Understanding Software Updates for Connected Systems

Understanding Software Updates for Connected Systems

Design and Aesthetic Considerations: Exploring how sectional and roller doors differ in design, appearance, and suitability for different architectural styles.

In today's rapidly evolving technological landscape, the integration of connected systems into everyday appliances has become increasingly common. One such appliance that has seen significant advancements is the garage door system. Modern garage door installations often come equipped with smart technology, allowing homeowners to control and monitor their doors remotely through smartphones or home automation systems. At the heart of these connected systems lies a crucial component: software updates.


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The importance of software updates for garage door installations cannot be understated. These updates serve as the backbone for maintaining security, enhancing functionality, and ensuring compatibility within the ever-expanding ecosystem of connected devices.


Firstly, security is paramount when it comes to any connected system, and garage doors are no exception. These portals provide direct access to our homes and thus need robust protection against cyber threats. Software updates play a critical role in fortifying this defense by patching vulnerabilities that could be exploited by malicious actors. As cyber attacks become more sophisticated, manufacturers continuously develop new security protocols to safeguard your home. Regularly updating your garage door's software ensures that you have the latest defenses in place against unauthorized access.


Beyond security, software updates also bring enhancements in functionality that improve user experience and convenience. Manufacturers strive to innovate constantly by introducing features that make interacting with your smart garage door smoother and more intuitive. Whether it's integrating voice commands through virtual assistants like Alexa or Google Assistant or refining motion detection algorithms for better performance, these improvements are often delivered through software updates. By keeping your system updated, you can take full advantage of these advancements without needing additional hardware upgrades.


Furthermore, as technology progresses and new devices enter the market, maintaining compatibility across different platforms becomes essential for seamless operation. Software updates ensure that your garage door system remains compatible with other components of your smart home ecosystem. This might include harmonizing operations with newer smartphones or integrating smoothly with updated versions of home automation hubs like SmartThings or Apple HomeKit.


In summary, understanding the importance of software updates for connected systems like modern garage doors is crucial in harnessing their full potential while safeguarding against risks. Regular updates not only protect against security threats but also enhance functionalities and ensure compatibility within an interconnected world. As we move towards an increasingly digital future where connectivity defines our living spaces, staying informed about and diligent with software updates will remain vital for maximizing both safety and convenience in our homes.

In today's rapidly evolving technological landscape, the concept of a smart home has become more than just a futuristic dream; it is now an integral part of modern living. Among the various components that can be integrated into a smart home, the garage door system stands out as a significant element. A smart garage door system not only enhances convenience but also adds an extra layer of security to your home. However, like any connected system, it requires regular software updates to maintain its functionality and security. Understanding these updates and their role in the key components of a smart garage door system is essential for any homeowner looking to keep their technology up-to-date and secure.


At its core, a smart garage door system comprises several key components: the motorized opener, sensors, connectivity modules, and the control interface or app. Each of these elements plays a vital role in ensuring that the system functions seamlessly. The motorized opener is responsible for physically opening and closing the door. Sensors are crucial for detecting obstacles or checking whether the door is open or closed. Connectivity modules enable communication between the garage door and other devices or networks, often via Wi-Fi or Bluetooth. Lastly, the control interface-usually accessible through a smartphone app-allows users to operate the garage door remotely.


Software updates are critical to maintaining each component's optimal performance within this interconnected framework. These updates can address security vulnerabilities by patching flaws that hackers might exploit to gain unauthorized access to your network or even your home itself. Regular updates ensure that new features can be added over time without requiring hardware changes, thus extending the life and functionality of your existing devices.


Moreover, software updates often include enhancements that improve compatibility with other smart home systems or third-party applications. This interoperability is increasingly important as homeowners continue to expand their network of connected devices-from thermostats and lighting systems to security cameras and voice-activated assistants. A well-updated smart garage door can communicate effectively with these devices, creating a cohesive ecosystem that enhances overall efficiency and convenience.


Another essential aspect of understanding software updates for connected systems like smart garage doors is user experience improvement. Developers frequently release updates designed to streamline operations, fix bugs that may cause glitches or crashes in apps or interfaces, and refine user interfaces for greater intuitiveness and ease-of-use.


For homeowners who might be hesitant about regularly updating their systems due to fears about complexity or potential disruptions in service during installation periods-it's worth noting that manufacturers often take great care in testing these updates thoroughly before release. Additionally, they usually provide step-by-step instructions along with customer support options should any issues arise during implementation.


In conclusion, while setting up a smart garage door system offers numerous advantages regarding convenience and safety-it's equally important not only initially installing such systems but also keeping them updated throughout their lifespan by understanding how critical routine software maintenance truly is! With each update comes improvements not only towards operational efficiency but also increased protection against cybersecurity threats alongside enhanced capabilities integrating further within broader IoT ecosystems already present inside many homes today! By prioritizing regular check-ups on firmware versions installed across all aspects related directly back towards controlling access points surrounding properties alike-we ensure continued peace-of-mind knowing everything remains secure whilst maximizing utility provided from invested technologies themselves!

Common repair issues with traditional garage door styles

Garage doors, often overlooked yet crucial elements of our homes, serve not only as entry points but also as vital components of our property's aesthetic and security.. Traditional garage door styles, such as those made from wood or steel panels, are renowned for their classic appeal and robustness.

Common repair issues with traditional garage door styles

Posted by on 2025-01-01

The impact of automation on reducing garage door repair frequency

In recent years, the realm of garage door automation has experienced remarkable advancements, fundamentally altering how homeowners interact with this ubiquitous element of residential architecture.. Among the most compelling future trends is the potential impact of automation on reducing the frequency of garage door repairs.

The impact of automation on reducing garage door repair frequency

Posted by on 2025-01-01

Material Choices and Durability: Discussion on common materials used for each type of door, their durability, maintenance requirements, and impact on longevity.

In the rapidly evolving landscape of connected systems, software updates play a crucial role in maintaining security, functionality, and user satisfaction. However, implementing these updates is not without its challenges. Understanding these common challenges is essential for organizations seeking to ensure their systems remain reliable and secure.


One of the foremost challenges in implementing software updates for connected systems is ensuring compatibility across diverse hardware platforms and operating environments. Connected systems often encompass a wide array of devices, each with its own specifications and constraints. This diversity can lead to issues where an update that works seamlessly on one device causes failures or degraded performance on another. Developers must rigorously test updates across multiple platforms to minimize such risks, but this process can be time-consuming and resource-intensive.


Another significant challenge is managing downtime during the update process. For many connected systems, particularly those used in critical applications like healthcare or industrial control systems, even brief periods of downtime can have severe consequences. Organizations must carefully plan updates to minimize disruption, which often involves scheduling them during low-usage periods or incorporating mechanisms for seamless rollbacks if issues arise post-update.


Security is also a critical concern when implementing software updates. Updates are often deployed to patch vulnerabilities; however, they also introduce new potential points of entry for cyber threats if not handled properly. Ensuring that update mechanisms are secure-by using encryption and authentication protocols-is vital to prevent malicious actors from exploiting the update process itself.


User resistance can present another hurdle in the effective implementation of software updates. Users may be wary of changes that could alter familiar interfaces or workflows, leading them to delay or avoid installing updates altogether. To combat this reluctance, developers should focus on clear communication about the benefits and necessity of each update while minimizing disruptions through intuitive design choices.


Bandwidth limitations pose yet another challenge in deploying software updates for connected systems spread over large geographical areas or in regions with limited internet connectivity. These constraints necessitate efficient delivery methods such as incremental updates rather than complete system overhauls.


Finally, there's the overarching challenge of maintaining comprehensive documentation throughout the update lifecycle-from planning and development through deployment and post-update support-to ensure that any issues can be quickly identified and resolved.


In conclusion, while software updates are indispensable for sustaining modern connected systems' functionality and security, they present several common challenges that require careful navigation. By understanding these obstacles-ranging from compatibility issues to security concerns-organizations can better strategize their approach to implementing effective software updates that enhance system resilience while minimizing disruption for users.

Material Choices and Durability: Discussion on common materials used for each type of door, their durability, maintenance requirements, and impact on longevity.

Insulation and Energy Efficiency: Evaluating the insulation properties of sectional and roller doors and how they affect energy efficiency in a home or commercial setting.

In today's interconnected world, the concept of a "smart home" is no longer a futuristic dream but a present reality. Among the many components of this modern household, connected garage doors play a crucial role in improving convenience and security. However, as with any connected system, managing software updates is critical to maintaining functionality and safeguarding against vulnerabilities. To ensure that these systems operate smoothly and securely, it is essential to understand best practices for managing updates.


Firstly, regularity is key. Software developers continuously work to improve their products by fixing bugs and enhancing features. By setting up automatic updates or regularly checking for new versions manually, homeowners can ensure their connected garage doors benefit from the latest advancements and security patches. This proactive approach minimizes risks associated with outdated software and enhances overall performance.


Secondly, understanding the source of updates is vital. Only download updates directly from the manufacturer or authorized platforms. This ensures authenticity and protects against malicious software that could compromise both the device and personal data. Manufacturers typically have dedicated apps or websites where legitimate updates are made available; utilizing these channels reduces exposure to potential threats.


Moreover, backing up settings before an update can save time and frustration should anything go awry during the process. Although most manufacturers strive to make updates seamless, unforeseen issues can sometimes lead to lost settings or configurations. A quick backup allows users to restore their preferred setup without hassle.


Another important practice is staying informed about update-related news from manufacturers. Subscription to newsletters or alerts from trusted sources keeps users abreast of critical announcements regarding software improvements or vulnerabilities that may require immediate attention.


Finally, cybersecurity awareness cannot be overstated when managing any connected system's updates. Employing strong passwords, enabling two-factor authentication if available, and maintaining network security through robust firewalls are complementary measures that enhance protection alongside regular software updates.


In conclusion, managing software updates for connected garage doors requires diligence and awareness but pays off significantly in terms of enhanced functionality and security. By adhering to best practices such as ensuring regularity in updating schedules, verifying update sources for authenticity, backing up settings before installation, staying informed through official channels, and prioritizing cybersecurity measures-users can enjoy peace of mind knowing their smart homes are both efficient and secure.

Security Features: Analyzing the security features inherent to sectional versus roller doors, including locking mechanisms and resistance to forced entry.

In today's increasingly interconnected world, software updates have become a cornerstone of maintaining the security and functionality of connected systems. As our reliance on technology grows, so does the importance of understanding the security considerations associated with these updates. Software updates are not just about adding new features or improving performance; they play a critical role in safeguarding systems against vulnerabilities and cyber threats.


At the heart of security considerations for software updates is the need to protect sensitive data and maintain system integrity. Every update is an opportunity to patch security holes that could otherwise be exploited by malicious actors. Cybercriminals are constantly searching for unpatched vulnerabilities in software, which they can use as entry points to infiltrate systems, steal data, or cause damage. Thus, regular and timely updates are essential to closing these gaps and reducing the attack surface available to hackers.


However, while software updates are crucial for maintaining security, they also introduce their own set of risks if not managed correctly. One major consideration is ensuring that updates themselves do not become vectors for cyberattacks. If an update process is compromised, attackers could distribute malicious code disguised as legitimate updates. To mitigate this risk, organizations must implement robust authentication mechanisms such as digital signatures that verify the authenticity of each update before it is applied.


Another significant consideration is compatibility and testing. Updates should be thoroughly tested in controlled environments before being deployed widely across connected systems. This helps prevent disruptions caused by unforeseen conflicts with existing applications or hardware configurations. Inadequate testing can result in downtime or loss of functionality, which could be particularly detrimental for mission-critical systems.


The timing and frequency of updates also play a vital role in their effectiveness from a security standpoint. While frequent updates ensure that systems remain protected against emerging threats, they can also strain resources if not managed efficiently. Organizations must balance the need for immediate protection with practical considerations such as user convenience and operational continuity.


Furthermore, communication with end-users during the update process cannot be underestimated. Clear instructions regarding when and how to install updates help ensure compliance and reduce resistance among users who might otherwise delay or ignore them due to lack of understanding or concerns about potential disruptions.


Lastly, organizations should adopt a proactive approach by anticipating future vulnerabilities through threat intelligence gathering and analysis. Staying informed about evolving cyber threats allows developers to prioritize critical patches over less urgent ones based on real-time risk assessments.


