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USPAP 2018-2019 Edition

© The Appraisal Foundation

38

STANDARD 5

STANDARDS RULE 5-5

In developing a mass appraisal, when necessary for credible assignment results, an appraiser must:

(a) collect, verify, and analyze such data as are necessary and appropriate to develop:

(i)

the cost new of the improvements;

(ii)

depreciation;

(iii) value of the land by sales of comparable properties;

(iv) value of the property by sales of comparable properties;

(v)

value by capitalization of income or potential earnings (i.e., rentals, expenses, interest rates,

capitalization rates, and vacancy data);

Comment: This Standards Rule requires appraisers engaged in mass appraisal to take reasonable

steps to ensure that the quantity and quality of the factual data that are collected are sufficient to

produce credible appraisals. For example, in real property, where applicable and feasible

,

systems

for routinely collecting and maintaining ownership, geographic, sales, income and expense, cost,

and property characteristics data must be established. Geographic data must be contained in as

complete a

set of cadastral maps as possible,

compiled according to current standards of detail and

accuracy. Sales data must be collected, confirmed, screened, adjusted, and filed according to current

standards of practice. The sales file must contain, for each sale, property characteristics data that are

contemporaneous with the date of sale. Property characteristics data must be appropriate and relevant

to the mass appraisal models being used. The property characteristics data file must contain data

contemporaneous with the date of appraisal including historical data on sales

,

where appropriate and

available. The data collection program must incorporate a quality control program, including checks

and audits of the data to ensure current and consistent records.

(b) base estimates of capitalization rates and projections of future rental rates and/or potential earnings

capacity, expenses, interest rates, and vacancy rates on reasonable and appropriate evidence;

60

Comment: This requirement calls for an appraiser, in developing income and expense statements and cash

flow projections, to weigh historical information and trends, current market factors affecting such trends, and

reasonably anticipated events, such as competition from developments either planned or under construction.

(c) identify and, as applicable, analyze terms and conditions of any available leases; and

(d) identify the need for and extent of any physical inspection.

61

STANDARDS RULE 5-6

When necessary for credible assignment results in applying a calibrated mass appraisal model an appraiser must:

(a) value improved parcels by recognized methods or techniques based on the cost approach, the sales

comparison approach, and income approach;

(b) value sites by recognized methods or techniques; such techniques include but are not limited to the sales

comparison approach, allocation method, abstraction method, capitalization of ground rent, and land

residual technique;

(c) when developing the value of a leased fee estate or a leasehold estate, analyze the effect on value, if any,

of the terms and conditions of the lease;

60 See Advisory Opinion 33,

Discounted Cash Flow Analysis.

61 See Advisory Opinion 2,

Inspection of Subject Property

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