The Appraisal Process I. Definition of the Assignment a.

Identify Real Estate (Know exactly what property is to be appraised, Location, Identification of the asset, Legal Description) b. Identify property rights (Rights of ownership/control, Bundle of rights, restriction of ownershiptaxation; eminent domain; escheat; police power. Legal private agreementslimitation of use; easements; right of ways; and party wall agreement) c. Use of the valuation (sale, Information for financial reporting, mortgage, merger acquisition or stock offering, taxation, trust or succession plan, divorce settlement, litigation, insurance plan) d. Define value (Market Value, Other Market value) e. Date of value (date which the value estimate will apply, and the date of the intended report) f. Scope of the assignment (research, data, reasoning, analysis and conclusion) g. Other limiting condition (constrains imposed on valuation by client: appraiser or local statutes) Preliminary Data Analysis and Data Selection and Collection a.1 General Economic Data (Regional, city and neighborhood) Social Economic Governmental Environmental a.2 Property Specific Data (Subject and Comparable Data) Cost and Depreciation Income and Expense Capitalization Rate, Yield Rate History of ownership Use of property (utilization histories)

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a.3 Competitive Supply and demand (The Subject Market) Inventory and competitive properties (new properties to be built, existing properties to be adapted) Sales and listings vacancies and offerings (market trends) Demand studies Absorption rate

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Highest and Best Use (Physically possible, legally permissible, appropriately justified, financially feasible) Significant differences on how properties can be used, optimal utility Land as though vacant Property as improved Specified in terms of use, time and market participants Land Value Estimate Analytical Methodologies depends (Market price for asset type, Quality and quantity of available data) Application of the three approaches (market based valuation approach) Sales Comparison Approach Income Capitalization Approach Cost Approach Reconciliation of value indicators and final value estimate Definition of value Purpose and intended use of the valuation Relevant information as of the valuation date Value estimates from the valuation methods performed. Strengths and weaknesses of each valuation approach Cost approach most appropriate when earnings are poor Income Approach- useful when cash flow is stable, however, value is significantly affected by properties financial leverage and assumption about discount rates. Comparable transaction analysis- useful however reliable date is extremely difficult to obtain, particularly for small privately-held businesses. No two property or transactions are the same Report of defined value Oral Report Form Report Narrative Report

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VII.

General Contents of Form Report Part 1 Property Description Subject property includes basic information about the subject property Neighborhood in which subject property is located including trends and other factors that affect the property and its neighborhood Site the data for property appraisal Description of improvements found on property under appraisal Comments of appraiser regarding additional features of the property Condition of property improvements and adverse environmental condition

Part 2 Valuation Section Cost approach analysis, including the breakdown of reproduction cost figures Sales comparison approach analysis, itemization factor contributing to price differences between the subject property and comparable property Income approach analysis, using the right method for the type of property Reconciliation statement (how appraiser correlated values derived by the appraisal approaches used to arrive at a single final estimate of market value.

Style and Format 1. Organized presentation for clients ease understanding; order and detail depend upon clients need. 2. General Outline (order of variable) Introduction Title Page Letter of Transmittal Table of Contents Certification of Value Summary of important Conclusion Premises of the appraisal Qualifying and Limiting Condition Including general and Underlying assumption Purpose of the appraisal Definition of value and date of value estimate Property rights appraised Presentation of data Identification of the property with photographs Area, city, neighborhood and location of data Zoning and taxes Site data

Description of improvement history Analysis of data and conclusion HABU of the land though vacant HABU of the property as improved Land value The sales comparison approach The cost approach The income capitalization approach Reconciliation of value indications to a final value