ASA s 7 th Annual Equipment Valuation Conference. Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation

Size: px
Start display at page:

Download "ASA s 7 th Annual Equipment Valuation Conference. Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation"

Transcription

1 ASA s 7 th Annual Equipment Valuation Conference Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation

2 Background Information Rick Wilichowski Managing Director, Machinery & Equipment Valuations 25+ years of experience Personal Property and Real Property Appraiser Liquidation Experience Set up, Marketing, Sales, and One Time Auctioneer Leads personal property valuation practice group Financial reporting, lending, property tax, and litigation support Wide Variety of Experience 1

3 Gordon Brothers Been around for over 100 years We are an investment and restructuring firm that specializes in strategic asset optimization The Valuation Group is one of the largest asset valuation practices in the world serving the financial community Over 70 appraisal professionals providing expert opinions regarding machinery & equipment, industrial inventory, retail inventory, consumer inventory, business enterprise, discreet intangibles, and brands. Global reach with locations in the U.S., Canada, the U.K., Germany, Spain, Brazil, Tokyo, and Sydney. 2

4 Session Requests We have a time limit There will be time for questions There is art and science to our profession We are a profession of opinionated people be respectful Everything is open for interpretation There is never a single right answer 3

5 Purpose Introduce/Offer a different way of thinking Expose an Opportunity Build Confidence Build Support Find opportunity for New Business 4

6 Assumptions You have an understanding of The cost approach The sales comparison approach The 3 forms of depreciation 5

7 TODAY S TOPIC Depreciation Utilizing Market Data in the Cost Approach 6

8 TODAY S TOPIC Analyzing Depreciation Total or Isolating Economic Obsolesence Recognizing Opportunity for support Data is not perfect Weaknesses in every approach Some information is better than none Appraiser has to analyze the data and make a decision Data points to a conclusion Appraiser has an opinion and takes a position The data does not present a clear conclusion 7

9 The Task Q: What are we trying solve? A: Value (or a depreciation amount) Q:What ultimately determines an asset s value? A: Depreciation Q:How do we determine the correct amount of depreciation? 8

10 Why might we want to do this? Appraisal problem General Asset Support Unique Asset(s) Lease Residual Value Prospective Values Litigation Support Property Tax Assessment Challenge Client Request 9

11 Depreciation What is it? How to determine it? Sources of data input? Is it measurable? Is it accurate? Is it supportable? 10

12 What tools do we have available? Approaches to value 1. Cost 2. Sales 3. Income 4. Approaches 4 through 11 11

13 Other Methods 1. OEM Opinions 2. Dealer Opinions 3. Rule of Thumb Method 4. This Is How I Always Do It Method 5. Lifeline Method 12

14 Reconciliation of the Approaches Must weigh the relative significance, applicability, and accuracy of each approach 1. Appropriateness 2. Accuracy of the Data 3. Quantity of Information 13

15 Let s be Real THERE IS NOTHING EASY ABOUT YOUR JOB AND SOMEONE WILL ALWAYS THINK YOU ARE WRONG 14

16 So what can you do? Supportable information Analyze the data Take the guesswork out of it Isolate the information that is difficult for someone to dispute. Don t allow yourself to put in a position that you cannot defend Document Document Document 15

17 Depreciation Comparable Sale Analysis What can you potentially estimate? Total Depreciation Annual depreciation estimate EOY estimates (Prospective values) Economic Obsolescence Distress Factor 16

18 Depreciation Comparable Sale Analysis What s the formula? Replacement Cost New at time of sale (Less) Sale Price Equals ALL forms of Depreciation All you have to do now is figure out the amount of each type of depreciation 17

19 Depreciation Total Depreciation Best if you can analyze multiple sales of the same vintage Establishes the amount of depreciation incurred by age Allows for F.O. that may be occurring to be accounted for more accurately F.O. (if any) as a % of the total will increase as an asset ages. Allows for E.O. to accounted for more accurately. E.O. as a % of total depreciation my decrease as an asset ages. 18

20 Factors to Consider RCN at time of sale Direct Cost Indirect Cost Trend Factors Producers Price Index Marshall Valuation Service Life Expectancy OEM Discussion ASA Life Study Marshall Valuation Service 19

21 Example #1 Change of Ownership Wheel Loader 2018 Case 821G (2 hours) Cost: $228,000 (verified as a good average price) Researched with multiple regional dealers Asked for comps - mostly opinions of value Machinery Trader 2017 asking $185k (1 hour) 81% of RCN 2016 asking $185 (47 hours) 81% of RCN Ritchie Brothers 2017 (8 hours) sold on 2/20/2018 for $175k 77% of RCN 2017 (11 hours) sold on 5/23/2018 for $155k 68% of RCN 2016 (13 hours) sold on 2/20/2017 for $160k 70% of RCN 20

22 Example #2 Automotive Depreciation Analysis for 3 Asset Categories Stamping Presses Robots CNC Machines 21

23 Percentage of Replacement Cost Stamping Presses GB Data % Sales Percentage of Replacement Cost - Presses 90.00% 80.00% Assessor's Line Plot Line 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Age in Years 22

24 Percentage of Replacement Cost Robots GB Data % Sales Percentage of Replacement Cost - Robots 90.00% 80.00% Assessor's Line Plot Line 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Age in Years 23

25 Percentage of Replacement Cost CNC Machinery GB Data Sales Percentage of Replacement Cost - CNC Equipment % 90.00% 80.00% Assessor Line Plot Line 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Age in Years 24

26 Example #3 Heavy Haul Trailers Unique Asset Type Expensive Lack of Quality Market Information 25

27 Example #3 Heavy Haul Trailers OEM/Dealer/Liquidator Calls RCN Secondary market transactions Market conditions Market penetration Units sold Market data Competition Opinions of value 26

