FIN353 Introduction

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
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
Final Grade Weighting Policy
Mid-term
Final Exam
Course Project
Class Participation
Total:
30%
35%
30%
5%
100%

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
22

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What are the course objectives?

What are the course objectives?

What topics will be covered in the course?

What topics will be covered in the course?

Finance 353:

Real Estate Valuation

Wayne Foss, MBA, MAI, CRE

techniques of appraisal analysis

recent regulatory changes

To develop an analytical approach to

Fin 351 or equivalent

Course Syllabus, cont...

The Appraisal of Real Estate

Appraisal of a Single Family Residence

Group Project (3 to 4 students to a group)

Course Syllabus, cont...

50% Multiple Choice or True False

50% Short Answer or Problems

Unless there an extraordinary circumstance

Course Syllabus, cont...

Final Grade Weighting Policy

Course Syllabus, cont...

Nature of Value, Foundations, Markets

The valuation process, Appraisal Reports

Fee Simple and Partial Interest

Highest and Best Use Analysis, Land Valuation

Highest and Best Use Analysis, Land Valuation

Cost Approach & Depreciation

Sales Comparison Approach

Sales Comparison Approach

Yield Capitalization and DCF

Nature of Appraisals, Value and

Real Estate Markets

The valuation process and

The Valuation Process

A systematic procedure employed to provide

The Valuation Process

Preliminary Analysis and Data Selection and Collection

Competitive Supply and Demand

Highest and Best Use Analysis

Land Value Estimate

Reconciliation of Value Indications and Final Value Estimate

Fee Simple and Partial Interests,

Fee Simple and Partial Interests

Data Collection and Analysis

Neighborhoods and Districts

A group of complementary land uses

Characterized by homogeneous land

Land and Building Descriptions

Types of Legal Descriptions

Highest and Best Use Analysis,

Highest and Best Use Analysis

Land or Site as though vacant

Legally Permissibility, Physically Possible,

The Cost Approach

Building Cost Estimates

The Sales Comparison Approach

The Sales Comparison Approach

Five Step Model