Real Estate Division

CPD 131 - Commercial Valuation Basics

Pre-requisite: None.

This course introduces the principles and approaches of real estate valuation for the non-appraiser, with an emphasis on commercial properties including apartments, offices, retail properties, and industrial properties (warehouses). The course is intended to be completed after CPD 130, although it may stand alone for students with some prior knowledge of appraisal fundamentals. The course describes the appraisal process from receipt of a contract or terms of reference for a valuation through to submitting the appraisal report.

The three traditional approaches will be explained in detail, as they pertain to commercial appraisals, with an emphasis on the income approach. Appraisal review is also covered. This three-lesson course is not intended to teach all there is to know about commercial appraisal. Students completing this course will be able to recognize and apply the concepts learned in practical situations, and recognize the limits of their knowledge where the services of a professional appraisal reviewer may be necessary. Please note: this course is not eligible for AIC CPD credit (but is eligible for 9 PDP credits for BCREA members).

Course Outline

Foreword: Introduction to Professional Development Courses

Lesson 1: Fundamentals of Commercial Appraisal

  • Instructor's Comments
  • Overview of the Appraisal Process for Commercial Properties
  • Step 1: Definition of the Problem
  • Step 2: Scope of Work
  • Step 3: Data Collection and Property Description
  • Step 4: Data Analysis
  • Summary
  • Review and Discussion Questions
  • Appendix 1: A Primer on Commercial Leases
  • Appendix 2: Commercial Real Estate Construction Materials and Methods

Lesson 2: Valuation Approaches for Commercial Properties

  • Instructor's Comments
  • Step 5: Application of the Approaches to Value
  • The Income Approach
  • Understanding Income Capitalization
  • Steps in the Income Approach to Value
  • Calculating Net Operating Income
  • Capitalization Process: Estimating a Rate of Return
  • Direct Capitalization
  • Capitalization of Income Into an Indication of Value
  • Reconciliation of Income Approach Value Indications
  • Advanced Capitalization Techniques
  • Valuation of Partial Interests and the Income Approach
  • Strengths and Weaknesses of the Income Approach
  • The Direct Comparison Approach
  • The Cost Approach
  • Step 6: Reconciliation of Value Indications & Final Estimate of Value
  • Step 7: Communicate Findings
  • Summary
  • Review and Discussion Questions
  • Appendix 1: Appraisal in a Nutshell

Lesson 3: Evaluating Commercial Appraisal Reports

  • Instructor's Comments
  • Legal Considerations for Appraisers
  • Appraisal Review for the Non-Appraiser
  • Helpful Hints for Appraisal Review
  • Case Study 1 - Multi-Family Rental Project: Income Approach
  • Case Study 2 - Retail Strip Mall: Direct Comparison and Cost Approaches
  • Case Study 3 - Narrative Appraisal Report: Industrial Property
  • Summary
  • Review and Discussion Questions
  • Addenda A: Case Study 3 - Narrative Appraisal Report

Afterword

  • The Final Examination

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