Exam 3 Grades

If you have not received your exam 3 grade, I will be in my office (PB204) tonight from 6 PM to 6:20 PM.  At 6:20 PM, I will be heading down to the SSRE meeting featuring Ryan DeYoung in room PB192 (auditorium).

No class Thursday, December 9th

You guys were correct.  This Thursday is a blackout day and we do not have class.

Final Exam Annoucements

According to my schedule, the FIN 181 final exam is on Thursday, December 16th starting at 5:45 PM.

Good news and bad news regarding the final exam.

First the good news.  The final exam may replace your lowest exam grade from the semester.  For example, if you scored a 50% on exam 1 and you score a 70% on the final exam, the final exam score of 70% will replace the 50% exam 1 score.

Now the bad news.  The final exam is cumulative (covers the entire course) and will be challenging.  I have not finished writing the final exam but you can expect up to 100 questions with additional short answer questions and problems.

Because the exam is cumulative, you need to study the material from the entire semester.  I will suggest that you do not forget about the final reconciliation chapter and video clip.  This material was not included on exam 3 but will certainly appear on the final exam.

I will give a little guidance on the short answer and problem sections.  Because the performance on the income approach material (direct capitalization and discounted cash flow analysis) was sub-par on exam 3, the short answer and problem section will emphasis this material.  You should also be ready to write a final reconciliation given a valuation scenario.

Study hard and see you next Thursday!

Interview with Real Estate Salesman

Salesperson Interview
By Allen Perry

Curtis Payne is a real estate sales person who deals in the Fresno area with an emphasis on the East side of the city. Payne is not affiliated with the N.A.R., but he is still an upcoming salesman in that area of Fresno. Payne is a 43 year old, happily married, father of two and resides here in Fresno. Payne hopes to one day become a certified member of the N.A.R. but for now is doing the independent real estate route for this field of work. Here is the interview that I conducted with Mr. Curtis Payne from the conversation we had.

Q: How did you get into the real estate business?

A: Well, it was about 10 years ago now. I needed a means to support my children and my 9 to 5 was not getting the job done so I looked into taking some real estate courses because I heard everyone was making money! Even if they just dabbled in the market, so I finished up some community real estate courses and jumped head first into the real estate game. The rest is history.

Q: What are your favorite aspects of working in real estate?

A: The obvious answer would be tat it allows me to make extra income, but to really answer that I would have to say that you could get work done outside of an office setting. I don’t like to be cooped in a miniature cubicle and being a real estate salesman allows me and actually forces me to get out in the community and interact with people. That fits my personality perfectly.

Q: What are some of the amenities that add to a property’s value in your market?

A: Most of my business is over on Fresno’s east side. This part of town is not the most prestigious area in Fresno to live in, but there are some decent neighborhoods. With that being said Fresno Pacific University is located in East Fresno and I have noticed that properties that are relatively closer to the university add to its value. Another commodity in my area is new homes, which have the most up to date cooling and heating systems with the most energy efficient technology built into the home. People like to stay away from some of the harsh weather we get in Fresno.

Q: What are amenities that decrease property value?

A: Like I said earlier Fresno’s east side is not known as the best part the city and some neighborhoods are known for heavier gang activity than others. Properties in these areas that have higher crime indexes take a big hit in value. Also, older homes that are not up to date do not attract as man buyers. The foreclosures in a neighborhood are also another dig deterrent to buyers and decrease property value.

Q: What are some of the valuation techniques that you use when negotiating the purchase/sale of a property?

A: For the most part you have to watch the market. The sales comparison approach has been very helpful to me in my short career and this usually shows me a range at which I am going to do be advising my client to bargain at. Rarely have I used any other technique to do this (laughs).

Q: Do you feel as though in the current market people are getting the right value for purchases and sales in this country?

A: I feel as though every sale that is not mad under distress or out of a con the right value has been determined. If two grown individuals fairly negotiate the terms of a deal, then no one should feel as though the right value was not found. It should not matter what the economic conditions for the country are.

Q: What is your opinion of the future housing market in Fresno?

