馃攳
Appraisals (Part 1 of 3) | Real Estate Exam Prep - YouTube
Channel: The Real Estate Classroom
[0]
hey everybody my name is paul vachesky
[2]
and welcome to the real estate classroom
[4]
youtube channel hey before we get
[5]
started as
[6]
always give this video a thumbs up hit
[8]
that red subscribe button click on the
[9]
notification bell
[11]
comments and questions down below in the
[13]
comment section love love love
[15]
comments and questions all right so in
[17]
today's video
[18]
this is actually video one of three
[21]
what's a three-part series on the
[23]
appraisal process
[24]
everything that you need to know as a
[26]
real estate professional but also
[28]
as a student studying for their real
[30]
estate exam and it starts
[32]
with this video
[33]
[Music]
[40]
okay appraisals appraisers the appraisal
[43]
report
[45]
these are things that you have to know
[46]
for your real estate licensing exam
[49]
now why do we have appraisals why do we
[52]
do them why are they necessary well
[55]
things need to have enough there has to
[57]
be a mechanism if you will
[58]
for an independent third party someone
[61]
that's disinterested in the transaction
[63]
to determine
[64]
value of things now we get appraisals
[67]
for
[68]
obviously homes that are being bought
[70]
and sold
[71]
commercial properties industrial uh land
[74]
but we also get appraisals for things
[77]
like personal property
[78]
and coin collections and vehicles
[81]
antique vehicles
[82]
antiques see there are so many different
[85]
things that we need appraisals for
[88]
and this is why it's an entire industry
[90]
now in this particular case in these
[92]
three videos we're going to discuss
[94]
appraisals
[95]
insofar as how it relates to real estate
[98]
the reason we have appraisals is so a
[101]
disinterested third party is going to
[103]
determine
[104]
or estimate the value of
[107]
a property based on the data that's
[110]
available to that appraiser
[113]
okay now i got the appraisal process
[116]
outlined on the screen and i so we're
[118]
just going to take a 50
[119]
50 000 foot view of how the process
[122]
works
[123]
it all starts with that licensed
[124]
appraiser who's been hired by the lender
[127]
or the buyer
[128]
to do an appraisal on a piece of
[130]
property that uh
[131]
someone wants to buy now typically
[133]
that's
[134]
uh it's done because the lender wants to
[137]
ensure that they're not going to loan
[138]
more money
[139]
than the home is is worth the buyer
[142]
wants to know because they don't want to
[143]
pay
[144]
more than the home is worth and it all
[146]
starts with identifying the subject
[148]
property
[149]
so the the the appraiser is going to get
[152]
a
[153]
an order from the lender and it's going
[156]
to give the subject
[157]
properties address the subject property
[160]
is the property that we're trying to
[162]
determine the value on
[164]
okay it's that piece of property that
[166]
the purchaser
[168]
has uh put an offer to purchase in on
[172]
the appraiser once he's he or she's
[174]
determined the subject
[175]
property then they're going to start
[177]
collecting the data to determine the
[179]
value
[180]
and it starts with they're going to
[181]
collect they're going to collect
[184]
data and do an economic analysis a
[186]
neighborhood analysis
[187]
and a property analysis so let's talk
[190]
about each one
[191]
briefly economic analysis they're going
[193]
to
[194]
research and collect data on how's the
[196]
community itself
[197]
doing is it growing is it stagnant is it
[201]
you know is it depopulating is there
[203]
industries that are coming in
[205]
and creating jobs is there industries
[207]
that are closing down
[208]
increasing and unemployment those type
[210]
of things neighborhood analysis
[213]
neighborhood analysis determines what
[215]
that specific surrounding area
[217]
around the subject property is like is
[219]
it aging
[220]
is the material condition of the
[223]
neighborhood
[224]
declining is it is crime rates going up
[226]
those type of things
[228]
because that all has an impact on the
[230]
future value
[231]
and then we have the property analysis
[233]
and that is the property specifically
[235]
is it run down is it being maintained
[238]
those type of things
[240]
next in bullet point c the appraiser is
[243]
going to then determine
[245]
what's the appropriate what we call
[247]
approach to value