28 Heavy Haul Trailer 2014 Trail King Dual Lane Built in 2014 (~3.5 years old at time of sale) Sold in January 2018 $2.2MM 2018 RCN $1.7MM Sale Price (Fair Market Value) $500,000 in total depreciation 22% of RCN or roughly 6.5% per year (assuming 3.5 years old) 27

29 Heavy Haul Trailer 2010 Trail King Suspension Beam Built in 2010 (7+ years old at time of sale) Sold in March 2017 $3MM 2017 RCN $2MM Sale Price (Fair Market Value) $1MM in total depreciation 33% of RCN or roughly 6% per year (assuming 7 years old) 28

30 Heavy Haul Trailer 2007 Trail King Suspension Beam Built in 2007 Sold in Q ~8 years old $1.9MM 2014 RCN $975,000 Sale Price (Fair Market Value) $925,000 in total depreciation 49% of RCN or roughly 8% per year (assuming 8 years old) 29

31 Ag Study Recovery values of large tractors and combines Studied comparable sales from mid-1990s to present Supplied separate recovery curves for 1-, 2-, and 3-year old assets Provided an overlay of multiple economic indicators 30

32 CNC Equipment FLV Recovery as % Original Cost (Q12017 and based on last 2 years of data) Turning Centers and Small/Mid-Size Machining Centers China/Taiwan/S.Korea Current 65% EOY 1-45% EOY 2-40% EOY 3-35% EOY 4-30% EOY 5-25% Japanese/German Current 75% EOY 1-55% EOY 2-50% EOY 3-45% EOY 4-40% EOY 5-35% 31

33 Isolating Economic Obsolescence RCN (at time of sale) - the sale price = depreciation Physical Deterioration Functional Obsolescence Economic Obsolescence 32

34 Depreciation Analysis Isolating E.O. Physical Deterioration Methods of estimation Age/Life Method ratio of age to its life Effective Age/Physical Life = % of P.D. Use/Total Use ratio of use to its total expected use Use/Total Use = % of P.D. 33

35 Depreciation Analysis Functional Obsolescence Methods of estimation You may not be able to segregate obsolescence factors if you are dealing with an asset type that suffers from a high or varying levels of F. O. The inability to accurately quantify F.O. is the one of the main weaknesses of the extraction method. Excess Capital Method Excess Operating Expenses 34

36 Depreciation Analysis Economic Obsolescence Process of Elimination Total Depreciation (Less) P.D. Estimate (Less) F.O. Estimate* Economic Obsolescence 35

37 Example #4 The Data (24) Vertical Thermal Reactors (wafer processors for semiconductor manufacturing) New in 1996 Cost $797,000 each or $19,128,000 total Effective date of valuation August 1997 Still new and in the crate Problem: what are they worth? 36

38 Example #4 - continued Analysis Cost Approach Physical Deterioration None New and In Crate Functional Obsolescence OEM discussion No technological change, however Curable Customer specific requirements - $200,000 average cost to cure Curable Superadequacy Net of $203,248 Economic Obsolescence Unknown 37

39 Example #4 - continued Analysis of Market Transactions Market Research Called OEM Dealer calls End User calls Research Results 33 transactions identified in a 3-year period All during the economic downturn Hard to account for new and in the crate Conclusion of $175,000 38

40 Example #4 - continued Analysis of Actual Sales Customer had sold all (24) Vertical Thermal Reactors by mid Called OEM to understand curable F.O. ACTUALLY incurred Discussed transactions with seller Discussed transactions with buyers Reverse engineered the cost approach solving for E.O. $200,000 FMV value conclusion 39

41 Example #4 - continued Description: Sales Order #V19933 Replacement Cost New ("RCN") $797,680 (Less) Factors of Depreciation Physical Deterioration ("PD") Curable $0 Incurable $0 Total PD $0 RCN (Less) PD $797,680 Functional Obsolescence ("FO") Curable Reconfiguration Cost $230,000 Superadequacy of SMIF $203,248 Total Curable $433,248 Incurable $0 Total FO ($433,248) RCN (Less) PD and FO $364,432 External 20% of RCN (Less) PD 20% ($159,536) Value Indicated by the Cost Approach $204,896 VALUE CONCLUSION $204,896 40

42 Example #4 - Result Deposition of both experts Presentation of facts by attorneys Review of facts by judge Full dismissal of opposing appraisal Success for the client 41

43 Example #5 Food Processor Property Tax Dispute Beef slaughter facility Analyzed 300 comparable transactions Called OEMs to determine RCN estimates at time of sale Utilized age/life method to determine P.D. estimate Discussed F.O. with OEMs Isolated E.O. for each comparable (filled in the blank) Determined an E.O. curve by year Applied the E.O. % in the cost approach valuation model 42

44 Distressed Sales The difference between the RCN and the Sale Price includes all forms of depreciation PLUS a potential discount for the DURESS and/or a discount due to QUANTITY issues. Unless you know a lot of the details of the sale, it is difficult to estimate, unless you are analyzing a lot of sales and can determine an average. 43

45 Distressed Sales Recognize the facts and acknowledge the weaknesses of the analysis If you have enough data points use averages Find/verify comps where you have enough knowledge of the facts to isolate factors Make research calls to help with an educated decision 44

46 Fair Value Financial Reporting Economic Obsolescence Capacity Utilization Actual Performance Company specific Management specific Employee specific Market share specific Customer specific Equipment specific 45

47 Economic Obsolescence Fair Value Company is being sold May have been underperforming Strategic buyer New management New sales force CapX investment 46

48 E.O. Fair Value Must consider projections Capacity Utilization of the Industry Discuss with auditors Mothballed plant Over -utilized plant 47

49 ASA s 7 th Annual Equipment Valuation Conference Cost Approach and Sales Comparison Approach: A Closer Look at Depreciation THANK YOU!