A: In my opinion I believe Fresno will soon be one of the nation’s most newly developing cities. The city of Fresno is making efforts to rebuild downtown and other areas around Fresno. This will create jobs, which will attract new people to Fresno. These people will of course need somewhere to live and that is where I come in (laughs). But Fresno’s stock is on the rise and many housing opportunities will come from this boom.

Allen: Thank you for your time
Curtis: No problem, my pleasure

Blog Post 3 Deadline Extension

The deadline for blog post 3 is tomorrow but I can see that many of you could use an extension.  Therefore, I am extending the deadline to December 14th.

Remember, you will submit your paper to me by email in Word format (please include all exhibits).  After I reply to you, then your can email the paper to your interviewee and ask him or her for their permission to post to the paper on our class blog.

Interview questions

1. Why did you get into the residential real estate business?
2. How long have you been a real estate agent for?
3. What changes have you seen in the market since you started?
4. How has your marketing for obtaining listings and buyers changed over the last few years?
5. Do you have different types of clients now as compared to a few years ago?
6. How would you describe the central valley residential real estate market?
7. How would you describe the value of residential properties now compared to 4 years ago?
8. What do you think the best method for estimating a value of a property is, and what method do you use most often?
9. What is your future prediction of the real estate market in the central valley?
10. What qualities do you possess that make you a successful real estate agent?
11. Do you have any tips for a new real estate agent just entering the market?
12. Do you have any suggestions for first-time home buyers?

Interview with a realtor

1. How long have you been in real estate?

2. As a realtor, what are some key qualities that have helped you become successful?

3. What types of sells have you dealt with?

4. When did you notice a major turn in the market?

5. Have the current market conditions affected the types of listings you’ve obtained?

6. What steps do you take in determining the value of a piece of property?

7. Which techniques or methods have you found to be the most useful or accurate in the valuation process?

8. What are the pros and cons of the different methods?

9.Have you noticed any improvement in the market since the economic plunge?

10. When do you expect the market to stabilize again?

11. What do you think it will take to see a continuous growth in the market?

Exam 3 Result

I will pass back exam 3 with answer key at the beginning of Thursday's class.  Please arrive on time if you want to review your exam.

The class average was 73% and the median was 74%.  The grades ranged from 100% to 53%.

On Thursday we will use a program called Argus which is a sophisticated discounted cash flow analysis program.  I can tell from  grading exam 3 that DCF is a weakness.  I think everyone needs to review the DCF materials below before Thursday's class.

Investment Problem Video Clips
            Investment Problem Instructions (1, 2, and Homework)

            Investment Problem 1 Steps 1-7

            Amortization Table

            Investment Problem Spreadsheet

            Investment Problem Print Out  with Notes (pdf file)

            Investment Problem Video/Audio Clips:

                Introduction to the Investment Problem

                Step 1

                Step 2-3

                Step 4-5

                Step 6-7

Today's On-line Class

Please login to http://www.my.dimdim.com/gazarian at 3:30 PM today.  When you login, please use your first and last name.  We will cover some material for Thursday class.

Also, please view the view clip below before next Tuesday's class.

Final Reconciliation  Video/Audio Clip (27 min)

Don't forget, DimDim requires the most recent version of Flash or you may have audio problems.  See below for instructions.

Updating Your Computer's Version of Flash: DimDim Requires Most Recent Version

As of 10/20/2010, the latest version of Flash was 10.1.  To check the version of Flash on your computer, goto http://www.adobe.com/software/flash/about.  

To update Flash, goto get.adobe.com/flashplayer/otherversions.  This site will ask you if you are using a PC or Mac, then just follow the prompts.  Thank you for updating Flash.  Students without the most recent version of Flash may have audio problems when using DimDim.

Note that the Google Chrome browser automatically updates with the most recent Flash version.

Interview Questions

Interview with a Realtor

1.)When did you get into the realty business?
2.)How did you get into the realty business?
3.)What are some of your favorite things about dealing with real estate?
4.)What is the current market like in the central California real estate market?
5.)What are some of the hot-spots in the area that you deal in?
6.)What are some of the techniques that you use to value a house?
7.)What are some of the amenities that add value to the properties in your market?
8.)What are some of the amenities that decrease value to the properties in your market?
9.)What is your opinion of the future market in the area that you deal in?