In conclusion, navigating the landscape of software updates requires careful attention to various security considerations aimed at protecting connected systems from ever-evolving cyberspace challenges while minimizing disruption risks posed by poorly managed deployments themselves . By prioritizing authenticity , compatibility ,timeliness ,user engagement ,and foresightful planning organizations empower themselves fortify their defenses against sophisticated adversaries seeking exploit weak links inherent within interconnected digital ecosystems .

Cost Comparison: Breaking down the initial costs, long-term value, maintenance expenses, and potential return on investment for each door type.

In the rapidly evolving landscape of connected systems, software updates are not merely a matter of convenience but a critical component for maintaining optimal performance and ensuring safety. The impact of outdated software on system performance and safety is profound, often leading to inefficiencies, vulnerabilities, and potential security breaches.


At the heart of any connected system lies its software-the code that drives functionality, usability, and protection. When this software becomes outdated, it can no longer keep pace with the demands placed upon it by modern technological advancements or emerging threats. One of the most immediate impacts is on system performance. Outdated software tends to be less efficient because it lacks enhancements that improve speed and responsiveness. Users may experience slower processing times, frequent crashes, or incompatibility with new applications or devices. These issues not only frustrate users but also hinder productivity in environments where time and efficiency are critical.


Furthermore, outdated software poses significant safety risks. As technology evolves, so do cyber threats. Hackers continually develop new methods to exploit vulnerabilities in systems that have not been updated with the latest security patches. This can lead to data breaches where sensitive information is stolen or corrupted. In more severe cases, especially within industrial or infrastructural settings such as power grids or transportation networks, compromised systems can result in catastrophic failures with potentially devastating consequences.


Moreover, outdated software limits an organization's ability to innovate and adapt to changing market conditions or consumer expectations. Without regular updates that introduce new features or improvements, businesses may find themselves lagging behind competitors who are better equipped to leverage technology for strategic advantage.


Understanding the importance of timely software updates involves recognizing their role as both a shield against external threats and a catalyst for improved system functionality. Regular updates ensure that connected systems remain robust against evolving challenges while optimizing performance through bug fixes and feature enhancements.


In conclusion, maintaining up-to-date software is essential for preserving both the integrity and efficiency of connected systems. By prioritizing timely updates, organizations can safeguard their assets from potential threats while maximizing operational effectiveness-a dual benefit that underscores the vital role of contemporary software management practices in today's interconnected world.

Real estate appraisal, property valuation or land valuation is the process of assessing the value of real property (usually market value). Real estate transactions often require appraisals because every property has unique characteristics. The location also plays a key role in valuation. Appraisal reports form the basis for mortgage loans, settling estates and divorces, taxation, and so on. Sometimes an appraisal report is used to establish a sale price for a property.

Types of value

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There are several types and definitions of value sought by a real estate appraisal. Some of the most common are:

  • Market value – the price at which an asset would trade in a competitive Walrasian auction setting. Market value is usually interchangeable with open market value or fair value. International Valuation Standards (IVS) define:
Market value – the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.[1]
  • Value-in-use, or use value[2] – the net present value (NPV)[3] of a cash flow that an asset generates for a specific owner under a specific use. Value-in-use is the value to one particular user, and may be above or below the market value of a property.
  • Investment value – the value to one particular investor, and may or may not be higher than the market value of a property. Differences between the investment value of an asset and its market value motivate buyers or sellers to enter the marketplace. International Valuation Standards (IVS) define:
Investment value – the value of an asset to the owner or a prospective owner for individual investment or operational objectives.[1]
  • Ad valorem tax value – the value used for taxation purposes, determined by the collection of data through the mass appraisal process. The mass appraisal process applies the data collected through various sources to real property to determine taxable value.[4]
  • Insurable value – the value of real property covered by an insurance policy. Generally, it does not include the site value.
  • Liquidation value – may be analyzed as either a forced liquidation or an orderly liquidation and is a commonly sought standard of value in bankruptcy proceedings. It assumes a seller who is compelled to sell after an exposure period which is less than the market-normal time-frame.

Price vs value

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There can be differences between what the property is worth (market value) and what it cost to buy it (price). A price paid might not represent that property's market value. Sometimes, special considerations may have been present, such as a special relationship between the buyer and the seller where one party had control or significant influence over the other party. In other cases, the transaction may have been just one of several properties sold or traded between two parties. In such cases, the price paid for any particular piece is not its market "value" (with the idea usually being, though, that all the pieces and prices add up to the market value of all the parts) but rather it's market "price".

At other times, a buyer may willingly pay a premium price, above the generally accepted market value, if his subjective valuation of the property (its investment value for him) was higher than the market value. One specific example of this is an owner of a neighboring property who, by combining his property with the subject property (assemblage), could obtain economies-of-scale and added value (plottage value). Similar situations sometimes happen in corporate finance. For example, this can occur when a merger or acquisition happens at a price which is higher than the value represented by the price of the underlying stock. The usual explanation for these types of mergers and acquisitions is that "the sum is greater than its parts", since full ownership of a company provides full control of it. This is something that purchasers will sometimes pay a high price for. This situation can happen in real estate purchases too.

But the most common reason for value differing from price is that either the buyer or the seller is uninformed as to what a property's market value is but nevertheless agrees on a contract at a certain price which is either too expensive or too cheap. This is unfortunate for one of the two parties. It is the obligation of a real property appraiser to estimate the true market value of a property and not its market price.

Frequently, properties are assessed at a value below their market values; this is known as fractional assessment.[5] Fractional assessment can result in properties that are assessed at 10% or less of their given market values.[6]

Market value definitions in the United States

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In the United States, appraisals are for a certain type of value (e.g., foreclosure value, fair market value, distressed sale value, investment value). The most commonly used definition of value is market value. While Uniform Standards of Professional Appraisal Practice (USPAP) does not define Market Value, it provides general guidance for how Market Value should be defined:

A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal.

Thus, the definition of value used in an appraisal or Current Market Analysis (CMA) analysis and report is a set of assumptions about the market in which the subject property may transact. It affects the choice of comparable data for use in the analysis. It can also affect the method used to value the property. For example, tree value can contribute up to 27% of property value.[7][8]

Main approaches to value

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There are three traditional groups of methodologies for determining value. These are usually referred to as the "three approaches to value" which are generally independent of each other:

  • The sales comparison approach (comparing a property's characteristics with those of comparable properties that have recently sold in similar transactions).
  • The cost approach (the buyer will not pay more for a property than it would cost to build an equivalent).
  • The income approach (similar to the methods used for financial valuation, securities analysis or bond pricing – where the implied property value is a function of the property's pro forma cash flow, or NOI in the context of real estate).

However, the recent trend of the business tends to be toward the use of a scientific methodology of appraisal which relies on the foundation of quantitative-data,[9] risk, and geographical based approaches.[10][11] Pagourtzi et al. have provided a review on the methods used in the industry by comparison between conventional approaches and advanced ones.[12]

As mentioned before, an appraiser can generally choose from three approaches to determine value. One or two of these approaches will usually be most applicable, with the other approach or approaches usually being less useful. The appraiser has to think about the "scope of work", the type of value, the property itself, and the quality and quantity of data available for each approach. No overarching statement can be made that one approach or another is always better than one of the other approaches.

The appraiser has to think about the way that most buyers usually buy a given type of property. What appraisal method do most buyers use for the type of property being valued? This generally guides the appraiser's thinking on the best valuation method, in conjunction with the available data. For instance, appraisals of properties that are typically purchased by investors (e.g., skyscrapers, office buildings) may give greater weight to the Income Approach. Buyers interested in purchasing single family residential property would rather compare price, in this case, the Sales Comparison Approach (market analysis approach) would be more applicable. The third and final approach to value is the Cost Approach to value. The Cost Approach to value is most useful in determining insurable value, and cost to construct a new structure or building.

For example, single apartment buildings of a given quality tend to sell at a particular price per apartment.[13] In many of those cases, the sales comparison approach may be more applicable. On the other hand, a multiple-building apartment complex would usually be valued by the income approach, as that would follow how most buyers would value it. As another example, single-family houses are most commonly valued with the greatest weighting to the sales comparison approach. However, if a single-family dwelling is in a neighborhood where all or most of the dwellings are rental units, then some variant of the income approach may be more useful. So the choice of valuation method can change depending upon the circumstances, even if the property being valued does not change much.

The sales comparison approach

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The sales comparison approach is based primarily on the principle of substitution. This approach assumes a prudent (or rational) individual will pay no more for a property than it would cost to purchase a comparable substitute property. The approach recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her wants and needs for the lowest cost. In developing the sales comparison approach, the appraiser attempts to interpret and measure the actions of parties involved in the marketplace, including buyers, sellers, and investors.

Data collection methods and valuation process

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Data is collected on recent sales of properties similar to the subject being valued, called "comparables". Only SOLD properties may be used in an appraisal and determination of a property's value, as they represent amounts actually paid or agreed upon for properties. Sources of comparable data include real estate publications, public records, buyers, sellers, real estate brokers and/or agents, appraisers, and so on. Important details of each comparable sale are described in the appraisal report. Since comparable sales are not identical to the subject property, adjustments may be made for date of sale, location, style, amenities, square footage, site size, etc. The main idea is to simulate the price that would have been paid if each comparable sale were identical to the subject property. If the comparable is superior to the subject in a factor or aspect, then a downward adjustment is needed for that factor.[clarification needed] Likewise, if the comparable is inferior to the subject in an aspect, then an upward adjustment for that aspect is needed.[clarification needed] The adjustment is somewhat subjective and relies on the appraiser's training and experience. From the analysis of the group of adjusted sales prices of the comparable sales, the appraiser selects an indicator of value that is representative of the subject property. It is possible for various appraisers to choose a different indicator of value which ultimately will provide different property value.

Steps in the sales comparison approach

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  1. Research the market to obtain information pertaining to sales, and pending sales that are similar to the subject property
  2. Investigate the market data to determine whether they are factually correct and accurate
  3. Determine relevant units of comparison (e.g., sales price per square foot), and develop a comparative analysis for each
  4. Compare the subject and comparable sales according to the elements of comparison and adjust as appropriate
  5. Reconcile the multiple value indications that result from the adjustment (upward or downward) of the comparable sales into a single value indication

The cost approach

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The cost approach was once called the summation approach. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. The value of the improvements is often referred to by the abbreviation RCNLD (for "reproduction/replacement cost new less depreciation"). Reproduction refers to reproducing an exact replica; replacement cost refers to the cost of building a house or other improvement which has the same utility, but using modern design, workmanship and materials. In practice, appraisers almost always use replacement cost and then deduct a factor for any functional dis-utility associated with the age of the subject property. An exception to the general rule of using the replacement cost is for some insurance value appraisals. In those cases, reproduction of the exact asset after a destructive event like a fire is the goal.

In most instances when the cost approach is involved, the overall methodology is a hybrid of the cost and sales comparison approaches (representing both the suppliers' costs and the prices that customers are seeking). For example, the replacement cost to construct a building can be determined by adding the labor, material, and other costs. On the other hand, land values and depreciation must be derived from an analysis of comparable sales data.

The cost approach is considered most reliable when used on newer structures, but the method tends to become less reliable for older properties. The cost approach is often the only reliable approach when dealing with special use properties (e.g., public assembly, marinas). However, it is important to consider if there is actually a market for the use and all forms of obsolescence. Some special use properties lack an active market such that the cost approach may not be reliable either and may be more indicative of a use value or such. In some cases, it may be appropriate to consider alternative uses.

Obsolescence

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The cost approach requires adjustments for obsolescence, stemming from three sources.

  • Physical (depreciation) - Reduction based on the wearing-out of the physical components.
  • Functional - Loss in value for some functional or design aspect of the property.
  • External - Loss in value for something outside of the property.

Physical depreciation is most familiar. As a structure ages, there is an effect on value. For example, buyers may reduce prices because they expect to make expensive replacements soon. Or in other cases, buyers expect higher utility expenses because they figure the property has older and worn insulation.

Functional obsolescence relates to the design of the property. It could be something that is inadequate about a property (say a house that lacks a swimming pool in a hot climate like Arizona) or something that is superadequate (say a 2-bedroom house that has 9 bathrooms). In either case, there is a deduction to the value compared to the costs of the structures that are there. For example, the 9 bathrooms all cost the same to construct but they add less and less. The appraisal should evaluate whether it is feasible to cure (fix) the item - that is, consider if the increase in value by fixing it exceeds the cost of the fix.