Cornerstone 2 Basic Valuation of Machinery and Equipment

Cornerstone 2 Basic Valuation of Machinery and Equipment INSTITUTE FOR PROFESSIONALS IN TAXATION PERSONAL PROPERTY TAX SCHOOL Cornerstone 2 Basic Valuation of Machinery and Equipment Learning Objectives At the end of this section, the learner will be able to:

More information

How to Read a Real Estate Appraisal Report

How to Read a Real Estate Appraisal Report How to Read a Real Estate Appraisal Report Much of the private, corporate and public wealth of the world consists of real estate. The magnitude of this fundamental resource creates a need for informed

More information

Chapter 6: Auto and RV Dealership Asset Valuation (Equipment)

Chapter 6: Auto and RV Dealership Asset Valuation (Equipment) Chapter 6: Auto and RV Dealership Asset Valuation (Equipment) Knowing how much the dealership s furniture, fixtures and equipment are worth will determine the amount of goodwill that is being paid as part

More information

Proving Depreciation

Proving Depreciation Institute for Professionals in Taxation 40 th Annual Property Tax Symposium Tucson, Arizona Proving Depreciation Presentation Concepts and Content: Kathy G. Spletter, ASA Stancil & Co. Irving, Texas kathy.spletter@stancilco.com

More information

Table of Contents. Chapter 1: Introduction (Mobile Technology Evolution) 1

Table of Contents. Chapter 1: Introduction (Mobile Technology Evolution) 1 Chapter 1: Introduction (Mobile Technology Evolution) 1 I. WHY APPRAISAL IS IMPORTANT (p. 3) II. DEFINITION OF APPRAISAL (p. 4) A. Opinion (p. 4) B. Value (p. 5) C. Appraisal Art or Science? (p. 5) D.

More information

2016 Association of Accredited Small Business Consultants. All rights reserved.

2016 Association of Accredited Small Business Consultants. All rights reserved. BUSINESS VALUATION 2016 Association of Accredited Small Business Consultants. All rights reserved. This information is furnished with the understanding that the publisher is not engaged in rendering legal,

More information

THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330

THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330 THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330 REVIEW NOTES by CHUCK DUNN CHAPTER 19 Copyright 2010 by the Real Estate Division and Chuck Dunn. All rights reserved CHAPTER 19 - DEPRECIATION

More information

Preface Who Should Read This Book 3 Organization and Content 4 Acknowledgments 5 Contacting the Author 5 About the Author 6

Preface Who Should Read This Book 3 Organization and Content 4 Acknowledgments 5 Contacting the Author 5 About the Author 6 Preface.................................................................... 3 Who Should Read This Book 3 Organization and Content 4 Acknowledgments 5 Contacting the Author 5 About the Author 6...........................................................

More information

Real Estate Appraisal

Real Estate Appraisal Market Value Chapter 17 Real Estate Appraisal This presentation includes materials from Ling and Archer, 4 th edition, Real Estate Principles The highest price a property will bring if: Payment is made

More information

Collaborative Valuation: When Equipment and Real Estate Intersect

Collaborative Valuation: When Equipment and Real Estate Intersect Collaborative Valuation: When Equipment and Real Estate Intersect BY PARK R. JOHNSON, MBA, ASA, MRICS APPRAISERS SHARE VALUES It might be said within the valuation community what has long been remarked

More information

Broker. Basic Business Appraisal. Chapter 9. Copyright Gold Coast Schools 1

Broker. Basic Business Appraisal. Chapter 9. Copyright Gold Coast Schools 1 Broker Chapter 9 Basic Business Appraisal 1 Learning Objectives Describe the characteristics of the legal entities a business appraiser may encounter List at least 5 reasons for a business appraisal List

More information

THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330

THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330 THE APPRAISAL OF REAL ESTATE 3 RD CANADIAN EDITION BUSI 330 REVIEW NOTES by CHUCK DUNN CHAPTER 17 Copyright 2010 by the Real Estate Division and Chuck Dunn. All rights reserved CHAPTER 17- THE COST APPROACH

More information

Special Purpose Properties. Special Valuation Considerations

Special Purpose Properties. Special Valuation Considerations Special Purpose Properties Special Valuation Considerations 2017 Case Study in Ottawa: New Automobile Dealership Many brand-specific specialties Cost: $4,000,000 (including land and a developer fee) Sales

More information

A Demonstration Appraisal Report. Of a. Located at. Date of Appraisal. Prepared for. Prepared by

A Demonstration Appraisal Report. Of a. Located at. Date of Appraisal. Prepared for. Prepared by A Demonstration Appraisal Report Of a Located at Date of Appraisal Prepared for Prepared by International Association of Assessing Officers Professional Designation Subcommittee 314 West 10 th Street Kansas

More information

BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 9

BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 9 BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 9 1. Students should give a brief definition of each of the following terms and provide one example which illustrates how they are

More information

Sales Associate Course

Sales Associate Course Sales Associate Course Chapter Sixteen Appraisal 1 2 Appraiser Specific amount Impartial (non biased) Defendable Estimate (Opinion) of value Fee based on time and difficulty Must follow Uniform Standards

More information

Mass Appraisal of Income-Producing Properties

Mass Appraisal of Income-Producing Properties Chapter 10 Mass Appraisal of Income-Producing Properties Whether valuing income-producing property or residential property, you can use similar information and methods for collecting and analyzing data

More information

MODULE 7-A: APPRAISALS, BPOS AND USPAP

MODULE 7-A: APPRAISALS, BPOS AND USPAP MODULE 7-A: APPRAISALS, BPOS AND USPAP LEARNING OBJECTIVES One of the most challenging aspects of the real estate business is the development of prices or values of the rights to real estate. Buyers and

More information

Business Valuation More Art Than Science

Business Valuation More Art Than Science Business Valuation More Art Than Science One of the more difficult aspects of business planning is business valuation. It is also one of the more important aspects. While owners of closely held businesses

More information

Schedule. SECTION 1. Cost Approach Principles and Cost Estimation (Morning Day 1) Overview 8:00 8:30 Registration Classroom Rules and Procedures

