Real Property Valuation Research Articles

The relationship of geographical indications with real property valuation and management

PurposeThe purpose of this paper is to examine the relationship of geographical indications (GIs) with real property valuation and management.Design/methodology/approachThe paper considers existing and developing legal frameworks and current guidance with practical examples to support points made.FindingsGIs have been overlooked to date in valuation guidance yet have a relevance that needs to be addressed. They are also relevant to practice and theory in other areas, for example compulsory purchase and planning.Research limitations/implicationsThe paper identifies issues and problems: it does not suggest complete solutions, which in particular areas will need to be based on further research.Practical implicationsThe paper has a high degree of practical relevance.Originality/valueThe paper is believed to be the first to consider the implications of GIs on real property valuation and management. The research identifies a gap in present valuation guidance and the potential for inconsistency in approach. The paper highlights the importance and relevance of GIs.

Real property valuation decision support system

This paper describes a project research regarding the use of the Hedonic Price Model (HPM) for mass real property appraisal. This project aims at developing a series of HPM equations for a major Hong Kong real estate surveyor. The main housing estates in Hong Kong are based on historical transaction data and other value-added property attributes. The outcomes meet with the stringent requirement of professional property appraisers in Hong Kong. On top of nominal HPM equation valuation figures, two indices will be used to qualify them to the satisfied valuation. A comprehensive building address database and the equations have been developed for most major Hong Kong housing estates. The system can be adopted by foremost institutions with large property portfolios, so they can evaluate the total capitalisation of their assets on the fly. REIT fund managers may also find it helpful to investors for making more informed decisions.

Irvine Hill Business Park: A Case Study in the Valuation of Real Property Having Brownfield Issues

Irvine Hill Business Park: A Case Study in the Valuation of Real Property Having Brownfield Issues

Research review

AbstractThis issue of Research Review focuses on four keynote addresses and plenary papers delivered at the World Valuation Congress (WVC) held in Singapore from 26th–29th April, 2001. The WVC was established in the early 1980s in order to provide a forum at an international level for the exchange of ideas on real estate pricing. The theme of the conference was ‘Real Property Valuation in a Dynamic Environment’ and the four papers selected for this review highlight the changing environment within which current appraisal practice is undertaken. Copyright © 2001 Henry Stewart Publications

THE APPLICATION OF MULTI-CRITERION METHODS FOR VALUATION OF RECREATION PROPERTY/DIE ANWENDUNG DER MEHRKRITERIELLEN METHODE BEI DER BEWERTUNG VON ERHOLUNGSGRUNDSTÜCKEN

Multi-criterion valuation methods are widely used in real estate valuation all over the world. In USA, UK and other countries these methods are part of techniques based on comparative and reinstatement values as well as on income use [1]. A number of problems in the valuation of real property can be eliminated by the methods of multiple criteria analysis, which came into existence only at the second half of the 20th century. Currently, they have become very important in the international practice of the real property valuation. In most cases they are based on market modelling and economic assumptions. Therefore, sometimes they are referred to as separate valuation methods, and classified as modern ones. This article describes a new method of multiple criteria analysis. This method based on the market analysis and valuation principle is in line with the traditional comparative value method, therefore it can be attributed to the group of the indirect comparative value methods. These methods facilitate the universal and more extensive multiple criteria analysis of the property, since they take account of a number of different criteria, ie qualitative, quantitative ones, market conditions. The proposed method can meet the demands and needs of many interested groups since it enables to estimate not only the market value of the property, but also other values, eg investment value, value of use, market value of the current use of the property, etc. This article analyses the theoretical model of the method, which was used to estimate the market value of the recreation premises.

THE APPLICATION OF MULTI-CRITERION METHODS FOR VALUATION OF RECREATION PROPERTY

Summary Multi-criterion valuation methods are widely used in real estate valuation all over the world. In USA, UK and other countries these methods are part of techniques based on comparative and reinstatement values as well as on income use [1]. A number of problems in the valuation of real property can be eliminated by the methods of multiple criteria analysis, which came into existence only at the second half of the 20th century. Currently, they have become very important in the international practice of the real property valuation. In most cases they are based on market modelling and economic assumptions. Therefore, sometimes they are referred to as separate valuation methods, and classified as modern ones. This article describes a new method of multiple criteria analysis. This method based on the market analysis and valuation principle is in line with the traditional comparative value method, therefore it can be attributed to the group of the indirect comparative value methods. These methods facilita...

Reasons to Eliminate the Band-of-Investment Technique for Estimating the Overall Capitalization Rate

Executive Summary: The purpose of this article is to present the idea that the band of investment (BOI) should be eliminated as an appropriate method for extracting an overall capitalization rate in the valuation of real property. This recommendation is derived from the very restrictive market presumptions that must hold for its correct usage. The traditional use of the (BOI) when the property has amortized debt and an expected change in value will consistently produce estimates that are too low. The commonly taught mortgage-equity technique that values the equity separately from the debt should be substituted in its place. The latter relies on the universally understood discounted cash flow and incorporates the effects of equity build-up.

