Real estate principles a value approach by david ling

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F IF TH E D I TI O N Real Estate Principles A VALU E A PPROACH David Ling | Wayne Archer Real Estate Principles A Value Approach Fifth Edition Finance Series Page, c 2018 (spring) The McGraw-Hill/Irwin Series in Finance, Insurance, and Real Estate Stephen A Ross, Franco Modigliani Professor of Finance and Economics, Sloan School of Management, Massachusetts Institute of Technology, Consulting Editor Ross, Westerfield, Jaffe, and Jordan Corporate Finance: Core Principles and Applications FINANCIAL MANAGEMENT Ross, Westerfield, and Jordan Fundamentals of Corporate Finance Eleventh Edition Block, Hirt, and Danielsen Foundations of Financial Management Sixteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Twelfth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Ninth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Eighth Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory Fourth Edition Cornett, Adair, and Nofsinger M: Finance Third Edition DeMello Cases in Finance Third Edition Grinblatt (editor) Stephen A Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Eleventh Edition Ross, Westerfield, and Jaffe Corporate Finance Eleventh Edition Fifth Edition Saunders and Cornett Financial Institutions Management: A Risk Management Approach Ninth Edition Ross, Westerfield, and Jordan Essentials of Corporate Finance Ninth Edition Saunders and Cornett Financial Markets and Institutions Sixth Edition Shefrin Behavioral Corporate Finance: Decisions that Create Value Second Edition INVESTMENTS Bodie, Kane, and Marcus Essentials of Investments Tenth Edition Bodie, Kane, and Marcus Investments Tenth Edition Hirt and Block Fundamentals of Investment Management Tenth Edition Jordan, Miller, and Dolvin Fundamentals of Investments: Valuation and Management Eighth Edition Stewart, Piros, and Heisler Running Money: Professional Portfolio Management First Edition Sundaram and Das Derivatives: Principles and Practice Second Edition FINANCIAL INSTITUTIONS AND MARKETS Rose and Hudgins Bank Management and Financial Services Ninth Edition Rose and Marquis Financial Institutions and Markets Eleventh Edition INTERNATIONAL FINANCE Eun and Resnick International Financial Management Eighth Edition REAL ESTATE Brueggeman and Fisher Real Estate Finance and Investments Fifteenth Edition Ling and Archer Real Estate Principles: A Value Approach Fifth Edition FINANCIAL PLANNING AND INSURANCE Allen, Melone, Rosenbloom, and Mahoney Retirement Plans: 401(k)s, IRAs, and Other Deferred Compensation Approaches Eleventh Edition Altfest Personal Financial Planning Second Edition Harrington and Niehaus Risk Management and Insurance Second Edition Kapoor, Dlabay, Hughes, and Hart Focus on Personal Finance: An Active Approach to Help You Achieve Financial Literacy Fifth Edition Kapoor, Dlabay, Hughes, and Hart Personal Finance Eleventh Edition Walker and Walker Personal Finance: Building Your Future Second Edition Real Estate Principles A Value Approach Fifth Edition David C Ling University of Florida Wayne R Archer University of Florida REAL ESTATE PRINCIPLES: A VALUE APPROACH, FIFTH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2018 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2013, 2010, 2008, and 2005 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper LWI 21 20 19 18 17 ISBN 978-0-07-783636-8 MHID 0-07-783636-7 Chief Product Officer, SVP Products & Markets: G Scott Virkler Vice President, General Manager, Products & Markets: Marty Lange Managing Director: James Heine Executive Brand Manager: Charles Synovec Director, Product Development: Rose Koos Lead Product Developer: Michele Janicek Product Developer: Jennifer Upton Digital Product Developer: Tobi Philips Director of Digital Content: Douglas Ruby Digital Product Analyst: Kevin Shanahan Marketing Manager: Melissa Caughlin Director, Content Design & Delivery: Linda Avenarius Program Manager: Mark Christianson Content Project Managers: Jeni McAtee, Bruce Gin, Karen Jozefowicz Buyer: Jennifer Pickel Content Licensing Specialists: Melisa Seegmiller, text; Melissa Homer, image Cover Image: Photographs in the Carol M Highsmith Archive, Library of Congress, Prints & Photographs Division Compositor: Aptara, Inc Printer: LSC Communications All credits appearing on page or at the end of the book are considered to be an extension of the copyright page Library of Congress Cataloging-in-Publication Data Names: Ling, David C., author | Archer, Wayne R., author Title: Real estate principles : a value approach / David C Ling, University of Florida, Wayne R Archer, University of Florida Description: Fifth Edition | Dubuque, IA : McGraw-Hill Education, [2016] | Revised edition of the authors’ Real estate principles, c2012 Identifiers: LCCN 2016047076| ISBN 9780077836368 (alk paper) | ISBN 0077836367 (alk paper) Subjects: LCSH: Real estate business—United States Classification: LCC HD255 L56 2016 | DDC 333.33/2—dc23 LC record available at https://lccn.loc.gov/2016047076 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites mheducation.com/highered Dedications To my wife, Lucy, for her continued patience and understanding during this latest revision of the book and to our children, Alex, Sarah, and Rebecca, who have really tried to understand why Dad spends so many nights and weekends working in his home office —DCL To my wife, Penny, who has always matched our efforts in this book with an equal measure of her devotion, support, and assistance; to our children Stephen, John, and Jennifer, who generously supported me with enthusiasm for the task; and to my mother and Penny’s mother, who always kept the faith that I would something useful with my “typewriter.” —WRA www.downloadslide.com About the Authors david c ling wayne r archer David C Ling is the McGurn Professor of Real Estate at the Wayne R Archer is the William D Hussey Professor at the University of Florida Professor Ling received an MBA (1977) ­Warrington College of Business, University of Florida He is in finance and a Ph.D (1984) in real estate and economics from Executive Director of the Bergstrom Center for Real Estate Stud- The Ohio State University His academic and professional publi- ies He received a Masters in economics from Wichita State Uni- cations have included articles on housing policy and economics, versity (1968) and a Ph.D in economics from Indiana University mortgage markets and pricing, private commercial real estate (1974) He has been a faculty member at the University of Florida investments, publicly traded real estate companies, and perfor- since 1971 From 1979 through 1981, he served as a visiting mance evaluation researcher at the Federal Home Loan Bank Board and Federal During 2000 Professor Ling served as President of the Savings and Loan Insurance Corporation His research publica- American Real Estate and Urban Economics Association tions include articles on office markets, house price indices, mort- (AREUEA) From 2000 to 2005, he also served as editor of Real gage prepayment, mortgage pricing, and mortgage default risk Estate Economics Professor Ling serves on numerous journal Professor Archer is a member of the American Real Estate editorial boards including Real Estate Economics, the Journal of and Urban Economics Association, where he has served on the Real Estate Finance and Economics, the Journal of Housing board of directors, and also is a member of the American Real Economics, and The Journal of Real Estate Research In 2011, Estate Society He served on the editorial board of Real Estate Professor Ling was the recipient of the George Bloom Award, Economics He is a Fellow of the Homer Hoyt Institute which is presented annually by the Directors of the American Professor Archer has worked in industry education through- Real Estate and Urban Economics Association for “outstanding out his academic career, including service as the educational contributions to the field of real estate academics.” In 2010, he consultant to the Florida Real Estate Commission from 1985 to was awarded the David Ricardo Medal by the American Real 1999 Among additional roles, he served as a regular faculty Estate Society, which is ARES’s highest honor “in recognition of member in programs of the Mortgage Bankers Association of research productivity and influence over a twenty year period.” America, in the Institute of Financial Education affiliated with Professor Ling has provided research and consulting ser- the U.S League of Savings and Loan Associations, and, more vices to several state and national organizations including the recently, with Freddie Mac In addition, he has provided consult- Federal National Mortgage Association, the National Associa- ing services to industry and government from time to time tion of Home Builders, the National Association of Realtors, the throughout his career Florida Association of Realtors, and the CCIM Institute He is a Fellow of the Homer Hoyt Institute, a faculty member of the Weimer School of Advanced Studies in Real Estate, a board member and Fellow of the Real Estate Research Institute, a member of the National Association of Real Estate Investment Trusts’s Research Council, and a Fellow of the Royal Institution of Chartered Surveyors (FRICS) Additional information on Professor Ling is available at http://warrington.ufl.edu/departments/fire vi Additional information on Professor Archer is available at http://warrington.ufl.edu/departments/fire www.downloadslide.com Brief Table of Contents part SETTING THE STAGE  part The Nature of Real Estate and Real LEGAL AND REGULATORY DETERMINANTS OF VALUE  18 Legal Foundations to