External obsolescence is something outside of the property. It could be changes in market conditions, or an undesirable neighboring property. External obsolescence cannot be fixed.

The income approach

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The income capitalization Approach (often referred to simply as the "income approach") is used to value commercial and investment properties. Because it is intended to directly reflect or model the expectations and behaviors of typical market participants, this approach is generally considered the most applicable valuation technique for income-producing properties, where sufficient market data exists.

In a commercial income-producing property this approach capitalizes an income stream into a value indication. This can be done using revenue multipliers or capitalization rates applied to a Net Operating Income (NOI). Usually, an NOI has been stabilized so as not to place too much weight on a very recent event. An example of this is an unleased building which, technically, has no NOI. A stabilized NOI would assume that the building is leased at a normal rate, and to usual occupancy levels. The Net Operating Income (NOI) is gross potential income (GPI), less vacancy and collection loss (= Effective Gross Income) less operating expenses (but excluding debt service, income taxes, and/or depreciation charges applied by accountants).

Alternatively, multiple years of net operating income can be valued by a discounted cash flow analysis (DCF) model. The DCF model is widely used to value larger and more expensive income-producing properties, such as large office towers or major shopping centres. This technique applies market-supported yields (or discount rates) to projected future cash flows (such as annual income figures and typically a lump reversion from the eventual sale of the property) to arrive at a present value indication. In Canada, reversion values typically range from 16x-21x the NOI of year of sale.

When homes are purchased for personal use the buyer can validate the asking price by using the income approach in the opposite direction. An expected rate of return can be estimated by comparing net expected costs to the asking price. This return can be compared to the home owner's other investing opportunities.[14]

UK valuation methods

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In the United Kingdom, valuation methodology has traditionally been classified into five methods:[15]

1. Comparative method. Used for most types of property where there is good evidence of previous sales. This is analogous to the sales comparison approach outlined above.

2. Investment method, also known as hardcore. Used for most commercial (and residential) property that is producing future cash flows through the letting of the property. This method compares the estimated rental value (ERV), or "top slice" to the current ("passing") income, or "bottom slice", to give an indication of whether the future value of the property should rise or fall based on income. If a property's income is higher than the ERV this is sometimes known as "froth", which may be confused with the US use of "froth" describing the period before a real estate bubble.

The cash flows can be compared to the market-determined equivalent yield, and the property value can be determined by means of a simple model. Note that this method is really a comparison method, since the main variables are determined in the market. In standard U.S. practice, however, the closely related capitalizing of NOI is confounded with the DCF method under the general classification of the income capitalization approach (see above).

3. Residual method. Used for properties ripe for development or redevelopment or for bare land only. The site or unimproved property value is based on the improved or developed value less costs of construction, professional fees, development finance costs and a developer's profit or return on risk. [clarification needed]

4. Profit method. Used for trading properties where evidence of rates is slight, such as hotels, restaurants and old-age homes. A three-year average of operating income (derived from the profit and loss or income statement) is capitalized using an appropriate yield. Note that since the variables used are inherent to the property and are not market-derived, therefore unless appropriate adjustments are made, the resulting value will be value-in-use or investment value, not market value.

5. Cost method. Used for land and buildings of special character for which profit figures cannot be obtained or land and buildings for which there is no market because of their public service or heritage characteristics. Both the residual method and the cost method would be grouped in the United States under the cost approach (see above).

Under the current RICS Valuation Standards, the following bases of value are recognized:

  • Market value (see PS 3.2);
  • Market rent (see PS 3.3);
  • Worth (investment value) (see PS 3.4); and
  • Fair value (see PS 3.5)

Practice in the UK

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The common public experience of chartered surveyors is in the process of obtaining a mortgage loan.[16] A mortgage valuation will be required by any mortgage lender as a condition of obtaining a mortgage loan. The homebuyer may take the option to instruct the same surveyor to carry out a "RICS HomeBuyer Report" or a "RICS Building Survey" (sometimes called a "Structural Survey"[17]), usually at additional cost.[16] When the surveyor is instructed in this combined role, the mortgage valuation is still produced for the lender, and the HomeBuyer Report or Building Survey is additionally prepared for the borrower. This arrangement can avoid the potential conflict of interest where the surveyor has as client both the lender and the borrower in the transaction. Because of the ethics and professional liability aspect, borrowers should note that the lender's survey is produced solely for the lender and the surveyor will not be liable for loss or omission to the borrower. Since reform of the RICS Red Book of valuation practice in recent years, the definition of a mortgage valuation has been deleted. It is now a market valuation which is the same definition given to the valuation in the RICS HomeBuyer Report.

The Council of Mortgage Lenders recommends that buyers should not rely only on the mortgage valuation, but obtain a fuller survey for their own purposes.[citation needed] However, a fuller survey is rarely a condition of the loan.

A structural defect

The borrower may prefer to select an independent surveyor to undertake the HomeBuyer Report or Building Survey.

Mortgage valuation report

A mortgage valuation is for the benefit of the lender. Its purpose is merely to confirm the property is worth the price paid, in order to protect the lender's interests.[18] Invariably there is a disclaimer on the report that confirms that the surveyor has no responsibility to the borrower. This is a legally valid exclusion.

RICS Home Surveys

Under the reforms undertaken by RICS in the early 21st century to better regulate the provision of professional products to the general public, a sector that is usually unable to fully appreciate the consequences of inadequate specification of the required items to be surveyed and how they are reported, RICS produced a new range of consumer products with RICS branding. Three consumer products are now available - 1. RICS Condition Report 2. RICS HomeBuyer Report 3. RICS Building Survey These products have a consistent appearance over the range, with common typefaces and general format. The distinctions come in the detail that is subsequently provided. These are discussed below.

RICS Condition Report

This is short report that looks briefly at the property to report on the visual condition of nine external elements of construction, nine internal elements of construction, seven services supplied to the building, and three key components of the grounds in which the property is sited. The reports rates conditions from 1 - good, 2, - needing attention in the near future, 3 - needing attention now using a traffic light system to draw attention to things that matter.

In practice this report is of little value to the buyer unless the surveyor attends at the same time as the buyer is carrying out a viewing and wants an early indication of general condition, making the most of the surveyor's expert knowledge about how buildings can fail that are not obvious to the average buyer. Some surveyors agree to carry out these surveys as a precursor to then extending the service with a more detailed report in either of the other two types in the RICS Home Surveys suite.[19] Usually, the fee for the first report is discounted in the fee for the detailed follow up report, since when the surveyor returns to the property, there is already an understanding of what problems are in the property.

RICS HomeBuyer Report

This document format has been revised in 2010 to include an easy to assimilate format for the reader. The problem with the earlier format often reported to RICS by clients in receipt of the previous 'Homebuyer's Survey and Valuation' was that the structure did not easily distinguish the faults from the main description. A traffic light system was introduced and surveyors have to rate each element of the inspection according to priority. In this way, serious impediments are identified easily, and less critical defects commented upon to give the reader advice on what will need attention in the near future. It does not comment on the maintenance requirements for items found to be in satisfactory condition, only confirming that there is no cause for concern at this time. This format is suitable for a wide range of properties, but is best suited to traditionally built houses that are not subject to very serious distress or previous major alterations or extensions. This report is much longer than the condition report and looks in more detail at the property to report on the visual condition and maintenance needs of nine external elements of construction, nine internal elements of construction, seven services supplied to the building, and three key components of the grounds in which the property is sited. The reports rates conditions from 1 - good, 2 - needing attention in the near future, 3 - needing attention now using a traffic light system to draw attention to things that matter. The report also includes commentary to advise the solicitor on issues that need addressing in the conveyance, and any risks that affect the building, grounds and people of a more general nature. There is also a market valuation of the property and an assessment of rebuilding costs for insurance purposes.

Not all chartered surveyors are permitted to undertake providing the RICS HomeBuyer Report as it contains a market valuation. Under rules of the Royal Institution of Chartered Surveyors, any surveyor undertaking these surveys must also be an RICS Registered Valuer and carry professional indemnity insurance for this task. This is an attempt by RICS to provide consumer confidence after the older valuation reports came into disrepute.

RICS Building Survey
A thatched cottage

There are a number of variations to a residential building survey which offers the home purchaser a choice of products. The two main variants are the RICS Guidance note version stemming from the earlier RICS guidance note 2004 (more recently updated by the "Surveys of residential property RICS guidance note 3rd edition" which was introduced in December 2013). The primary difference between guidance note and the practice note for the consumer is the format of the reports. A bespoke style or a framework (traffic light signal) style. For surveyors guidance is "best practice" and practice note is "mandatory".

The guidance note version can be provided in an agreed word document style format with an appendix for photographs etc. There is also a choice (at extra commissioning cost) to add a market valuation and other services such as costing for repairs and project management / further investigation services by agreement as cited at the end of this description. In effect, is a fully bespoke report.

The alternative is the practice note version (introduced to the market in November 2012). It is a similar traffic light signal format as the other RICS survey products such as the RICS condition report and the RICS homebuyer reports.

Both report formats (guidance note and practice note versions) are appropriate for virtually all properties, including but not limited to listed buildings, thatched cottages, timber frame homes and so on,.

The building survey is the most detailed survey available [20] from most firms of Chartered Surveyors.[18] Thorough though it is, it may still lead to recommendations for further investigation from other specialists; see below. However, A competent surveyor will always try to investigate causes of damp and building defects before recommending for further investigation. The building survey report is much longer than the condition report but may not be much longer than the homebuyer report as its content depends on the condition observed in each individual case. The practice note version building survey looks in more detail at the property to report on the visual condition and maintenance needs of nine external elements of construction, with scope for sub-division into individual features, with the nine internal elements of construction and the seven services supplied to the building examined in a similar manner. Also the three key components of the grounds in which the property is sited can be subdivided as necessary.

The practice note version of the report also rates conditions from 1 - good, 2 - needing attention in the near future, 3 - needing attention now using a traffic light system to draw attention to things that matter. In this format, if there is a defect, not only will it be identified but its causes analyzed and methods of repair and elimination of the cause discussed in some detail. The report also includes commentary to advise the solicitor on issues that need addressing in the conveyance, and any risks that affect the building, grounds and people of a more general nature. There is also discussion on the means of escape in case of fire, which in older houses in particular can be compromised by poor design and alterations. There is no market valuation or an assessment of rebuilding costs for insurance purposes in the document. These can be added, along with cost estimates for the repairs by a separate agreement as discussed in the helpful RICS explanatory notes to clients.

Collectively, a key feature of RICS building surveys are that they provide an opportunity for clients and surveyors to strike up a detailed dialogue about the property they are intending to purchase. Purchasers find a building survey useful in allowing for further negotiations on price or for providing a clients briefing document for extensions or repairs. The building survey is a very interactive process.

Energy performance certificate

Chartered surveyors can also provide an energy performance certificate.

Limits

Chartered Surveyors are not necessarily specialists in other fields, and may recommend further investigations by an electrician, a gas engineer, a structural engineer or expert of another kind, depending on what they find during their inspection. They may also recommend work by the buyer's solicitor to confirm matters which might affect their valuation, such as (with leasehold properties), the unexpired term of the lease, who is responsible for the boundaries, and so forth.

The Chartered Surveyor's inspection is typically non-intrusive. They do not have the authority to lift floorboards, drill holes, or perform excavations at a property which the prospective buyer does not, at this stage, own, which means that certain defects or problems may not be apparent from their inspection.[21]

Their fees are a component of the cost of moving house in the United Kingdom.

Appraisers

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Besides the mandatory educational grade, which can vary from Finance to Construction Technology, most, but not all, countries require appraisers to have the license for the practice. Usually, the real estate appraiser has the opportunity to reach 3 levels of certification: Appraisal Trainee, Licensed Appraiser and Certified Appraiser. The second and third levels of license require no less than 2000 experience hours in 12 months and 2500 experience hours in no less than 24 months respectively.[22][23] Appraisers are often known as "property valuers" or "land valuers"; in British English they are "valuation surveyors". If the appraiser's opinion is based on market value, then it must also be based on the highest and best use of the real property. In the United States, mortgage valuations of improved residential properties are generally reported on a standardized form like the Uniform Residential Appraisal Report.[24] Appraisals of more commercial properties (e.g., income-producing, raw land) are often reported in narrative format and completed by a Certified General Appraiser.

Further considerations

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Scope of work

[edit]

While the Uniform Standards of Professional Appraisal Practice (USPAP) has always required appraisers to identify the scope of work needed to produce credible results, it became clear in recent years[when?] that appraisers did not fully understand the process for developing this adequately. In formulating the scope of work for a credible appraisal, the concept of a limited versus complete appraisal and the use of the Departure Rule caused confusion to clients, appraisers, and appraisal reviewers. To deal with this, USPAP was updated in 2006 with what came to be known as the Scope of Work Project. Following this, USPAP eliminated both the Departure Rule and the concept of a limited appraisal, and a new Scope of Work rule was created. In this, appraisers were to identify six key parts of the appraisal problem at the beginning of each assignment:

  • Client and other intended users
  • Intended use of the appraisal and appraisal report
  • Definition of value (e.g., market, foreclosure, investment)
  • Any hypothetical conditions or extraordinary assumptions
  • Effective date of the appraisal analysis
  • Salient features of the subject property

Based on these factors, the appraiser must identify the scope of work needed, including the methodologies to be used, the extent of the investigation, and the applicable approaches to value. Currently, minimum standards for scope of work are:

  • Expectations of the client and other users
  • The actions of the appraiser's peers who carry out similar assignments

The scope of work is the first step in any appraisal process. Without a strictly defined scope of work, an appraisal's conclusions may not be viable. By defining the scope of work, an appraiser can properly develop a value for a given property for the intended user, and for the intended use of the appraisal. The whole idea of "scope of work" is to provide clear expectations and guidelines for all parties as to what the appraisal report does, and does not, cover; and how much work has gone into it.

Types of ownership interest

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The type of real estate "interest" that is being valued, must also be known and stated in the report. Usually, for most sales, or mortgage financings, the fee simple interest is being valued. The fee simple interest is the most complete bundle of rights available. However, in many situations, and in many societies which do not follow English Common Law or the Napoleonic Code, some other interest may be more common. While there are many different possible interests in real estate, the three most common are:

  • Fee simple value (known in the UK as freehold) – The most complete ownership in real estate, subject in common law countries to the powers reserved to the state (taxation, escheat, eminent domain, and police power)
  • Leased fee value – This is simply the fee simple interest encumbered by a lease. If the lease is at market rent, then the leased fee value and the fee simple value are equal. However, if the tenant pays more or less than market, the residual owned by the leased fee holder, plus the market value of the tenancy, may be more or less than the fee simple value.
  • Leasehold value – The interest held by a tenant. If the tenant pays market rent, then the leasehold has no market value. However, if the tenant pays less than the market, the difference between the present value of what is paid and the present value of market rents would be a positive leasehold value. For example, a major chain retailer may be able to negotiate a below-market lease to serve as the anchor tenant for a shopping center. This leasehold value may be transferable to another anchor tenant, and if so the retail tenant has a positive interest in the real estate.

Valuer and Valuation:

A "valuer" is an individual or professional who is trained and qualified to determine the value of assets, typically real estate or personal property, for various purposes. Valuers assess the worth or fair market value of these assets based on their knowledge, expertise, and analysis of relevant data.

"Valuation" refers to the process of determining the value or worth of an asset, property, business, or financial instrument. Valuation can be performed for a wide range of reasons, including businesses, assets, etc.

Home inspection

[edit]

If a home inspection is performed prior to the appraisal and that report is provided to the appraiser, a more useful appraisal can result. This is because the appraiser, who is not an expert home inspector, will be told if there are substantial construction defects or major repairs required. This information can cause the appraiser to arrive at a different, probably lower, opinion of value. This information may be particularly helpful if one or both of the parties requesting the appraisal may end up in possession of the property. This is sometimes the case with property in a divorce settlement or a legal judgment.[25]

Mass appraisal and automated valuation models

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Automated valuation models (AVMs) are growing in acceptance. These rely on statistical models such as multiple regression analysis, or machine learning algorithms.[26] While AVMs can be quite accurate, particularly when used in a very homogeneous area, there is also evidence that AVMs are not accurate in other instances such as when they are used in rural areas, or when the appraised property does not conform well to the neighborhood.

Computer-assisted mass appraisal (CAMA) is a generic term for any software package used by government agencies to help establish real estate appraisals for property tax calculations. A CAMA is a system of appraising property, usually only certain types of real property, that incorporates computer-supported statistical analyses such as multiple regression analysis and adaptive estimation procedure to assist the appraiser in estimating value.[27]

Geographic-assisted mass appraisal (GAMA) is a generic term for any geographic information system-centric software package used by government agencies to help establish real estate appraisals for property tax calculations.[28]

Spatial-CAMA (SCAMA) is a general term for mass appraisal where spatial data is used with spatial dependence or spatial heterogeneity models. Spatial Lag Model (SLM) and Spatial Autoregressive Moving Average (SARMA) fall under spatial dependence while Geographically Weighted Regression Models (GWR) falls under spatial heterogeneity.[29]

Governing authorities and professional organizations

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International

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The various U.S. appraisal groups and international professional appraisal organizations have started collaborating in recent years towards the development of International Valuation Standards. This will facilitate global real estate appraisal standards, a much-needed adjunct to real estate investment portfolios which cross national boundaries. Some appraisal groups are already international organizations and thus, to some extent, already incorporate some level of global standards.

The International Valuation Standards Council (IVSC) is a non-governmental organization (NGO) member of the United Nations with membership that encompasses all the major national valuation standard-setters and professional associations from 150 different countries (including the Appraisal Institute, the American Society of Appraisers, the RICS, the [Practising Valuers Association of India] and the Appraisal Institute of Canada). IVSC publishes the International Valuation Standards (IVS), now in its 12th edition.

Germany

[edit]

In Germany, real estate appraisal is known as real estate valuation (Immobilienbewertung). Real estate appraisers (Immobilienbewerter or Gutachter) can qualify to become a Öffentlich bestellter und vereidigter Sachverständiger (officially appointed and sworn expert). However, this formerly very important title has lost a lot of its importance over the past years, but still is of some value in court procedures. The title is not generally required for appraisals.

Governing authorities

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Real estate appraisal in Germany is partly codified by law. The federal Baugesetzbuch (abbr. BauGB, "German statutory code on building and construction'") contains guidelines on governing authorities, defines the term market value and refers to continuative rules (chapter 3, articles 192 ff.). Each municipality (city or administrative district) must form a Gutachterausschuss (appraisal committee), consisting of a chairman and honorary members.[30] The committee gathers information on all real estate deals (it is mandatory to send a copy of each notarial purchase contract to the Gutachterausschuss) and includes it in the Kaufpreissammlung (purchase price database). Most committees publish an official real estate market report every two years, in which besides other information on comparables the land value is determined. The committees also perform appraisals on behalf of public authorities.

Federal regulations

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The BauGB defines the Verkehrswert or Marktwert (market value, both terms with identical meaning) as follows: "The market value is determined by the price that can be realized at the date of valuation, in an arm's length transaction, with due regard to the legal situation and the effective characteristics, the nature and lay of the premises or any other subject of the valuation"[31] (non-official translation). The intention, as in other countries, is to include all objective influences and to exclude all influences resulting from the subjective circumstances of the involved parties.

This federal law is supported by the Wertermittlungsverordnung (abbr. WertV, "regulation on the determination of value").[32] The WertV defines the codified valuation approaches and the general valuation technique. German codified valuation approaches (other approaches such as DCF or residual approach are also permitted, but not codified) are the:

  • Vergleichswertverfahren (sales comparison approach) – used where good evidence of previous sales is available and for owner-occupied assets, especially condominiums and single-family houses;
  • Ertragswertverfahren (German income approach) – standard procedure for property that produces future cash flows from the letting of the property;
  • Sachwertverfahren (German cost approach) – used for specialised property where none of the above approaches applies, e. g. public buildings.

WertV's general regulations are further supported by the Wertermittlungsrichtlinie (abbr. WertR, "directive on the determination of value").[33] The WertR provides templates for calculations, tables (e.g., economic depreciation) and guidelines for the consideration of different influences. WertV and WertR are not binding for appraisals for nonofficial use, nonetheless, they should be regarded as best practice or Generally Accepted (German) Valuation Practice (GAVP).

Comments on German GAVP

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In most regards Generally Accepted (German) Valuation Principles is consistent with international practice. The investment market weighs the income approach most heavily. However, there are some important differences:

  • Land and improvements are treated separately. German GAVP assumes that the land can be used indefinitely, but the buildings have a limited lifespan; This coincides with the balancing of the assets. The value of the land is determined by the sales comparison approach in both the income and cost approaches, using the data accumulated by the Gutachterausschuss which is then added to the building value.
  • In order to account for the usage of the land, the net operating income is reduced by the Liegenschaftszins (interest paid to the land-owner by the owner of the building, i.e., ground rent). The Liegenschaftszins is the product of the land value and the Liegenschaftszinssatz (interest rate for land use). The Liegenschaftszinssatz is the equivalent of the yield—with some important differences—and is also determined by the Gutachterausschuss.
  • Unlike the All Risks Yield (ARY) in UK practice, the Liegenschaftszinssatz (abbr. LZ) does not include an allowance for default (not to be confused with a structural vacancy), therefore this needs to be subtracted from gross operating income. As a result, the Liegenschaftszinssatz will usually be lower than the All Risks Yield.
  • Based on the assumption that the economic life of the improvements is limited, the yield and remaining economic life determine the building value from the net operating income.
  • Contracts in Germany generally prescribe that the landlord bears a higher portion of maintenance and operating costs than their counterparts in the United States and the UK.

Criticism

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Mathematically the distinction between land and improvements in the income approach will have no impact on the overall value when the remaining economic life is more than thirty years. For this reason, it has become quite common to use the Vereinfachtes Ertragswertverfahren (simplified income approach), omitting the land value and the Liegenschaftszins. However, the separate treatment of land and buildings leads to more precise results for older buildings, especially for commercial buildings, which typically have a shorter economic life than residential buildings.

An advantage of the comparatively high degree of standardization practiced by professional appraisers is the greater ability to check an appraisal for inconsistency, accuracy and transparency.

Professional organizations

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The Federal German Organisation of Appointed and Sworn Experts (Bundesverband Deutscher Sachverständiger und Fachgutachter, abbr. BDSF)[34] is the main professional organization encompassing the majority of licensed appraisers in Germany. In recent years, with the move towards a more global outlook in the valuation profession, the RICS has gained a foothold in Germany, somewhat at the expense of the BDSF. Another German Organisation of Appointed and Sworn Experts is the Deutsche Sachverständigen Gesellschaft, abbr. DESAG.[35] This organization also includes a large number of licensed appraisers in Germany.

With special focus on hypothetical value, in 1996, German banks with real estate financing activities formed the HypZert GmbH, an association for the certification of real estate valuers.[36] A HypZert qualification is regarded as mandatory by many German banks.

Israel

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In Israel, the real estate appraisal profession is regulated by the Council of Land Valuers, an organ of the Ministry of Justice; the largest professional organization, encompassing the majority of appraisers/land valuers is the Association of Land Valuers. Valuers must be registered with the Council, which is a statutory body set up by law, and which oversees the training and administers the national professional exams that are a prerequisite for attaining registration. In 2005 the Council set up a Valuation Standards Committee with the purpose of developing and promulgating standards that would reflect best practice; these have tended to follow a rules-based approach.

Historically, most valuations in Israel were statutory valuations (such as valuations performed for purposes of Betterment Tax, a tax administered on any gains accruing to the property by way of changes to the local planning) as well as valuations performed for purposes of bank lending. Since Israel implemented the International Financial Reporting Standards (IFRS) in 2008, the profession has been engaged in performing valuations for purposes of financial reporting.

United Kingdom

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In the UK, real estate appraisal is known as property valuation and a real estate appraiser is a land valuer or property valuer (usually a qualified chartered surveyor who specializes in property valuation).[15] Property valuation in the UK is regulated by the Royal Institution of Chartered Surveyors (RICS), a professional body encompassing all of the building and property-related professions. The RICS professional guidelines for valuers are published in what is commonly known as the Red Book. The 2017 version was the RICS Valuation – Global Standards (1 July 2017),[37] superseding an edition published in 2011. RICS Valuation Standards contains mandatory rules, best practice guidance and related commentary. The 2017 version adopts and applies the International Valuation Standards (IVS) published by the International Valuation Standards Council (IVSC). Changes to the standards are approved by the RICS Valuation Professional Group Board, and the Red Book is updated accordingly on a regular basis. While based in the UK, RICS is a global organization and has become very active in the United States in recent years through its affiliation with the Counselors of Real Estate, a division of the National Association of Realtors.