Blog 3 Questions

1. How did you get into the residential real estate field?
2. What us your educational background?
3. What is the most challenging and rewarding aspects of your job?
4. What is a "typical" work day like for you?
5. What are some key qualities that have helped you become successfull?
6. What techniques or methods are used in valuation of residential real estate?
7. Which techniques have you found to be the most accurate in the valuation process?
8. Are there any pros and cons when dealing with different methods for valuation of houses?
9. What factors are responsible for the decrease in home values in recent years?
10. How has the current market conditions affected your business?
11. When do you expect properties to regain their values or experience growth again?

Blog Post 3

John Kendall
Kendall Appraisal Services
Residential Real Estate Appraiser

Blog Post 3

Stefan Fackelmann

Dipl.-Wirtsch.-Ing. (FH)

Sachverständiger für Immobilienbewertung (surveyor for real estate appraisal)

Kaufmann der Grundstücks- und Wohnungswirtschaft (IHK)

1.      What is your educational background

2.      Why did you decide to get in this field?

3.      Are there some legal prequisites you had to fulfill to become a real estate broker in Germany?

4.      What kind of individual (skills and personality) is best suited for this career?

5.      What are your major responsibilities?

6.      Which method do you use to appraise the property? Do you use a special program?

7.      Which market data do you use to estimate the value of a property?

8.      What are the fees you demand?

9.      Which are the most reasons the customers want you to appraise their property?

10.  Would you choose this career again?

Exam 3 Announcement

Exam 3 is this Tuesday and will cover Chapter 17 through 23 (we will save chapters 25 and 26 for the final).  The exam format includes multiple choice, short answer, and calculation problems.  Please bring pencils, eraser, and Scan-tron.

Informational Interviews: Comments

Don't forget that at least 1/3 to 1/2 of your informational interview questions should be related to real estate valuation.  I think we will find that property values and valuation skills are important to every aspect of the real estate industry.

You may conduct your informational interview in person, by phone, or by email.  I would recommend that you ask your interviewee for their format preference.  Also, I would suggest that you try to physically meet with your interviewee to make a more personal connection (dress professionally and be on-time!).  If you conduct the interview in person or by phone, you must ask the interviewee if you may record the session.  If they do not agree, do not record under any circumstances.  You must take good notes.

Please tell your interviewee that you will email your final version of your interview to him or her.  In this email, you will ask your interviewee for their permission to post the interview on our class blog (https://sites.google.com/site/fin181hansz/).  Please make sure that they know this is a public blog.  We will not post any interviews without the interviewee's permission.  Don't forget you could include photos of the person, their office, or business logo with their permission.  Also, please consider any other appropriate visuals including tables, chart, graphs, maps, and other photos.

You may do some minor editing of the answers but do not alter the intent or content of the answers.  If some questions were misunderstood, inappropriate, or the interviewee simple preferred not to answer the question, you may exclude question from the interview.  It will depend on the length and nature of the questions and responses but it looks like 10 to 15 questions are most appropriate.  Remember, you may need to exclude a a couple questions.

Please do not forget to write a good introduction and conclusion to your information interview.  The introduction should introduce the person you are interviewing (at a minimum the person's name, company, affiliation, industry they work in, years in the business, and the geographic region they typically cover).  The final paragraph should summarize and synthesis your findings from the interview with respect to valuation in your interviewee business and industry.  Also, do not forget to thank your interviewee in person and in the paper itself (the introduction or most likely the conclusion).

For this assignment, please email me your informational interview in a Word file attachment by the assignment due date. I will grade the assignment and return it to you by email.  You can then send your paper to the interviewee and once you get their permission, you can post it on the course blog. Good luck and enjoy the assignment.  This is a good opportunity to meet someone in the real estate industry.