Duncan's Bookstore: Connecting Real Property and Business Valuation

EMIL E. MALIZIA University of North Carolina at Chapel Hill. Campus Box No. 3140, Chapel Hill, NC 27599-3410 Focus The purpose of the Duncan's Bookstore case is to show the relationship between real property valuation and business valuation. Duncan's building and lot, valued at $100,000, are currently used as a bookstore. But his business is less valuable than his real estate. The challenge of the case is to value the business objectively and realize that it does not represent the most profitable use of the site. Setting This case involves the sale of a retail business that includes a 3,500 sq.ft. building on a 6,000 sq.ft. lot. The current owner of Duncan's Bookstore has decided to sell his business and retire. The owners of Stewart's Bookstore are motivated buyers. Exhibits Exhibits include 1994 financial statements for Duncan's Bookstore and Stewart's Bookstore. Availability This case and teaching notes are available for $1.50 for at least 10 copies (plus shipping). Call the author at 919-962-4759 to order copies. Teaching Notes The teaching notes suggest procedures for using the case. They summarize the situation, present valuations of the business and the real estate, suggest appropriate bargaining positions for the buyers and the seller, and explain the error that most students will make in resolving the case. The owners of Stewart's Bookstore, Dave Stewart and Joe Hannah, were discussing their impressions of Duncan's Bookstore, the business they were interested in buying. They had met with Nate Duncan, the current owner, on several occasions, had inspected his facility, and had talked with walk-in customers and several of his university accounts. Duncan had described the recent history of his business and had given them the most current annual financial statements (see Exhibit 1). Stewart and Hannah needed to decide whether to offer to buy Duncan's existing business or any specific assets that Duncan owned. They were motivated buyers because they were interested in expanding their business and were sure that Duncan could find other qualified buyers in the near future. Duncan's Bookstore and Stewart's Bookstore were comparable retail operations, each operated from one location in the same metropolitan area. Duncan's business was housed in a 3,500 sq. ft. building on a 6,000 sq. ft. lot. The property was located in the central city about 2 1/2 miles from Stewart's suburban location. Duncan's neighborhood situated on the fringe of downtown was undergoing transition. For many years, small, locally owned and operated retail businesses had dominated the area. On-street parking and several conveniently located parking lots had adequately accommodated the customers. The residential population, which consisted of university students and middle- to lower-income young families, had been gradually declining for some time. The area was experiencing moderate but sustained development pressure from the nearby university and from government and financial institutions in the core area. …

Optimal Comparable Selection and Weighting in Real Property Valuation: An Extension

Vandell (1991) recently developed a rigorous minimum variance technique for selecting and weighting comparables in real estate appraisal. This article extends Vandell's methodology in three areas: (1) an alternative objective function; (2) an approach that explicitly recognizes the non‐negativity constraint on comparable weights; and, (3) a more robust comparable inclusion process. Using Vandell's data, we show how our methodology modifies Vandell's results.

Optimal Comparable Selection and Weighting in Real Property Valuation

This paper formalizes certain aspects of the sales comparison approach to valuation that heretofore have been quite ad hoc. Specifically, it applies statistical theory to decisions about how many comparables to select, what the criteria for comparable selection should be, and how the proper weights for each adjusted value estimate can be determined such that the final value estimate is both unbiased and of minimum variance. Several results are derived that run counter to conventional practice; for example, it may not always be optimal to consider first the “best” comparables because of a lack of independence among their adjusted value estimates. Furthermore, it is always desirable to consider more comparables (regardless of how “bad”) so long as their adjusted value estimates are optimally weighted in the final value estimate. Finally, weights usually selected for “inferior” comparables are typically too small. A final exercise empirically applies the methodology to a sample of sales.

Philadelphia's Earned Income Tax

The city of Philadelphia is tapping a new source of revenue for $18,000,000 in 1940. Events leading to its adoption have their basis in the past ten years of financial distress. These events were not peculiar to Philadelphia. They may be found in one form or another as budgetary problems in many leading municipalities of the nation. Outstanding among the factors causing distress in Philadelphia was a 25 per cent decline in the assessed valuation of real property since the peak year 1931. This represented over a billion dollars of valuation and a loss of $20,000,000 in current real estate tax levy. Since current real estate has been the chief source of the city's annual income, the decline resulted in curtailment of essential city services and reduction of personnel.For some years, curtailment of services, reduction in personnel, and the fortunate receipt of large annual sums from delinquent taxes enabled the city to survive the difficulties of the depression. However, the point was reached when these factors no longer sufficed to balance the budget. They were followed by more doubtful financial expedients, namely, overestimating of yearly receipts, floating of current deficits by means of temporary loans, and short-changing of sinking funds through excessive valuation of sinking-fund assets.

Valuation of Real Property.

Valuation of Real Property.