United States

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Appraisal practice in the United States is regulated by state. The Appraisal Foundation (TAF) is the primary standards body; its Appraisal Standards Board (ASB) promulgates and updates best practices as codified in the Uniform Standards of Professional Appraisal Practice (USPAP), while its Appraisal Qualifications Board (AQB) promulgates minimum standards for appraiser certification and licensing.

The federal government regulates appraisers indirectly because if the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) finds that a particular state's appraiser regulation and certification program is inadequate, then under federal regulations all appraisers in that state would no longer be eligible to conduct appraisals for federally chartered banks.[38] The ASC oversees the TAF. Banks make widespread use of mortgage loans and mortgage-backed securities, and would be unable to do so without appraisals.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) demanded all the states to develop systems for licensing and certifying real estate appraisers.[39] To accomplish this, the Appraisal Subcommittee (ASC) was formed within the FFIEC, with representatives from the various Federal mortgage regulatory agencies.[40] Thus, currently all the real estate appraisers must be state-licensed and certified. But prior to the 1990s, there were no commonly accepted standards either for appraisal quality or for appraiser licensure. In the 1980s, an ad-hoc committee representing various appraisal professional organizations in the United States and Canada met to codify the best practices into what became known as the USPAP. The U.S. Savings and Loan Crisis resulted in increased federal regulation via FIRREA, which required federal lending regulators to adopt appraisal standards. A nonprofit organization, The Appraisal Foundation (TAF), was formed by the same organizations that had developed USPAP, and the copyright for USPAP was signed over to TAF. Federal oversight of TAF is provided by the Appraisal Subcommittee, made up of representatives of various federal lending regulators. TAF carries out its work through two boards: the Appraisal Standards Board promulgates and updates USPAP; the Appraisal Qualifications Board (AQB) promulgates minimum recommended standards for appraiser certification and licensure. During the 1990s, all of the states adopted USPAP as the governing standards within their states and developed licensure standards which met or exceeded the recommendations of TAF. Also, the various state and federal courts have adopted USPAP for real estate litigation and all of the federally lending regulators adopt USPAP for mortgage finance appraisal.[40]

Professional organizations

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In addition, there are professional appraisal organizations, organized as private non-profit organizations that date to the Great Depression of the 1930s. One of the oldest in the United States is the American Society of Farm Managers and Rural Appraisers (ASFMRA), which was founded in 1929.[41] Others were founded as needed and the opportunity arose in specialized fields, such as the Appraisal Institute (AI) and the American Society of Appraisers (ASA) founded in the 1930s, the International Right of Way Association and the National Association of Realtors which were founded after World War II. These organizations all existed to establish and enforce standards, but their influence waned with increasing government regulation. In March 2007, three of these organizations (ASFMRA, ASA, and AI) announced an agreement in principle to merge. NAIFA (National Association of Independent Fee Appraisers), a charter member of The Appraisal Foundation, helped to write Title XI, the Real Estate Appraisal Reform Amendments. It was founded in 1961.

One of the most recognized professional organizations of real estate appraisers in America is the Appraisal Institute (AI). It was formed from the merger of the American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers. Founded along with others in the 1930s, the two organizations merged in the 1990s to form the AI. This group awards four professional designations: SRA, to residential appraisers, AI-RRS, to residential review appraisers, MAI, to commercial appraisers, and AI-GRS, to commercial review appraisers. The Institute has enacted rigorous regulations regarding the use and display of these designations. For example, contrary to popular belief, "MAI" does not stand for "Member, Appraisal Institute". According to the institute, the letters "do not represent specific words", and an MAI may not use the words "Member, Appraisal Institute" in lieu of the MAI mark. The primary motive for this rule is to prevent trademark dilution. These designations require attendance in appraisal technique classes, ethical training, exams, and a review of the candidate's work by designated appraisers.

The National Association of Appraisers (NAA) was formed with a purpose of uniting those engaged in the appraisal profession for the purpose of exerting a beneficial influence upon the profession and to advocate appraiser interests. The NAA has established an advisory group consisting of leadership at the state organizations and coalitions called the Board of Governors where those states can help guide the NAA in acting in the best interest of all appraisers. The NAA also has a designated membership, MNAA (Member of the National Association of Appraisers, who is an individual who holds an appraisal license, certification or similar appraisal credential issued by a governmental agency; and who accepts the membership requirements and objectives of the National Association of Appraisers.

Other leading appraisal organizations include the National Association of Independent Fee Appraisers and the National Association of Master Appraisers, which were also founding sponsor-members of the Appraisal Foundation.[42] The Massachusetts Board of Real Estate Appraisers (MBREA), founded in 1934, is the only state appraisal association that has been named a sponsor of the Appraisal Foundation.[43] In recent years, the Royal Institution of Chartered Surveyors (RICS) has become highly regarded in the United States, and has formed a collaboration with the Counselors of Real Estate, a division of the National Association of Realtors. RICS, which is headquartered in London, operates on a global scale and awards the designations MRICS and FRICS to Members and Fellows of RICS. The Real Estate Counseling Group of America is a small group of top U.S. appraisers and real estate analysts who have collectively authored a disproportionately large body of appraisal methodology and, the National Association of Real Estate Appraisers (NAREA), founded in 1966, with the goal to elevate the professionalism and success of the Appraisal Industry.

The leading appraisal organization for personal property valuation is the American Society of Appraisers which is a sponsor member of the Appraisal Foundation and awards the ASA (Accredited Senior Appraiser) designation to candidates who complete five years of documented appraisal experience, pass a comprehensive exam along with required commercial and/or residential appraisal coursework, and submit two appraisal reports for review.

Racial bias

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Implicit bias and racial composition of neighborhoods have long been thought to impact on home appraisal values.[44] Recent studies from Freddie Mac and other industry leaders have confirmed that traditional modelling based on comparable sales and a variety of other factors (income, credit score, etc.) cannot explain the appraisal value gap minorities face.[45] Some would argue that these pricing disparities are partially explained by neighborhood quality, which opponents say is a byproduct of historical redlining.[46]

Russia

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In Russia, on par with many other former Soviet Union economies, the profession emerged in the first half of 1990, and represented a clean break with the former practice of industry-specific pricing specialists and with activities of statutory price-setting authorities in the Soviet Union. Currently, property valuation, as it is called, is a specialism within general-purpose "valuation profession", which functions in a self-regulatory mode overseen by "self-regulated professional organizations" of valuers (SROs), i.e. public supervisory entities established under provisions of special legislation (which very loosely can be likened to trade unions). The principal among those is Russian Society of Appraisers, established in 1993 and presently exercising oversight over about half of the valuation profession membership. Among its 6000+ members a sizeable majority are real property valuers, rubbing shoulders with business and intangible assets appraisers. The latter categories of valuers are also allowed to value property, though valuation professionals tend to specialize. In late 2016, it was mandated that valuers should pass through compulsory state-administered attestation process to verify their competence, the details of which as to breakdown in specialization or otherwise remain to be hammered out.

As of mid-2016, Valuers in Russia, including real property valuers, are deemed to be purposely-educated individuals maintaining their Valuation SRO membership and bearing unlimited property liability for the result of their services, that is their professional status is modeled on the organization of public notaries. Regardless of the fact, over 80% of valuers tend to be employed by valuation or consulting companies, and thus do not enter practice as stand-alone individual entrepreneurs. High-end appraisal services are principally represented by valuation arms of the International "Big-four" consultancies in the country, but there also exist reputable national corporate valuation brands.

The majority of property valuations in the country are typically conducted to meet legal requirements outlined in the Federal Valuation Law, with the most recent amendment taking place in 2016. Additionally, other related laws, such as the Joint Stock Companies Law, outline over 20 instances where valuations are mandated. These mandatory cases include valuations for purposes such as privatization, securing loans, handling bankruptcy and liquidation proceedings, among others.

Before the year 2000, valuations for corporate financial reporting held greater significance. However, this changed when the national accounting regulator discontinued its promotion of the accounting fair value option. Currently, the government is in the process of outsourcing the mass appraisal of properties for taxation purposes to professional valuation institutions.

Adjudication of valuer-certified estimates of value in case of the onset of disputes is conducted through the Experts Councils of valuers' SROs. Official courts tend to concur with the resolutions of such Councils. In some rare instances the imprimatur of SRO's Experts Councils is also required for a valuation done by a particular valuer to enter into effect.

The technical details of practice of real estate valuers in Russia are aligned with the international pattern. Members of the Russian Society of Appraisers formerly were bound by the observance of the International Valuation Standards. There also exists a set of 14 general-purpose government-developed "Federal Valuation Standards" (FSOs 1,2,3 --are the general valuation standards first adopted in 2007 (and revised 2015) and covering Terms of engagement and Valuation report content requirements, FSOs 7–11 are asset-specific standards adopted in 2015, while FSO 9 is currently the only purpose-specific standard in the set dealing with valuations of property for loan security purposes; the last two FSO standards adopted in 2016 cover determination of investment and liquidation values, however, they do not touch on the methodology for determining these values, only scraping the reporting requirements). In view of the international conformity drive in the latest round of FSO standards setting, general requirements in the new FSO standards are close to those in the International Valuation standards set, however they can be more specific on occasion and mandate compulsory disclosure of uncertainty in valuation reports using the interval/range format.

With effect from 1 August 2017, new amendments to the Federal Valuation Law came to impose the compulsory certification of valuers by a state-affiliated testing centre. Consequently, this two-hour written exam certification measure, aimed to counter a perception of wide-spread malpractice among the members of the national valuation profession, provides for three valuer-specializations: real estate valuers, plant and machinery valuers, and business and intangible asset valuers, with the exam content requirements varying substantially for each specialization. Valuers would lose a right to practice, unless they comply with the requirement to take this compulsory certification exam at or before 31 March 2018. A general assessment of this measure is that the numbers of certified valuers in Russia are set to dwindle down to some 2000–3000 valuers nationwide (across all the specialisms mentioned), i.e. decimating some 80% of the current Valuer SRO's membership, due to the complexity of the certification exams.

Hong Kong

[edit]

The Hong Kong Institute of Surveyors (HKIS) regulates property surveyors in Hong Kong. Established in 1984, Institute is the only professional organisation representing the surveying profession in Hong Kong. The HKIS was statutorily incorporated by virtue of the Hong Kong Institute of Surveyors Ordinance in January 1990 (Cap. 1148). In July 1991, the Surveyors Registration Ordinance (Cap. 417) was passed to set up a Registration Board to administer the registration of surveyors. In May 2006, the number of members had reached 6,723. A general practice surveyor advises on the best use of the land, assesses the feasibility and viability of the proposed development project as well as the valuation, marketing, sale, leasing and management of completed developments. It also has a website to provide real-time properties' value estimate across whole Hong Kong.[47]

Australia

[edit]

The Australian Property Institute (API) was formed in 1926 as the Commonwealth Institute of Valuers. The Institute has undergone several name changes over the last century as the array of services offered by its members expanded. It serves to regulate the profession of property valuers throughout Australia.

Today the API represents the interests of more than 8,600 property professionals throughout Australia. API members include residential, commercial and plant and machinery valuers, property advisers, property analysts, property fund and asset managers, property facility managers, property lawyers and property researchers and academics. The Institute's primary role is to set and maintain the highest standards of professional practice, education, ethics and professional conduct for its members and the broader property profession.[48]

New Zealand

[edit]

Real estate valuation in New Zealand is regulated by the New Zealand Institute of Valuers ('NZIV') and the Valuers Registration Board of New Zealand ('VRB'), both of which are statutory bodies established under the Valuers Act 1948 (NZ). The NZIV remains the statutory professional body for valuers in New Zealand, with perpetual succession under the Act. The NZIV can make Rules as lower level legislation and has a Code of Ethics (reviewed in 2023). The NZIV Rules were last changed in 2012 and remain current. The VRB has jurisdiction in relation to serious matters affecting the registration of a valuer including discipline where a valuer has acted in such a way as to meet the threshold. The Valuers Act 1948 sets the threshold under s31 as matters where a valuer could be struck off the register of valuers. The NZIV has power for discipline for relatively more minor matters. The NZIV governs NZIV members and has power to discipline members and fine them up to $500, admonish members or terminate their membership. The designations "Registered Valuer" and "Public Valuer" are legally protected under the legislation, being reserved for Valuers Registered under the Act. The NZIV, under the Act, can admit non-valuer members (such as non-valuer land economists).