Value  18 15 Mortgage Calculations and Decisions  410 part FINANCING AND INVESTING IN COMMERCIAL REAL ESTATE  430 16 Commercial Mortgage Types and Decisions  430 Government Controls and Real 17 Sources of Commercial Debt and Equity 18 Investment Decisions: Ratios  483 Capital 455 MARKET VALUATION AND APPRAISAL 99 19 Investment Decisions: NPV and IRR  503 20 Income Taxation and Value  523 Market Determinants of Value  99 Forecasting Ownership Benefits and Value: Market Research  129 Valuation Using the Sales Comparison and Cost Approaches  160 Valuation Using the Income Approach  191 part Conveying Real Property Interests  45 Estate Markets  69 part TIME, OPPORTUNITY COST, AND VALUE DECISIONS  384 14 The Effects of Time and Risk on Value  384 Estate Markets  part FINANCING HOME OWNERSHIP  217 Real Estate Finance: The Laws and Contracts 217 10 Residential Mortgage Types and Borrower part CREATING AND MAINTAINING VALUE 555 21 Enhancing Value through Ongoing Management 555 22 Leases and Property Types  578 23 Development: The Dynamics of Creating Value 604 Glossary 633 Index 648 Decisions 244 11 Sources of Funds for Residential Mortgages  273 part BROKERING AND CLOSING THE TRANSACTION 305 12 Real Estate Brokerage and Listing Contracts  305 13 Contracts for Sale and Closing  339 vii www.downloadslide.com Preface T he study and practice of real estate draws on a multitude of disciplines including architecture, urban and regional planning, building construction, urban economics, law, and finance This diversity of perspectives presents a challenge to the instructor of a real estate principles course Depending on their backgrounds and training and on the interests of the students, some instructors may choose to emphasize the legal concepts that define and limit the potential value of real estate Other instructors may focus more on licensing and brokerage issues (popular topics with many students) or on the investment decision-making process Still others may feel that real estate market and feasibility analysis should be the core topics in a principles class In short, one of the difficulties in teaching an introductory real estate course is that there appear to be too many “principles.” The critical question thus becomes: What framework should be used to teach these principles? Although the subject of real estate can be studied from many perspectives, we have adopted the value perspective as our unifying theme Why? Because value is central to virtually all real estate decision making including whether and how to lease, buy, or mortgage a property acquisition; whether to renovate, refinance, demolish, or expand a property; and when and how to divest (sell, trade, or abandon) a property Thus, whether a person enters the business of real estate in a direct way (e.g., development and ownership), becomes involved in a real estate service business (e.g., brokerage, property management, consulting, appraisal), or simply owns a home, he or she must continually make investment valuation decisions or advise others on their decisions The key to making sound investment decisions is to understand how property values are created, maintained, increased, or destroyed Once value is established as the central theme, all other concepts and principles of real estate analysis can be built around it Legal considerations, financing requirements and alternatives, income and property tax considerations, and local market conditions all are important primarily in the context of how they affect the value of the property For example, in Part students will study growth management and land use regulations Although these concepts have great interest from a political and public policy perspective, they are important from a real estate view primarily because of their potential effects on property rents and values Similarly, the “imperfections” in real estate markets discussed in Part 3—such as the lack of adequate data, the large dollar value of properties, and the immobility of land and structures—are of interest primarily because of their effects on market values Our objective is to provide the reader with a framework and a set of valuation and decision-making tools that can be used in a variety of situations The Fifth Edition Since the publication of Real Estate Principles: A Value Approach, Fourth Edition, continued changes have come upon the world of real estate This is true in transactions and brokerage with continued advancement of electronic marketing and the arrival of completely new forms and procedures for most real estate transactions, it is true in valuation with the expansion of automated valuation systems, a new version of the Uniform Residential Appraisal Report, and of new residential and commercial property data sources, and it is true in development and construction with the shift to “green” building But it is still more true in real estate finance and capital sources where the dramatic advancement of internet lending and the implementation of the “Dodd-Frank” Act have displaced traditional viii www.downloadslide.com Preface ix practices, procedures and players, in mortgage finance For investment property, the new players tend to be neither debt nor equity, but integrated entities who create a “capital structure,” and even the ownership structure, for the property In addition, there continues to be change with profound and far-reaching implications in a world where we now understand that both residential and commercial property values can go down as well as up This realization colors the demand for home ownership as well as every aspect of real estate investment, finance, and transactions for the foreseeable future Changes in This Edition ∙ The Test Bank has been expanded by 5-10 questions per chapter ∙ Industry Issues are updated throughout the text to reflect current issues and concerns in the real estate industry ∙ All web links and web search exercises are revised and updated ∙ Data, charts, and graphs have been updated wherever possible throughout the text ∙ Chapter 1: The discussion of the role of government and the production of real estate assets is updated ∙ Chapter 2: Numerous clarifications and updates have been made throughout the chapter New material on condominiums has been added along with a related new Industry Issue ∙ Chapter 3: All content is updated ∙ Chapter 4: All content is updated, along with numerous clarifications In addition, new topics are added, including form based zoning, and a summary overview of restrictions on real property ∙ Chapter 5: The effect of the Great Recession is incorporated References are expanded and updated The use of aerial photos to depict changing urban patterns is refined ∙ Chapter 6: All content is updated New tools of market analysis are examined, including the use if exclusion analysis, use of proxy variables and use of analogy ∙ Chapter 7: The chapter is updated to reflect recent changes in Uniform Standards for Professional Appraisal Practice (USPAP) that governs the appraisal process The latest version of the Uniform Residential Appraisal Report (URAR) is included ∙ Chapter 8: The Centre Point office building example is updated to reflect current mortgage rates and other market conditions Additional practice problems on direct capitalization are added to the end-of-chapter problems ∙ Chapter 9: All charts are updated Discussion of foreclosure is expanded along with owner choices in case of a financially “underwater” residence, including the process of a short sale Discusson of the Dodd-Frank Wall Street Reform and Consumer Protection Act is expanded, along with the Consumer Financial Protection Bureau and new forms and procedures required for home mortgage loans ∙ Chapter 10: All the data and examples are updated All FHA, VA, and conventional prime residential loan requirements and lender guidelines are updated New topics include expanded discussion of “piggyback” mortgages and Qualified Mortgages ∙ Chapter 11: Numerous topics have been clarified and all tables, charts, and examples have been updated The terminology is updated to reflect current industry usage Discussion of mortgage banking has been updated to reflect changes in the nature of that industry A new industry issues topic has been added on the rent vs buy decision Finally discussion is added on the new public policy focus in home mortgage lending: ability to pay ∙ Chapter 12: A new Industry Issues insert is included on the question of who should use a broker The example listing agreement form has been replaced with an updated version All information and examples are updated and discussions are expanded or clarified ∙ Chapter 13: The Dodd-Frank Act has resulted in complete change in the forms and procedures for home mortgage lending and for virtually all home sale closings These changes have been fully incorporated in the chapter Also, a new section has been added on the increasingly common practice of escrow and electronic closings www.downloadslide.com 652 Index correspondent relationship, 443 cost approach to appraisal, 167 cost-of-funds index, 219, 219n4 cost recovery period, 533 costs hard, 616 of real estate transactions, 14 in segmentation of market, 14 soft, 615 co-tenancy clause, 597–598 Counselors of Real Estate (CRE), 193 counteroffer, 341 County Business Patterns, 142 county government, recording process in, 55 covenant, 30, 47 restrictive, 30–31 covenant against encumbrances, 48 covenant of quiet enjoyment, 48 covenant of seizin, 47 CPM Code of Ethics, 567 credit scoring, 296 credit tenants, 559 credit union, 284 creditworthiness, 296, 559–560 cumulative classification, in zoning, 78 curtesy, 37 custodial maintenance, of property, 564 customization, in