Blog 3 Questions

1. What is your educational background?

2. How/Why did you get started in this field?

3. What are your duties/responsibilities? What is a typical day like for you?

4. What kind of skills and personality is the best fit for a career in the home building business?

5. How has the crash in the real estate market affected local home building?

6. With high-energy costs, what do new homes offer that older ones may not in terms of energy efficiency?

7. How does DeYoung obtain market data in the area?

8. Are there any major development plans for the area in the next 5 years?

9. What do you foresee for the future of home building?

10. What is the most rewarding aspect of your career?

Blog 3 Questions

1. What made you decide to get into the residential real estate field?

2. What are you major responsibilities?

3. What is the most challenging and rewarding aspects of your job?

4. What skills would you say an individual must have to be successful in this field?

5. What is the importance of accurate valuations in residential real estate?

6. Who is primarily responsible for determining a property’s value?

7. What techniques are used in valuation of residential real estate?

8. Where is the information for this method is primarily found?

9. What are the advantages and disadvantages of the techniques?

10. What are alternate methods of valuation if the desired information is not available?

11. What factors are responsible for the decrease in home values in recent years?

12. When do you expect properties to regain their values or experience rapid growth again?

Mexico Property Valuation

Valuation of Property in Mexico

Allen Perry

An appraiser must assess value on any property that they are assigned to. Much of the time the valuation of a location type is very similar; sometimes other factors will designate a need to use unusual techniques for a subject’s valuation. These circumstances are called special property types and an appraiser must be aware of this. Things that can make a subject property different can be lack of relevant comparable properties or subject properties located I different countries (where other factors can affect value as compared to the US). For instance, valuation in a country like Mexico can be very different then how you would value a property in the United States. For example, construction, land, building, and maintenance cost are extremely lower than US prices. This needs to be considered in the valuation. Another aspect that needs to be weighed in is the state of the infrastructure around the subject property. Overall, the value ad appeal of land and property comes down to three key factors: location, local infrastructure, and local amenities (Buying & Selling Real Estate in Mexico).

Location is a major issue that affects value in Mexico. This is similar to factors that affect value in the United States, but it is especially important to consider when doing a valuation of a property in Mexico. There are many areas in Mexico that are very remote with little to zero infrastructures. This will obviously lower the value of a subject property. In most markets in Mexico the values of properties are increasing on a year-to-year basis, but they have not risen as fast as US and European markets (Buying & Selling Real Estate in Mexico). Mexico is a very big country and not all land development is feasible. Location is a major factor when valuing a property in Mexico, but it is not the only issue that must be considered when conducting a property valuation in Mexico. The local infrastructure around the subject property is an issue that needs to be assessed when valuing a property.

Things like roads, airports, and public services are luxuries that citizens of the US take for granted, but these things are not common place in all areas of Mexico. When doing a valuation appraisal in Mexico an appraiser must take into account the fact of if the subject property is located in an area where there is a proper infrastructure in place. As the years progress, the infrastructure in Mexico is gradually getting better, but an appraiser must remain cognizant of areas in Mexico where there is little to no infrastructure. Subject properties located in these areas should be reflected in a valuation report. Once an appraiser considers both the location and local infrastructure adjustments for the property there is another element that needs to be considered.

In the United States, just about anywhere a subject property is located there are basic amenities that come with the property and that the property is near by. In Mexico, this is not always the case. An appraiser must be aware of the subject property’s amenities. Does the property have access to running water and a sewage connection? Is the property near any schools and hospitals? These are questions an appraiser must answer these questions before they place a value on a property. If a property is not equipped with running water and sewage then the value of the property will be significantly reduced. Also, if the property is not located near any hospitals or schools (for residential properties) then a subject property will have less value then a property that does. If an appraiser does not account for these issues in a valuation, then they will be seriously mistaken.

Land/property valuation in Mexico can basically be adjusted for through location, local infrastructure, and local basic amenities. If a subject property does not have access to roads, airports and public services like a police force then the property will have a drastic decrease in value. A property also needs to have basic amenities working in the property as well as near the subject property. Many people living in or near the numerous Indian communities do not have access to basic amenities (Mexico: Between a Rock and a hard place). An appraiser needs to be aware of this when valuing a property in Mexico. Most factors of land valuation are the same in the United States and in Mexico, but these few factors must stay in an appraisers head when they are doing a valuation of a property.

References:

; Buying and Selling Real Estate in Mexico, http://www.mexperience.com/property/buying-selling-real-estate-in-mexico.hip

Ioffe, Karina; Mexico: Rock & Hard Place: The Joys & Malcontents of Modernization and What it means for the local population, www.mexconnect.com/articles30390-mexico-between-a-rock-and-a-hard-place-the-joys