž–Ž—œȱ Š—ȱ ŽŠž›Žœȱ ‘Šȱ Š—ȱ Š™™›Š’œŽ›ȱ ’••ȱ ›ŠŽȱ ’—ȱ ‘Žȱ šžŠ•’¢ȱ Š—ȱ Œ˜—’’˜—ȱ œž›ŸŽ¢ǰȱ ‘’Œ‘ȱ ’œȱ ‘Žȱ ›˜ž— ˜›”ȱ ˜›ȱ ‘Žȱ Š—Š•¢œŽœȱ ‘Šȱ˜••˜ ȱ’–™›˜ŸŽ–Ž—ȱŠ—Š•¢œ’œȱ’—ȱ‘ŽȱŸŠ•žŠ’˜—ȱ™›˜ŒŽœœǯ PROPERTY INSPECTION ˜–Ž’–ŽœȱŒ˜—œž–Ž›œȱŽšžŠŽȱŠ™™›Š’œŠ•ȱ ’‘ȱ‘Žȱ’—œ™ŽŒ’˜—ȱ˜ȱ‘Žȱœž‹“ŽŒȱ›ŽŠ•ȱŽœŠŽǰȱ ‹žȱ’—œ™ŽŒ’˜—ȱ’œȱ“žœȱ˜—Žȱ˜ȱ‘Žȱ–Š—¢ȱŠœ”œȱ™Ž›˜›–Žȱ’—ȱŠ—ȱŠ™™›Š’œŠ•ǯȱ›˜Žœœ’˜—Š•ȱ ™›˜™Ž›¢ȱ’—œ™ŽŒ˜›œȱŠ›Žȱœ™ŽŒ’Š•’£ŽȱŒ˜—›ŠŒ˜›œȱ ’‘ȱŽ¡™Ž›’œŽȱ’—ȱž—Œ˜ŸŽ›’—ȱŽŽŒœȱ ’—ȱ ‘Žȱ œ›žŒž›Žȱ Š—ȱ –ŠŽ›’Š•œȱ ˜ȱ ŸŠ›’˜žœȱ ¢™Žœȱ ˜ȱ ™›˜™Ž›’Žœǯȱ ™™›Š’œŽ›œȱ –žœȱ ‹Žȱ Š–’•’Š›ȱ ’‘ȱ ‘Žȱ ™›˜™Ž›¢ȱ ’—œ™ŽŒ’˜—ȱ ™›˜ŒŽœœǰȱ ‹žȱ ‘Žȱ Š’–ȱ ˜ȱ Š—ȱ Š™™›Š’œŽ›ȱ ’—ȱ ‘Žȱ ꎕȱ’œȱ—˜ȱ˜ȱŒ˜–™›Ž‘Ž—œ’ŸŽ•¢ȱ›ŽœŽŠ›Œ‘ȱ‘Žȱœž‹“ŽŒȱ›ŽŠ•ȱŽœŠŽǯȱŠ‘Ž›ǰȱŠ—ȱŠ™™›Š’œŽ›ȱ ˜‹œŽ›ŸŽœȱ‘ŽȱŒ˜–™˜—Ž—œȱŠ—ȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ‘Žȱœž‹“ŽŒȱ™›˜™Ž›¢ȱ‘Šȱ ’••ȱ’—ĚžȬ Ž—ŒŽȱŸŠ•žŽȱ’—ȱ‘Žȱ–Š›”Ž™•ŠŒŽǯ ‘Žȱ ’–™˜›Š—ŒŽȱ ˜ȱ ™›˜™Ž›¢ȱ ’—œ™ŽŒ’˜—ȱ œ‘˜ž•ȱ —˜ȱ ‹Žȱ ž—Ž›Žœ’–ŠŽǯȱ žŒ‘ȱ ˜ȱ ‘Žȱ ™›’–Š›¢ȱ ŠŠȱ Š—ȱ Š™™›Š’œŽ›ȱ Œ˜••ŽŒœȱ Œ˜–Žœȱ ›˜–ȱ ‘Žȱ ™›˜™Ž›¢ȱ ’—œ™ŽŒ’˜—ȱ ™›˜ŒŽœœǯȱ ‘Žȱ ›ŽŠ•ȱ ŽœŠŽȱ ‹Ž’—ȱ Š™™›Š’œŽȱ –žœȱ ‹Žȱ ž—Ž›œ˜˜ȱ ’—ȱ ‘Žȱ Œ˜—Ž¡ȱ ˜ȱ ’œȱ ’––Ž’ŠŽȱ property inspection œž››˜ž—’—œȱ Š—ȱ ‘Žȱ ŽěŽŒȱ ˜ȱ ˜‘Ž›ȱ —ŽŠ›‹¢ȱ The act or process of inspecting firsthand ’–™›˜ŸŽ–Ž—œȱ Š—ȱ •Š—ȱ žœŽœǯȱ ˜–™Š›’œ˜—ȱ ˜ȱ the typical improvements and building components of the real estate involved ‘Žȱ œž‹“ŽŒȱ Š—ȱ Œ˜–™Š›Š‹•Žœȱ ’œȱ Œ›žŒ’Š•ȱ ˜›ȱ ‘Žȱ in an appraisal assignment, either the ’›ŽŒȱ Œ˜–™Š›’œ˜—ȱ Š—ȱ ’—Œ˜–Žȱ Š™™›˜ŠŒ‘Žœǰȱ Š—ȱ subject property or comparable properties. Žœ’–Š’—ȱ‹ž’•’—ȱŒ˜œœȱ’—ȱ‘ŽȱŒ˜œȱŠ™™›˜ŠŒ‘ȱ’œȱ Property inspection is the most visible step ’–™˜œœ’‹•Žȱ ’‘˜žȱŠ—ȱŠŒŒž›ŠŽȱ’—ŸŽ—˜›¢ȱ˜ȱ‘Žȱ in improvement analysis. ‹ž’•’—ȱŒ˜–™˜—Ž—œȱ’—ȱ‘Žȱœž‹“ŽŒǯȱ —ȱŠ’’˜—ǰȱ R1ARE10.indb 2 10/4/2010 10:35:51 AM Chapter 11 – Improvement Analysis 11.3 Œ˜–™Š›’œ˜—ȱ ˜ȱ ‘Žȱ šžŠ•’¢ȱ Š—ȱ Œ˜—’’˜—ȱ ˜ȱ ‹ž’•’—ȱ Œ˜–™˜—Ž—œȱ ŒŠ—ȱ ‹Žȱ ŽœœŽ—’Š•ȱ ’—ȱ –Š”’—ȱŠ“žœ–Ž—œǯ Š—¢ȱ Š™™›Š’œŽ›œȱ •ŽŠ›—ȱ ‘˜ ȱ ˜ȱ ’—œ™ŽŒȱ Šȱ ™›˜™Ž›¢ȱ ‘›˜žȱ ˜—Ȭ‘ŽȬ“˜‹ȱ ›Š’—’—ǯȱ —Œ›ŽŠœŽȱ œŒ›ž’—¢ȱ ›˜–ȱ Œ•’Ž—œȱ Š—ȱ Š™™›Š’œŠ•ȱ ›Žž•Š˜›œȱ ‘Šœȱ ›Ž–’—Žȱ Š™™›Š’œŽ›œȱ ˜ȱ ‘Ž’›ȱ ™›˜Žœœ’˜—Š•ȱ ˜‹•’Š’˜—ȱ ˜ȱ ž—Ž›œŠ—ȱ Œ˜—œ›žŒ’˜—ȱ –Ž‘˜œȱ Š—ȱ –ŠŽ›’Š•œǰȱ ˜ȱ “žŽȱ Œ˜—’’˜—ȱ Š—ȱ œŽ›Ÿ’ŒŽŠ‹’•’¢ȱ ˜ȱ ‹ž’•’—ȱ –ŠŽ›’Š•œȱ Š—ȱ Œ˜–™˜—Ž—œǰȱ Š—ȱ ˜ȱ ŠœœŽœœȱ ž—Œ’˜—Š•’¢ǯȱ ‘Žȱ ™›˜™Ž›¢ȱ ’—œ™ŽŒ’˜—ȱ ŒŠ—ȱ ‹Žȱ ˜—Žȱ ˜ȱ ‘Žȱ •˜—Žœȱ ™Ž›’˜œȱ ˜ȱ ŠŒŽȬ˜ȬŠŒŽȱ ’—Ž›ŠŒ’˜—ȱ ‹Ž ŽŽ—ȱ ‘Žȱ Š™™›Š’œŽ›ȱ Š—ȱ ‘Žȱ Œ•’Ž—Dzȱ ž—Š–Ž—Š•ȱ –’œŠ”Žœȱ ’—ȱ‘Žȱ™Ž›˜›–Š—ŒŽȱ˜ȱ‘Žȱ™›˜™Ž›¢ȱ’—œ™ŽŒ’˜—ȱŠ—ȱ’—ȱ’—Ž›ŠŒ’˜—œȱ ’‘ȱ‘ŽȱŒ•’Ž—ȱŒŠ—ȱ ‹Žȱ Ž–‹Š››Šœœ’—ȱ Š—ȱ ŽŸŽ—ȱ Œ˜œ•¢ǰȱ Š–Š’—ȱ ‘Žȱ ›Ž•Š’˜—œ‘’™ȱ ‹Ž ŽŽ—ȱ Š™™›Š’œŽ›ȱ Š—ȱ Œ•’Ž—ȱŠ—ȱ“Ž˜™Š›’£’—ȱŠ—¢ȱžž›Žȱ‹žœ’—Žœœȱ‹Ž ŽŽ—ȱ‘Ž–ǯȱŠ’•ž›Žȱ˜ȱ’œŒ•˜œŽȱŽŽŒœȱ ’—ȱŠ—ȱ’–™›˜ŸŽ–Ž—ȱ‹ŽŒŠžœŽȱ‘˜œŽȱŽŽŒœȱ Ž›Žȱ–’œœŽȱ’—ȱ‘Žȱ™›˜™Ž›¢ȱ’—œ™ŽŒ’˜—ǰȱ˜›ȱ Š’•ž›Žȱ˜ȱŸŽ›’¢ȱ’—˜›–Š’˜—ȱŠ‘Ž›Žȱ‘›˜ž‘ȱ˜‘Ž›ȱ–ŽŠ—œȱŠ›Žȱ̊ œȱ˜ȱŠ—ȱŠ™™›Š’œŠ•ȱ ›Ž™˜›ȱ‘ŠȱŒŠ—ȱ›Žœž•ȱ’—ȱ•’’Š’˜—ȱŠŠ’—œȱŠ—ȱŠ™™›Š’œŽ›ǯ ˜–Ž’–Žœȱ Š—ȱ Š™™›Š’œŽ›ȱ ’••ȱ —˜ȱ ‘ŠŸŽȱ ‘Žȱ Ž¡™Ž›’œŽȱ ˜ȱ “žŽȱ ‘Žȱ šžŠ•’¢ȱ Š—ȱ Œ˜—’’˜—ȱ ˜ȱ œ™ŽŒ’Š•’£Žȱ Žšž’™–Ž—ȱ ˜›ȱ Š¢™’ŒŠ•ȱ ‹ž’•’—ȱ –ŠŽ›’Š•œȱ Š—ȱ –Š¢ȱ ‘ŠŸŽȱ ˜ȱ ›Ž•¢ȱ ˜—ȱ ‘Žȱ “ž–Ž—ȱ ˜ȱ ˜‘Ž›ȱ ™›˜Žœœ’˜—Š•œǯŗȱ ˜›ȱ Šȱ Œ˜–™•Ž¡ȱ ™›˜™Ž›¢ǰȱ œžŒ‘ȱ Šœȱ Šȱ –Š—žŠŒž›’—ȱ™•Š—ȱŒ˜—Š’—’—ȱœ˜™‘’œ’ŒŠŽȱŽšž’™–Ž—ȱŠ—ȱ–ŽŒ‘Š—’ŒŠ•ȱœ¢œŽ–œǰȱŠ—ȱ Š™™›Š’œŽ›ȱ–Š¢ȱꗍȱ‹•žŽ™›’—œȱ™›˜Ÿ’Žȱ‹¢ȱ‘ŽȱŽŸŽ•˜™Ž›Ȧ˜ —Ž›ȱ˜ȱ‹Žȱ‘Ž•™ž•ǯ BUILDING DESCRIPTION —ȱ ‘Žȱ ŸŠ•žŠ’˜—ȱ ™›˜ŒŽœœǰȱ Š—ȱ Š™™›Š’œŽ›ȱ ŽœŒ›’‹Žœȱ ‘Žȱ Žœ’—ǰȱ •Š¢˜žǰȱ Š—ȱ Œ˜—œ›žŒ’˜—ȱ ŽŠ’•œȱ˜ȱ‘Žȱœž‹“ŽŒȱ’–™›˜ŸŽ–Ž—œǰȱ ‘’Œ‘ȱ’—Œ•žŽȱ‘Žȱœ›žŒž›Š•ȱŒ˜–™˜—Ž—œǰȱ–ŠŽȬ ›’Š•œǰȱ Š—ȱ –ŽŒ‘Š—’ŒŠ•ȱ œ¢œŽ–œȱ ˜ȱ ŽŠŒ‘ȱ ‹ž’•’—ȱ ž—Ž›ȱ ’—ŸŽœ’Š’˜—ǯȱ ‘Žȱ Š™™›Š’œŽ›ȱ Š•œ˜ȱ ŽŽ›–’—Žœȱ ‹ž’•’—ȱ œ’£Žȱ Š—ȱ ‘Žȱ ž—Œ’˜—ǰȱ Œ˜—’’˜—ǰȱ Š—ȱ œŽ›Ÿ’ŒŽŠ‹’•’¢ȱ ˜ȱ ŽŠŒ‘ȱ Ž•Ž–Ž—ȱŽœŒ›’‹Žǯ ȱ’œȱŠ•œ˜ȱ’–™˜›Š—ȱ‘Šȱ‘ŽȱŠ™™›Š’œŽ›ȱŽœŒ›’‹Žȱ ‘Šȱ˜Žœȱ—˜ȱŒ˜—œ’žŽȱŠȱ‹ž’•’—ȱ ’–™›˜ŸŽ–Ž—ǰȱ œžŒ‘ȱ Šœȱ ™Ž›œ˜—Š•ȱ ™›˜™Ž›¢ȱ ’Ž–œȱ ‘Šȱ œ‘˜ž•ȱ ‹Žȱ Ž¡™›Žœœ•¢ȱ Ž¡Œ•žŽȱ ›˜–ȱ ‘Žȱ Š™™›Š’œŠ•ǯȱ —ȱ œ˜–Žȱ ’—œŠ—ŒŽœǰȱ ‘’œȱ ’••ȱ ›Žšž’›Žȱ œ™ŽŒ’Š•ȱ Š—Š•¢œ’œȱ ˜ȱ ŽŽ›–’—Žȱ building description ‘Ž‘Ž›ȱ ’Ž–œȱ ˜ȱ –ŠŒ‘’—Ž›ȱ Š—ȱ Žšž’™–Ž—ȱ The analysis of a building's design, layout, Š›Žȱ ™Ž›œ˜—Š•ȱ ™›˜™Ž›¢ȱ ˜›ȱ šžŠ•’¢ȱ Šœȱ ę¡ž›Žœǯȱ construction details, size, condition, and current ‘Žȱ ‹ž’•’—ȱ ŽœŒ›’™’˜—ȱ ™›˜Ÿ’Žœȱ ‘Žȱ use that provides the basis for comparing ‹Šœ’œȱ ˜›ȱ Œ˜–™Š›’—ȱ ‘Žȱ œž‹“ŽŒȱ ™›˜™Ž›¢ȇœȱ the subject property's improvements and the ’–™›˜ŸŽ–Ž—œȱ ’‘ȱ ’–™›˜ŸŽ–Ž—œȱ ‘Šȱ Š›Žȱ improvements typically accepted in the subject ¢™’ŒŠ••¢ȱ Œ˜—œ’Ž›Žȱ ’—ȱ ‘Žȱ œž‹“ŽŒȱ ™›˜™Ž›¢ȇœȱ property's market. –Š›”Žȱ Š—ȱ ’‘ȱ ‘Žȱ ’ŽŠ•ȱ ’–™›˜ŸŽ–Ž—œȱ Šœȱ ŽŽ›–’—Žȱ’—ȱ‘’‘ŽœȱŠ—ȱ‹ŽœȱžœŽȱŠ—Š•¢œ’œǯ ˜ȱŠ—Š•¢£Žȱ‘ŽȱšžŠ•’¢ȱŠ—ȱŒ˜—’’˜—ȱ˜ȱ’–™›˜ŸŽ–Ž—œǰȱŠ™™›Š’œŽ›œȱ—ŽŽȱŠȱŽ—Ž›Š•ȱ ž—Ž›œŠ—’—ȱ ˜ȱ ‘Žȱ ‹ž’•’—ȱ Œ˜—œ›žŒ’˜—ȱ ™›˜ŒŽœœȱ Š—ȱ ‘Žȱ ˜™Ž›Š’˜—ȱ ˜ȱ ŽœœŽ—’Š•ȱ 1 R1ARE10.indb 3 Ethics Rule 4.2.7 of CUSPAP forbids an appraiser from undertaking an appraisal assignments if his or her inspection skills are inadequate. CUSPAP 12.29 provides that an appraiser's inspection should, at the minimum, be thorough enough to (a) adequately describe the real estate the appraisal report, (b) develop an opinion of highest and best use when such an opinion is necessary and appropriate, and (c) make meaningful comparisons in the valuation of the property. 