Download Why Value? - Association of Real Estate Agents (AREA)

Valuations, Methods, Importance
Presented by:
Mark Farrell
G.A. Farrell & Associates Limited
Why Value?
 The First Question is  The Value of What?

Real Estate
Why Value?
 Several Different Types of Value
 Several Different Standpoints
 e.g. your Home
Value As Seen By - Yourself
Value As Seen By - Buyer
Value As Seen By - Bank
Value As Seen By - Valuer
Value As Seen By – Tax Assessor
Assessed Value
Going-Concern Value
Insurance Value
Liquidation Value, Salvage Value
 MARKET VALUE
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
Market Value
 Wherein the parties had each acted
 knowledgeably
 prudently and
 without compulsion
Valuation Methodology
 How do Valuers arrive at Value?
 Most Common 
Sales Comparison Approach
Sales Comparison Approach
Sales Comparison Approach
 Often hear comments like:
 Market Is Inflated
 Actual Costs Are Less
 It Is NOT Real Value
Sales Comparison Approach
Cost Approach
Cost Approach
 Used For Special-Purpose Properties –
 (Brewery, Church, Hospital)
 In other Words, Properties that do not sell often
 Replacement Cost less Depreciation
Is Building Adequately Insured?
 Construction costs increasing again
 Imperative to check building Insurance
 Failure = Financial Hardship
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
Income
Approach
Income Approach
 Who is a Typical Buyer?
 An Investor
 What is Primary Concern?
 INCOME!
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
Valuation Methodology
 Important Ingredients:
 Analytical Skills
 Objectivity & Impartiality
 INFORMATION!
Why Value?
 What is Importance of Value?
 Bank – In case of Default
 Insurance Company - In case of Damage
 You - In case of Purchasing / Selling
Why Value?
 What is Importance of Value?
 Investors - In case of Measuring Return
 Values Change Over Time
Price Movements 1973-2013
Achieving Success
 Research shows to achieve Success –
 Need Proper Mentor.
 Some people choose –
 Intelligent people
 Good-looking people
 Sporting or singing stars.
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!
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....
That is…
1. George Clooney
6. Nelson Mandela
2. President Obama
7. John Lennon
3. Bob Marley
8. Brian Lara
4. Russell Latapy
9. Mark Farrell
5. Dwight Yorke
10. Mighty Sparrow
THANK YOU!
ANY QUESTIONS?