Finance 353:

Real Estate Valuation

A Short Course in the Valuation
of Residential and Commercial
Real Estate

Wayne Foss, MBA, MAI, CRE

Foss Consulting Group
Email: wfoss@fossconsult.com

Introduction

Student Introduction
Name
Academic Level
Real Estate Experience
What do you expect to get from
this course?
Future Goals

Instructor Introduction

Course Syllabus

Objectives

Course Coverage

techniques of appraisal analysis

development of appraisal theories

recent regulatory changes

To develop an analytical approach to

identifying and solving real estate problems

Prerequisites

Fin 351 or equivalent

Course Syllabus, cont...

Required Textbook

The Appraisal of Real Estate

12th Edition
The Appraisal Institute

Course Project

Appraisal of a Single Family Residence

Group Project (3 to 4 students to a group)

Property of your choice
length approximately 30 to 50 pages including
exhibits
presentation of findings in class

Course Syllabus, cont...

Examinations

Type

50% Multiple Choice or True False

Closed Book, Closed Notes

50% Short Answer or Problems

Open Book, Open Notes

No Partial Credit
Calculators are permitted, computers are not
Make-up examinations are not permitted

Unless there an extraordinary circumstance

Course Syllabus, cont...

Final Grade Weighting Policy

Mid-term
Final Exam
Course Project
Class Participation
Total:

30%
35%
30%
5%
100%

Course Syllabus, cont...

The Final Course Grade will be based on the
following Scale:
Grade
A+
A
AB+
B
BC+
C
CD+
D
DF

=
=
=
=
=
=
=
=
=
=
=
=
=

GPA
4.0
4.0
3.7
3.3
3.0
2.7
2.3
2.0
1.7
1.3
1.0
0.7
0.0

Pctg. Range
97-100%
93-96%
90-92%
87-89%
83-86%
80-82%
77-79%
73-76%
70-72%
67-69%
63-66%
60-62%
Less than 60%

Class Schedule
DATE

TOPIC

ASSIGNMENT

Aug. 25

Introduction

Sept. 1

Nature of Value, Foundations, Markets

Ch 1-3

The valuation process, Appraisal Reports

Ch 4, 26

15

Fee Simple and Partial Interest

Data Collection/Neighborhoods

Ch 5
Ch 7-8

22

Land/Building Description

Ch 9-10

29

Midterm

Oct.

Special Assignment

11

Highest and Best Use Analysis, Land Valuation

Ch 11-12

20

Highest and Best Use Analysis, Land Valuation

Ch 11-12

27

Cost Approach & Depreciation

Ch 13-16

Class Schedule
DATE

TOPIC

ASSIGNMENT

Nov 3

Sales Comparison Approach

Ch 17-19

10

Sales Comparison Approach

Ch 17-19

17

Income Approach

Ch 20-22

24

Fall Recess

Dec. 1
8
15

Yield Capitalization and DCF

Ch 23, 24

Reconciliation

Ch 25

Case Presentations
Final Examination

10

Nature of Appraisals, Value and

Real Estate Markets

Nature of Appraisals

Nature of Value

Definitions
Purpose and Intended Use
Distinctions between real estate, real
property and personal property
Price versus Cost
Types of Value
Economic Principles

Real Estate Markets

Characteristics
Market Analysis

11

The valuation process and

Appraisal Reports

The Valuation Process

A systematic procedure employed to provide

the answer to a clients questions about the
value of real property

Appraisal Reports

Complete or Limited
Self-contained, Summary or Restricted

12

The Valuation Process

Definition of the Problem
Identification Identification
of real estate of property
rights to be
valued

Use of
appraisal

Definition of
Value

Date of
value
estimate

Description
of scope of
appraisal

Other
limiting
conditions

Preliminary Analysis and Data Selection and Collection

General
Specific
Region, City, Neighborhood Subject and Comparables

Competitive Supply and Demand

The Subject Market

Highest and Best Use Analysis

Land as though vacant

Property as improved

Land Value Estimate

Application of the Three Approaches
Cost

Sales Comparison

Income Capitalization

Reconciliation of Value Indications and Final Value Estimate

Report of Defined Value

13

Fee Simple and Partial Interests,

Data Collection and Neighborhoods

Fee Simple and Partial Interests

Data Collection and Analysis

Types of Estates
Lease Interests
Easements
General Data
Specific Data

Neighborhoods and Districts

A Neighborhood is

A group of complementary land uses

A District is

Characterized by homogeneous land

uses

14

Land and Building Descriptions

Land Description

Types of Legal Descriptions

Site analysis
Sources of Data

Building Description

Architecture
Inspection
Improvement Analysis

15

Highest and Best Use Analysis,

Land Valuation

Highest and Best Use Analysis

Land or Site as though vacant

Property as Improved
Systematic Approach to analysis

Legally Permissibility, Physically Possible,

Financial Feasibility, Maximally Productive

Land Valuation

Approaches

Sales Comparison
Allocation and Abstraction
Income Capitalization

Units of Comparison

16

The Cost Approach

Building Cost Estimates

Reproduction Cost
Replacement Cost

Depreciation

Physical Deterioration
Functional Obsolescence
External Obsolescence
Curable or Incurable

17

The Sales Comparison Approach

The Sales Comparison Approach

Five Step Model

Research
Data verification
Units of comparison
Compare with sale property with the subject
Reconciliation

The identification and measurement of

adjustments
Types of adjustments
Adjustment Process

18

The Income Approach

Ownership Interests
Market Value versus Investment Value
Five Step Model

Research
Data verification
Reconstructed Operating Statement
Selection of the Appropriate Capitalization
method(s) and the Capitalization of Income
Reconciliation

Derivation of Rates

19

Yield Capitalization, Discounted Cash

Flow and Reconciliation

Yield Capitalization, Discounted Cash

Flow

Time Concept
Data Requirements
Applications

Reconciliation of Value Indications

A Review
Appropriateness of the Approaches
The Final Value Opinion

A Range or a Point Estimate?

20

Case Presentations and the

Appraisal Report

Case Presentations

3 to 4 students to a group
15 to 20 minute presentation of
findings

The Appraisal Report

Complete Self-Contained Format

30 to 50 pages

21

So Thats

An Introduction to Real Estate Valuation

Wayne Foss, MBA, MAI, CRE, Fullerton, CA USA

Phone: (714) 871-3585 Fax: (714) 871-8123
Email: wfoss@fossconsult.com

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