Schedule. SECTION 1. Cost Approach Principles and Cost Estimation (Morning Day 1) Overview 8:00 8:30 Registration Classroom Rules and Procedures Schedule SECTION 1. Cost Approach Principles and Cost Estimation (Morning Day 1) Overview 8:00 8:30 Registration Classroom Rules and Procedures Introduction Cost Approach Pretest Part 1. Introduction to

More information

REAL ESTATE RENOVATION DECISIONS BASED ON COST APPROACH APPRAISING PRINCIPLES Real estate renovation decisions

REAL ESTATE RENOVATION DECISIONS BASED ON COST APPROACH APPRAISING PRINCIPLES Real estate renovation decisions REAL ESTATE RENOVATION DECISIONS BASED ON COST APPROACH APPRAISING PRINCIPLES Real estate renovation decisions I. PŠUNDER University of Maribor, Faculty of Civil Engineering, Maribor, Slovenia Durability

More information

Chapter 37. The Appraiser's Cost Approach INTRODUCTION

Chapter 37. The Appraiser's Cost Approach INTRODUCTION Chapter 37 The Appraiser's Cost Approach INTRODUCTION The cost approach for estimating current market value starts with the recognition that a parcel of real estate contains two components - the land and

More information

Distressed Properties, Vacancy Shortfall, and Entrepreneurial Incentive

Distressed Properties, Vacancy Shortfall, and Entrepreneurial Incentive Property Tax Valuation Insights Distressed Properties, Vacancy Shortfall, and Entrepreneurial Incentive Michelle DeLappe, Esq., and Andrew T. Robinson, MAI A commercial property that suffers from below-market

More information

Course Mass Appraisal Practices and Procedures

Course Mass Appraisal Practices and Procedures Course 331 - Mass Appraisal Practices and Procedures Course Description This course is designed to build on the subject matter covered in Course 300 Fundamentals of Mass Appraisal and prepare the student

More information

REAL PROPERTY VALUATION METHODS

REAL PROPERTY VALUATION METHODS REAL PROPERTY VALUATION METHODS Introduction Valuation of a property may be prepared by different methods. The appropriate application of a method of valuation depends on the nature of the property as

More information

Following is an example of an income and expense benchmark worksheet:

Following is an example of an income and expense benchmark worksheet: After analyzing income and expense information and establishing typical rents and expenses, apply benchmarks and base standards to the reappraisal area. Following is an example of an income and expense

More information

Broker. Sales Comparison, Cost Depreciation and Income Approaches. Chapter 7. Copyright Gold Coast Schools 1

Broker. Sales Comparison, Cost Depreciation and Income Approaches. Chapter 7. Copyright Gold Coast Schools 1 Broker Chapter 7 Sales Comparison, Cost Depreciation and Income Approaches 1 Learning Objectives Describe the assumptions underlying the sales comparison approach Calculate the various adjustments necessary

More information

Selling The Obsolescence Argument From the Appraiser s Prospective

Selling The Obsolescence Argument From the Appraiser s Prospective Selling The Obsolescence Argument From the Appraiser s Prospective John Ray Director American Appraisal Associates, Inc. Dallas, Texas (214) 459-6408 johnray@american-appraisal.com An independent third-party

More information

Appraisal Analysis. Presented by R. Lee Robinette, ASA

Appraisal Analysis. Presented by R. Lee Robinette, ASA Appraisal Analysis Presented by R. Lee Robinette, ASA OR Use of Material This and all accompanying slides contain materials which are the property of the Investment Recovery Association, 638 West 39th

More information

Typical Valuation Approaches and How to Deal With Them

Typical Valuation Approaches and How to Deal With Them Typical Valuation Approaches and How to Deal With Them January, 2018 Anthony F. DellaPelle, Esq., CRE Shareholder, McKirdy, Riskin, Olson & DellaPelle, P.C. Morristown, New Jersey Christian F. Torgrimson,

More information

Preface Table of Contents Chapter 1: Overview of the Liquor Store Industry... 13

Preface Table of Contents Chapter 1: Overview of the Liquor Store Industry... 13 Preface.................................................................... 3 Who Should Read This Book 3 Organization and Content 4 Chapter 4: Liquor Store Business Valuation 4 Acknowledgments 5 Contacting

More information

Fundamentals of Real Estate APPRAISAL. 10th Edition. William L. Ventolo, Jr. Martha R. Williams, JD

Fundamentals of Real Estate APPRAISAL. 10th Edition. William L. Ventolo, Jr. Martha R. Williams, JD A Fundamentals of Real Estate APPRAISAL 10th Edition William L. Ventolo, Jr. Martha R. Williams, JD Dennis S. Tosh, PhD William B. Rayburn, PhD, MAI, CFA Consulting Editors Dearb rri Real Estate Education

More information

California Real Estate License Exam Prep: Unlocking the DRE Salesperson and Broker Exam 4th Edition

California Real Estate License Exam Prep: Unlocking the DRE Salesperson and Broker Exam 4th Edition California Real Estate License Exam Prep: Unlocking the DRE Salesperson and Broker Exam 4th Edition ANSWER SHEET INSTRUCTIONS: The exam consists of multiple choice questions. Multiple choice questions

More information

Functional and Physical Obsolescence in Property Tax Strategies for Reducing Real and Business Personal Property Valuations

Functional and Physical Obsolescence in Property Tax Strategies for Reducing Real and Business Personal Property Valuations Presenting a live 110 minute teleconference with interactive Q&A Functional and Physical Obsolescence in Property Tax Strategies for Reducing Real and Business Personal Property Valuations THURSDAY, APRIL

More information

RESIDUAL ANALYSIS PRINCIPLES AND PROCEEDURES

RESIDUAL ANALYSIS PRINCIPLES AND PROCEEDURES RESIDUAL ANALYSIS PRINCIPLES AND PROCEEDURES OVERVIEW 1. Residual analysis or extractions, are a form of land valuation study. 2. This analysis relies on the improved sales (typically the largest group