[248]
or the appropriate type of appraisal
[252]
and there are three that you have to be
[253]
aware of first one is what's called a
[256]
sales comparison approach or sometimes
[258]
called a market
[259]
data approach this is the one that we
[262]
see
[262]
in the uh single family homes arena this
[266]
is where
[267]
the subject property that subject
[269]
property is that property that we're
[270]
trying to find the value for
[273]
we compare that to similar type
[275]
properties that have recently sold
[278]
within the you know the last six months
[280]
maybe a year
[281]
but they've recently sold and then we
[283]
make the comparisons
[286]
cost approach deals more with the
[288]
replacement
[289]
value so if i'm an insurance company i'm
[292]
going to want a cost approach
[293]
to ensure a church for example
[297]
where there really are no comparables to
[299]
to look for
[300]
and it's based on how much money would
[303]
it take
[304]
or cost the insurance company if there's
[306]
a total casualty to rebuild this church
[309]
to look like it does today
[311]
in today's dollars minus depreciation
[315]
interestingly enough of all the three
[317]
approaches to value that you see on your
[319]
screen cost approach is the only one
[322]
that takes into consideration
[324]
depreciation and we're going to talk
[325]
about depreciation
[327]
in a different video and then the last
[329]
one is income approach we use this type
[331]
of appraisal for
[332]
income producing properties things like
[335]
uh
[336]
apartment communities and retail malls
[339]
and things like that
[340]
the key what to remember with income
[342]
producing or income approach to value is
[345]
income producing properties income
[347]
approach to value
[348]
the appraiser in d is going to analyze
[351]
all the results
[352]
and then there he or she is going to put
[355]
it into that
[356]
written appraisal report okay so as i
[359]
said before the purpose of the appraisal
[361]
is to define the value but understand
[364]
that
[364]
you know depending on the industry value
[366]
means something different
[368]
to different people so for example if
[370]
i'm a lender
[372]
i want value for me is ensuring
[376]
that we don't loan more than the
[378]
property is worth if i am an insurance
[381]
company i don't want to over
[382]
insure the property uh those type of
[385]
things
[386]
so value represents today's worth
[389]
or today's value that's what the
[391]
appraisal does
[392]
and it does infer some future benefit as
[395]
you remember in our last
[397]
slide there we were talking about the
[399]
neighborhood analysis and the economic
[401]
analysis
[402]
that's what that statement is saying
[404]
we're going to determine the
[406]
uh the present value and then we're
[409]
going to report whether or not this area
[411]
this community this neighborhood is
[413]
progressing or
[414]
regressing very important to the
[416]
valuation process
[418]
now next i want to get into and bullet
[420]
point number two is what are all the
[421]
different
[422]
reasons that we uh we need appraisals
[425]
and that's important to know and look at
[428]
bullet point 2a there
[430]
there are two key terms two key real
[432]
estate terms that you have to know
[434]
and i've seen these on in fact i seen
[437]
market price on my broker's exam several
[439]
years ago
[441]
market value is defined as
[444]
the most probable price in which a
[446]
willing buyer will buy and a willing
[449]
seller will sell
[450]
market price was the actual sale price
[454]
so let me give you an example
[456]
let's say that uh well real estate
[459]
agents
[460]
they do what's called competitive market
[462]
analysis or sometimes called a
[464]
cma they go out to the property they
[466]
they do a similar analysis like the
[469]
appraiser does to determine what the
[471]
current market value is
[473]
now the difference between what an agent
[475]
does and an appraisal
[476]
appraiser does is the agent is going to
[479]
determine the market value which is the
[481]
value
[481]
in today's dollars let me give you an
[484]
example
[486]
if you live in an area that the market
[487]
is extremely hot
[489]
there's high demand which is driving up
[491]
prices
[492]
that means homes in a certain area a
[494]
certain neighborhood
[496]
a month ago the average price could have
[498]
been 200 000 but now the average price
[500]
is 225.