defining fixtures, 23 CVS, 605 D data in appraisal, 165 initial collection of, 133 processing, 119 data analysis, in appraisal, 165–166 debt acquiring a property with an existing, 233–234 mezzanine, 616 in refinancing decision, 267 debt coverage ratio (DCR), 440–441, 495 debt financing, 512n11 debt interests, in capital markets, 9, 10 debt refinancing, cash flows and, 487–488 debt-to-income ratio, 297 debt yield ratio (DYR), 441, 495, 496 deceptive marketing, 238 declaration of covenants, 30 dedication, 53, 79 deed, 46–50 empty, 49 general warranty, 49 grant, 49 deed—Cont involuntary conveyance by, 51–52 involuntary conveyance without, 53–54 judicial, 50 quitclaim, 50 recording, 54–55 requirements of, 47–49 special warranty, 49 trustee’s, 50 types of, 49–50 voluntary conveyance by, 51 voluntary conveyance without, 52–53 deed in lieu of foreclosure, 228 deed of bargain and sale, 50 deed of trust, 226–227 See also mortgage(s) mortgage vs., 227 deed restriction, 30–31, 48 defaults, 223, 227–228 decisions, 267–268, 443 effect on borrower, 230–231 nonforeclosure responses to, 228–229 technical, 227 defeasance clause, 436 defeasance requirement, 223 deferred maintenance, 564 deferred maintenance, of property, 564 deficiency judgment, 230 delivery of deed, 49 Dell, 155 demand clause, 224 demolition, asset management and, 573 Department of Housing and Urban Development (HUD), 5, 439 depreciation accrued, 167, 179, 180 methods of, 533–535 depreciation deductions, 531–535 cost recovery period, 533 depreciable basis, 531–533 methods of depreciation, 533–535 substantial improvements, 535 Dery, Matt, 87 descent, law of, 51 description of land in deeds, 48 methods of, 59–64, 59n10 description of property in appraisal, 165 in contract for sale, 343 design, of development projects architect, 611–614 engineers, 614 land planner, 614 landscape architect, 614 designated agents, 311 designations in sales and brokerage, 315–316 design-build construction, 619 developed land, in United States, 6, developers, 626–627 development comprehensive planning for construction, 618–620 coordination of contracting, 619–620 design, 611–614 architect, 611–614 engineers, 614 land planner, 614 landscape architect, 614 entering, 627–628 establishing site control, 606–607 feasibility analysis, 607–608 financing, 615–618 construction, 616 land acquisition, 615 mezzanine debt, 616 postconstruction, 617 growth restrictions on impact fees for marketing and leasing, 621–622 “numbers” of, 623–626 obtaining permits, 608–611 operation, 622–623 process of, 605–623 refinement, 607–608 site plan review in testing, 607–608 urban sprawl development and construction lending, 473 development process construction, 618–620 coordination of contracting, 619–620 design, 611–614 architect, 611–614 engineers, 614 land planner, 614 landscape architect, 614 establishing site control, 606–607 feasibility analysis, 607–608 financing, 615–618 construction, 616 land acquisition, 615 mezzanine debt, 616 postconstruction, 617 marketing and leasing, 621–622 obtaining permits, 608–611 operation, 622–623 process of, 605–623 refinement, 607–608 testing, 607–608 www.downloadslide.com 653 Index development sequence, typical, 623 devised, 51 direct capitalization, 199 abstracting cap rates from the market, 200–202 capitalization rates, 202–203 vs discounted cash flow, 192–193 income multipliers, 203–204 using for valuation, 199–205 direct co-ownership, 34, 34–38, 489–490 direct market extraction, 200 discount brokerage, 323–324 discounted cash flow direct capitalization vs., 192–193 models, investment valuation using, 505–511 vs ratios, 497–498 discounted cash flow (DCF) analysis, 205 estimating future sale proceeds, 206–207 using for valuation, 205–208 valuing future cash flows, 207–208 word of caution, 206 discounting, 207, 387 of commercial property, 396–397 present value of annuity, 394, 396 present value of lump sum, 393–395, 394 timeline for, 394 in time value of money, 385, 393–399 with uneven cash flows, 397–399, 398 user and capital markets in, 11 discount points, 413 discount rate in comparing loans, 419, 419–420 effect of taxes on, 515, 515–516 effect on present values, 402, 402–403 discrimination in housing, 318–320 disintermediation, 277, 277n4 disposition of freeholds, 25 of leaseholds, 26–27 as property right, 20 divorce, conveyance by, 52 doctrine of constructive notice, 54 Dodd-Frank Wall Street Reform and Consumer Protection Act, 238–239, 254, 364 Dollar General, 156 Dollar Tree, 156 dominant parcel, 27 dower, 37 down payment, 251 dual agency, 309, 309–310 unintentional, 312 due diligence, 445–446 due-on-sale clause, 226 E early payment mortgage (EPM), 421 earnest money, 361, 365 easement, 27, 29 implications of, 28, 29 implied, 53 vs license, 30 rights of, 29 easement appurtenant, 27, 27, 28 easement by estoppel, 53 easement by prescription, 53 easement by prior use, 53 easement in gross, 28 easement of necessity, 53 eBay Real Estate, 10 EBIDTA (earnings before deductions for interest, depreciation, income taxes, and amortization), 192n2 economic and environmental impact statements, 74 Economic and Housing Recovery Act, 258 economic base, 102 indicators of, 105–106 local economic activities and, 104 multiplier, 103–104 economic base multiplier, 103–104 economic rationale for employing a broker, 306–307 economic vacancy rate, 197n8 economies agglomeration, 107–108 agriculture-based, 102 real estate and, 5–7 economies of scale industry, 107 effective borrowing cost (EBC), 414 computation of, 414–416 holding period and, 416–418, 417 prepayment and, 415–416 up-front costs and, 416–418 effective gross income (EGI), 195–197, 197 effective gross income multiplier (EGIM), 203 effective rent, 587, 587–589 effective tax rate, 91, 517 elective share, 37, 37n21, 38 electrical engineer, 614 Elysian Forest, planned unit development example, 135–140 eminent domain, 52, 83 encroachments, 57 Endangered Species Act, 22, 608 energy efficiency standards, 77 Energy Star program, 620 enforcement of deed restrictions, 30, 30n9 recording in, 54–55 engineers, 614 civil, 614 electrical, 614 mechanical, 614 soils, 614 structural, 614 English common law, 225 environmental engineers, 86 environmental hazards, 82–83 environmental impact report (EIR), 608 environmental impact statement (EIS), 608 environmental movement, in land use planning, 75 Environmental Protection Agency (EPA), 82, 83 Environmental Value Assessment (EVA), 83 Equal Credit Opportunity Act (ECOA), 236 equations, for time value of money, 387, 387–388 equitable title, 343 equity, negative, in default decision, 267 equity dividend rate (EDR), 493, 496 equity interests, in capital markets, 9, 10 equity of redemption, 229 equity REITs, 469 equity returns, 442–443 errors and omission insurance, 315 escrow, 362–363 escrow account, 225 in contract for sale, 361 for earnest money, 365 escrow agent, 362–363 escrow clause, 225 escrow closings, 379–380 estate for years, 24 estate(s), 24, 24–27 estimated closing costs, 368–372, 369–371 estoppel, easement by, 53 Evans, Edna, 322 Evans, Lloyd, 322 evidence of title, 55–59, 56, 57 exceptions and reservations clause, 48 exclusionary zoning, 78 exclusive agency listing, 322 exclusive classification, in zoning, 78 exclusive right of sale listing, 322–323 exculpatory clause, 224 expansion option, 586 expected investment yield, use of term, 400 www.downloadslide.com 654 Index expenses fixed, 197 variable, 197 externalities, 70, 71 congestion, 71 impact fee, 81 internalizing, 81 negative, 71 urban sprawl, 71–72 extraterritorial jurisdiction, 74 F facilitating brokers, 312 Fair Housing Act, 318, 319 fallout risk, 280 Family Dollar, 152 Fannie Mae, 223n9, 230, 237, 245, 246n2, 287, 288–289, 290, 439 conforming standards of, 247–248, 247n5 importance of, 289–291 status of, 289–291 fast-track construction, 619 feasibility analysis, of project, 607–608 Federal Aviation Administration, 208 Federal Deposit Insurance Corporation (FDIC), 11 federal government eminent domain of, 83–88 in environmental hazard regulation, 83 Fifth Amendment and, 83n6 role in real estate market, 11 Federal Home Loan Banks, 291–292 Federal Home Loan Mortgage Corporation, 285 See also Freddie Mac Federal Housing Administration (FHA), 223n9, 226, 250, 252–253, 439 Federal Reserve Bank, 107 Federal Reserve Board, 219n4 Federal Reserve System (Fed), 11, 278 Federal Truth-in-Lending Act of 1968 (TILA), 364 Federl Deposit Insurance Corporation (FDIC), 282 fee simple absolute, 24, 25 fee simple conditional, 24, 25 fee simple estate, 209 FHA Home Equity Conversion Mortgage (HECM), 257–258 FHA mortgage insurance, 251 FHA mortgage loans, 251–253 reverse mortgages, 257–258 fiberglass, as environmental hazard, 82 Fidelity Federal Savings and Loan v De la Cuesta, 226 fiduciary relationship, 308 fiduciary responsibilities accounting, 308 confidentiality, 308 disclosure, 308 loyalty, 308 obedience, 308 skill and care, 308 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 277 financial risk, 442 financial risk ratios, 494–497 financing construction, 616 land acquisition, 615 mezzanine, 616 postconstruction, 617 financing terms, in appraisal, 167 fire safety codes, 77 fixed expenses, 197 fixed rate financing typical loan terms on, 434 fixed-rate mortgages, 418–421 balance on, 412–413 payments on, 411–412, 412n1 fixture, 22 flat lease scheduled rents for, 582 flat rent, 581 Fleming Realty and Insurance, Inc., 322 flex space, 598 floating-rate mortgage, 436–437 floor loan, 617 Florida bankruptcy in, homestead protection from, 32, 32n13 building codes in, 77 Community Development Districts in, 92 contract for sale in, 347–360 government rectangular survey of, 64, 65 homestead exemption in, 90, 