More information

VALUATION CONSIDERATIONS AND METHODS FOR A PATENT VALUATION ANALYSIS

VALUATION CONSIDERATIONS AND METHODS FOR A PATENT VALUATION ANALYSIS Insights Autumn 2009 54 Intellectual Property Valuation Insights VALUATION CONSIDERATIONS AND METHODS FOR A PATENT VALUATION ANALYSIS C. Ryan Stewart In recent years, the value of patents and other intellectual

More information

Always Accurate, Always on Time

Always Accurate, Always on Time Always Accurate, Always on Time Clearing the Air: Going-Concern Valuation vs General Valuation Knowing When you Can be Better Served by a More In-depth Valuation Expert Jan, 2015 Clearing the Air: Going-Concern

More information

REAL ESTATE MARKET AND YOUR TAX

REAL ESTATE MARKET AND YOUR TAX REAL ESTATE MARKET AND YOUR TAX ASSESSMENT All of us Island property owners received our tax assessment notices from the County recently. As real estate agents we have been fielding many questions about

More information

Depreciation Analysis Guide

Depreciation Analysis Guide Market Value Assessment in Saskatchewan Handbook Depreciation Analysis Guide Saskatchewan Assessment Management Agency 2012 This document is a derivative work based upon a handbook entitled the "Market

More information

Rockwall CAD. Basics of. Appraising Property. For. Property Taxation

Rockwall CAD. Basics of. Appraising Property. For. Property Taxation Rockwall CAD Basics of Appraising Property For Property Taxation ROCKWALL CENTRAL APPRAISAL DISTRICT 841 Justin Rd. Rockwall, Texas 75087 972-771-2034 Fax 972-771-6871 Introduction Rockwall Central Appraisal

More information

2016 LANDU Course Descriptions. Agricultural Land Brokerage and Marketing

2016 LANDU Course Descriptions. Agricultural Land Brokerage and Marketing 2016 LANDU Course Descriptions Agricultural Land Brokerage and Marketing Gain an understanding of the basics of agricultural land brokerage process s well as insights on how to best market these types

More information

The Three Approaches to Value

The Three Approaches to Value Chapter 6 The Three Approaches to Value The appraiser considers three approaches to develop indications of value. These are: Cost approach; Sales comparison (market) approach; and Income approach. All

More information

A Demonstration Appraisal Report. Of a. Located at. Date of Appraisal. Prepared for. Prepared by

A Demonstration Appraisal Report. Of a. Located at. Date of Appraisal. Prepared for. Prepared by A Demonstration Appraisal Report Of a Located at Date of Appraisal Prepared for Prepared by International Association of Assessing Officers Professional Designation Subcommittee 314 W. 10 th Street Kansas

More information

CAMA System Depreciation. CAMA System Depreciation and Effective Age

CAMA System Depreciation. CAMA System Depreciation and Effective Age CAMA System Depreciation and Effective Age Edgar Clodfelter, VMPA NEMRC Sr. Appraiser ed@nemrc.com The goal of the Assessor is not cost, but market value. Cost is merely the avenue to market value Property

More information

procedures Basic Appraisal F i n a l Examination #2 2 nd edition

procedures Basic Appraisal F i n a l Examination #2 2 nd edition F i n a l Examination #2 A n s w e r Key Page 82 1. When determining effective gross income from potential gross income, an appraiser considers a. debt service. b. depreciation. c. fixed expenses. d. vacancy

More information

Part 1. Estimating Land Value Using a Land Residual Technique Based on Discounted Cash Flow Analysis

Part 1. Estimating Land Value Using a Land Residual Technique Based on Discounted Cash Flow Analysis Table of Contents Overview... v Seminar Schedule... ix SECTION 1 Part 1. Estimating Land Value Using a Land Residual Technique Based on Discounted Cash Flow Analysis Preview Part 1... 1 Land Residual Technique...

More information

2018 SCCAI RESIDENTIAL SYMPOSIUM USPAP OF THE FUTURE. Paula Konikoff, JD, MAI, AI GRS

2018 SCCAI RESIDENTIAL SYMPOSIUM USPAP OF THE FUTURE. Paula Konikoff, JD, MAI, AI GRS USPAP OF THE FUTURE Paula Konikoff, JD, MAI, AI GRS WHERE WE ARE NOW 2 Joint task force for Improvement of USPAP Appraisal Institute and Appraisal Foundation develop USPAP Optimization Concept 3 When unnecessary

More information

Basic Appraisal Procedures

Basic Appraisal Procedures Hondros Learning Basic Appraisal Procedures Timed Outline Topic Area Reference(s) Learning Objectives The student will be able to identify and/or apply: Teaching Method Time Segment (Minutes) Day 1 Chapter

More information

AI General Demonstration Grading Sheet

AI General Demonstration Grading Sheet AI General Demonstration Grading Sheet Traditional Report - Fundamental Market Analysis Option Account # Candidate Subject Property Address Grader Date Mailed to Grader Original Submission If original

More information

Week11, Chap 8 Accounting 1A, Financial Accounting

Week11, Chap 8 Accounting 1A, Financial Accounting Week11, Chap 8 Accounting 1A, Financial Accounting Reporting and Interpreting Property, Plant, and Equipment;Natural Resources; and Intangibles Instructor: Michael Booth Understanding The Business Insufficient

More information

2. The, and Act, also known as FIRREA, requires that states set standards for all appraisers.

2. The, and Act, also known as FIRREA, requires that states set standards for all appraisers. CHAPTER 4 SHORT-ANSWER QUESTIONS 1. An appraisal is an or of value. 2. The, and Act, also known as FIRREA, requires that states set standards for all appraisers. 3. Value in real estate is the "present