[502]
all right so real estate professionals
[504]
are going to go out and determine the
[505]
market value
[506]
in today's today's dollars so the agent
[508]
puts the house up for sale for 200 000
[511]
because he or she believes that's the
[512]
market value
[514]
well they get a whole bunch of offers in
[516]
uh there's a bidding war that happens
[517]
and now
[518]
the market price the actual sale price
[521]
is 225
[522]
000 that is a direct reflection
[526]
of the market then comes along
[530]
an appraiser now the appraiser uses a
[532]
different process
[534]
they use the actual market price of
[537]
properties that have sold
[541]
similar properties that have sold over
[542]
the last six months maybe a year
[546]
which if it's a rising market that means
[549]
they're those comparables is what we
[551]
call them
[552]
those homes that it sold three six seven
[554]
months ago they're going to have a
[556]
lower market price so what happens is we
[559]
get a
[560]
we get an appraisal that comes back at
[562]
205
[563]
000 instead of the 225 which was the
[566]
actual purchase price
[568]
and it puts that deal in jeopardy we
[570]
call it
[571]
obtaining a bad uh a bad appraisal
[575]
that's what we call it a bad appraisal
[576]
when the apprais the appraised value
[578]
doesn't
[580]
meet or exceed the the actual purchase
[583]
price
[584]
we're not going to go into what happens
[586]
when that happens but
[588]
it's important to understand those two
[590]
concepts here that market price
[592]
reflects the current supply and demand
[595]
of a neighborhood or
[596]
a particular type house and then the
[599]
market price is the actual price
[602]
let's look at 2b loan value certainly
[605]
that if you're a lender and you're
[607]
loaning money you want to determine
[608]
whether or not the subject property
[611]
uh what the what the value of the
[613]
collateral is so the you know the lender
[615]
doesn't loan more than the house is
[616]
worth
[618]
2c insurance value that's for appraisal
[621]
that's done for insurance coverages
[623]
d tax value i have seen and it's common
[627]
where a an appraisal is done on property
[630]
and other things like coin collections
[632]
and
[633]
antiques and vehicles and other things
[635]
because someone who owned them has
[636]
passed away
[638]
and now for the purpose of inheritance
[640]
taxes that need to be paid
[643]
the value has to be established and
[645]
remember that appraiser whether it's
[647]
someone who's appraising homes or coin
[649]
collections or antiques
[651]
they're that disinterested third party
[654]
and their job is to give an honest
[656]
valuation
[657]
distant disinterested valuation
[661]
look at 2e tax assessments if you live
[663]
in an area where
[664]
property taxes are very high
[667]
and you want to challenge those property
[669]
taxes then a
[671]
an appraiser's an appraisal is done
[674]
to establish what we call the ad
[678]
valorem tax i actually misspelled it it
[680]
should be ad
[681]
ad valorem tax that's what we call
[683]
property tax so
[684]
you use an appraisal to go out and
[686]
challenge the valuation for tax purposes
[690]
2f eminent domain if the school district
[694]
in that area wants to
[696]
buy that house through eminent domain
[698]
then typically what they're going to do
[700]
is get
[701]
three independent appraisers to go out
[704]
and do an appraisal
[705]
and then they usually average the three
[708]
uh valuations of the individual
[711]
appraisals and that's
[712]
that is what the eminent domain value
[714]
becomes relocation if
[716]
if somebody is being transferred with
[718]
their company and a relocation
[720]
company is involved many times the
[721]
relocation company will actually
[723]
buy the house well they're going to want
[726]
an appraisal that's done to make sure
[728]
that they know the accurate value
[730]
liquidation 2h if there is a forced
[733]
auction or a for sale
[735]
i have seen this where the bank has to
[738]
foreclose on a
[739]
on a farm or a ranch and they're going
[741]
to have a for sale or an auction
[743]
they'll have a an appraisal done
[746]
typically it's the higher value
[747]
you know million two three four million
[749]
type pieces of property and then
[752]
unfortunately divorces
[753]
it's not uncommon to have an appraisal
[755]
done so marital assets can be
[758]
adequately and correctly distributed
[761]
through the divorce
[762]
process bullet point number three
[765]
competitive market analysis or a
[767]
competitive market analysis
[770]
or what we call a cma and a fee
[772]
appraisal
[773]
agents have to know this um because
[776]
in your in your exam many times
[779]
you have to take the you have to take a
[783]
term
[784]
and take the definition of the term and
[786]
apply it to the situation that's
[788]
outlined in the
[789]
in the test question you have to know
[791]
that a competitive
[793]
market analysis which is a cma is what
[795]
real estate agents do
[797]
fee appraisal is something that a
[800]
licensed
[801]
appraiser does all right that's
[804]
you're not going to see a an appraiser
[807]
go out and do a
[808]
market analysis and you're not going to
[810]
see a real estate agent go do
[812]
an appraisal okay big difference
[816]
all right now before you go remember
[818]
this is video one of three it's a
[820]
three-part series
[821]
i'm gonna put the second video to my
[824]
right here in the box
[825]
if you have not subscribed yet highly
[827]
encourage you to do that click the
[829]
little circle to my left here
[830]
and as always questions and comments
[832]
down below other than that
[834]
thanks for hanging and i'll see you in
[836]
the next video which is
[838]
part two to the appraisal process
Most Recent Videos:
You can go back to the homepage right here: Homepage