Real Estate Appraiser cheat sheet

Market value is the most probable price in a competitive, arm's-length sale after reasonable exposure, with informed parties, no undue stimulus, and payment in cash or equivalent.

The four value elements are demand, utility, scarcity, and transferability; all must be present for a property to have market value.

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive, tested both as vacant and as improved.

Key valuation principles include substitution, contribution, conformity, progression/regression, anticipation, change, balance, supply/demand, and externalities.

The three approaches are sales comparison (market data), cost (land plus improvements less depreciation), and income (capitalization of income).

Real property is the bundle of rights in land and improvements; common estates include fee simple, leased fee, and leasehold.

Exposure time is the estimated period a property would have been offered before a hypothetical sale date; it is not the same as marketing time after listing.

Depreciation is loss in value from physical deterioration, functional obsolescence, or external obsolescence; each may be curable or incurable.

Sales comparison adjusts comparable sales to the subject: subtract when the comparable is superior, add when inferior, using sequence rights, financing, conditions, market, location, physical.

Cost approach: value = land value + cost new (reproduction or replacement) - accrued depreciation.

Income approach: net operating income = effective gross income - operating expenses; value = NOI ÷ capitalization rate.

Capitalization rate = NOI ÷ value; gross rent multiplier = sale price ÷ gross rent; value = GRM × subject gross rent.

Potential gross income includes rent roll plus other income; effective gross income = PGI - vacancy and collection loss + other income.

Operating expenses include taxes, insurance, maintenance, management, utilities; exclude debt service, depreciation, capital expenditures, and income taxes.

Reconciliation selects a final value by weighing approach reliability, data quality, and relevance; it is not a simple average.

Site value methods include sales comparison, allocation, extraction, subdivision development, land residual, and ground rent capitalization.

An appraisal report must state intended use and user, scope, subject, market, approaches, reconciliation, certification, and assumptions/limiting conditions.

USPAP requires appraisers to be competent, define scope of work, disclose assumptions, certify compliance, and retain workfiles for at least five years or two years after final judicial disposition.

FIRREA requires federally related transactions to be performed by state-certified or licensed appraisers in compliance with USPAP.

Appraiser independence prohibits contingent fees, coercion, undisclosed interests, and advocacy; appraisers must disclose prior services and conflicts.

Confidentiality protects assignment results and confidential information; disclosure is allowed only to the client or as authorized or required by law.

The competency rule requires knowledge and experience for the assignment or steps to gain it, including disclosure of limits in the report.

Fair housing laws prohibit discrimination in appraisal based on protected classes; appraisals must be objective and supported by market evidence.

A state appraiser board enforces licensing laws, education, experience, and disciplinary standards; practice without a license is prohibited.

Property law concepts affecting value include zoning, easements, deed restrictions, encroachments, eminent domain, and adverse possession.

An appraiser must not misrepresent value, report content, or professional qualifications; ethics require impartiality, objectivity, and independence.