There are also voluntary professional bodies for real estate valuation such as the Royal Institute of Chartered Surveyors (RICS) and the Property Institute of New Zealand (PINZ). Both of these bodies have a wider membership, beyond real estate valuers. PINZ has around 1,700 members in New Zealand and overseas (such as ex-pats in the UK, Asia and Australia). PINZ has a service level agreement with the NZIV, whereby PINZ contracts to perform tasks for the statutory professional body, NZIV. PINZ was formed in 2000 to act as the voice of the property professions. There have been 'political divisions' within the valuation profession in New Zealand, expressed at AGMs and through 'proxy wars' over the last 20 years or so. Many valuers are supportive of amalgamation of the NZIV functions under the multi-disciplinary voluntary body PINZ, whilst many others wish to retain a separate statutory professional body for valuers (the NZIV). There are various reasons in the debate and the governing legislation is under review and amendments or repeal is being considered. At present, the Act remains in force and the NZIV is legally a distinct body with statutory functions, powers and duties.

PINZ incorporated much of the membership of the NZIV, the Institute of Plant & Machinery Valuers (IPMV) and the Property & Land Economy Institute of New Zealand (PLEINZ). PINZ now represents the interests of valuers, property and facilities managers, property advisors and plant and machinery valuers. PINZ has developed into one of the largest professional bodies for standards, qualifications and ethics across all facets of the property profession within New Zealand. It works with government, industry and other professional associations, education stakeholders and the media to promote its standards and views.[49]

In New Zealand, the terms "valuation" and "valuer" usually relates to one who undertakes that professional role in terms of the Valuer Act 1948 requirements or the unregulated or voluntarily self-regulated (if members of PINZ) plant and machinery, marine or art valuers. Whereas, the term "appraisal" is usually related to an estimate by a real estate sales person or licensed agent under the Real Estate Agents Act 2008. The Real Estate Institute of New Zealand includes many valuer members, but the governing legislation for sales and agency (disposal of interests of land on behalf of others) does not extend to include provision for that role by valuers regardless of membership of NZIV, RICS or PINZ.

There exists a significant difference in the responsibilities of a real estate agent and a valuer. While a real estate agent is allowed to represent the interests of their client, a valuer is required to offer an unbiased and independent assessment of value. The legal framework governing these roles is distinct as well. Lawyers, Conveyancers, and Real Estate Agents operate under legislation separate from that which regulates valuers. Specifically, the legal provision outlining the responsibilities of Lawyers and Conveyancers is the Lawyers and Conveyancers Act of 2006..

The number of Registered Valuers in New Zealand has generally between 1,000 - 1,300. This is an ageing 'top heavy' professional with difficulty retaining new and young members due to pay, work stress and the recent advent of 'clearing houses' for banks to order valuations for mortgage purposes. The clearing houses have largely ended the long-standing local practice of members of the public seeking advice directly from a valuer. The use of electronic estimates based on Rating Values (Local Government mass appraisal for levies) is also leading to a reduction in standard valuation work and is significantly affecting the viability of small valuation businesses. The profession is in the process of a wider corporate re-structuring of the valuation market due to these factors with various perceptions within profession as to the merits of the events of the last five years.

See also

[edit]
  • American Measurement Standard
  • Auditing Standards Board
  • Building inspection
  • Climate appraisal
  • Conveyancing
  • German income approach
  • Home inspection
  • Housing affordability index
  • International Property Measurement Standards
  • Investment rating for real estate
  • Kriging
  • Land value tax
  • List of real estate topics
  • Peak land value intersection
  • Royal Institution of Chartered Surveyors
  • Verification and validation
  • Real estate
  • Real estate business
  • Real estate bubble

References

[edit]
  1. ^ a b International Valuation Standards 2011
  2. ^ Joseph F. Schram Jr. (January 2006). Real Estate Appraisal. Rockwell Publishing. pp. 36–. ISBN 978-1-887051-25-5. Archived from the original on 3 January 2014. Retrieved 7 January 2012.
  3. ^ Finn Helles; Niels Strange; Lars Wichmann, eds. (2003). Recent accomplishments in applied forest economics research. Springer. pp. 20–. ISBN 978-1-4020-1127-6. Archived from the original on 3 January 2014. Retrieved 7 January 2012.
  4. ^ "Standard on Mass Appraisal Real Property" (PDF). iaao.org/media/standards/MARP_2013.pdf. April 2013. Archived from the original (PDF) on 15 April 2019. Retrieved 30 September 2018.
  5. ^ Ansell, Ben W. (2019). "The Politics of Housing". Annual Review of Political Science. 22: 165–185. doi:10.1146/annurev-polisci-050317-071146.
  6. ^ Hultquist, Andy; Petras, Tricia L. (2012). "Determinants of Fractional Assessment Practice in Local Property Taxation: An Empirical Examination" (PDF). Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association. 105: 146–152.
  7. ^ "Protecting Existing Trees on Building Sites" p.4 published by the City of Raleigh, North Carolina, March 1989, Reprinted February 2000
  8. ^ "How Valuable Are Your Trees" Archived 11 August 2011 at the Wayback Machine by Gary Moll, April 1985, American Forests Magazine.
  9. ^ Lins, Marcos Pereira Estellita; Novaes, Luiz Fernando de Lyra; Legey, Luiz Fernando Loureiro; et al. (2005). "Real Estate Appraisal: A Double Perspective Data Envelopment Analysis Approach". Annals of Operations Research. 138 (1): 79–96. doi:10.1007/s10479-005-2446-1. S2CID 2263094.
  10. ^ Adair, Alastair; Norman Hutchison (2005). "The reporting of risk in real estate appraisal property risk scoring". Journal of Property Investment & Finance. 23 (3): 254–268. doi:10.1108/14635780510599467.
  11. ^ Chica-Olmo, Jorge. "Prediction of Housing Location Price by a Multivariate Spatial Method: Cokriging". Archived from the original on 22 October 2007. Retrieved 15 September 2008.
  12. ^ Pagourtzi, Elli; Assimakopoulos, Vassilis; Hatzichristos, Thomas; French, Nick; et al. (2003). "Real estate appraisal: a review of valuation methods". Journal of Property Investment & Finance. 21 (4): 383–401. doi:10.1108/14635780310483656. S2CID 154722531.
  13. ^ "Apartment - Everything You Need to Know About Sell" (in Polish). Retrieved 19 January 2021.
  14. ^ "Retail Investor .org : How To Value Real Estate, And Calculate Its Expected Returns – Investor Education". retailinvestor.org. Archived from the original on 4 June 2017. Retrieved 1 June 2017.
  15. ^ a b Maliene, V., Deveikis, S., Kirsten, L. and Malys, N. (2010). "Commercial Leisure Property Valuation: A Comparison of the Case Studies in UK and Lithuania". International Journal of Strategic Property Management. 14 (1): 35–48. doi:10.3846/ijspm.2010.04.cite journal: CS1 maint: multiple names: authors list (link)
  16. ^ a b Royal Institution of Chartered Surveyors Archived November 17, 2007, at the Wayback Machine
  17. ^ Shire Direct.com Archived 2008-07-24 at the Wayback Machine's mortgage glossary
  18. ^ a b "Council of Mortgage Lenders". Archived from the original on 11 February 2015. Retrieved 4 April 2021.
  19. ^ "Home". adrianjsingleton.co.uk.
  20. ^ RICS [1](webpage)
  21. ^ Northern Rock Archived February 28, 2009, at the Wayback Machine
  22. ^ "How to Become a Certified Residential Appraiser". kapre.com. Archived from the original on 18 May 2017. Retrieved 1 June 2017.
  23. ^ "How to Become a Licensed Appraiser". kapre.com. Archived from the original on 18 May 2017. Retrieved 1 June 2017.
  24. ^ "Uniform Residential Appraisal Report (Form 1004): PDF" (PDF). Archived (PDF) from the original on 21 March 2012. Retrieved 1 June 2017.
  25. ^ Jennifer Saranow Schultz (27 October 2010). "Home Inspections During Divorces". The New York Times. Archived from the original on 31 October 2010. Retrieved 30 October 2010.
  26. ^ "Valuation" Archived 8 December 2005 at the Wayback Machine, RICS Organization
  27. ^ https://www.iaao.org/media/Pubs/IAAO_GLOSSARY.pdf[permanent dead link] [bare URL PDF]
  28. ^ "Assessment Analyst Adoption Accelerates". GISuser. 14 January 2016. Retrieved 6 July 2023.
  29. ^ Cusack, Margie M. (2018). GIS for Property Tax and Assessment Professionals. Kansas City, MO. ISBN 978-0883292433.cite book: CS1 maint: location missing publisher (link)
  30. ^ "§ 192 BauGB – Einzelnorm". bundesrecht.juris.de. Archived from the original on 20 September 2007. Retrieved 1 June 2017.
  31. ^ "§ 194 BauGB – Einzelnorm". bundesrecht.juris.de. Archived from the original on 21 September 2007. Retrieved 1 June 2017.
  32. ^ "German text of the WertV". Archived from the original on 26 August 2007. Retrieved 1 June 2017.
  33. ^ "German text of the WertR". Archived from the original on 9 August 2007. Retrieved 1 June 2017.
  34. ^ "Bundesverband Deutscher Sachverständiger und Fachgutachter". bdsf.de. Archived from the original on 9 June 2017. Retrieved 1 June 2017.
  35. ^ DESAG. "Sachverständigenverband – Deutsche Sachverständige – DESAG". deutsche-sachverstaendigen-gesellschaft.de. Retrieved 1 June 2017.
  36. ^ German page of HypZert GmbH
  37. ^ "Red Book 2017". rics.org. Retrieved 17 October 2018.
  38. ^ The Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure (PDF). United States Department of the Treasury. 2008. pp. 79–80. ISBN 978-016080645-2. Archived (PDF) from the original on 27 October 2011.
  39. ^ Penny Singer, "Reappraising the Appraisal Industry", New York Times, Aug 19, 1990 Archived 7 June 2008 at the Wayback Machine Retrieved 14 February 2008
  40. ^ a b "Home". appraisalfoundation.org. Archived from the original on 9 June 2017. Retrieved 1 June 2017.
  41. ^ "Land Expert Source – ASFMRA". ASFMRA.org Land Expert Source – ASFMRA.org Land Expert Source. Archived from the original on 6 June 2017. Retrieved 1 June 2017.
  42. ^ 2006 "USPAP Online" Archived 5 December 2006 at the Wayback Machine, Appraisal Foundation
  43. ^ "MBREA". mbrea.org. Archived from the original on 3 June 2017. Retrieved 1 June 2017.
  44. ^ LaCour-Little, Michael; Green, Richard K. (1 May 1998). "Are Minorities or Minority Neighborhoods More Likely to Get Low Appraisals?". The Journal of Real Estate Finance and Economics. 16 (3): 301–315. doi:10.1023/A:1007727716513. ISSN 1573-045X. S2CID 152452718.
  45. ^ "Racial and Ethnic Valuation Gaps In Home Purchase Appraisals". www.freddiemac.com. Retrieved 30 September 2021.
  46. ^ Perry, Andre M.; Rothwell, Jonathan; Harshbarger, David (27 November 2018). "The devaluation of assets in Black neighborhoods". Brookings. Retrieved 30 September 2021.
  47. ^ "香港物業估價網 – 免費住宅物業估值". 香港物業估價網. Archived from the original on 3 June 2017. Retrieved 1 June 2017.
  48. ^ "API". api.org.au. Archived from the original on 3 June 2017. Retrieved 1 June 2017.
  49. ^ "Who We Are : Property Institute of New Zealand". property.org.nz. Archived from the original on 10 July 2017. Retrieved 1 June 2017.

