Thursday February 26, 2026 Class #10

OAKLAND EXCHANGE

VIDEO

Thursday February 19, 2026 Class #9

CHAPTER 5

Download Student Handout for Class

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You can tell beginners that every appraisal answers 7 core questions:

Who hired me? → Client
Who will use it? → Intended Users
Why is it needed? → Intended Use
What kind of value? → Type & Definition
Value as of when? → Effective Date
What am I valuing? → Property Characteristics
Any special rules? → Assignment Conditions

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1️⃣ The Client

Definition:
The client is the person or company that hires the appraiser and pays for the appraisal.

Simple Explanation:
Think of the client as the “customer” who asks the appraiser to figure out what a property is worth.

Examples:

A bank ordering an appraisal for a mortgage
A buyer hiring an appraiser before purchasing
An attorney needing a value for court

👉 Only the client can authorize changes to the assignment.

2️⃣ Intended Users of the Report

Definition:
The intended users are the people the appraiser expects will rely on the appraisal results.

Simple Explanation:
These are the people allowed to use the appraisal to make decisions.

Examples:

The lender
The borrower
A government agency
An investor group

⚠️ Important teaching point:
Not everyone who reads the report is an intended user.

3️⃣ Intended Use of the Report

Definition:
The intended use explains why the appraisal is being done.

Simple Explanation:
It answers the question:
👉 “What decision will this appraisal help someone make?”

Common Intended Uses:

Mortgage lending
Estate planning
Property tax appeal
Divorce settlement
Investment analysis

📌 The intended use affects:

Scope of work
Report format
Level of analysis

4️⃣ Type and Definition of Value (with Source)

Definition:
This tells us what kind of value the appraiser is estimating and provides the official definition from a recognized source.

Simple Explanation:
Value is not just one thing — there are different kinds depending on the situation.

Common Types of Value

Market Value – most common
Investment Value
Insurable Value
Liquidation Value
Use Value

Example (Market Value Definition Source)

Usually taken from:

Federal banking regulations
Fannie Mae
Freddie Mac
USPAP recognized sources

Student Example:
Market value = what a typical buyer would likely pay under normal conditions.

5️⃣ Effective Date of the Opinion of Value

Definition:
The effective date is the specific date the value opinion applies to — not necessarily when the report was written.

Simple Explanation:
Value changes over time, so we must say:
👉 “What was the property worth on THIS date?”

Types of Effective Dates

Current date (inspection date)
Retrospective date (past)
Prospective date (future)

Example:
An estate appraisal might use a value as of the owner’s date of death.

6️⃣ Relevant Characteristics of the Property

Definition:
These are the physical, legal, and economic features that affect value.

Simple Explanation:
Everything about the property that makes it worth more or less.

Key Characteristics

Physical

Size, age, condition
Bedrooms/bathrooms
Construction quality

Legal

Zoning
Easements
Deed restrictions

Economic

Income potential
Lease terms
Market area

Since you teach valuation, you can tell students:
👉 This is where Highest and Best Use begins.

7️⃣ Assignment Conditions

(Extraordinary Assumptions & Hypothetical Conditions)

These are special rules or situations that affect how the appraisal is done.

✔️ Extraordinary Assumption

Definition:
An assumption that is believed to be true but is not fully verified.

Simple Explanation:
The appraiser says:
👉 “I’m assuming this is true — but if it turns out wrong, the value could change.”

Example:

Assuming no environmental contamination exists
Assuming square footage from plans is accurate

✔️ Hypothetical Condition

Definition:
A condition that is known to be false but is used for analysis purposes.

Simple Explanation:
The appraiser pretends something is true to answer a “what if” question.

Example:

Valuing a property as if renovated
Valuing land as if rezoned

⚠️ Important teaching note:
Hypothetical conditions must be clearly disclosed.

You can tell beginners that every appraisal answers 7 core questions:

Who hired me? → Client
Who will use it? → Intended Users
Why is it needed? → Intended Use
What kind of value? → Type & Definition
Value as of when? → Effective Date
What am I valuing? → Property Characteristics
Any special rules? → Assignment Conditions

Tuesday February 17, 2026 Class #8

FINDING REAL ESTATE DATA

ADDRESS: 1192 Arlington Ave Sw, Atlanta, GA 30310

DATABASES

Thursday February 12, 2026 Class #7

Finding General Market Data

SOURCES

Private Companies: (CBRE, JLL, Collier)
Public Entities: (ARC, Cities, County, State)
Search Engines: Google
AI: ChatGBT

1. Regional Market Overview (Macro Market Analysis)

Purpose of Analysis

This section summarizes regional economic and demographic trends that influence demand for the subject property and supports the appraiser’s Highest and Best Use and marketability conclusions.

Geographic Definition

The regional market area is defined as:
[Metropolitan Area / County / Economic Region]

Economic Overview

Major employment sectors: [List key industries]
Recent job growth trends: [Upward / Stable / Declining]
Infrastructure or development drivers: [Transportation, airport, universities, etc.]
Interest rate and capital market influences (if applicable)

Analysis Commentary:

Explain how population change affects demand for the property type.

