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Understanding Real Estate Value: Methods, Importance, and Insights

This presentation by Mark Farrell & Associates delves into the significance of property valuation, highlighting various types of value including market, liquidation, and insurance. It addresses different perspectives on property value, such as those of owners, buyers, and assessors. The methodology of valuation is explained, focusing on approaches like sales comparison, cost, and income analysis. Understanding the importance of accurate valuation can aid in financial decisions, investing, and property transactions. Join us in exploring the multifaceted nature of real estate value.

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Understanding Real Estate Value: Methods, Importance, and Insights

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Presentation Transcript

  1. Why Value? Valuations, Methods, Importance Presented by: Mark Farrell G.A. Farrell & Associates Limited

  2. Why Value? • The First Question is - • The Value of What? • Real Estate

  3. Why Value? • Several Different Types of Value • Several Different Standpoints • e.g. your Home

  4. Value As Seen By - Yourself

  5. Value As Seen By - Buyer

  6. Value As Seen By - Bank

  7. Value As Seen By - Valuer

  8. Value As Seen By – Tax Assessor

  9. Assessed Value

  10. Going-Concern Value

  11. Insurance Value

  12. Liquidation Value, Salvage Value • MARKET VALUE

  13. Market Value • The estimated amount for which a property should exchange on the date of valuation – • between a willing buyer and a willing seller • in an arm’s-length transaction • after proper marketing

  14. Market Value • Wherein the parties had each acted • knowledgeably • prudently and • without compulsion

  15. Valuation Methodology • How do Valuers arrive at Value? • Most Common - • Sales Comparison Approach

  16. Sales Comparison Approach

  17. Sales Comparison Approach • Often hear comments like: • Market Is Inflated • Actual Costs Are Less • It Is NOT Real Value

  18. Sales Comparison Approach

  19. Cost Approach

  20. Cost Approach • Used For Special-Purpose Properties – • (Brewery, Church, Hospital) • In other Words, Properties that do not sell often • Replacement Cost less Depreciation

  21. Is Building Adequately Insured? • Construction costs increasing again • Imperative to check building Insurance • Failure = Financial Hardship

  22. Are Buildings Adequately Insured? • Sum Insured (S.I.) $1,000,000 • Current Replacement Cost $1,500,000 • Damage $600,000 • Percentage of CRC 40% • Insurance Proceeds $400,000 • Shortfall $200,000

  23. Income Approach

  24. Income Approach • Who is a Typical Buyer? • An Investor • What is Primary Concern? • INCOME!

  25. Income Approach • Not Primarily Concerned With - • Cost of Building a Substitute • Selling Price of a Substitute • Significant Differences in Commercial Properties • Rent less Expenses • Convert into Value

  26. Valuation Methodology • Important Ingredients: • Analytical Skills • Objectivity & Impartiality • INFORMATION!

  27. Why Value? • What is Importance of Value? • Bank – In case of Default • Insurance Company - In case of Damage • You - In case of Purchasing / Selling

  28. Why Value? • What is Importance of Value? • Investors - In case of Measuring Return • Values Change Over Time

  29. Price Movements 1973-2013

  30. Achieving Success • Research shows to achieve Success – • Need Proper Mentor. • Some people choose – • Intelligent people • Good-looking people • Sporting or singing stars.

  31. Achieving Success • Choice affects chances of success! • Psychologists have designed several tests and quizzes • Contain numbers and personalities • Actually shows chances of Success • Allow me to try on of the quizzes and we will see if it is of benefit to you, ok? • Remember however, I am NOT a Psychologist!

  32. Achieving Success: • Pick a number from 1-9......... • Times this number by 3......... • Then add 3............... ......... • Then times by 3 again........... • You should have a two digit number.... • Add these two numbers together..... • You then should be left with a single digit number which will tell you who your all time FAVORITE PERSON is....

  33. That is… • George Clooney • President Obama  • Bob Marley • Russell Latapy • Dwight Yorke • Nelson Mandela • John Lennon • Brian Lara • Mark Farrell • Mighty Sparrow

  34. THANK YOU! ANY QUESTIONS?

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