90n16 property tax rate limitations in, 93 tenancy by the entirety, 35 timesharing in, 39 Florida East Coast Railroad Depot, 119 Florida Supreme Court, 625 foreclosure, 227, 229–230 bankruptcy and, 232–233 conveyance by, 52 deed in lieu of, 228 judicial, 231–232 for nonpayment of taxes, 92 form-based zoning, 81 Forsythe Appraisals LLC, 201 fracking, 40 fraud, 342, 342n1 Freddie Mac, 223n9, 230, 237, 245, 246n2, 285, 287, 289, 290, 439 See also Federal Home Loan Mortgage Corporation importance of, 289–291 status of, 289–291 freeholds, 25, 29 Frej, Anne B., 132n3 frictional vacancy, 197n7 See also natural vacancy rate FTSE NAREIT, 571 full platform operating company, 468 funds from operations (FFO), 477 future cash flows valuing, 207–208 future sale proceeds estimating, 206–207 future value, 387 of annuity, 389, 392–393 equation for, 387, 387–388 of annuity due, 393 factors in, 385 internal rate of return and, 399–400 of lump sum, 388–390, 389, 391 equation for, 387, 387–388 risk in, 385 time in, 385 G gap financing See mezzanine debt garden apartments, 590 gas rights, 40, 41 general agent, 308 general contractor, 618, 622 general lien, 31, 32n12 general partnership, 458 General Service Administration (GSA), 5 general warranty deed, 49 geographical information systems (GIS), 153–154 Ginnie Mae, 285, 287–288 See also Government National Mortgage Association (GNMA) Global Industry Classification Standard (GICS), 471 GNMA mortgage-backed security process, 286 going-concern value, 163n3 going-in cap rate, 201, 492, 492–493 going-in IRR, use of term, 400 going-out cap rate, 206 goods comparison, 121 convenience, 120–121 www.downloadslide.com 655 Index government in real estate market, 10–11 in rights enforcement, 19 Government National Mortgage Association (GNMA), 285 See also Ginnie Mae government rectangular survey, 61–64, 62, 63, 64, 65 government-sponsored enterprises (GSEs), 245, 246n2, 287 See also Fannie Mae; Freddie Mac government-sponsored mortgage programs, 250–255 government-sponsored programs, 439 Graaskamp, James, 150, 627 graduated lease scheduled rents for, 582 graduated rent, 581 grant deed, 49 grantee, 47 grantor, 47 Great Depression, 227, 276 Great Lakes shipping, 102 Great Recession, 234, 300 green building codes, 77 Green Buildings Initiative, 620 Green Globes, 620 Greenspan, Alan, 301 gross floor area, 596 gross income effective, 195–197 potential, 194–195 gross income multiplier (GIM), 203n14 gross leasable area (GLA), 596 gross lease, 582 ground lease, 607 growth restrictions Guttentag, Jack M., 425 H habendum clause, 48 hard costs, 616 hazard insurance in closing costs, 368 prorating, 367 hazardous substances clause, 226 health codes, 77 highest and best use, 166 high-rise apartment buildings, 589 HOEPA, 238 holding period effective borrowing cost (EBC), 416–418, 417 holdouts, 71 home equity loan, 255–256 home financing for marginal borrowers affordable housing loans, 299–300 subprime lending, 300–301 home loan, borrower of, 294–296 Home Mortgage Disclosure Act (HMDA), 239 home mortgage finance commercial banks, 278–279 revolution in, 275–279 rise of a world economy and the demise of the thrifts, 276–278 home mortgage lenders, consolidation in, 283 home mortgage lending, 292–294 Community Reinvestment Act (CRA), 239 Dodd-Frank Wall Street Reform and Consumer Protection Act, 238–239 Equal Credit Opportunity Act, 236 Home Mortgage Disclosure Act, 239 Home Ownership and Equity Protection Act, 238 Real Estate Settlement Procedures Act, 237 regulation of, 236–239 Truth-in-Lending Act, 236 home mortgage loans, market for, 274–275 home mortgage underwriting modern, 297–298 traditional, 296–297 homeowners tax factors affecting, 548–550 Home Ownership and Equity Protection Act (HOEPA), 238 Homeowner’s Policy of Title Insurance, 57–58 homestead protection from bankruptcy, 32, 32n13 protection from liens, 32, 32n12 homestead exemption, 90, 90n16 Honda, 276 hospitality property, 401, 599 cash flows of, 401 Hotel and Motel Brokers of America, 318 hours of operation, 598 housing discrimination in, 318–320 expense ratio, 297 in household wealth, 7, low-income, 536 subsidy programs, 11 housing finance modern, 275 traditional, 275 housing type, in segmentation of market, 14 Houston, Texas, zoning absent from, 72, 73 Hoyt, Homer, 114, 117 Hummel, Alan, 201 hurricanes, 77 hybrid ARM, 259–260 I Ileka v Lyons, 319 impact fee, 81 implied easement, 53 improvements in highest and best use analysis, 166 leased premises, 584 improvements on the land, improvements to the land, inclusion of mortgage covenants by reference, 224 income See also net operating income (NOI) capitalization, 192 estimating appropriate, 489 multipliers, 203–204 property taxation and, 93 income approach to appraisal, 167 income-producing properties, appraisal of, 167 income subject to taxation, 526–527 income taxes in investment decisions, 490–491 and investor cash flows, 515–517 in refinancing, 265–266 income tax rates, 527–528 index rate, 219–220, 421–422 indicated value, 169 indirect co-ownership, 33, 34 industrial properties common lease provisions of, 598–599 and leases, 598–599 industrial property, 401 cash flows of, 401 industry, real estate as, industry economies of scale, 107, 107, 121–123 and clustering, 121–123 informal appraisal, 161 infrastructure monopolies in, 74 Initiative for a Competitive Inner City (ICIC), 156 innovations in brokerage, 323–324 Institute of Real Estate Management (IREM), 198, 561, 567, 568, 592 institutional-grade real estate, 14 www.downloadslide.com 656 Index institutional investors, 464, 464 vs noninstitutional investors, 468 insurable value, 163n3 insurance clause, 225 intangible assets, intention, in defining fixtures, 23 Intercontinental Hotel Group, 130 interest charges, 218–219 interest-only amortizing mortgages, 259, 260 interest-only balloon mortgages, 259, 260 interest-only mortgages, 420 interest rate holding period and, 417 index rate, 421–422 lender’s yield, 413–414 teaser rate, 421, 421–422 interest rate risk, 280 interest rates, 218–219 fixed, 218–219 variable, 218–219 interest rate spread, in refinancing, 266 interest rate swap, 433n3 interests, 23 nonpossessory, 27–32 possessory, 24–27 interlease risk, 588 intermediaries, 462 intermediary brokers, 312 internal rate of return (IRR), 202, 399 going-in, use of term, 400 impact of leverage, 512 investment decisions about office buildings, 510 vs net present value, 510–511 required, determining, 402, 402–403, 403 taxes and, 516, 516–517 International Association of Assessing Officials (IAAO), 94 International Council of Shopping Centers, 198, 318, 594 Internet data exchange (IDX), 320 internet marketing, 320 Interstate Highway System, 118 intestate, 51 inverse condemnation, 86–88, 87 investment-grade properties, 14, 403, 403 investments securitized, 465 investment valuation vs market valuation, 504–505 using discounted cash flow models, 505–511 investment value, 163, 404, 404–405 investment yield, expected, use of term, 400 ITRA Realty Group, 587 J Jensen Beach, 625 “JOBS” Act of 2012, 469 “Jobs and Growth” tax relief package, 469n9 John Laing Homes, 22 joint tenancy, 34, 35 Jones v Mayer Co, 319 J P Morgan Chase & Co., 276, 279 judicial deed, 50 judicial foreclosure, 231 vs power of sale, 231–232 jumbo loans, 247–248 just compensation, 86 K Kelo, Susette, 86, 87 kickbacks, prohibition against, 364 Kroger, 559 L labor force characteristics, 106 laches, 30, 30n10 land, acquisition financing, 615 in future income risk, 400–401 land acquisition loans, 449 land description in deeds, 48 methods of, 59–64, 59n10, 60 land development loans, 449 landlock, easements for, 53 landlord, property rights of, 23 landlord-tenant laws, 562–563 state-based, 563 land planners, 81, 614, 614 landscape architect, 614, 614 land use changes in, 6, counterarguments to land use controls, 72–72 externalities, 71–72 incomplete information, 72 monopolies, 70–71 regulation of, 70–72 building codes in, 77 counterarguments to, 72 in risk, 400–401 uncertainty and value stability, 72 in United States, 6, urban, 113 land use control building codes in, 77 challenges in, 75 comprehensive, 74 conflicting notions of best practice, 75–76 land use control—Cont counterarguments to, 72 legality of, 78–80 modern tools of, 80–82 public planning for, 73–76 administration of, 79–80 comprehensive planning, 74 revolution in, 75 subdivision regulations, 79 zoning in, 76–82 land use negotiation thoughts of an experienced developer on, 610–611 land value, in appraisal, 166 land value contours bid-rent curves and, 113 late fees, 223 lawful intent, required for contract for sale, 341 law of agency, 308–313 fiduciary responsibilities, 308–309 real estate agents, 309–310 comparison of traditional agency relationships, 310 dual agency, 309–310 subagency, 309 types of agents, 308 law of descent, 51 law(s) on environmental hazards, 82 licensing, 313 zoning under, 75, 78 lawsuit, for nonperformance, 362 leadership, quality of life and, 106 Leadership in Environmental Efficiency and Design (LEED), 620 leaking underground storage tanks (LUSTs), 82–83 Lear Jet, 107 leased fee estate, 209 leasehold estates, 24, 26–27, 29 lease options, 585–586 cancelation option, 586 expansion option, 586 relocation options, 586 renewal options, 585 lease(s) broader considerations, 588–589 commercial, 561 essential elements of, 579 ground, 607 industrial properties and, 598–599 negotiated provisions, 579–587 net, 582 office properties and, 591–594 the property, 557–559 property managers and, 561–562 www.downloadslide.com 657 Index lease(s)—Cont residential rental properties and, 589–591 retail properties and, 594–598 lease term, 580, 591 leasing agents, 559 brokers, 558 