2. Demographic Trends Relevant to Property Type

Age Distribution (When Relevant)

% population age groups
Trends supporting housing, retail, or senior living demand

Household Characteristics

Household size trends
Owner vs renter ratios
Housing affordability indicators

Income Levels

Income Range	% of Households
<$50,000
$50,000–$100,000
$100,000+

USPAP Note:
Demographic data is analyzed strictly for market demand and economic characteristics and is not intended to identify or evaluate protected classes.

3. Subject Submarket / Neighborhood Analysis (Micro Market)

Submarket Definition

The subject neighborhood is defined as:
[Radius, ZIP codes, Planning District, or Natural Boundaries]

Land Use Patterns

Predominant property types
Zoning patterns
Development density trends
Redevelopment activity

Market Activity Indicators

Indicator
Median Sale Price
Rent Levels
Vacancy Rate
Absorption Rate

Competitive Supply

Active developments
Pipeline projects
Barriers to entry

4. Market Demand Drivers

Describe the factors influencing demand:

Population growth
Employment nodes
Transportation access
School or institutional presence
Retail or amenity clusters

Explain how these factors influence value — not just descriptive statistics.

5. Exposure Time & Marketing Considerations

Based on market data:

Typical marketing period: [X months]
Buyer/tenant pool characteristics
Liquidity of the market segment

6. Highest & Best Use Market Support

Summarize how regional and neighborhood data supports:

Current use
Alternative uses
Development feasibility
Risk factors

Example language:

Population growth and income levels within the defined submarket support continued demand for [property type], which contributes to the conclusion that the current/improved use represents the highest and best use as of the effective date.

7. Data Sources

U.S. Census / American Community Survey
Local Planning Department
Brokerage Market Reports
MLS / CoStar / Real Capital Analytics
Field Observation

Homework for Tuesday February 17, 2026

Read Appraisal Textbook - Chapters 5 - 8: 42 pages

Tuesday February 10, 2026 Class #6

TODAY'S SUBJECT - CHAPTER #4

EXAMPLE OF PROFESSOR'S SISTRUNK APPRAISALS

Homework for Tuesday February 10, 2026

Read Appraisal Textbook - Chapters 5 - 8: 42 pages

Thursday February 5, 2025 - Class #6

TODAY

CHAPTER 3

Chapter 3 – The Nature of Value

History of Value Theory

Covers physiocrats, classical economists, marginal utility, and neoclassical synthesis.

1. Physiocrats (Physiocratic Economics)

Definition:
The physiocrats were 18th-century French economists who believed that land is the primary source of all wealth and that economic value ultimately flows from agricultural production.

Explanation in Real Estate Context:
Physiocrats viewed land as the fundamental productive asset in the economy. They argued that while labor and capital are important, only land produces a true “net surplus.” This idea strongly influenced early real estate valuation by establishing land as the foundation of economic value.

In appraisal terms, physiocratic thought supports:

The concept that land has inherent economic significance
The separation of land value from improvement value
The importance of highest and best use of land

Although modern appraisal no longer treats agriculture as the sole source of wealth, the physiocrats’ emphasis on land as a scarce, essential resource remains central to real estate economics.

2. Classical Economists (Classical Economics)

Definition:
Classical economists, such as Adam Smith, David Ricardo, and John Stuart Mill, argued that value is primarily derived from the cost of production, including land, labor, and capital.

Explanation in Real Estate Context:
Classical theory introduced the idea that the value of real estate improvements is related to the cost to create them. This thinking forms the intellectual foundation of the cost approach in appraisal.

Key real estate implications include:

Land + labor + capital = real estate value
Rent as a residual return attributable to land (Ricardo)
Recognition that production costs influence market prices over time

In appraisal practice:

If it costs more to build than the market will pay, development will slow
If market prices exceed costs, development increases

Classical economics explains why replacement and reproduction cost matter in valuation, even though cost does not always equal market value.

3. Marginal Utility (Marginal Utility Theory)

Definition:
Marginal utility theory holds that value is determined by the usefulness of the last (marginal) unit of a good or service to the buyer, rather than by its cost of production.

Explanation in Real Estate Context:
In real estate, marginal utility explains why additional features or improvements do not always increase value proportionally. Buyers pay based on perceived benefit, not construction cost.

Examples in appraisal:

A fifth bathroom may add little value compared to the fourth
An oversized luxury upgrade in a modest neighborhood may not be fully valued
Excess square footage beyond market norms yields diminishing returns

This theory directly supports:

The principle of contribution
The concept of functional obsolescence
Market-based adjustment decisions in the sales comparison approach

Marginal utility shifts the focus from “what it cost” to “what buyers are willing to pay.”

4. Neoclassical Synthesis (Neoclassical Economics)

Definition:
The neoclassical synthesis combines classical cost-based theory with marginal utility and demand-based theory, recognizing that value is determined by the interaction of supply and demand over time.

