Importance of Property Attributes Key to Market Value: The Appraisal Journal

CHICAGO (Dec. 10, 2014) – Appraisers can simulate the actions and thought processes of buyers by analyzing the importance of the quality of property attributes in the market, according to an article published this week in The Appraisal Journal.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.

“Qualitative Analyses in the Sales Comparison Approach Revisited,” by Gene Rhodes, MAI, demonstrates how an analysis of the relative quality of property attributes of comparable sales can be used to arrive at an opinion of the market value of the property being appraised. Comparable sales guide the analyst in forming an opinion of value of the property being appraised. By looking at the sale prices of comparables and their respective characteristics, it is possible to arrive at the market value of the property considering its characteristics.

The author advocates qualitative analyses of comparable sales through an objective ranking and weighting system of attributes – such as location, view, access, size and topography – just as buyers do when they evaluate properties.

The author emphasizes that the weighting of the importance of the attributes cannot be selected by the appraiser; instead it is assigned by the market. Appraisers can refine and test various weightings, but should select the attribute weights that result in a predicted price with the lowest standard deviation from the actual sale price – these are the attribute weights that exist in the market.

Gene Rhodes, MAI, is head of Gene Rhodes & Associates, a commercial real estate appraisal firm based in Addison, Texas, and has appraised a wide range of major commercial, industrial and multifamily properties throughout Texas. He previously served as an officer with the Henry S. Miller Appraisal Corporation and the Appraisal & Consulting Services Group of Grubb & Ellis Co. Rhodes is a state certified general real estate appraiser in Texas, and he received a BBA degree from Texas State University.

Read “Qualitative Analyses in the Sales Comparison Approach Revisited” in the Fall issue of The Appraisal Journal.

Also in The Appraisal Journal’s Fall 2014 issue:

“Data Sources; Uses and Evaluation,” by Stephen F. Fanning, MAI, looks at types and sources of data that can be used for the supply and demand analyses within an appraisal. Appraisers use both primary and secondary data as part of the market analysis of a property, and the article evaluates the role of both types of data.

“Is Across the Fence Methodology Consistent with Professional Standards?” by John T. Schmick and Jeffrey K. Jones, MAI, looks at the underlying foundation of the across the fence methodology for valuing corridors and argues that the methodology has deficiencies in highest and best use analysis that are not consistent with professional standards.

“Exposure Time and Market Value,” by Neill F. McDonald, MAI, looks at the Uniform Standards of Professional Appraisal Practice requirement that appraisers develop an opinion of reasonable market time. The article suggests that since reasonable exposure time is assumed in the definition of market value it is meaningless to estimate an actual exposure time.

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