commissions, 198n10 marketing and, 621–622 legal characteristics, in value of property rights, legal life estates, 24, 25 legal proceedings, deeds in, 50 legal title, 343 lender(s) in capital markets, 9, 10 in closing, 363–364 lender’s mortgage loan decisions ability-to-repay standard, 298 cash down payment requirement, 299 modern home mortgage underwriting, 297–298s recent underwriting failures, 299 traditional home mortgage underwriting, 296–297 capacity (ability to pay), 296–297 collateral, 296 creditworthiness, 296 lender’s yield, 414 computation of, 413–414 prepayment and, 415–416 Lennhoff, David C., 192n1 level-payment mortgages (LPMs), 246–247, 418 loan term for, 418–420 risk of, 424–425 leverage effect on cash flow, 506–507 effect on IRR, 512 effect on NPV, 512 impact on expected returns, 511–512, 512 impact on risk, 512–515, 513 levered cash flow, 506–507 liability assume, 233 in commercial loans, 431–432 release of, 233 LIBOR (London Interbank Offering Rate), 219, 219n5 license, 30 license law infractions, 315 failure to provide required information, 315 improper business practices, 315 improper handling of fees, 315 license law infractions—Cont mishandling trust money, 315 misrepresentation and fraud, 315 licensing laws, 313 of real estate brokers, 313–315 of salespersons, 313–315 lien(s), 31 assessment, 31 community development district lien, 31 consequences of, 32 general, 31, 32, 32n12 mechanics’, 32 mortgage, 31–32 priority of, 32 property tax, 31 specific, 31 lien theory, 225 and title theory, 225n10 life estates, 24, 25 life insurance policies, 463–464 lighting, 118–119 like-kind exchange, 548 limited liability company (LLC), 439, 460–461 limited partnership (LP), 439, 458–459 lines of credit, open-end, 255 linkages, 101 Linne, Mark R., 201 listing contracts, 309, 321 exclusive agency listing, 322 exclusive right of sale listing, 322–323 open listing, 322 provisions, 324–334 splitting the commission, 325–327 termination of, 325 termination of, 325 types of, 322–323 load factor, 593 loan balance, 412–413 Loan Estimate, 364 loan officer, 224 loan originators, 224 loan(s) application to closing, 445–446 assumable, 226 balloon, 222 broker, 224 bullet, 433n2 collateral, 296 commitment, 280 construction, 449 flipping, 238 floor, 617 land acquisition, 449 loan(s)—Cont land development, 449 miniperm, 449, 617 nonamortizing, 221 nonrecourse, 224 partially amortizing, 221 recourse, 224 securitizing, 281 servicing, 282 size, 442 submission package and application, 444–445 subprime, 223, 261, 300 thoughtlessness of, 14 terms, 440–441 loan submission package, 444–445 loan-to-value ratio (LTV) for home equity loan, 256 in investment decision, 495, 496 loan underwriting, 296 local economic activities, 104 See also secondary activities economic base and, 104 local government comprehensive planning in, 74 eminent domain of, 83 property taxation by, 88 in subdivision development, 79 localization, of real estate markets, 13–14 local property markets, in real estate asset production, 11–12 location characteristics in heterogeneity of real estate, 13 in value of property rights, location quotient, 106 location-value signature (LVS), 13 lockout provision, 435 Love Canal, 75, 83 low-income housing, 536 Lucas, David, 88 Lucas v South Carolina Coastal Council, 88, 88n13 lump sum, 387 future value of, 388–390, 389, 391 equation for, 387, 387–388 present value of, 393–395, 394 equation for, 387, 387–388 LUSTs (leaking underground storage tanks), 82–83 Lyons, Mary, 319 M maintenance as an investment decision, 564–566 management agreement, 566 management fees, 567–568 www.downloadslide.com 658 Index managers asset, 556 construction, 618 property, 556 margin, 220, 421, 421–422 marketable title, 49, 49n2 marketable title laws, 58–59 market analysis in appraisal, 165–166 important techniques in, 133–135 market analysis techniques, 133–135 example, 134–135 excluding the irrelevant, 134 finding proxy variables, 134 using analogy, 134 market data, sources of, 170 market errors, minimizing, 101 market facilitators real estate brokers as, 306 marketing aggressive, 238 deceptive, 238 internet, 320 and leasing, 621–622 market misjudgments in real estate, 100 market parameters, 133 market projections, and real estate cycles, 151–152 market rents, 194n4, 195 market research, 130–131 cycle of, 132 Elysian Forest, planned unit development example, 135–140 examples of, 135–150 final notes on the process of, 151 first analysis, 133 improving one’s capacity in, 151 initial collection of data, 133 market-defining story, 132–133 market projections and real estate cycles, 151–152 Palm Grove Office Complex example, 140–142 Plane Vista Apartments example, 142–150 refining, 133 reverse to conventional, 133 tools of, 153–156 geographical information systems (GIS), 153–154 psychographics, 154 survey research, 155–156 market research tools geographical information systems (GIS), 153–154 psychographics, 154 survey research, 155–156 market(s) capital (See capital markets) characteristics of, 13–15 externalities in, 71–72 for home mortgage loans, 274–275 localization of, 13–14 segmentation of, 14 unregulated, 70, 71 market segmentation, 131, 316 market valuation vs investment valuation, 504–505 market value, 162–163, 162n1 See also valuation reconciliation of, 168 marriage ownership interest from, 36–38 tenancy by the entirety, 35 Marriott, Hilton, 130 maturity imbalance problem, 248 McGurn, Ken, 613, 627 McGurn, Linda, 627 McGurn Investment Company, 627 Mears, Teresa, 326 mechanical engineer, 614 mechanics’ liens, 32 megamortgage banking, 282–284 Member of the Appraisal Institute (MAI), 162 metes and bounds, 59–60, 60 mezzanine debt, 616 mezzanine financing, 616 mezzanine loans, 439 Miami Herald, 284 Michigan, eminent domain in, 85 Microsoft, 559 Microsoft Excel, 388 millage rate, 90 mills, 90 mineral rights, 41 miniperm loan, 449, 617 minors, legal competency of, 341 mitigation banking entrepreneurship, 85 modern home mortgage underwriting, 297–298 Modigliani, Franco, 261 mold, as environmental hazard, 82 monopolies, regulation of, 70–71 Moody’s, 559 mortality risk, in reverse mortgages, 257 mortgage-backed securities, 285–287 mortgage banking, 279 creating and funding, 280 cycle, 282 loan commitment, 280 megamortgage banking, 282–284 and mortgage brokerage, 279–284 pipeline risk, 280–281 mortgage banking—Cont pooling and securitizing loans, 281 servicing the loans, 282 mortgage brokerage mortgage banking and, 279–284 mortgage brokers, 254, 279, 284 mortgage debt outstanding by type of loan, 274 mortgagee, 225 mortgage insurance FHA, 251 private mortgage insurance (PMI), 246–247, 248–250 mortgage insurance premium (MIP), 251, 252 mortgage liens, 31–32 mortgage loans adjustable rate mortgage (ARM), 421–425 adjustment periods of, 423 considerations in choosing, 425 example of, 421–422, 422 hybrid, 259–260 vs LPMs, 248 mechanics of, 421 option, 260–261 rate caps for, 423–425, 424 share of mortgage originations, 423, 423 teaser rates for, 421, 421–422 Alt-A, 261–262 alternative amortization schedules for, 420–421 balloon amortizing, 259, 260 calculations for, 412–418 choosing, 263 comparing costs of, 263–265 conforming conventional, 247 conventional, 246 prime, 246–250 early payment, 421 FHA loans, 251–253 fixed-rate, 418–421 balance on, 412–413 payments on, 411–412, 412n1 government-sponsored, 250–255 home equity loan, 255–256 hybrid ARMs, 259–260 interest-only, 420 interest-only amortizing, 259, 260 interest-only balloon, 259, 260 jumbo, 247–248 level-payment, 418 nonconforming conventional, 247 option ARMs, 260–261 partially amortizing, 420 piggyback, 255 www.downloadslide.com 659 Index mortgage loans—Cont primary market for, 245 prime, 246–250 private mortgage insurance for, 248–250 purchase-money, 254–255 Qualified Mortgage, 262 reverse, 256–258, 257, 258 secondary market for, 245–246 size of, 264 subprime thoughtlessness of, 14 VA-guaranteed, 253 mortgage market, primary, 245 mortgage menu, 245 mortgage notes adjustable rates, 219–221 index rate, 219–220 margin, 220 payment caps, 221 rate caps, 221 teaser rates, 221 interest rate and interest charges, 218–219 The Mortgage Professor, 425 mortgage REITs, 469 mortgage(s), 31, 224–226, 225 See also deed of trust acceleration clause, 226 adjustable rate, 219 balloon, 433–435 bankruptcy and foreclosure, 232–233 in commercial loans, 432–433 commercial mortgage loan(s) approval process, 443–448 balloon mortgage, 433–435 default decisions, 443 due diligence, 445–446 financial leverage, 442–443 financial risk, 442 floating-rate loans, 436–437 government-sponsored programs, 439 loan submission package, 444–445 loan terms, 440–441 maximum loan amount, 446–448 mezzanine loans, 439 mortgage in, 432–433 note for, 431–432 participation mortgages, 437 prepayment, 443 prepayment penalties, 436 prepayments, 435–436 sale-leasebacks, 437 second mortgage, 438–439 size of, 442 vs treasury yields, 435 mortgage(s)—Cont in condominiums, 35 in cooperatives, 36 vs deed of trust, 227 default, 227–228 deficiency judgment, 230 description of the property, 225 due-on-sale clause, 226 escrow clause, 225 floating-rate, 436–437 foreclosure, 229–230 hazardous substances clause, 226 insurance clause, 225 judicial foreclosure vs power of sale, 231–232 participation, 437 par value, 435 payment affordability, 434 permanent, 433–436 prepayments, 435–436 preservation and maintenance clause, 226 real estate debt without, 234–235 recording, 54–55 residential, 223n8 second, 438–439 secondary market for residential, 284–285 mortgagor, 225 MSCI, 571 multifamily property, 401 multinuclei city, 117 multiple city centers, 112–113 multiple listing service (MLS), 309 comparable sales data in, 170 