More information

ASSESSMENT METHODOLOGY

ASSESSMENT METHODOLOGY 2018 ASSESSMENT METHODOLOGY COST APPROACH A summary of the methods used by the City of Edmonton in determining the value of residential and non-residential properties valued using the cost approach in

More information

US Views on Valuation Methodology

US Views on Valuation Methodology US Views on Valuation Methodology Trevor R. Ellis, FAusIMM, CPG, CMA, CGA Mineral Property Valuer Ellis International Services, Inc. Denver, Colorado USA President American Institute of Minerals Appraisers

More information

Index of Examples. Chapter 1 Letter of Transmittal Chapter 2 General Assumptions and Limiting Conditions... 19

Index of Examples. Chapter 1 Letter of Transmittal Chapter 2 General Assumptions and Limiting Conditions... 19 Index of Examples Chapter 1 Letter of Transmittal... 1 Example 1A Detailed Letter of Transmittal... 2 Example 1B Detailed Letter of Transmittal with Risk Factors and Assumptions... 6 Example 1C Brief Letter

More information

State of Mexicali Ad Valorem Taxation of Property Statutes, Rules and Regulations

State of Mexicali Ad Valorem Taxation of Property Statutes, Rules and Regulations STATUTES CODE OF MEXICALI OF 2000, TITLE 50 REVENUE AND TAXATION, CHAPTER 7 AD VALOREM TAXATION OF PROPERTY Sec. 50-7-1. Legislative intent The intent and purpose of the tax laws of this state are to have

More information

Industrial and Commercial Real Estate Appraisal Procedures

Industrial and Commercial Real Estate Appraisal Procedures Property Valuation Thought Leadership Industrial and Commercial Real Estate Appraisal Procedures John C. Ramirez The application of the asset-based approach to business valuation often involves the appraisal

More information

ESOP Feasibility and Valuation Basics

ESOP Feasibility and Valuation Basics ESOP Feasibility and Valuation Basics Ohio Employee Ownership Center Akron/Fairlawn Hilton Fairlawn, Ohio April 21, 2006 Richard A. Schlueter rschlueter@comstockvaluation.com C VA 1 Levee Way, Suite 3109

More information

DETERMINING AGENCY VALUE PART 2

DETERMINING AGENCY VALUE PART 2 DETERMINING AGENCY VALUE PART 2 NORMALIZING THE INCOME STATEMENT By: Chuck Coyne, ASA This month we continue our discussion of how to determine an agency s value. Last month we briefly discussed some of

More information

Personal vs. Enterprise Goodwill: Where Are We and How Do I Deal With It? By: Gary R. Trugman CPA/ABV, MCBA, ASA, MVS

Personal vs. Enterprise Goodwill: Where Are We and How Do I Deal With It? By: Gary R. Trugman CPA/ABV, MCBA, ASA, MVS Personal vs. Enterprise Goodwill: Where Are We and How Do I Deal With It? By: Gary R. Trugman CPA/ABV, MCBA, ASA, MVS Speaker Biography Gary R. Trugman is the President of Trugman Valuation Associates,

More information

The capitalization rate is essential to any analysis through the income

The capitalization rate is essential to any analysis through the income FEATURES An Argument for Establishing a Standard Method of Capitalization Derivation by Eric T. Reenstierna, MAI The capitalization rate is essential to any analysis through the income capitalization approach.

More information

Appraisal Review Update: Trends and Best Practices for Lenders and Appraisers

Appraisal Review Update: Trends and Best Practices for Lenders and Appraisers Appraisal Review Update: Trends and Best Practices for Lenders and Appraisers Presenters: Eric Schwartz, MAI, SRA, AI-GRS Rob Moorman, MAI, SRA, AI-GRS AI Connect July 2016 Charlotte, N.C. 1 2 Meet the

More information

Residential Site Valuation and Cost Approach 2 nd Edition Hondros Learning Chapter Quiz and Work Problem Answer Key:

Residential Site Valuation and Cost Approach 2 nd Edition Hondros Learning Chapter Quiz and Work Problem Answer Key: Residential Site Valuation and Cost Approach 2 nd Edition Hondros Learning Chapter Quiz and Work Problem Answer Key: Chapter 1 Quiz 1. A parcel of land with on-site improvements (e.g., utilities) is best

More information

[PROPOSED REVISED] CHAPTER 16 LOS ANGELES COUNTY COURT RULES

[PROPOSED REVISED] CHAPTER 16 LOS ANGELES COUNTY COURT RULES [PROPOSED REVISED] CHAPTER 16 LOS ANGELES COUNTY COURT RULES Set forth below is a proposed complete revision of Chapter 16, Eminent Domain, of the Local Rules. September 30, 2009 Commissioner Bruce E.

More information

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax DECISION

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax DECISION IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax PETER METZGER, Plaintiff, v. CLATSOP COUNTY ASSESSOR, Defendant. TC-MD 120534D DECISION Plaintiff appeals the 2011-12 real market value of property

More information

FLORIDA BROKER PRELICENSE (FREC II) (V2)

FLORIDA BROKER PRELICENSE (FREC II) (V2) FLORIDA BROKER PRELICENSE (FREC II) (V2) TIME CONTENT OUTLINE LEARNING OBJECTIVES -- After this segment, the Licensing 7 hours 45 mins. License Law and Rules 1 explain the purpose of the license law describe

More information

Presentation to The New England Graduate Accounting Studies Conference June 18, 2014 Roger Winsby, President Axiom Valuation Solutions

Presentation to The New England Graduate Accounting Studies Conference June 18, 2014 Roger Winsby, President Axiom Valuation Solutions Current Developments in Business Valuation Presentation to The New England Graduate Accounting Studies Conference June 18, 2014 Roger Winsby, President Axiom Valuation Solutions Roger M. Winsby President

More information

Training the Next Generation of Appraisers The S.T.A.R.T. Program - Standards to Assure Responsible Training:

Training the Next Generation of Appraisers The S.T.A.R.T. Program - Standards to Assure Responsible Training: Training the Next Generation of Appraisers The S.T.A.R.T. Program - Standards to Assure Responsible Training: An Industry Solution to the Declining Number of Appraisers Entering the Profession and Practical

More information

Tangible Personal Property Summation Valuation Procedures

Tangible Personal Property Summation Valuation Procedures Property Tax Valuation Insights Tangible Personal Property Summation Valuation Procedures Robert F. Reilly, CPA For ad valorem property taxation purposes, industrial and commercial taxpayer tangible personal

More information

Land / Site Valuation A Basic Review. Leslie G. Pruitt Certified General Appraiser

Land / Site Valuation A Basic Review. Leslie G. Pruitt Certified General Appraiser Land / Site Valuation A Basic Review Leslie G. Pruitt Certified General Appraiser Whose is the land, it is to the sky and the depth Whose is the land, it is to the sky and the depth This ancient maxim

More information

Comment Letter 16 from the National Association of Romanian Valuers, ANEVAR

Comment Letter 16 from the National Association of Romanian Valuers, ANEVAR Comment Letter 16 from the National Association of Romanian Valuers, ANEVAR Comments on the Exposure Draft Proposed New International Valuation Standards, published June 2010 Email: CommentLetters@ivsc.org

More information

Chapter 7. Valuation Using the Sales Comparison and Cost Approaches. Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 7. Valuation Using the Sales Comparison and Cost Approaches. Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 Valuation Using the Sales Comparison and Cost Approaches McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Decision Making in Commercial Real Estate Centers

More information

Financing a farm can be a challenge. It is one thing to dream of farming, quite another to make it a reality. It is important to be realistic in

Financing a farm can be a challenge. It is one thing to dream of farming, quite another to make it a reality. It is important to be realistic in Financing a farm can be a challenge. It is one thing to dream of farming, quite another to make it a reality. It is important to be realistic in thinking about farm investments. In this segment, we ll

More information

* Are the Public and Private Capital Markets Worlds Apart? M. Mark Walker, PhD, CFA, CBA

* Are the Public and Private Capital Markets Worlds Apart? M. Mark Walker, PhD, CFA, CBA WINTER 2007/2008 THE INSTITUTE OF BUSINESS APPRAISERS, INC. Business Appraisal Practice In this Issue Editor's Column - Does a Historical Average, Weighted or Otherwise, Constitute an Income Forecast?

More information

Purchase Price Allocations ASC 805 Business Combinations

Purchase Price Allocations ASC 805 Business Combinations Purchase Price Allocations Introduction Mergers, acquisitions, and other business transactions have numerous accounting and tax implications. Buyers generally identify and report the fair values of the

More information

GENERAL ASSESSMENT DEFINITIONS

GENERAL ASSESSMENT DEFINITIONS 21st Century Appraisals, Inc. GENERAL ASSESSMENT DEFINITIONS Ad Valorem tax. A tax levied in proportion to the value of the thing(s) being taxed. Exclusive of exemptions, use-value assessment laws, and

More information

Uniform Residential Appraisal Report (URAR) Model Appraisal

Uniform Residential Appraisal Report (URAR) Model Appraisal Basic Appraisal Procedures Residential Applications & Model Appraisals 15-13 Uniform Residential Appraisal Report (URAR) Model Appraisal On the following pages are examples of a completed Fannie Mae/Freddie

More information

Chapter 13. The Market Approach to Value

Chapter 13. The Market Approach to Value Chapter 13 The Market Approach to Value 11/22/2005 FIN4777 - Special Topics in Real Estate - Professor Rui Yao 1 Introduction Definition: An approach to estimating market value of a subject property by

More information

Before Class starts.(make sure your name is on all submissions)

Before Class starts.(make sure your name is on all submissions) Before Class starts.(make sure your name is on all submissions) Fourth Homework due 10/27(MW) or 10/28(TR) before class. No exceptions. Help session 10/26 1:00-3:30pm in GBS130 Fifth Homework due 11/3(MW)

More information

Math Relating to Real Property Appraisals

Math Relating to Real Property Appraisals 1. Sales Comparison Approach Math Relating to Real Property Appraisals A. If the comparable property is superior in a feature, you subtract value from the comparable. Example: Comp #l has a 1-car garage

More information

3 things about Livingstone s Guide to Business Valuation

3 things about Livingstone s Guide to Business Valuation Book Information 3 things about Livingstone s Guide to Business Valuation 1. Designed to provide an introduction for students not experienced with the subject 2. Also serves as a refresher for those familiar

More information

Hybrid Appraisal Reports AND THE DATA THAT SUPPORTS THEM

Hybrid Appraisal Reports AND THE DATA THAT SUPPORTS THEM Hybrid Appraisal Reports AND THE DATA THAT SUPPORTS THEM Introduction DataMaster is a tool built by appraisers for appraisers, to move data more efficiently from your MLS and public records. Eliminating

More information

VALUATION AND APPRAISAL SERVICES

VALUATION AND APPRAISAL SERVICES VALUATION AND APPRAISAL SERVICES The Right Answer for Insurable Values Are you getting the right advice to complete your statement of value for insurance placement? A well-advised Statement of Value for

More information

Classify and describe basic forms of real estate investments.