10/4/2010 10:35:52 AM 11.4 The Appraisal of Real Estate – Third Canadian Edition ‹ž’•’—ȱœ¢œŽ–œǯŘȱ‘Žȱ¢™’ŒŠ•ȱŒ˜—œ›žŒ’˜—ȱ–ŠŽ›’Š•œȱŠ—ȱŽŒ‘—’šžŽœȱžœŽȱ’—ȱŠȱ›Ž’˜—ȱ ŒŠ—ȱŒ‘Š—Žȱ˜ŸŽ›ȱ’–Žȱ˜›ȱŠȱŸŠ›’Ž¢ȱ˜ȱ›ŽŠœ˜—œDZ yȱ Ž ȱ‹ž’•’—ȱŽŒ‘—˜•˜’ŽœȱŽŸ˜•ŸŽ yȱ ‘Žȱ™›’ŒŽœȱ˜ȱ–ŠŽ›’Š•œȱ̞ŒžŠŽȱœ’—’ęŒŠ—•¢ yȱ ’œ’—ȱ˜›ȱŠ••’—ȱŽ—Ž›¢ȱ™›’ŒŽœȱ–Š”ŽȱŠȱ™Š›’Œž•Š›ȱ‹ž’•’—ȱ–ŠŽ›’Š•ȱ–˜›ŽȱŽœ’›Š‹•Ž yȱ ‘Žȱ’ŒŠŽœȱ˜ȱŠœ‘’˜—ȱŠěŽŒȱ‘ŽȱŽ–Š—ȱ˜›ȱŠȱŒŽ›Š’—ȱ‹ž’•’—ȱ–ŠŽ›’Š•ȱ˜›ȱ ŽŠž›Ž ’‘ȱ Ž¡™Ž›’Ž—ŒŽȱ Š—ȱ ‘˜›˜ž‘ȱ ˜‹œŽ›ŸŠ’˜—ȱ ˜ȱ –Š›”Žȱ ›Ž—œǰȱ Š™™›Š’œŽ›œȱ ’••ȱ Š’—ȱ ’—œ’‘ȱ’—˜ȱ‘˜ ȱ‹ž’•’—ȱŒ˜–™˜—Ž—œȱŠ›Žȱ™Ž›ŒŽ’ŸŽȱŠ—ȱŸŠ•žŽȱ’—ȱŠȱ™Š›’Œž•Š›ȱ–Š›”Žǯ Elements of a Building Description —ȱ Š™™›Š’œŽ›ȱ ™›Ž™Š›Žœȱ Šȱ ‹ž’•’—ȱ ŽœŒ›’™’˜—ȱ ‹¢ȱ Œ˜—œ’Ž›’—ȱ Šȱ ŸŠ›’Ž¢ȱ ˜ȱ œ™ŽŒ’ęŒȱ ’—˜›–Š’˜—ȱ’—ȱœŽšžŽ—ŒŽǯȱ›’–Š›¢ȱŒ˜—ŒŽ›—œȱ’—Œ•žŽȱ‘Žȱ˜••˜ ’—ȱ’Ž–œDZ ŗǯȱ ‘Žȱ¢™Žȱ˜ȱžœŽȱ›Ž™›ŽœŽ—Žȱ‹¢ȱ‘ŽȱŽ¡’œ’—ȱ‹ž’•’— Řǯȱ ‘ŽȱŒ˜ŽœȱŠ—ȱ›Žž•Š’˜—œȱŠěŽŒ’—ȱ‘’œȱžœŽ řǯȱ ž’•’—ȱœ’£Žǰȱ™•Š—ǰȱŠ—ȱŒ˜—œ›žŒ’˜— Śǯȱ ŽŠ’•œȱ ˜ȱ ‘Žȱ ‹ž’•’—ȇœȱ Ž¡Ž›’˜›ȱ Š—ȱ ’—Ž›’˜›ȱ Š—ȱ ’œȱ Žšž’™–Ž—ȱ Š—ȱ –ŽŒ‘Š—’ŒŠ•ȱœ¢œŽ–œǰȱ‹˜‘ȱ‘˜œŽȱ’—Œ•žŽȱ’—ȱ‘Žȱ˜›’’—Š•ȱŒ˜—œ›žŒ’˜—ȱŠ—ȱ œž‹œŽšžŽ—ȱ’–™›˜ŸŽ–Ž—œ —ȱŠ™™›Š’œŽ›ȱ–žœȱŸ’Ž ȱŠȱ‹ž’•’—ȱ˜‹“ŽŒ’ŸŽ•¢ȱŠ—ȱŠ—Š•¢’ŒŠ••¢ǰȱ™Š¢’—ȱŒŠ›Žž•ȱŠĴŽ—Ȭ ’˜—ȱ ˜ȱ Š••ȱ Œ˜–™˜—Ž—œȱ ‘Šȱ ž•’–ŠŽ•¢ȱ Œ˜—›’‹žŽȱ ˜ȱ ‘Žȱ ŽŽ›–’—Š’˜—ȱ ˜ȱ ‘Žȱ ‹ž’•Ȭ ’—ȇœȱ ‘’‘Žœȱ Š—ȱ ‹Žœȱ žœŽȱ Šœȱ ’–™›˜ŸŽȱ Š—ȱ Š—¢ȱ Š•Ž›—Š’ŸŽȱ žœŽœȱ ˜ȱ ‹Žȱ Œ˜—œ’Ž›Žȱ ’—ȱ ‘ŽȱŠœœ’—–Ž—ǯȱ‘Žȱœ‘ŽŽ›ȱ—ž–‹Ž›ȱ˜ȱŒ˜–™˜—Ž—œȱ•’œŽȱ’—ȱŠȱŒ˜–™›Ž‘Ž—œ’ŸŽȱ‹ž’•’—ȱ ŽœŒ›’™’˜—ȱ œ‘˜ž•ȱ —˜ȱ ‹Žȱ –’œ’—Ž›™›ŽŽȱ ’—ȱ ‘Žȱ Š™™•’ŒŠ’˜—ȱ ˜ȱ ‘Žȱ Š™™›˜ŠŒ‘Žœȱ ˜ȱ ŸŠ•žŽǯȱ ‘Žȱ –Š›”Žȇœȱ ›ŽŠŒ’˜—ȱ ˜ȱ ‘Žȱ ™›ŽœŽ—ŒŽȱ ˜›ȱ Š‹œŽ—ŒŽȱ ˜ȱ œ›žŒž›Š•ȱ Œ˜–™˜—Ž—œȱ ’—ȱ Šȱ™›˜™Ž›¢ȱ’œȱŠȱ–˜›Žȱ’–™˜›Š—ȱŒ˜—œ’Ž›Š’˜—ȱ‘Š—ȱ‘Žȱœ’–™•ŽȱŠŒȱ‘Šȱ‘˜œŽȱŒ˜–™˜Ȭ —Ž—œȱŽ¡’œǯ ˜–Žȱ ’–™›˜ŸŽ–Ž—œȱ ŽŠž›Žȱ œžŒ‘ȱ ž—’šžŽȱ ˜›ȱ œ™ŽŒ’Š•’£Žȱ Žœ’—ǰȱ –ŠŽ›’Š•œǰȱ ˜›ȱ Œ˜—œ›žŒ’˜—ȱ ŽŠž›Žœȱ ‘Šȱ ’œ’—ž’œ‘ȱ ‘Ž–ȱ Š—ȱ –Š¢ȱ •’–’ȱ ‘Ž’›ȱ –Š›”ŽŠ‹’•’¢ǯȱ ˜›ȱ Ž¡Š–™•ŽǰȱŠȱŒ‘Ž–’ŒŠ•ȱ™•Š—ȱ˜›ȱŠȱ ‘Š›ȱŠŒ’•’¢ȱ–Š¢ȱ‘ŠŸŽȱœ™ŽŒ’Š•ȱ•˜ŒŠ’˜—Š•ȱŒ‘Š›ŠŒŽ›’œȬ ’Œœȱ‘ŠȱŒ˜–™•Ž–Ž—ȱ‘Žȱž—’šžŽȱŽŠž›Žœȱ˜ȱ‘Žȱ’–™›˜ŸŽ–Ž—œǯȱ‘Žȱ’쎛Ž—ŒŽœȱ›˜–ȱ ‘ŽȱŽŠž›Žœȱ˜ȱ˜‘Ž›ȱ™›˜™Ž›’Žœȱ ’‘ȱ‹›˜ŠŽ›ȱ–Š›”ŽŠ‹’•’¢ȱ˜ȱ—˜ȱ—ŽŒŽœœŠ›’•¢ȱœžŽœȱ ‘Šȱ‘Žȱ›ŽŠ•ȱŽœŠŽȱ’œȱ ’‘˜žȱŸŠ•žŽǰȱ›Š‘Ž›ȱ‘Šȱ–˜›Žȱœ™ŽŒ’Š•’£ŽȱŠ—Š•¢œŽœȱŠ›Žȱ—ŽŒŽœȬ œŠ›¢ǯȱ ž›‘Ž›–˜›Žǰȱ œ˜–Žȱ ™›˜™Ž›’Žœȱ –Š¢ȱ ‘ŠŸŽȱ œ™ŽŒ’Š•ȱ ’–™˜›Š—ŒŽȱ ˜ȱ ‘Ž’›ȱ ˜ —Ž›ȱ ˜›ȱ žœŽ›ȱ ‘Šȱ ˜Žœȱ —˜ȱ ›ŽĚŽŒȱ ‘Žȱ ŸŠ•žŽȱ ‘Žȱ ™›˜™Ž›¢ȱ –Š¢ȱ ‘ŠŸŽȱ ˜ȱ ’œȱ –Š›”Žǯȱ™™›Š’œŽ›œȱ –žœȱ Š”Žȱ ŒŠ›Žȱ ˜ȱ ŸŠ•žŽȱ ™›˜™Ž›¢ȱ ’—ȱ ŠŒŒ˜›Š—ŒŽȱ ’‘ȱ ‘Žȱ ’œŒ•˜œŽȱ œŒ˜™Žȱ ˜ȱ ˜›”ȱ Š—ȱ ˜ȱ ‹Žȱ Œ˜—œ’œŽ—ȱ ’‘ȱ ‘Žȱ Žę—’’˜—ȱ ˜ȱ ŸŠ•žŽȱ ’—ȱ ‘Žȱ Šœœ’—–Ž—ǯȱ ˜ ŽŸŽ›ǰȱ –Š—¢ȱ Š™™›Š’œŠ•œȱ –Š¢ȱ Š•œ˜ȱ ‹Žȱ žœŽȱ ’—ȱ ꗊ—Œ’Š•ȱ ›Ž™˜›’—ȱ Œ’›Œž–œŠ—ŒŽœȱ ‘Šȱ –’‘ȱ ›Žšž’›Žȱ 2 R1ARE10.indb 4 For an up-to-date and easy-to-read guide to construction materials and techniques, see Francis D.K. Ching and Cassandra Adams, Building Construction Illustrated, 3rd ed. (New York: John Wiley & Sons, Inc., 2000). 10/4/2010 10:35:52 AM Chapter 11 – Improvement Analysis 11.5 ‘ŽȱžœŽ›ȇœȱŒ˜—œ’Ž›Š’˜—ȱ˜ȱ‘Žȱœ™ŽŒ’Š•ȱ›Ž•Š’˜—œ‘’™ȱ˜ȱ‘Žȱ™›˜™Ž›¢ȱ˜ȱ’œȱ˜ —Ž›ȱ˜›ȱžœŽ›ǰȱ Š—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ȱ ’••ȱ‹Žȱ–˜›Žȱ–ŽŠ—’—ž•ȱ’ȱ‘’œȱœ™ŽŒ’Š•ȱ—Šž›Žȱ’œȱ’œŒžœœŽȱ’—ȱ ‘Žȱ›Ž™˜›ǯȱ —ȱœ˜–Žȱꗊ—Œ’Š•ȱ›Ž™˜›’—ȱŒ’›Œž–œŠ—ŒŽœǰȱ’ȱ–Š¢ȱ‹Žȱ—ŽŒŽœœŠ›¢ȱ˜ȱŽŸŽ•˜™ȱ  ˜ȱŠ™™›Š’œŠ•œDZȱ˜—Žȱ˜ȱ–Š›”Žȱ˜›ȱŠ’›ȱŸŠ•žŽȱŠ—ȱ‘Žȱ˜‘Ž›ȱŠȱžœŽȱŸŠ•žŽȱ˜›ȱ’œȱ˜ —Ž›ǯ Use Classification Š—ȱžœŽœȱŒŠ—ȱ‹Žȱ’Ÿ’Žȱ’—˜ȱŠ—¢ȱ—ž–‹Ž›ȱ˜ȱ¢™ŽœǰȱŽ™—’—ȱ˜—ȱ–Š›”Žȱ—˜›–œȱŠ—ȱ ™Ž›œ˜—Š•ȱ™›ŽŽ›Ž—ŒŽœǯȱ›Š’’˜—Š••¢ǰȱ–˜œȱŠ™™›Š’œŽ›œȱ‘ŠŸŽȱ’Ÿ’Žȱ•Š—ȱžœŽœȱ’—˜ȱ꟎ȱ –Š“˜›ȱ›˜ž™œDZ ŗǯȱ Řǯȱ řǯȱ Śǯȱ śǯȱ Žœ’Ž—’Š• ˜––Ž›Œ’Š• —žœ›’Š• ›’Œž•ž›Š• ‘Ž›ȱœ™ŽŒ’Š•’£ŽȱžœŽœ ŠŒ‘ȱ˜ȱ‘ŽœŽȱ›˜ž™œȱŒŠ—ȱ‹Žȱ‹›˜”Ž—ȱ˜ —ȱ’—˜ȱ’—Œ›ŽŠœ’—•¢ȱœ™ŽŒ’ęŒȱœž‹›˜ž™œǯ ¢œŽ–œȱ ˜ȱ žœŽȱ Œ•Šœœ’’ŒŠ’˜—ȱ –Š¢ȱ ŸŠ›¢ȱ ›˜–ȱ –Š›”Žȱ ˜ȱ –Š›”Žǯȱ ˜›ȱ Ž¡Š–™•Žǰȱ ’—ȱœ˜–Žȱ–Š›”Žœȱ‘˜Ž•œȱŠ—ȱ–˜Ž•œȱŠ›ŽȱŒ˜—œ’Ž›ŽȱŠȱ–Š“˜›ȱ™›˜™Ž›¢ȱŒ•Šœœ’’ŒŠ’˜—ǰȱ ‘Ž›ŽŠœȱ ’—ȱ ˜‘Ž›ȱ –Š›”Žœȱ ‘Ž¢ȱ Š›Žȱ Œ˜—œ’Ž›Žȱ Šȱ œž‹œŽȱ ˜ȱ Œ˜––Ž›Œ’Š•ȱ ™›˜™Ž›’Žœǯȱ ™™›Š’œŽ›œȱ œ‘˜ž•ȱ ‹Žȱ Š–’•’Š›ȱ ’‘ȱ ‘Žȱ ¢™Žœȱ ˜ȱ ™›˜™Ž›¢ȱ Ž’—Žȱ ‹¢ȱ ‘Žȱ –Š›”Žȱ ‘Ž¢ȱ Š›Žȱ ˜›”’—ȱ ’—ȱ Š—ȱ Ž–™•˜¢ȱ Šȱ œ¢œŽ–ȱ ˜ȱ žœŽȱ Œ•Šœœ’’ŒŠ’˜—ȱ ‘Šȱ ‘Ž’›ȱ Œ•’Ž—œȱ ’••ȱž—Ž›œŠ—ǯ ˜—’—ȱ ›Žž•Š’˜—œȱ ŽœŠ‹•’œ‘ȱ ‘Žȱ ™Ž›–’Žȱ žœŽœȱ ˜ȱ ›ŽŠ•ȱ ŽœŠŽǯȱ ¡’œ’—ȱ Š—ȱ ™˜Ž—’Š•ȱ •Š—ȱ žœŽœȱ –žœȱ ‹Žȱ Œ‘ŽŒ”Žȱ ŠŠ’—œȱ £˜—’—ȱ ›Žž•Š’˜—œȱ ˜ȱ ŽŽ›–’—Žȱ ’ȱ ‘Ž¢ȱ Š›Žȱ Œ˜—˜›–’—ȱ ˜›ȱ —˜—Œ˜—˜›–’—ȱ žœŽœǯȱ ‘Ž—ȱ ‘Žȱ ™›ŽœŽ—ȱ žœŽȱ ˜Žœȱ —˜ȱ Œ˜—˜›–ȱ ˜ȱ Œž››Ž—ȱ £˜—’—ȱ ›Žž•Š’˜—œǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ œ‘˜ž•ȱ Œ˜—œ’Ž›ȱ ‘˜ ȱ ‘’œȱ ŠŒȱ–’‘ȱŠŽŒȱ™›˜™Ž›¢ȱŸŠ•žŽǯ Building Codes and Ordinances —ȱŠ’’˜—ȱ˜ȱŠ—¢ȱžœŽȱ›Žœ›’Œ’˜—œȱ’–™˜œŽȱ‹¢ȱ£˜—’—ǰȱ‘Žȱ™•Š——’—ȱŠ—ȱŒ˜—œ›žŒ’˜—ȱ ˜ȱ‹ž’•’—œȱŠ›Žȱ›Žœ›’ŒŽȱ‹¢ȱŸŠ›’˜žœȱ•Š œǰȱŒ˜ŽœǰȱŠ—ȱ›Žž•Š’˜—œȱŽ—ŠŒŽȱŠȱŠ••ȱ•ŽŸŽ•œȱ ˜ȱ˜ŸŽ›—–Ž—ȱ˜ȱ™›˜ŽŒȱ‘Žȱ‘ŽŠ•‘ǰȱœŠŽ¢ǰȱŠ—ȱ Ž•Š›Žȱ˜ȱ‘Žȱ™ž‹•’Œǯȱ›˜Ÿ’—ŒŽœȱŠ—ȱ Ž››’˜›’Žœȱ ‘ŠŸŽȱ Œ˜Žœȱ ‘Šȱ Œ˜—›˜•ȱ ‘Žȱ ”’—œȱ ˜ȱ ‹ž’•’—œȱ ‘Šȱ Š›Žȱ Œ˜—œ›žŒŽȱ ’‘’—ȱ ‘Ž’›ȱ ‹˜›Ž›œǯȱ ˜ŸŽ›—–Ž—œȱ ŽœŠ‹•’œ‘ȱ ›Žž•Š’˜—œȱ ˜ȱ Ž—œž›Žȱ ˜ŒŒž™Š’˜—Š•ȱ ‘ŽŠ•‘ȱ Š—ȱ œŠŽ¢ǰȱ Ž—Ÿ’›˜—–Ž—Š•ȱ ™›˜ŽŒ’˜—ǰȱ ™˜••ž’˜—ȱ Œ˜—›˜•ǰȱ Š—ȱ Œ˜—œž–Ž›ȱ ™›˜ŽŒ’˜—ǯȱ ˜ŒŠ•ȱ Š—ȱ ›Ž’˜—Š•ȱ ‹ž’•’—ȱ Œ˜Žœȱ ŽœŠ‹•’œ‘ȱ ›Žšž’›Ž–Ž—œȱ ˜›ȱ ‘Žȱ Œ˜—œ›žŒ’˜—ȱ Š—ȱ ˜ŒŒž™Š—Œ¢ȱ ˜ȱ ‹ž’•’—œǰȱ Š—ȱ ‘Žȱ Œ˜Žœȱ Œ˜—Š’—ȱ œ™ŽŒ’ęŒŠ’˜—œȱ ˜›ȱ ‹ž’•’—ȱ –ŠŽ›’Š•œǰȱ –Ž‘˜œȱ ˜ȱ Œ˜—œ›žŒ’˜—ǰȱ Š—ȱ –ŽŒ‘Š—’ŒŠ•ȱ œ¢œŽ–œǯȱ ‘ŽœŽȱ Œ˜Žœȱ Š•œ˜ȱ ŽœŠ‹•’œ‘ȱ œŠ—Ȭ Š›œȱ ˜ȱ ™Ž›˜›–Š—ŒŽȱ Š—ȱ Š›Žœœȱ Œ˜—œ’Ž›Š’˜—œȱ œžŒ‘ȱ Šœȱ œ›žŒž›Š•ȱ œ›Ž—‘ǰȱ ꛎȱ ›Žœ’œŠ—ŒŽǰȱŠ—ȱŠŽšžŠŽȱ•’‘ȱŠ—ȱŸŽ—’•Š’˜—ǯȱ ž’•’—ȱŒ˜ŽœȱŽœŠ‹•’œ‘ȱŠ˜›–ȱ˜ȱœŠ—Š›ǰȱ‹žȱ‘Žȱ˜›’—Š—ŒŽœȱŽ—ŠŒŽȱ˜›ȱ‘Ž’›ȱ Š™™•’ŒŠ’˜—ȱ ˜Ž—ȱ ŸŠ›¢ȱ ›˜–ȱ Œ˜Žœȱ ˜›ȱ ™•ŠŒŽȱ œ™ŽŒ’Š•ȱ Ž›–œȱ ˜›ȱ Œ˜—’’˜—œȱ ˜—ȱ ‘˜ ȱ ‘Žȱ Œ˜Žœȱ ’••ȱ‹ŽȱŠ™™•’Žȱ’—ȱŠȱ’ŸŽ—ȱ“ž›’œ’Œ’˜—ǯȱ˜Žȱ‘Šȱ—Š’˜—Š•ȱ‹ž’•’—ȱŒ˜Žœȱ˜ȱ—˜ȱ R1ARE10.indb 5 10/4/2010 10:35:52 AM 11.6 The Appraisal of Real Estate – Third Canadian Edition Š• Š¢œȱ ›Š—œ•ŠŽȱ ’—˜ȱ •˜ŒŠ•ȱ ˜›’—Š—ŒŽœDzȱ ‘˜ ŽŸŽ›ǰȱ •˜ŒŠ•ȱ Œ˜Žœȱ ŒŠ—ȱ Šȱ ˜ȱ ‹žȱ —˜ȱ Š”Žȱ Š Š¢ȱ›˜–ȱœŠ—Š›œȱ’–™˜œŽȱ‹¢ȱ‘’‘Ž›ȱ•ŽŸŽ•œȱ˜ȱ˜ŸŽ›—–Ž—ǯ Size ŽŽ›–’—’—ȱ ‘Žȱ œ’£Žȱ ˜ȱ Šȱ ‹ž’•’—ȱ –Š¢ȱ œŽŽ–ȱ •’”Žȱ ‘Žȱ ŽŠœ’Žœȱ œŽ™ȱ ’—ȱ ™›Ž™Š›’—ȱ Šȱ ‹ž’•’—ȱ ŽœŒ›’™’˜—ǰȱ ‹žȱ ’ȱ ŒŠ—ȱ ‹Žȱ Šȱ ˜›–’Š‹•Žȱ Šœ”ȱ ˜›ȱ Š—ȱ Š™™›Š’œŽ›ȱ ‘˜ȱ ’œȱ —˜ȱ ™›Ž™Š›Žȱ˜›ȱ’œȱ’—‘Ž›Ž—ȱ’ĜŒž•’Žœǯȱ‘Žȱ–Ž‘˜œȱŠ—ȱŽŒ‘—’šžŽœȱžœŽȱ˜ȱŒŠ•Œž•ŠŽȱ ‹ž’•’—ȱœ’£ŽȱŸŠ›¢ȱ›Ž’˜—Š••¢ǰȱ’Ž›ȱŠ–˜—ȱ™›˜™Ž›¢ȱ¢™ŽœǰȱŠ—ȱ–Š¢ȱ›Ž•ŽŒȱ‹’ŠœŽœȱ ‘Šȱœ’—’ęŒŠ—•¢ȱŠěŽŒȱ˜™’—’˜—œȱ˜ȱŸŠ•žŽǯȱ‘ŽȱŠ™™›Š’œŽ›ȱ–žœȱ”—˜ ȱ‘Žȱ–ŽŠœž›Ž–Ž—ȱ ŽŒ‘—’šžŽœȱ žœŽȱ ’—ȱ ‘Žȱ Š›ŽŠȱ ‘Ž›Žȱ ‘Žȱ ‹ž’•’—ȱ ’œȱ •˜ŒŠŽȱ Šœȱ Ž••ȱ Šœȱ ‘˜œŽȱ žœŽȱ ˜ȱ ŽœŒ›’‹Žȱ ™›˜™Ž›’Žœȱ Ž•œŽ ‘Ž›Žǯȱ Š’•ž›Žȱ ˜ȱ Š™™•¢ȱ –ŽŠœž›Ž–Ž—ȱ ŽŒ‘—’šžŽœȱ Š—ȱ ›Ž™˜›ȱ ‹ž’•’—ȱ’–Ž—œ’˜—œȱŒ˜—œ’œŽ—•¢ȱ ’‘’—ȱŠ—ȱŠœœ’—–Ž—ȱŒŠ—ȱ’–™Š’›ȱ‘ŽȱšžŠ•’¢ȱ˜ȱ‘Žȱ Š™™›Š’œŠ•ȱ›Ž™˜›ǯ —ȱ Š™™›Š’œŽ›ȱ žœŽœȱ ‘Žȱ œ¢œŽ–ȱ ˜ȱ –ŽŠœž›Ž–Ž—ȱ Œ˜––˜—•¢ȱ Ž–™•˜¢Žȱ ’—ȱ ‘Žȱ Š›ŽŠȱ Š—ȱ’—Œ•žŽœȱŠȱŽœŒ›’™’˜—ȱ˜ȱ‘Žȱœ¢œŽ–ȱ’—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ǯȱ ›˜œœȱ‹ž’•’—ȱŠ›ŽŠȱ’œȱ žœžŠ••¢ȱŒŠ•Œž•ŠŽǯȱŽŠœž›Ž–Ž—œȱŠ”Ž—ȱ›˜–ȱ™•Š—œȱœ‘˜ž•ȱ‹ŽȱŒ‘ŽŒ”ŽȱŠŠ’—œȱŠŒžŠ•ȱ ‹ž’•’—ȱ–ŽŠœž›Ž–Ž—œȱ‹ŽŒŠžœŽȱŠ•Ž›Š’˜—œȱŠ—ȱŠ’’˜—œȱŠ›Žȱ˜Ž—ȱ–ŠŽȱŠŽ›ȱ™•Š—œȱ Š›Žȱ ™›Ž™Š›Žǯȱ ‘Žȱ Š›ŽŠœȱ ˜ȱ ŠĴŠŒ‘Žȱ ™˜›Œ‘Žœǰȱ ›ŽŽœŠ—’—ȱŠ›ŠŽœǰȱŠ—ȱ˜‘Ž›ȱ–’—˜›ȱ‹ž’•’—œȱ Systems for measuring residential and nonŠ›ŽȱŠ• Š¢œȱŒŠ•Œž•ŠŽȱœŽ™Š›ŠŽ•¢ǯȱ residential properties vary. Gross building ˜ȱ –Š—ŠŽȱ Š—Š’Š—ȱ œŠ—Š›œȱ Ž¡’œȱ ˜›ȱ area is measured for all property types ‹ž’•’—ȱ–ŽŠœž›Ž–Ž—ǯȱ‘Žȱ™™›Š’œŠ•ȱ —œ’žŽȱ˜ȱ other than one-unit residential. Gross living Š—ŠŠȱ ‘Šœȱ ™ž‹•’œ‘Žȱ ž’Ž•’—Žœȱ ˜›ȱ –ŽŠœž›’—ȱ area and gross leasable area are other Šȱ ‘˜žœŽDzȱ ‘˜ ŽŸŽ›ǰȱ ‘ŽœŽȱ Š›Žȱ —˜ȱ –Š—Š˜›¢ǯȱ ȱ common measurements. ’Ž•¢ȱ ŠŒŒŽ™Žȱ –ŽŠœž›Ž–Ž—ȱ œŠ—Š›ȱ ˜›ȱ ›Žœ’Ȭ Ž—’Š•ȱ ™›˜™Ž›’Žœȱ ’œȱ šžŠ›Žȱ ˜˜ŠŽȱ Ȯȱ Ž‘˜ȱ ˜›ȱ Š•Œž•Š’—DZȱ ȱŝŜśȬŘŖŖřǰȱŽŸŽ•˜Žȱ‹¢ȱ‘ŽȱŠ’˜—Š•ȱœœ˜Œ’Š’˜—ȱ˜ȱ ˜–Žȱž’•Ž›œȱ ǻ ǼȱŽœŽŠ›Œ‘ȱŽ—›Žȱ ’‘ȱ‘Žȱ–Ž›’ŒŠ—ȱŠ’˜—Š•ȱŠ—Š›œȱ —œ’žŽȱǻ Ǽǯȱ‘Žȱ Š—Š’Š—ȱ ŽŠ•ȱ œŠŽȱ œœ˜Œ’Š’˜—ȱ ǻǼȱ ‘Šœȱ ›ŽŒ˜––Ž—Žȱ ’œȱ –Ž–‹Ž›œȱ žœŽȱ ‘’œȱ œŠ—Š›ǯȱŠ‹•ŽȱŗŗǯŗȱŽœŒ›’‹ŽœȱŒ˜––˜—ȱ‹ž’•’—ȱ–ŽŠœž›Ž–Ž—ȱœŠ—Š›œǯ ’ŒŽȱ ‹ž’•’—œȱ ™›ŽœŽ—ȱ œ™ŽŒ’Š•ȱ ™›˜‹•Ž–œȱ ˜›ȱ Š™™›Š’œŽ›œȱ ‹ŽŒŠžœŽȱ ‘Ž¢ȱ Š›Žȱ –ŽŠœž›Žȱ ’Ž›Ž—•¢ȱ ’—ȱ ’Ž›Ž—ȱ ›Ž’˜—œǯȱ ‘Žȱ ž’•’—ȱ  —Ž›œȱ Š—ȱ Š—ŠŽ›œȱ œœ˜Œ’Š’˜—ȱ —Ž›—Š’˜—Š•ȱ ǻǼȱ ‘Šœȱ ŽœŠ‹•’œ‘Žȱ Šȱ –Ž‘˜ȱ ˜›ȱ –ŽŠœž›’—ȱ ˜’ŒŽȱ ‹ž’•’—ȱ •˜˜›ȱ Š›ŽŠǯȱ ‘’œȱ ’Ž•¢ȱ žœŽȱ –Ž‘˜ȱ ’œȱ ŽœŒ›’‹Žȱ ’—ȱ ȇœȱ ™ž‹•’ŒŠȬ ’˜—ȱŠ—Š›ȱŽ‘˜ȱ˜›ȱŽŠœž›’—ȱ•˜˜›ȱ›ŽŠȱ’—ȱ’ŒŽȱž’•’—œǰȱ ‘’Œ‘ȱ’œȱž™ŠŽȱ ™Ž›’˜’ŒŠ••¢ǯȱ ‘Žȱ ŽœŒ›’™’˜—ȱ ˜ȱ Š—ȱ ˜’ŒŽȱ ‹ž’•’—ȱ œ‘˜ž•ȱ ’—Œ•žŽȱ –ŽŠœž›Ž–Ž—œȱ ˜ȱ‘Žȱ˜••˜ ’—DZ yȱ ›˜œœȱ‹ž’•’—ȱŠ›ŽŠ yȱ ’—’œ‘Žȱ‹ž’•’—ȱŠ›ŽŠ yȱ ŽŠœŠ‹•Žȱ‹ž’•’—ȱŠ›ŽŠ ˜–Žȱ–Ž‘˜œȱ˜ȱ˜ĜŒŽȱ–ŽŠœž›Ž–Ž—ȱŠ••˜ŒŠŽȱŠȱ™›˜ȱ›ŠŠȱ™˜›’˜—ȱ˜ȱ‘Žȱ›Žœ›˜˜–œǰȱ Ž•ŽŸŠ˜›ȱ •˜‹‹’Žœǰȱ Š—ȱ Œ˜››’˜›œȱ ˜ȱ ŽŠŒ‘ȱ Ž—Š—Dzȱ ˜—Žȱ ŸŠ›’Š’˜—ȱ Š•œ˜ȱ ’—Œ•žŽœȱ Šȱ ™›˜ȱ ›ŠŠȱ ™˜›’˜—ȱ ˜ȱ ‘Žȱ ›˜ž—ȱ ̘˜›ȱ –Š’—ȱ •˜‹‹¢ȱ ’—ȱ ŽŠŒ‘ȱ Ž—Š—ȇœȱ •ŽŠœŽȱ Š›ŽŠǯȱ ...
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