multipliers, 494 Municipal Utility Districts (MUDs), 92 mutual assent, 341, 342 N National Association of Colleges and Employers, 619 National Association of Home Builders Model Green Home Guidelines program, 620 National Association of Industrial and Office Properties, 318 National Association of Mortgage Brokers (NAMB), 254 National Association of Realtors (NAR), 5, 234, 315–316, 320 National Council of Real Estate Investment Fiduciaries (NCREIF), 571 National Family Mortgage, 234 National Housing Act, 250, 250n10 National Resources Inventory Report, 6, 6 natural vacancy rate, 195 See also frictional vacancy negative amortization, 221, 238 negative equity, in default decision, 267 negative externalities, 71 negative financial leverage, 442 negotiated lease provisions, 579–587 access to premises, 586 advertising and signage, 586 alterations and improvements, 584 assignment and subletting, 584–585 concessions, 584 lease options, 585–586 cancelation option, 586 expansion option, 586 relocation options, 586 renewal options, 585 lease term, 580 operating expenses, 582–583 parking, 586 rental payments, 581–582 base rent, 582 flat rent, 581 graduated rent, 581–582 percentage rent, 582 subordination and non-disturbance, 587 use of the premises, 580 neighborhood shopping center, 595 net asset value (NAV), 477 net benefit income tax and, 265 in refinancing, 264–265 net income multiplier (NIM), 494 net listing, 306 net operating income (NOI), 192, 199 estimating, 193–199 net operating income (NOI), estimating, 193–199 capital expenditures, 198–199 effective gross income, 195–197 net operating income, 199 operating expenses, 197–198 potential gross income, 194–195 net present value (NPV), 405 cash multiple vs., 607 impact of leverage, 512 vs internal rate of return (IRR), 510–511 investment decisions about office buildings, 508–510, 509 in refinancing, 264 taxes and, 516, 516–517 net sale proceeds (NSP), 207 new construction pace of, local markets in, 12 volatility of process, 12 www.downloadslide.com 660 Index new listing services, 323–324 new urbanism, 76 New York Stock Exchange (NYSE), in market value, 161 New York Times, 295 NIMBY phenomenon, 621 nonamortizing loan, 221 nonconforming conventional loans, 247 nonconforming uses, 78 non-disturbance, 587 nonforeclosure responses to default, 228–229 noninstitutional investors vs institutional investors, 468 nonjudicial foreclosure, 231 See also power of sale nonperformance, remedies for, 362–363 nonpossessory interests, 27–32 nonrecourse loans, 224, 431–432 nontax revenue, 89 note, 218 See also mortgage loans adjustable rates, 219 index rate, 219 margin, 220 payment cap, 221 rate caps, 221 teaser rate, 221 bankruptcy and foreclosure, 232–233 for commercial mortgage loan, 431–432 default, 227–229 deficiency judgment, 230 demand clause, 224 foreclosure, 229–230 interest rate and interest charges, 218–219 judicial foreclosure vs power of sale, 231 late fees, 223 mortgage or deed of trust, 224–227 acceleration clause, 226 description of the property, 225 due-on-sale clause, 226 escrow clause, 225 hazardous substances clause, 226 insurance clause, 225 preservation and maintenance clause, 226 payments, 221–222 personal liability, 223–224 prepayment penalties, 223 right of prepayment, 222–223 term, 222 notice actual, 55 constructive, 54 O occupancy, certificate of, 617 offer, required for contract for sale, 341–342, 361 office buildings common lease provisions of, 593–594 defining rentable space in, 592–593 expense stops, 593–594 investment decisions about assumptions in, 485 before-tax equity reversion (BTER) in, 507–508 debt financing, 487–488 example, 484–485 financial risk ratios, 494–497 income tax in, 490–491 internal rate of return, 510 multipliers, 494 net present value in, 508–510, 509 profitability ratios, 492–493 investment valuation, 505–506, 505–506 and leases, 591–594 lease terms, 593 levered cash flow, 506–507 unlevered cash flow, 506–507 Office Depot, 155 office properties common lease provisions of, 593–594 defining rentable space in, 592–593 expense stops, 593–594 and leases, 591–594 lease terms, 593 offices, new forms of, 118–119 oil rights, 41 commercial property brokerage, 322 open-end line of credit, 255 open listing, 322 operating expense escalation clause, 583 operating expense ratio (OER), 494–495, 496 operating expenses vs capital improvements, 530 operating expenses (OE), 197, 197–198, 197n9, 582–583 estimates, appropriate, 489 opportunity cost, 267, 394 optimal ownership form, 461–462 option, on the land, 606 option ARM, 260–261 ordinary annuity, 387 ordinary life estate, 24, 25 Otis, Elisha, 114 outlet center, 595 overall capitalization rate, 201 overall caps, 221 owner associations, in condominiums, 36 ownership estates, 25 Owner’s Policy of Title Insurance, 57–58 P Palm Grove Office Complex example, 140–142 parcel, 27 parking, 586 partial interests, valuing, 209–210 partially amortizing loan, 221 partially amortizing mortgages, 420 participation mortgages, 437 partnerships, 489–490 par value, 435 patent, 51 payback period, in refinancing, 266 payment, for mortgage, calculating, 411–412 payment caps, 221 payments, 221–222 Peiser, Richard, 132n3 pension funds, 463 percentage rent, 582 clause, 596–597 performance evaluation and compensation, 571 performance standard, 81 periodic caps, 221 periodic tenancy, 24, 26 permanence potential, 560 permanent mortgages, 433–436 penalties, 436 typical loan terms on, 434 permits, development projects and, 608–611 personal liability, 223–224 personal performance, 361 personal property, 4, 20 fixtures as, 22–23 personal residence, liens on, 32, 33 personal rights, 20, 20 Pfizer, 86, 87 Phase I EVA (Environmental Value Assessment), 83 piggyback loan, 255 pipeline risk, 280, 280–281 PITI, 297 Plane Vista Apartments example, 142–150 Plane Vista Orlando, Florida, 143 planned unit development (PUD), 80 planning commission, 80 plat lot and block number, 61, 62 plat map, 61, 62 police power, 70, 76–78, 79, 94 pooled equity investments, 457–462 www.downloadslide.com 661 Index pooling, and securitizing loans, 281 portfolio lenders, 279 positive externalities, 71 positive financial leverage, 442 possession adverse, 53, 53n6 as property right, 20 possessory interest, 24–27 postconstruction financing, 617 potential gross income (PGI), 194, 194–195 power of attorney, 341 power of sale, 224, 230n20, 231 See also nonjudicial foreclosure judicial foreclosure vs., 231–232 for residential mortgages, 231 power shopping center, 595 premises access to, 586 condition of, 591 repairing and maintaining, 564–566 use of, 580 premiums for FHA mortgage insurance, 251–252 for private mortgage insurance, 249–250 prorating, 367 prepayment effective borrowing cost and, 415–416 lender’s yield and, 415–416 prepayment penalties, 223, 238, 436 yield maintenance, 223 present value, 387 vs acquisition price, 404, 404–405 of annuity, 394, 396 equation for, 387, 387–388 effect of discount rates on, 402, 402–403 internal rate of return and, 399–400 loan term and, 419, 419 of long-term cash flows, 399 of lump sum, 393–395, 394 equation for, 387, 387–388 as point of indifference, 395 preservation and maintenance clause, 226 preventive maintenance, of property, 564 price-earnings (PE) ratios, 192 primary mortgage market, 245 prime conventional mortgage loans, 246–250 “prime” home mortgage loans, 289 principal, 308 principal meridian, 61 private conduits, 291 private data services, for comparable sales data, 170 private debt, in capital markets, 9, 10 private equity, in capital markets, 9, 10 private mortgage insurance (PMI), 246–247, 248–250 probate, 37, 37n20, 51 production revolution, 118 profession, real estate as, professional associations and designations, 568–569 Professional Real Estate Development: The ULI Guide to the Business (Peiser and Frej), 132n3 profitability ratios, 492–493, 497–498 pro forma, 205 project, cycle of evolving, 609 property, acquiring with an existing debt, 233–234 corrective maintenance of, 564 custodial maintenance of, 564 decision to improve or alter, 571–573 deferred maintenance of, 564 description of, 225 leasing, 557–559 marketing, 557 nature of, 19–23 preventive maintenance of, 564 quiet enjoyment of, 579 residential, 560 “subject to” the existing loan, 233 property acquisition, initial investment in, 487 property management, 561 property management agreements, 566–568 contents of, 566 property managers, 556, 561 collecting rent, 562 communicating with owners, 563 complying with landlord-tenant laws, 562–563 functions of, 557–566 maintaining tenant relations, 563 marketing the property, 557–559 leasing the property, 557–559 owners as, 556–557 repairing and maintaining the premises, 564–566 corrective maintenance, 564 custodial maintenance, 564 deferred maintenance, 564 maintenance as an investment decision, 564–566 preventive maintenance, 564 selecting tenants, 559–561 creditworthiness, 559–560 residential properties, 560 tenant mix, 560 signing leases, 561–562 top third-party, 562 property markets, 9, 11 property owners communicating with, 563 as managers, 556–557 property rights, 20 as enduring, 20 nature of, 19–22 nonrevocability of, 19 vs personal rights, 20, 20 protesting, 22 real estate as, of real property, 21, 21, 23–32 restrictions on, 22 property tax lien, 31 proprietary lease, 36n19 pro rata share, 490 prorating, 367 proxy variables as market analysis techniques, 134 Pruitt-Igoe public housing project, 100 psychographics, 154 public debt, in capital markets, 9, 10 public equity, in capital markets, 9, 10 public planning, for land use control administration of, 79–80 challenges in, 75 comprehensive, 74 public purpose, 85 public real estate markets, 473–475 