Classify and describe basic forms of real estate investments. LOS 43.a 2017 CFA Exam SS 15 Classify and describe basic forms of real estate investments. Card 1 of 52 LOS 43.a There are four basic forms of real estate investment; private equity (direct ownership),

More information

Question #4 Which of the following is NOT one of the three categories used to identify an appraiser certified general appraiser licensed appraiser cer

Question #4 Which of the following is NOT one of the three categories used to identify an appraiser certified general appraiser licensed appraiser cer PRACTICE TEST Question #1 The following are the four major influences on interest rates EXCEPT... fiscal policies of the NAR demand for money monetary policies of the Federal Reserve supply of money Question

More information

Direct Capital Value Comparison (Sales Comparison Approach)

Direct Capital Value Comparison (Sales Comparison Approach) 1. Introduction: It is the commonly used method and most accurate It is frequently used in the valuation of residential property for sale purpose and rental valuation for commercial properties. Require

More information

BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 10

BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 10 BUSI 330 Suggested Answers to Review and Discussion Questions: Lesson 10 1. The client should give you a copy of their income and expense statements for the last 3 years showing their rental income by

More information

Examples of Quantitative Support Methods from Real World Appraisals

Examples of Quantitative Support Methods from Real World Appraisals Examples of Quantitative Support Methods from Real World Appraisals Jeffrey A. Johnson, MAI Integra Realty Resources Minneapolis / St. Paul Tony Lesicka, MAI Central Bank 1 Overview of Presentation EXAMPLES

More information

(ii) Particulars of land sales used: Date of sale Sale price** Address of property Land sales not used in analysis with reason code** (iii) (iv)

(ii) Particulars of land sales used: Date of sale Sale price** Address of property Land sales not used in analysis with reason code** (iii) (iv) Issue by Methodology Documents, Studies or Information Subject to Disclosure Party Responsible and Timing of Disclosure 1 COST APPROACH (a) Land Value Particulars relating to land value by market area

More information

2015 Member Profile Florida REALTORS Report

2015 Member Profile Florida REALTORS Report 2015 Member Profile REALTORS Report Prepared for: REALTORS Prepared by: NATIONAL ASSOCIATION OF REALTORS Research Division July 2015 2015 Member Profile Report Table of Contents Introduction... 2 Highlights...

More information

Appraisal Review: Analyzing the 1004

Appraisal Review: Analyzing the 1004 Appraisal Review: Analyzing the 1004 1 LIVE ONLINE PARTICIPANT GUIDE Version: 8.12 Table of Contents The Purpose of the Appraisal... 3 Define Market Value... 3 Scenario 1 (John Johnson report) - 1004 Uniform

More information

A winning game plan for industrial property tax appeals

A winning game plan for industrial property tax appeals A winning game plan for industrial property tax appeals Wade E. Norwood, Esq. Principal Law Offices of Wade E. Norwood Pasadena, California (626) 796-5100 wade@calpropertytax.com Tim M. Landolt, ASA, MBA

More information

UNIFORM APPRAISAL DATASET (UAD) FHA SPOTLIGHT - SELECTION AND VERIFICATION OF COMPARABLE SALES

UNIFORM APPRAISAL DATASET (UAD) FHA SPOTLIGHT - SELECTION AND VERIFICATION OF COMPARABLE SALES Spring 2011 Issue 3 FHA APPRAISER In This Issue: Welcome to the third issue of the Federal Housing Administration Appraiser Roster Newsletter. We hope you will find it informative. Uniform Appraisal Dataset

More information

Risk Management Insights

Risk Management Insights Risk Management Insights Appraisal Review Part II: Income Capitalization Approach George Mann, Managing Director and Chief Appraiser, Collateral Evaluation Services, Inc.and Nikki Griffith, MAI, CCIM,

More information

Who s Afraid of the Big, Bad Cost Approach? William D. Shepherd General Counsel Hillsborough County Property Appraiser

Who s Afraid of the Big, Bad Cost Approach? William D. Shepherd General Counsel Hillsborough County Property Appraiser Who s Afraid of the Big, Bad Cost Approach? William D. Shepherd General Counsel Hillsborough County Property Appraiser 1 Cost Approach? Eww!! 2 3 Reasons for the Cost Approach s Bad Reputation: Poor job

More information

DALLAS CENTRAL APPRAISAL DISTRICT DCAD VALUATION PROCESSES

DALLAS CENTRAL APPRAISAL DISTRICT DCAD VALUATION PROCESSES DALLAS CENTRAL APPRAISAL DISTRICT DCAD VALUATION PROCESSES DALLAS CENTRAL APPRAISAL DISTRICT DCAD DCAD appraisers appraise a large universe of properties by developing appraisal models DCAD appraisers

More information

VALUE FINDING APPRAISAL REPORT

VALUE FINDING APPRAISAL REPORT RE 90 Rev. 01-2014 VALUE FINDING APPRAISAL REPORT (Compensation not to exceed $65,000) COUNTY John Doe 2880 Lancaster-Newark Rd. (SR 37), Pleasant Twp., 43030 Owner Mailing Address of Owner East side of

More information

What is an Appraisal? Equity Valuations and Consulting Services Ltd.

What is an Appraisal? Equity Valuations and Consulting Services Ltd. What is an Appraisal? Equity Valuations and Consulting Services Ltd. Reid Umlah AACI designation since 1993 Principal of Equity Valuations and Consulting Services Ltd. Experience with First Nations Lands

More information

Property Tax and Real Estate Appraisal Services

Property Tax and Real Estate Appraisal Services Property Tax and Real Estate Appraisal Services Appraisers/Consultants Micheal R. Lohmeier, ASA, MAI Certified General Real Estate Appraiser Direct: 248.368.8873 E: MLohmeier@virchowkrause.com Micheal

More information

Appraisal Theory In Practice

Appraisal Theory In Practice 2013 Great Minds Symposium Appraisal Theory In Practice Demonstration report: Guideposts for Best practices Back to the land: Land and agricultural valuation Depreciation analysis: A hands-on workshop

More information

UNDERSTANDING HOW USPAP APPLIES TO REAL PROPERTY APPRAISAL PRACTICE USPAP Matrix

UNDERSTANDING HOW USPAP APPLIES TO REAL PROPERTY APPRAISAL PRACTICE USPAP Matrix UNDERSTANDING HOW USPAP APPLIES TO REAL PROPERTY APPRAISAL PRACTICE - 2014-2015 USPAP Matrix This matrix assumes an Appraisal Report Format under S. R. 2-2(a). *Last updated 9/11/14* GENERAL Violation

More information