CRE Appraisals: Components, Approaches to Value & Cap Rates
Commercial real estate (CRE) appraisals can be lengthy and very detailed. Want to navigate to key sections quickly? Want to understand key areas of lending focus (beyond the value conclusion), both in terms of reviewing the report and making use of its conclusions? As banks continue to deal directly with CRE loans as a major portion of their loan portfolios, plus indirectly through income-producing or rental real estate holdings that affect customers, it is important to understand the key sections of the report and terminology used. For example, there can be a critical difference between providing a value based on fee simple interest versus leased fee interest. Stepping away from all the rules and regulations, this program focuses on the “nuts and bolts” of the report itself.
- Types of appraisals by format
- What to look for within the assumptions and limiting conditions
- Property ownership interests clarified (fee simple, leased fee, etc.)
- Highest and best use of the property
- Approaches to value
- Cost approach and information useful in the underwriting and loan structuring process
- Income approach options of discounted cash flow (DCF) and direct capitalization, with the steps to building net operating income (NOI) and the drivers of cap rates used in direct capitalization
- Comparables and the key issue to consider when selecting and evaluating comps
- Reconciliation of value
Who Should Attend?
CRE lenders, commercial lenders, private bankers, small business lenders, credit analysts, portfolio managers, assistant relationship managers, consumer and mortgage lenders, loan review specialists, special assets officers, lending managers, credit officers and CRE support personnel.
Richard Hamm has been training bankers for 30+ years, designing and delivering courses specializing in commercial lending and credit, including portfolio and risk management, commercial real estate (CRE) and appraisals, plus selling and negotiating skills, and director training.
His clients include National associations such as the American Bankers Association (ABA) and the Risk Management Association (RMA), regional banking schools such as the Graduate School of Banking at Colorado, the Southwestern Graduate School of Banking (SWGSB) and other major schools, state banking and community banking associations in ten states, and individual banks
He is based in Huntsville, AL and has owned/operated Advantage Consulting & Training for 15+ years, after a 22-year banking career including senior positions in lending and credit, plus president during the formation of a community bank. He has BS and MBA degrees from the University of Alabama.
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