Real Estate Cheat Sheet

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Cost Approach Formula: Cs – Ds + Vsl = V Value: An object, product or service that: has utility or usefulness, Is scarce, Is desired by people (is in demand),Is transferable from one person to anotherLand Appraisal Methods: Market or Direct Sales Comparison, Allocation, Abstraction, Development, Land Residual Which Method to Use? 1)Market Method is considered most reliable, but not practical if lot sales are not occurring in a neighborhood.(2)Allocation Method is quick and easy, but only reliable if based on ample, recent data.(3)Abstraction Method is the one you will use most often.(4)Development Method is a special case…appropriate for unimproved land.(5)Land Residual Method uses Income Method, leads to circular reasoning.…show more content…
The Cap rate is simply the property operating earnings divided by the property asset or value. Reconciliation, Defined The process of reducing a range of value indications into an appropriate conclusion for that analysis. Having applied different valuation methods, the appraiser makes a determination of the single best supportable estimate of value. It is NOT an average of the valuation methods, nor a narrowing of the values derived from each method (unless errors are detected). Approach Relevance: Owner Occupied => Downplay Income Approach. Unique Property => Downplay Cost Approach. Income Properties => Downplay Cost Approach (unless buildings are new) Zipf’s Law: City Population = Largest City’s Population ÷ Rank. City Pattern: Generally, cities of similar size are not located near each other. Factors Underlying City Patterns, Economies of Scale – Cheaper to produce goods in large volume, Economies of Agglomeration – Cost advantages to colocating production factors, Positive Locational Externalities – “piggyback” benefits, Factors that make centralization less productive or more costly:, Congestion, Pollution, Crime, Transportation costs CPT: Central Place Theory: To reduce spatial friction, places of similar size, rank or function will tend to be evenly spaced across a featureless plain. City-Economy Concepts: Economic Base: (1) Local production for local consumption and export, (2) Investment returns, (3) Government transfers. Export Base

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