Explanation in Real Estate Context:
Neoclassical economics provides the theoretical foundation of modern appraisal practice. It recognizes that:

Cost influences supply
Utility and demand influence price
Value reflects the balance between production costs and market demand

This synthesis explains why appraisers use three approaches to value:

Cost Approach – rooted in classical economics
Sales Comparison Approach – rooted in marginal utility and substitution
Income Capitalization Approach – grounded in expectations of future benefits

Neoclassical theory also supports:

Market equilibrium concepts
Capitalization of income
Anticipation of future benefits

In short, modern appraisal theory is neoclassical applied economics.

Agents of Production

Land, labor, capital, and entrepreneurial coordination.

Factors of Value

Utility, scarcity, desire, and effective purchasing power.

Key Appraisal Principles

Anticipation, change, substitution, balance, competition, supply and demand.

1. Anticipation

Definition:
Anticipation is the principle that real estate value is created by the expectation of future benefits, not by past costs or historical prices.

Real Estate Explanation:
Buyers and investors purchase property based on what they expect the property will provide in the future—such as rental income, appreciation, utility, or lifestyle benefits. A property’s current value reflects these expectations, not what it cost to build or what it sold for previously.

Appraisal Implications:

Basis of the income capitalization approach
Explains why zoning changes, new infrastructure, or neighborhood trends affect value
Reinforces that appraisals are valid as of a specific date

2. Change

Definition:
Change recognizes that real estate markets are dynamic and that property values are constantly influenced by social, economic, governmental, and environmental forces.

Real Estate Explanation:
No property or neighborhood remains static. Changes in demographics, interest rates, land use regulations, technology, or economic conditions continuously affect property demand and value.

Appraisal Implications:

Explains depreciation and obsolescence
Requires appraisers to analyze market trends
Supports time adjustments in comparable sales
Reinforces the concept of effective date of value

3. Substitution

Definition:
The principle of substitution states that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute, assuming no undue delay.

Real Estate Explanation:
If multiple similar properties are available, buyers will choose the one with the lowest price that provides comparable utility. This principle governs buyer behavior in both owner-occupied and investment markets.

Appraisal Implications:

Foundation of the sales comparison approach
Basis of the cost approach
Explains price ceilings in real estate markets
Supports adjustment logic for comparable sales

4. Balance

Definition:
Balance holds that real estate value is maximized when land and improvements are in proper proportion and when all elements of a property are in economic equilibrium.

Real Estate Explanation:
A property is most valuable when its size, quality, and design match market demand and site characteristics. Over-improvement or under-improvement reduces value.

Appraisal Implications:

Explains diminishing returns
Helps identify overbuilt properties
Supports highest and best use analysis
Guides improvement decisions

5. Competition

Definition:
Competition refers to the interaction among buyers, sellers, landlords, and tenants as they seek to maximize returns or utility in the marketplace.

Real Estate Explanation:
Properties compete with one another for buyers and tenants. When profits are high, competition increases; when markets are oversupplied, values and rents decline.

Appraisal Implications:

Influences vacancy rates and rent levels
Affects income projections
Explains market cycles
Essential in market area and competitive supply analysis

6. Supply and Demand

Definition:
The principle of supply and demand states that real estate value varies directly with demand and inversely with supply, although not always proportionally.

Real Estate Explanation:
When demand increases faster than supply, prices rise. When supply exceeds demand, prices decline. Because real estate supply is slow to adjust, values are often strongly influenced by short-term demand changes.

Appraisal Implications:

Drives market value conclusions
Influences absorption rates
Critical to feasibility and highest and best use analysis
Explains price volatility in active markets

Tuesday February 3, 2026 - Class #5

SUBJECT TODAY

TEXTBOOK CHAPTERS 1 & 2

Chapter 1 – Introduction to Appraisal

Purpose of Appraisal

Defines appraisal as a professional, unbiased opinion of value. Distinguishes appraisal from informal price opinions by brokers, developers, or owners.

Role of the Appraiser

Explains licensing, certification, ethics, and competency. Emphasizes independence, objectivity, and adherence to USPAP and professional standards.

Why Appraisals Are Needed

Used in lending, litigation, taxation, eminent domain, estate planning, and investment decision-making.

Types of Value

Introduces market value, use value, investment value, insurable value, assessed value, and fair value.

Chapter 2 – Land, Real Estate, and Ownership of Real Property

Land vs. Real Estate vs. Real Property

Clarifies that appraisers value rights and interests, not physical land alone.

Bundle of Rights

Explains ownership rights such as use, exclusion, transfer, and enjoyment.

Public Restrictions

Taxation, eminent domain, police power, and escheat.

Private Restrictions

Easements, covenants, deed restrictions, and encumbrances.

Forms of Ownership

Private vs public ownership and various ownership structures.

Class Powerpoint

Continue Reading Main Textbook,

Next Class Chapters 3 and 4.