Further reading

[edit]
  • Barris, J. (2008) An expert system for appraisal by the method of comparison. PhD Thesis, UPC, Barcelona
  • Barris, J., & Garcia-Almirall, P. (2011) A density Function of the Appraisal Value. European Real Estate Society 2011 – Eindhoven, The Netherlands, Best Paper on Real Estate Valuation
  • Baum, A., Nunnigton, N., & Mackmin, D. (2011) The Income Approach to Property Valuation (6th Edition). Estates Gazette, London
  • Brown, G., & Matysiak, G. (1999) Real Estate Investment: A Capital Market Approach. Financial Times, London
  • Isaac, D., & O'Leary, J. (2012) Property Valuation Principles (2nd Edition), Palgrave MacMillan, London
  • Kane, S., Linne, M. and Johnson, J. (2004) Practical Applications in Appraisal Valuation Modeling. Appraisal Institute, Chicago
  • Hayward, R. (ed.) (2008) Valuation: Principles into Practice (6th edition). Estates Gazette, London
  • Maliene, V. (2011). "Specialised property valuation: Multiple criteria decision analysis". Journal of Retail & Leisure Property. 9 (5): 443–50. doi:10.1057/rlp.2011.7.
  • Maliene, V., Deveikis, S., Kirsten, L. and Malys, N. (2010). "Commercial Leisure Property Valuation: A Comparison of the Case Studies in UK and Lithuania". International Journal of Strategic Property Management. 14 (1): 35–48. doi:10.3846/ijspm.2010.04.cite journal: CS1 maint: multiple names: authors list (link)
  • Simons, Robert (2007) When Bad Things Happen to Good Property Environmental Law Institute, Washington, DC
  • Tachovsky, Michael, Environmental Dead Zones: The Evaluation of Contaminated Properties The Appraisal Journal (2021)
  • The Appraisal Foundation, Uniform Standards of Professional Appraisal Practice. Updated and published annually through the 2006 edition; henceforth, updated editions are to appear biannually.
  • The Appraisal Institute, The Appraisal of Real Estate (15th Edition).
  • The Appraisal Services in Middle East and North Africa, www.landsterling.com. RICS certified Valuation services.
  • Italian Property Valuation Standard – Codice delle Valutazioni Immobiliari, Third edition – English version (2006)
  • Duca, John V., John Muellbauer, and Anthony Murphy. 2021. "What Drives House Price Cycles? International Experience and Policy Issues." Journal of Economic Literature, 59 (3): 773-864.

 

In law, a warranty is an expressed or implied promise or assurance of some kind. The term's meaning varies across legal subjects.[1] In property law, it refers to a covenant by the grantor of a deed.[2] In insurance law, it refers to a promise by the purchaser of an insurance about the thing or person to be insured.[3]

In contract law, a warranty is a contractual assurance given, typically, by a seller to a buyer,[4] for example confirming that the seller is the owner of the property being sold.[5] A warranty is a term of a contract, but not usually a condition of the contract or an innominate term, meaning that it is a term "not going to the root of the contract",[6] and therefore only entitles the innocent party to damages if it is breached,[6] i.e. if the warranty is not true or the defaulting party does not perform the contract in accordance with the terms of the warranty. A warranty is not a guarantee: it is a mere promise. It may be enforced if it is breached by an award for the legal remedy of damages.

Depending on the terms of the contract, a product warranty may cover a product such that a manufacturer provides a warranty to a consumer with whom the manufacturer has no direct contractual relationship because it is purchased via an intermediary.

A warranty may be express or implied. An express warranty is expressly stated (typically, written); whether or not a term will be implied into a contract depends on the particular contract law of the country in question. Warranties may also state that a particular fact is true at a point in time, or that the fact will continue into the future (a "continuing warranty").

Express warranty

[edit]

Express warranties are created when the seller makes a guarantee to the buyer that the product or service being offered has certain qualities. For there to exist an express warranty, a statement regarding the product or service must be made to the buyer and the statement must play a role in the buyer's decision to purchase the product or service. If, after purchase, the buyer feels that the given statement was a misrepresentation of the actual product or service, the buyer can file for breach of express warranty.[7]

Implied warranty

[edit]

Implied warranties are unwritten promises that arise from the nature of the transaction, and the inherent understanding by the buyer, rather than from the express representations of the seller.

Sale of goods

[edit]

Warranties provided in the sale of goods (tangible products) vary according to jurisdiction, but commonly new goods are sold with implied warranty that the goods are as advertised. Used products, however, may be sold "as is" with no warranties. Each country, however, defines its own parameters with regard to implied conditions or implied warranties. The rules regarding warranties are largely standardised; i.e., the concepts of offer, acceptance, consideration, capacity to contract and intention to create legal relations. Those are the five elements to create a legally binding contract in the United States (all 50 states), England and Wales, Scotland and Northern Ireland, each of the seven states of Australia, and all other common law countries. Countries with civil law systems, however, recognise legally binding contracts which are not supported by consideration.[citation needed]

United States

[edit]

In the United States, various laws apply, including provisions in the Uniform Commercial Code which provide for implied warranties.[8] However, these implied warranties were often limited by disclaimers. In 1975 the Magnuson–Moss Warranty Act was passed to strengthen warranties on consumer goods.[9] Among other things, under the law implied warranties cannot be disclaimed if an express warranty is offered, and attorney fees may be recovered.[9] In some states, statutory warranties are required on new home construction, and "lemon laws" apply to motor vehicles.

Article 2 of the Uniform Commercial Code, which has been adopted with variations in each state, provides that the following two warranties are implied unless they are explicitly disclaimed (such as an "as is" statement):

  • The warranty of merchantability is implied unless expressly disclaimed by name, or the sale is identified with the phrase "as is" or "with all faults." To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations. For example, a fruit that looks and smells good but has hidden defects may violate the warranty if its quality does not meet the standards for such fruit "as passes ordinarily in the trade". In most states, products inherently come with implied warranty of merchantability; however, in states like Massachusetts under consumer protection law, it is illegal to disclaim this warranty on household goods sold to consumers. (Massachusetts General Laws, Chapter 106: Section 2-316A)
  • The warranty of fitness for a particular purpose is implied unless disclaimed when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide tires for use on snowy roads and receives tires that are unsafe to use in snow.

Defects In Materials and Workmanship

[edit]

A common kind of warranty on goods is a warranty that the product is free from material defects in materials and workmanship. This simply promises that the manufacturer properly constructed the product, out of proper materials. This implies that the product is not defective for the purposes for which it was made.

Warranties may be time limited, thus limiting the time the buyer has to make a claim for breach of warranty. For example, a typical 90-day warranty on a television gives the buyer 90 days from the date of purchase to claim that the television was improperly constructed. Should the television fail after 91 days of normal usage, which because televisions customarily last longer than 91 days means there was a defect in the materials or workmanship of the television, the buyer nonetheless may not collect on the warranty because it is too late to file a claim. Consumer protection laws implemented by statute, however, provide additional remedies as it is not usually expected that a television will last for only 90 days.

Time-limited warranties are often confused with performance warranties. A 90-day performance warranty would promise that the television would work for 90 days, which is fundamentally different from promising that it was delivered free of defects and limiting the time the buyer has to prove otherwise. But because the usual evidence that a product was delivered defective is that it later breaks, the effect is very similar.

One situation in which the effect of a time-limited warranty is different from the effect of a performance warranty is where the time limit exceeds a normal lifetime of the product. If a coat is designed to last two years, but has a 10-year limited warranty against defects in materials and workmanship, a buyer who wears the coat for 3 years and then finds it worn out would not be able to collect on the warranty. But it is different from a 2-year warranty because if the buyer starts wearing the coat 5 years after buying it, and finds it wears out a year later, the buyer would have a warranty claim in Year 6. On the other hand, a 10-year performance warranty would promise that the coat would last 10 years.

Satisfaction guarantee

[edit]

In the United States, the Magnuson–Moss Warranty Act of 1976 provides for enforcement of a satisfaction guarantee warranty. In these cases, the advertiser must refund the full purchase price regardless of the reason for dissatisfaction.[10]

Lifetime warranty

[edit]

A lifetime warranty is usually a warranty against defects in materials and workmanship that has no time limit to make a claim, rather than a warranty that the product will perform for the lifetime of the buyer.[11] The actual time that product can be expected to perform is normally determined by the custom for products of its kind used the way the buyer uses it.

If a product has been discontinued and is no longer available, the warranty may last a limited period longer. For example:

  • the Cisco Limited Lifetime Warranty currently lasts for five years after the product has been discontinued, but only if you know where you bought it from as the seller is responsible for administering it.[12]
  • HP Networking product lifetime warranties last for as long as one owns the product.[13]

Limited warranty

[edit]

A warranty may be limited in duration (as above) and/or in scope. In Avrora Fine Arts v Christie, Manson and Woods (a UK High Court case), the auctioneers had issued a "limited warranty" that a certain painting sold at auction had been painted by the Russian painter Boris Kustodiev, which experts subsequently stated was not the case. The sale was cancelled and the buyer was reimbursed, but further claims of negligence and misrepresentation were denied because they fell outside the warranty's scope.[14]

Breach of warranty

[edit]

Warranties are breached when the promise is not performed at all, or not performed in accordance with the contract. The seller may honor the warranty by making a refund or a replacement. The statute of limitations depends on the jurisdiction and contractual agreements. In the United States, the Uniform Commercial Code § 2-725 provides for a four-year time limit, which can be limited to one year by contract, starting from the date of delivery or if future performance is guaranteed from the date of discovery. Refusing to honor the warranty may be an unfair business practice. In the United States, breach of warranty lawsuits may be distinct from revocation of contract suits; in the case of the breach of warranty, the buyer's item is repaired or replaced while breach of contract involves returning the item to the seller.[15]

Warranty label on top of a hard disk
Warranty label on top of a hard disk
Warranty label lifted. The word "VOID" is shown multiple times
Warranty label lifted. The word "VOID" is shown multiple times.

Some warranties require that repairs be undertaken by an authorized service provider. In such cases, service by non-authorized personnel or company may void (nullify) the warranty. However, according to the Magnuson-Moss Act (a U.S. Federal law that governs warranties, which was passed in 1975), if the warranty does not provide full or partial payment of labor (to repair the device or system), it is the owner's choice who will provide the labor, including the possibility of DIY ("Do It Yourself") repairs, in which case the device or system owner will pay zero dollars for labor, yet the company that provided the warranty must still provide all the parts needed for the repair at absolutely no charge to the owner.

If the defective product causes injury, this may be a cause of action for a product liability lawsuit (tort). Strict liability may be applied.

Extended warranty

[edit]

In addition to standard warranties on new items, third parties or manufacturers may sell or offer extended warranties (also called service contracts).[16] These extend the warranty for a further length of time. However, these warranties have terms and conditions which may not match the original terms and conditions. For example, these may not cover anything other than mechanical failure from normal usage. Exclusions may include commercial use, "acts of God", owner abuse, and malicious destruction. They may also exclude parts that normally wear out such as tires and lubrication on a vehicle.

These types of warranties are provided for various products, but automobiles and electronics are common examples. Warranties which are sold through retailers such as Best Buy may include significant commission for the retailer as a result of reverse competition.[17] For instance, an auto warranty from a car dealership may be subcontracted and vehicle repairs may be at a lower rate which could compromise the quality of service. At the time of repair, out-of-pocket expenses may be charged for unexpected services provided outside of the warranty terms or uncovered parts. Extended Warranties are mostly back to back underwritten by underwriters, who are the actual bearer of the risk.

Representations versus warranties

[edit]

Statements of fact in a contract or in obtaining the contract are considered to be either warranties or representations. Traditionally, warranties are factual promises which are enforced through a contract legal action, regardless of materiality, intent, or reliance.[18] Representations are traditionally *pre*contractual statements which allow for a tort-based action if the misrepresentation is innocent, negligent or fraudulent.[19] In U.S. law, the distinction between the two is somewhat unclear;[18] warranties are viewed as primarily contract-based legal action while negligent or fraudulent misrepresentations are tort-based, but there is a confusing mix of case law in the United States.[18] In modern English law, sellers often avoid using the term 'represents' in order to avoid claims under the Misrepresentation Act 1967 (although English law will look to the substance rather than the form of the representation to decide what it is), while in America 'warrants and represents' is relatively common.[20] Some modern commentators suggest avoiding the words and substituting 'state' or 'agree', and some model forms do not use the words;[19] however, others disagree.[21]

Product types

[edit]

Appliance warranty

[edit]

Canada and United States

[edit]

Written warranties on new major appliances, such as refrigerators, kitchen stoves and dishwashers, usually cover the cost of parts and labor to repair defects in materials or workmanship which appear under normal home use.