public records comparable sales data in, 170 real property placed in, 54–55 public use, 85–86 Publix, 559 purchase-money mortgage (PMM), 254–255 Q Qualified Mortgage, 262 Qualified Mortgages standard, 238 quality of life and leadership, 106 quiet enjoyment of the property, 579 Quigley, John, 22 quitclaim deed, 49 R radon, 82 range lines, 63, 63 Rapanos, John, 84 rate caps, 221 for ARM loans, 423–425, 424 rate lock agreement, 446 rate of return in time value of money, 399–400 raw land, Real Capital Analytics, 201 www.downloadslide.com 662 Index real estate defined, economy and, 5–7 heterogeneous nature of, 13 immobility of, 13 as industry, institutional-grade, 14 market misjudgments in, 100 markets and participants, 7–12 nature of, overview, 1–2 as profession, as rights, 4, 19 tangible asset, 2–4 and U.S wealth, 6–7, valuation of, market characteristics in, 161 real estate agency relationships and disclosures, 310–312 real estate agents, 309–310 See also real estate brokers designated, 311 dual agency, 309–310 general, 308 special, 308 subagency, 309 traditional agency relationships, 310 types of, 308 universal, 308 real estate appraisers, 162 real estate assets, managing corporate, 573–574 real estate attorneys, 232, 372, 373 real estate brokerage firms commercial brokerage, 316–317 international aspects of brokerage, 321 market segmentation, 316 residential brokerage, 317–320 specialization and service, 316 real estate brokers, 317 See also real estate agents brokerage licensing administration, 314 in closing, 363 economic rationale for employing, 306–307 facilitating, 312 intermediary, 312 license law infractions, 315 licensing of, 313–315 marketing function, 316–321 commercial brokerage, 316–317 international aspects of brokerage, 321 market segmentation and specialization and service, 316 residential brokerage, 317–320 real estate brokers—Cont real estate license, obtaining, 314–315 exemptions, 314–315 experience requirements, 314 general requirements, 315 transaction, 312–313 transactions with and without, 307 real estate brokers as market facilitators, 306 real estate business brokerage and, 306–307 real estate commission, 314 real estate counselors, 488 real estate cycles market projections and, 151–152 real estate debt without a mortgage, 234–235 real estate decisions role of urban analysis in, 123–124 real estate development projects, 153 Real Estate Exchange, 318 real estate investment trusts (REITs), 192, 458, 468–470, 556, 571 historical stock offerings and total market capitalization of listed, 474 income, measuring, 476–477 investment performance, 478, 478–479 management, 476 mutual funds and, 470 nonlisted, 470 private, 470 securities offerings by, 475 valuation, 477–478 real estate investors, environmental hazards and, 83 real estate license exemptions, 314–315 experience requirements, 315 general requirements, 315 Real Estate Market Analysis: A Case Study Approach (Schmitz and Brett), 132n3 real estate market research as storytelling, 131–133 real estate private equity funds, 466–467 real estate professionals, 573 real estate property acquiring with an existing debt, 233–234 corrective maintenance of, 564 custodial maintenance of, 564 decision to improve or alter, 571–573 deferred maintenance of, 564 description of, 225 leasing, 557–559 real estate property—Cont marketing, 557 preventive maintenance of, 564 quiet enjoyment of, 579 “subject to” the existing loan, 233 Real Estate Report, 201, 403, 403 Real Estate Research Corporation (RERC), 201, 403 real estate sales associates, 587 real estate sales brokers, 587 real estate salespersons, 317 Real Estate Settlement Procedures Act (RESPA), 237, 364 real estate valuation market segmentation, 131 slipperiest step in, 130–131 real property, 4, 20 assessed value of, 90–91 classes of, 525–526 dealer property, 525 fixtures as, 22–23 investment property, 525 modes of conveyance, 50–54, 51 personal residence, 525 restrictions on ownership, 94 rights of, 21, 21, 23–32 taxable value of, 90–91 tax-exempt, 90 trade or business property, 525 Real Property Administrator (RPA), 569 real property tax ad valorem, 88–89 in adverse possession, 54 calculating, 90–91 in closing costs, 368 in comparable sales data, 170 criticisms of, 93–94 exemption from, 90 government power over, 88–89 homestead exemption for, 90 jurisdiction over, 89–90 lien for, 31 mechanics of, 89–93 nonpayment of, 92–93 poor administration of, 94 prorating, 367 as regressive, 93 special assessments, 91–92 tax rate effective, 91 millage, 90 reconciliation, 168 reconstructed operating statement, 194, 194 recording statutes, 54–55 recourse loans, 224 recovery fund, 315 redlining, 239 www.downloadslide.com 663 Index refinancing, decision about, 264–267 refinement, of project, 607–608 regional shopping center, 595 regulation, of home mortgage lending, 236–239 regulatory taking, 86–88 rehabilitation, 571 reinvestment risk, 435 REIT IPO market, 474 relationships, in defining fixtures, 23 release of liability, 233 reliction, 54 relocation options, 586 remainder estate, 25 remainder state, 24 remodeling, 571 renewal options, 585 rent base, 582 collecting, 562 contract, 195 effective, 587–589 flat, 581 graduated, 581–582 market, 195 percentage, 582 property managers and, 562 user markets in determining, 11 rentable area, 592 rentable/usable ratio, 592 rental growth rate, 489 rental payments, 581–582 flat rent, 581 graduated rent, 581 percentage rent, 582 rental real estate operational management of, 622–623 required returns, determining, 402, 402–403, 403 rescind, 236 rescission, 362 residential appraisers, 193 residential brokerage, 317–318 residential lending, 224 residential market, segmentation of, 14 residential mortgages, 223n8 See also mortgage(s) Fannie Mae, 288–289 Federal Home Loan Banks, 291–292 Freddie Mac, 289 Ginnie Mae (GNMA), 287–288 private conduits, 291 purchasers in the secondary market, 287–292 secondary market for, 284–285 secondary market purchasers, 292 states having power of sale for, 231 residential properties, 560 appraisal of, 167, 168 comparable sales data for, 169 residential rental properties common lease provisions of, 590–591 condition of premises, 591 and leases, 589–591 lease term, 591 rules and regulations, 591 utilities, 591 restricted appraisal report, 168 restrictive covenants, 30–31 retailing, new forms of, 118–119 retail properties common lease provisions of, 596–598 common area maintenance, 598 co-tenancy clause, 597–598 hours of operation, 598 percentage rent clause, 596–597 use clauses, 597 defining leasable area in, 596 and leases, 594–598 returns effect of taxes on, 546–547 reuse, asset management and, 573 revenue, trends in, 489 reverse mortgage loans, 256–258, 257, 258 reversion, 206 rezoning, 80 Riegle Community Development and Regulatory Improvement Act, 278n6 right of first refusal, 586 right of prepayment, 222–223 right of survivorship, 35 right(s) nature of, 19–22 as nonrevocable, 19 personal, 20, 20 real estate as, 4, 19 risk, 385 fallout, 280 in future value, 385 interest rate, 280 interlease, 588 leverage impact on, 512–515, 513 pipeline, 280–281 with rate caps, 424–425 reinvestment, 435 spectrum of, 400, 401 value and, 400–402 Rockefeller Center, 607 root of title, 59 rule of capture, 41 S safety codes, 77 sale estimation, 539–548 adjusted basis, 539–540 complications caused by alternative ownership forms, 547–548 corporate tax rates, 542–543 effect of taxes on values and returns, 546–547 net benefits of tax depreciation, 545–546 Section 1231 property, 543–544 taxable gain or loss, 540 taxation of income from a fully taxable sale, 541–542 taxes due on sale, 544–545 types of income generated by a sale, 541 sale-leasebacks, 437 sale listing agreement, exclusive right of, 329–334 sales, designations in, 315–316 sales comparison approach to appraisal, 167, 169 adjustments to transaction prices in, 170–175, 176, 177 comparable properties in, 168–169 comparable sales data in, 169–170, 175–176, 176–177 salespersons license, 313 licensing of, 313–315 sanitation codes, 77 Schmitz, Adrienne, 132n3 scope, in appraisal, 165 Sears, 155 secondary activities, 104 See also local economic activities secondary market purchasers of residential mortgages in, 287–292 for residential mortgages, 284–285 secondary mortgage market, 245–246 second mortgage, 438–439 Section 199, 252 Section 203 loans, 252 Section 1231 property, 543–544 sections, 61, 63, 63–64, 64 sector model of urban form, 114–117, 117 securities mortgage-backed, 285–287 securitized investments, 465 securitizing loans pooling and, 281 segmentation, of real estate markets, 14 self-contained appraisal report, 168 self-storage facilities, 100 www.downloadslide.com 664 Index seller rights and obligations of, 340 steps before closing, 372 selling expenses (SE), 207 selling price market value as, 163 Senior Residential Appraiser (SRA), 162 separate accounts, 466 separate property, 38 services, convenience, 120–121 servient parcel, 27 settlement, procedures for, 364 shale gas leases, 40 shopping centers community, 595 gross floor area of, 596 leases, 599 neighborhood, 595 power, 595 regional, 595 specialty, 595 short sale, 228 signage, 586 The Silent Spring (Carson), 75, 75n3 Simon, Robert, 100 Simon Property Group (SPG), 192 market value of, 161 single agency, 309 site control, establishing, 606–607 site plan review, 80 skyscrapers, smart growth, 75 Society of Industrial and Office Realtors, 318 soft costs, 615 soils engineer, 614 Sony, 276 special agent, 308 special assessments, 91–92 specialty shopping center, 595 special use classification, in zoning, 78 special warranty deed, 49 specific lien, 31 specific performance, 362 spouses, in tenancy by entirety, 35 