Real estate appraisal

For instance, appraisals of properties that are typically purchased by investors (e.g., skyscrapers, office buildings) may give greater weight to the Income Approach.

The approach recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her wants and needs for the lowest cost.

In developing the sales comparison approach, the appraiser attempts to interpret and measure the actions of parties involved in the marketplace, including buyers, sellers, and investors.

Alternatively, multiple years of net operating income can be valued by a discounted cash flow analysis (DCF) model.

The DCF model is widely used to value larger and more expensive income-producing properties, such as large office towers or major shopping centres.

This technique applies market-supported yields (or discount rates) to projected future cash flows (such as annual income figures and typically a lump reversion from the eventual sale of the property) to arrive at a present value indication.

Under the current RICS Valuation Standards, the following bases of value are recognized: The common public experience of chartered surveyors is in the process of obtaining a mortgage loan.

[16] When the surveyor is instructed in this combined role, the mortgage valuation is still produced for the lender, and the HomeBuyer Report or Building Survey is additionally prepared for the borrower.

The problem with the earlier format often reported to RICS by clients in receipt of the previous 'Homebuyer's Survey and Valuation' was that the structure did not easily distinguish the faults from the main description.

In this way, serious impediments are identified easily, and less critical defects commented upon to give the reader advice on what will need attention in the near future.

This format is suitable for a wide range of properties, but is best suited to traditionally built houses that are not subject to very serious distress or previous major alterations or extensions.

The report also includes commentary to advise the solicitor on issues that need addressing in the conveyance, and any risks that affect the building, grounds and people of a more general nature.

Collectively, a key feature of RICS building surveys are that they provide an opportunity for clients and surveyors to strike up a detailed dialogue about the property they are intending to purchase.

They may also recommend work by the buyer's solicitor to confirm matters which might affect their valuation, such as (with leasehold properties), the unexpired term of the lease, who is responsible for the boundaries, and so forth.

They do not have the authority to lift floorboards, drill holes, or perform excavations at a property which the prospective buyer does not, at this stage, own, which means that certain defects or problems may not be apparent from their inspection.

Real estate appraisers (Immobilienbewerter or Gutachter) can qualify to become a Öffentlich bestellter und vereidigter Sachverständiger (officially appointed and sworn expert).

BauGB, "German statutory code on building and construction'") contains guidelines on governing authorities, defines the term market value and refers to continuative rules (chapter 3, articles 192 ff.).

The BauGB defines the Verkehrswert or Marktwert (market value, both terms with identical meaning) as follows: "The market value is determined by the price that can be realized at the date of valuation, in an arm's length transaction, with due regard to the legal situation and the effective characteristics, the nature and lay of the premises or any other subject of the valuation"[31] (non-official translation).

However, there are some important differences: Mathematically the distinction between land and improvements in the income approach will have no impact on the overall value when the remaining economic life is more than thirty years.

Valuers must be registered with the Council, which is a statutory body set up by law, and which oversees the training and administers the national professional exams that are a prerequisite for attaining registration.

[15] Property valuation in the UK is regulated by the Royal Institution of Chartered Surveyors (RICS), a professional body encompassing all of the building and property-related professions.

While based in the UK, RICS is a global organization and has become very active in the United States in recent years through its affiliation with the Counselors of Real Estate, a division of the National Association of Realtors.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) demanded all the states to develop systems for licensing and certifying real estate appraisers.

In the 1980s, an ad-hoc committee representing various appraisal professional organizations in the United States and Canada met to codify the best practices into what became known as the USPAP.

[43] In recent years, the Royal Institution of Chartered Surveyors (RICS) has become highly regarded in the United States, and has formed a collaboration with the Counselors of Real Estate, a division of the National Association of Realtors.

[44] Recent studies from Freddie Mac and other industry leaders have confirmed that traditional modelling based on comparable sales and a variety of other factors (income, credit score, etc.)

In late 2016, it was mandated that valuers should pass through compulsory state-administered attestation process to verify their competence, the details of which as to breakdown in specialization or otherwise remain to be hammered out.

While a real estate agent is allowed to represent the interests of their client, a valuer is required to offer an unbiased and independent assessment of value.

This is an ageing 'top heavy' professional with difficulty retaining new and young members due to pay, work stress and the recent advent of 'clearing houses' for banks to order valuations for mortgage purposes.