Warranties often cover defects up to a year after purchase or delivery.[22] However some exclude new owners when a house or appliance is sold within the year (Frigidaire,[23] LG,[24] Samsung[25]). Others do let warranties transfer to new buyers (Amana,[26] General Electric,[27] Whirlpool). Some manufacturers cover refrigerators' sealed parts (compressors, tubing, etc.) for five years (General Electric,[27] Samsung,[28] Whirlpool)[25] or seven years (LG[24]) or ten years (KitchenAid[29]).

Warranties on water heaters cover parts for 5 to 12 years in single family residences, one year otherwise. They do not cover new owners when a house or heater is sold; nor do they cover the original owner if the heater is moved to a second location.[30][31][32][33][34] Tank models from A. O. Smith do not allow heating elements to be replaced with lower (or higher) wattages, and do not cover renter-occupied single family. They end if the unit is flooded or ever uses desalinated or deionized water, such as municipal desalination plants or reverse osmosis filters.[32][33] Smith's tank models for manufactured housing do not provide coverage if a whirlpool or hot tub is connected.[33]

Tank water heater warranties exclude labor, liability for water damage, and shipping cost to return the old heater or parts. Tankless warranties do not exclude water damage; they cover labor for a year, and Ruud/Rheem covers return shipping on tankless models.[31][34] Smith's tankless water heaters do not restrict coverage to a single family, and require professional installation.[34]

Implied warranties under US law could extend for longer periods. However, most states allow the written warranties to include clauses which limit these implied warranties to the same time period as the written warranty.[35]

Car warranty

[edit]

United States

[edit]

New car factory warranties commonly range from one year to five years and in some cases extend even 10 years, with typically a mileage limit as well. Car warranties can be extended by the manufacturer or other companies with a renewal fee.

Used car warranties are usually 3 months and 3,000 miles.

United Kingdom

[edit]

In the United Kingdom, types of warranties have been classified as either an:

  1. original manufacturer warranty,
  2. insurance warranty underwritten and regulated as insurance or
  3. obligor warranty, typically written by a car dealership or garage.

In the United Kingdom, the Financial Conduct Authority (FCA), which began to regulate insurance contracts in this context in 2005, determined that additional warranties sold by car dealerships are "unlikely to be insurance".[36] Insurance warranties may offer greater protection to the consumer.

Home Warranty

[edit]

A home warranty protects against the costs of home and appliance repair by offering home warranty coverage for houses, townhomes, condominiums, mobile homes, and new construction homes. When a problem occurs with a covered appliance or mechanical system such as an air conditioning unit or furnace, a service technician repairs or replaces it. The homeowner may have to pay for a service call fee and the home warranty company pays the balance for the repair or replacement of the covered item.

Intellectual property right warranty

[edit]

An intellectual property right (IPR) warranty provides contractual protection against breach of rights in software development and other fields where IPR is protected. Increasing reluctance on the part of suppliers to offer an IPR warranty or indemnity has been noted in recent years.[37]

Warranty data

[edit]

Warranty data consists of claims data and supplementary data. Claims data are the data collected during the servicing of claims under warranty and supplementary data are additional data such as production and marketing data.[38] This data can help determine product reliability and plan for future modifications.[38]

See also

[edit]
  • Business law
  • Collateral TORT
  • Consumer protection
  • Due diligence
  • Extended warranty
  • Magnuson-Moss Warranty Act
  • Surety
  • Warranty deed
  • Warranty tolling

References

[edit]
  1. ^ Gilmore, Grant; Black, Jr., Charles L. (1975). The Law of Admiralty. Foundation Press. p. 63. ISBN 0882774093.
  2. ^ Black's Law Dictionary (15 ed.). Thomson Reuters West. 2015. p. 1344. ISBN 9780314642721.
  3. ^ Black's Law Dictionary (15 ed.). Thomson Reuters West. 2015. p. 1345. ISBN 9780314642721.
  4. ^ Gordons Partnership Solicitors, Guarantees, Warranties and Indemnities – Spot the Difference, accessed 2 February 2023
  5. ^ Johnson, M., Warranties in share purchase agreements, Rocket Lawyer, accessed 2 February 2023
  6. ^ a b Hogg M. (2011). Promises and Contract Law: Comparative Perspectives, p. 48, Cambridge University Press.
  7. ^ Bagley, Constance; Dauchy, Craig (2018). The Entrepreneur's Guide to Law and Strategy (Fifth ed.). Boston, MA: Cengage Learning, Inc. pp. 313–315. ISBN 978-1-285-42849-9.
  8. ^ Warranties in Sales of Goods. LexisNexis Study Outlines.
  9. ^ a b 12 Reasons to Love the Magnuson-Moss Act. Journal of Texas Consumer Law. Reprinted with permission from the National Consumer Law Center.
  10. ^ Andreoni J. (2005). Trust, Reciprocity, and Contract Enforcement: Experiments on Satisfaction Guaranteed.
  11. ^ Lifetime Warranties. Warranty Week. WebCite Archive.
  12. ^ "Cisco Limited Lifetime Hardware Warranty Terms". Retrieved 2008-09-10.
  13. ^ "HP Networking warranty information". Retrieved 2011-08-26.
  14. ^ Maitland Chambers, AVRORA FINE ARTS INVESTMENT LTD V CHRISTIE, MANSON & WOODS LTD (2012), accessed 23 December 2022
  15. ^ Davis T. (2009). UCC Breach of Warranty and Contract Claims: Clarifying the Distinction. Baylor Law Review.
  16. ^ "Appliances - 247 Home Rescue". 247 Home Rescue. Retrieved 26 June 2015.
  17. ^ Baker T, Siegelman P. (2013). Protecting Consumers from Add-On Insurance Products: New Lessons for Insurance Regulation.
  18. ^ a b c West G D, Lewis W B. (2009). Contracting to Avoid Extra-Contractual Liability—Can Your Contractual Deal Ever Really Be the "Entire" Deal? The Business Lawyer.
  19. ^ a b Primack MA. (2009), and it was relied upon by a party to enter into the contract. Representations, Warranties and Covenants: Back to the Basics in Contracts, and do not form part of the contract. National Law Review.
  20. ^ Ferara L N, Philips J, Runnicles J. (2007). Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements Archived 2013-05-14 at the Wayback Machine. Jones Day Publications.
  21. ^ Telman J. (2012). Representations and Warranties. ContractsProf Blog.
  22. ^ Moor, Tom (2016). "Are Extended Warranties on Appliances Worth It?". Angies' List (published 2016-07-22). Retrieved 16 January 2017. Most manufacturers offer warranties for appliances that last from three months to up to one year.
  23. ^ "Frigidaire, All about the Use & Care of your Refrigerator" (PDF). Electrolux. p. 20. Retrieved 11 September 2016.
  24. ^ a b "LG OWNER'S MANUAL FRENCH DOOR REFRIGERATOR". LG. pp. 55–58. Retrieved 11 September 2016.
  25. ^ a b "WHIRLPOOL® REFRIGERATOR WARRANTY" (PDF). Whirlpool. Archived from the original (PDF) on 20 December 2016. Retrieved 11 September 2016.
  26. ^ "AMANA® MAJOR APPLIANCE WARRANTY" (PDF). Amana. Archived from the original (PDF) on 20 September 2016. Retrieved 11 September 2016.
  27. ^ a b "GE Appliances, Refrigerators, Owner's Manual" (PDF). General Electric. p. 11. Retrieved 11 September 2016.
  28. ^ "Refrigerator Product Info". Samsung. Retrieved 11 September 2016.
  29. ^ "KITCHENAID® REFRIGERATOR WARRANTY" (PDF). KitchenAid. Archived from the original (PDF) on 20 December 2016. Retrieved 23 September 2016.
  30. ^ "Certificate of Limited Warranty, Rheem and Ruud Water Heaters". ruud.com/product/ruud-residential-electric-water-heaters-professional-achiever-series-standard-electric/#specs-docs. 2014-09-01. Retrieved 2017-10-13.
  31. ^ a b "Rheem Limited Warranty For the RHEEM®, RUUD®, Richmond®, Paloma®, and Sure Comfort® Residential Tankless Gas Water Heaters". ruud.com/product/ruud-condensing-tankless-professional-ultra-series-96-direct-vent-indoor/#specs-docs. Retrieved 2017-10-13.
  32. ^ a b AO Smith (2017-08-01). "Limited Warranty [nor manufactured housing]" (PDF). hotwater.com/resources/product-literature/warranty-sheets/residential-electric/. Retrieved 2017-10-13.
  33. ^ a b c "AO Smith Water Heaters, Residential Electric Warranty [Manufactured Housing]" (PDF). hotwater.com/resources/product-literature/warranty-sheets/residential-electric/. Retrieved 2017-10-13.
  34. ^ a b c A. O. Smith. "Warranty" (PDF). hotwater.com/resources/product-literature/warranty-sheets/tankless/. Retrieved 2017-10-13.
  35. ^ "What you need to know about warranty laws". Consumer Reports. 2013. Retrieved 11 September 2016.
  36. ^ What is a contract of insurance? Archived 2012-10-06 at the Wayback Machine. Financial Services Authority.
  37. ^ Simon Halberstam LLP, Difference between an IPR indemnity and an IPR warranty, published 2009, accessed 27 December 2022
  38. ^ a b Wu S. (2012). Warranty Data Analysis: A Review. Quality and Reliability Engineering International.
[edit]
  • Federal Trade Commission: Warranty Information (United States)

 

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Driving Directions in Will County


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Reviews for Overhead Door Company of Joliet


Overhead Door Company of Joliet

Hector Melero

(5)

Had a really great experience with Middleton Overhead Doors. My door started to bow and after several attempts on me fixing it I just couldn’t get it. I didn’t want to pay on something I knew I could fix. Well, I gave up and they came out and made it look easy. I know what they are doing not to mention they called me before hand to confirm my appointment and they showed up at there scheduled appointment. I highly recommend Middleton Overhead Doors on any work that needs to be done

Overhead Door Company of Joliet

Owen McCarthy

(5)

I called the office just by chance to see if there was an available opening for a service call to repair a busted spring. Unfortunately I didn’t catch the name of the person who answere, but she couldn’t have been more pleasant and polite. She was able to get a tech to my house in an hour. I believe the tech’s name was Mike and he too was amazing. He quickly resolved my issue and even corrected a couple of things that he saw that weren’t quite right. I would recommend to anyone and will definitely call on Middleton for any future needs. Thank you all for your great service.

Overhead Door Company of Joliet

Jim Chuporak

(5)

Received a notice the morning of telling me when to expect the men to come and put the door in. he was on time, answered all my questions, worked diligently in the cold. And did an absolutely awesome job. Everything was cleaned up, hauled away from the old door. I am extremely happy with the service I received from the first phone call I made through having the door put in. My wife and I are very, very happy with the door.

Overhead Door Company of Joliet

Kelley Jansa

(5)

We used Middleton Door to upgrade our garage door. We had three different companies come out to quote the job and across the board Middleton was better. They were professional, had plenty of different options and priced appropriately. The door we ordered came with a small dent and they handled getting a new panel ordered and reinstalled very quickly.

Overhead Door Company of Joliet

Andrea Nitsche

(4)

Scheduling was easy, job was done quickly. Little disappointed that they gave me a quote over email (which they confirmed was for labor and materials), but when they finished it was just over $30 more. Not a huge deal, but when I asked why, I was told they gave me an approx cost and it depends on what is needed. I get that in general, however, they installed the door and I gave them my address and pics of the existing prior to getting a quote. I feel like they could have been more upfront with pricing. And just a heads up, it was pricey... Had them change the weather stripping, from ringing my doorbell to pulling out my driveway when done was literally 20 mins, cost was just over $260 😬

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Frequently Asked Questions

Software updates are essential for connected garage door systems to enhance security, improve functionality, fix bugs, and ensure compatibility with other smart home devices. They help protect against vulnerabilities that could be exploited by cyber threats.
Most connected garage door systems will notify you through a mobile app or email when an update is available. You can also check the manufacturers website or app for any update notifications or version changes.
To safely install a software update, ensure your device is connected to a stable power source and reliable internet connection. Follow the manufacturer’s instructions in the mobile app or user manual closely. Avoid interrupting the process once it has started to prevent installation issues.
If a software update causes issues, try restarting the system and checking all connections. Consult the troubleshooting section of the user manual or contact customer support for assistance. In some cases, reverting to a previous version may resolve problems until further updates are released.