spreadsheets, for future valuation, 388 Standard and Poor’s, 559 standard sale timeline vs contract for deed timeline, 235 Standards for Real Estate Transactions, 361 Staples, 155 state, comprehensive planning for, 74 state-based landlord-tenant laws, 563 state government in comprehensive planning, 74 eminent domain of, 83 role in real estate market, 10 statement of condition, 591 Statute of Frauds, 54, 342–343, 343n3 statutory right of redemption, 230 Stevens, John Paul, on eminent domain, 87 storytelling real estate market research as, 131–133 structural engineer, 614 structural standards, in building codes, 77 structures, incomplete information on, 72 subagency, 313, 309 subchapter S corporation, 460, 460n5 subcontractors, 618 subdivisions dedication in, 53 deed restrictions in, 30–31 platted, 61, 62 regulation of, 79 subject property, 161 sublease, 584 subletting, 584–585 submarkets, 316 subordination, 587 subordination agreement, 617 subprime lending, 300–301 subprime loans, 223, 261, 300 thoughtlessness of, 14 subsurface, property rights of, 21, 21, 41 suburban retail centers, 156 summary appraisal report, 168 Superfund, 82, 83 superregional malls, 595 Supreme Court on eminent domain, 85–86 on wetlands regulation, 84 on zoning, 88 surveying, in metes and bounds, 59–60 survey research, 155–156 Susette Kelo v City of New London, Connecticut, 87 sustainability standards, 77 syndicate, 465 T taking, under eminent domain, 86–88 tangible assets, 2–4 Target, 155 tax factors affecting homeowners, 548–550 taxable gain, 540 taxable loss, 540 taxable value, 89–91 tax assessor, 90–91 taxation income subject to, 526–527 tax base, 89 tax credits, 535–536 tax deductions for home equity loan interest, 256 tax depreciation net benefits of, 545–546 taxes ad valorem, 88–89 effect on IRR, 516, 516–517 effect on NPV, 516, 516–517 income taxes in investment decisions, 490–491 and investor cash flows, 515–517 in refinancing, 265–266 jurisdictions over, 89–90 taxes from operations, 536–538 tax-exempt properties, 90 tax liabilities cash calculation vs tax calculation, 529 costs of mortgage financing, 530 depreciation deductions, 531–535 cost recovery period, 533 depreciable basis, 531–533 methods of depreciation, 533–535 substantial improvements, 535 estimating from operations, 528–535 estimating from sale, 539–548 adjusted basis, 539–540 complications caused by alternative ownership forms, 547–548 corporate tax rates, 542–543 effect of taxes on values and returns, 546–547 net benefits of tax depreciation, 545–546 Section 1231 property, 543–544 taxable gain or loss, 540 taxation of income from a fully taxable sale, 541–542 taxes due on sale, 544–545 types of income generated by a sale, 541 like-kind exchange, 548 low-income housing, 536 operating expenses vs capital improvements, 530 tax credits, 535–536 taxes from operations, 536–538 tax shelter, 538–539 tax rate effective, 91 millage, 90 tax revenues, uses of, 85, 89 tax shelter, 538–539 www.downloadslide.com 665 Index teaser rates, 221, 421, 421–422 technical defaults, 227 technology air-conditioning, lighting, and new forms of retailing and offices, 118–119 change in the 20th century, 117–119 data processing and communications, advances in, 119 production revolution, 118 urban transportation revolution, 118 tenancy joint, 34, 35 periodic, 24, 26 tenancy at sufferance, 24, 26 tenancy at will, 24, 26 tenancy by the entirety, 34, 35 tenancy for years, 24, 26 tenancy in common, 34, 34–35 tenancy-in-common (TIC), 461, 462 tenant improvement (TI) allowance, 580 tenant mix, 560 tenant property, fixtures as, 23 tenant relations maintaining, 563 tenant reps, 558 tenant(s) anchor, 596 credit, 559 property rights of, 23 responsibility for operating expenses, 582 selecting, 559–561 term, in real estate loans, 222 term for amortization, 222 terminal capitalization rate (Rt), 206 terminal value (Vt), 206 termination, of listing contract, 325 term to maturity, 222 testate, 51 testing, of project, 607–608 Texas bankruptcy in, homestead protection from, 32, 32n13 zoning in, 72 thrifts, 275 demise of, 276–278 tier lines, 63, 63 time, in future value, 385 time limits, in contract for sale, 346 timesharing, 38–39 time value of money (TVM), 385 compounding operations, 388–393, 389 discounting operations, 393–399 explanation of, 385–386 rates of return in, 399–400 required returns, determining, 402, 402–403, 403 terminology used for, 387 timeline in, 386, 386 yields in, 399–400 timing of construction expenditures, 625 title, 56 conveyance of, in contract for sale, 361 equitable, 343 evidence of, 55–59, 56 legal, 343 marketable, 50, 58–59, 59n9 root of, 59 title abstract, 56 title abstract with attorney’s opinion, 57 title examiners, 59 title insurance, 50, 57 in closing costs, 368–372 controversy over, 58 limitations of, 57 obtaining, 372 title insurance commitment, 57–58 title researchers, 59 title search, 56 scope of, 58–59 title theory, 225 lien theory and, 225n10 Title VIII of the Civil Rights Act, 318 Torrens certificate, 58 Toshiba, 276 tourism, 104 townships, 61–63 toxic waste, 82 Toyota, 276 Toyota Motor Sales South Campus Office Development, Torrance, California, 620 trade fixtures, 23, 584 traditional agency relationships, 310 traditional home mortgage underwriting, 296–297 capacity (ability to pay), 296–297 collateral, 296 creditworthiness, 296 transaction arm’s-length, 169 complexity of, 14 cost of, 14 transaction-based commissions, 224 transaction broker, 312 transaction brokers, 312–313 transaction prices, 163 trustee, 226 trustee’s deed, 50 Truth-in-Lending Act (TILA), 236, 414 typical development sequence, 623 U umbrella partnership REIT (UPREIT), 476 underwriting failures, 299 undue influence, 342, 342n2 Uniform Probate Code (UPC), 51 Uniform Residential Appraisal Report (URAR), 168 Uniform Residential Landlord and Tenant Act (URLTA), 563n2 Uniform Standards of Professional Appraisal Practice (USPAP), 163 unintended dual agency, 311 unintentional dual agency, 312 United States Green Building Council (USGBC), 620 United States tax law objectives and implementation of, 524 taxation of individuals and corporations, 524 universal agent, 308 unlevered cash flow, 506–507, 507n2 up-front costs, and effective borrowing cost, 416–418 up-front mortgage insurance premium (UFMIP), 251, 252 urban analysis role in real estate decisions, 123–124 urban form combined effects on, 119–120 concentric ring model of, 113–114 sector model of, 114–117 urban growth agglomeration economies, 107–108 industry economies of scale, 107 labor force characteristics, 106 quality of life and leadership, 106 supply side of, 106–108 urbanism, new, 76 Urban Land Institute (ULI), 198, 590 urban land uses bid-rent curves and, 113 location patterns of, 120–123 comparison goods and clustering, 121 convenience “goods” and central place patterns, 120–121 industry economies of scale and clustering, 121–123 urban planning, smart growth in, 75 urban service areas, 74 urban service boundary, 401 urban sprawl, 71–72 urban systems, performance standards for, 81 urban transportation revolution, 118 usable area, 592 www.downloadslide.com 666 Index US Bancorp, 276 U.S Bureau of the Census, 142 U.S Census, 106 U.S Department of Energy, 620 U.S Department of Treasury Office of Thrift Supervision (OTS), 280 use clauses, 597 as property right in, 20 U.S Environmental Protection Agency, 620 user markets, interaction with other markets, 11, 12 in rental rate determination, 11 use value, 163n3 U.S Federal Reserve Board, U.S News & World Report, 326 U.S Supreme Court, 226 U.S Treasury, 219, 223, 290 U.S wealth, and real estate, 6–7, utilities, tenants and, 591 V vacancy assumptions about, 489 in highest and best use analysis, 166 vacancy and collection loss rates, 197n8 VA-guaranteed loans, 253 valuation investment value in, 163n3 market characteristics in, 161 market value in, 162–163 transaction prices in, 163 value assessed, 90, 163n3 in decision making, 11 fixtures in, 23 going-concern, 163n3 indicated, 169, 178 insurable, 163n3 investment, 163, 404, 404–405 market interaction in determining, 11, 12 risk and, 400–402 stability of, 72 taxable, 91 uncertainty in, 72 values effect of taxes on, 546–547 variable expenses, 197 proxy, 134 variance, 78 ventilation codes, 77 Veterans Affairs (VA), 223n9, 250 Veterans Affairs (VA) loans, 226 virtual office websites (VOWs), 320 W Walgreens, 559, 605 The Wall Street Journal, 219 Walmart, 155 Wal-Mart, 605 Walt Disney World, 606 warehouses, 598 warehousing, 278 water, property gained or lost by, 54 water rights, 39–41 Wells Fargo, 276, 279 Wells Fargo Commercial Real Estate, 440 wetlands, regulation of, 84–85 Wilshire Associates, 571 words of conveyance, 47 World War II, 118–119, 276 Y yield-maintenance agreement, 436 yield maintenance prepayment penalty, 223 yields, in time value of money, 399–400 Z Zappos.com, 155 zoning administration of, 79–80 criticism of, 71–72 exclusionary, 78 form-based, 81 in land use control, 76–82 legality of, 78 ordinances, 77–78 vs planned unit development, 80 urban systems in, 81 zoning commission, 79, 80 zoning ordinances, 77–78 ... contain expanded examples and discussions of real estate valuation and appraisal: Appraisal Institute The Appraisal of Real Estate, 14th ed Chicago: American Institute of Real Estate Appraisers,... Estate: A Tangible Asset  Real Estate: A Bundle of Rights  Real Estate: An Industry and Profession  Real Estate and the Economy  Land Use in the United States  Real Estate and U.S Wealth  Real. .. Market Analysis for Real Estate Chicago: Appraisal Institute, 2014 Kane, M S., M R Linne, and J A Johnson Practical Applications in Appraisal Valuation Modeling: Statistical Methods for Real Estate