Such an appraisal is requested mainly owing to real estate tax assessment and condemnation. The individual states in the United States have different rules in this regard. However, most of them share the common themes of the Uniform Appraisal Standards for Federal Land Acquisitions.

The history and trends of casinos

I. Nelson Rose detailed the background and trends of casinos in his book Gambling and the Law. This book was originally published in 1986. In the book, he mentions that in the United States gambling is in its ‘third wave’. According to him, the first wave came during the period spanning the colonial period to the Civil War. This was the period of lotteries that were mostly influenced by the printing press.

The second wave occurred after the Civil War as a means to raise money for rebuilding by the South. The third wave began with the Great Depression when gambling was legalized in the state of Nevada. By 2015, commercial casino gaming was legalized by 22 states in the USA. The revenue generated from these casinos amounted to $38.3 billion at the time.

The casinos in the United States can be divided into four categories. They are commercial casino gaming, online casinos, limited stakes gaming, and tribal casinos. While the revenues from commercial casinos had been on the rise since 2009, the continued success was never guaranteed. The commercial casinos were faced with increased competition and ageing offerings in games and entertainment. 

With the onset of the COVID-19 pandemic, online casinos became immensely popular owing to lockdowns. As the casino players could not visit the land-based establishments, they turned to online casinos. Such casinos have great benefits for players, such as grand welcome bonuses and a large variety in games. For more information about online casinos, visit casinosjungle.com

The valuation of casinos

All the traditional methods used in the valuation of commercial properties are also useful in the valuation of casinos. They also involve certain obstacles that must be negotiated carefully by the appraiser. The comparable properties would be the sales of buildings that were used as casino establishments. Usually, the appraisers can arrive at a value through the income approach. 

They need not get into the business being conducted in the casino. Most of the time, there is a lack of substantial direct evidence of sale prices or property rents. This would lead anyone to conclude that the cost approach is most reliable for casinos. Depreciation is also a significant element in this process. 

The cost approach cannot always be put forward as a standalone method for valuing casinos. In most the cases, the appraiser must consider the total assets of the business. The sales and revenue derived from them are also considered. Based on these factors, the value of the casino can be derived.

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For instance, homes in New York City would always be expensive compared to those in Arizona or Phoenix. However, there are some lesser-known factors that impact the value of homes. Here, we have identified some key areas to consider with regard to your property.

Insurance

With the growth of a town, the chances of it getting incorporated increases. Once it achieves the ‘city’ status, there is an increase in the demand for services. As a result, you would witness a growth in firefighter forces and the local police. This is subsidized by city taxes. 

The transition of your town to a city involves some major changes. One of them is a shift from pure volunteer services to paid, professional services. The police, EMTs, firefighters, and other emergency services add an extra layer of insurance to your health and property. 

It would certainly have a positive impact on the value of your property. The appraisal of your house is impacted by the value of the homes around you. This is owing to the growth in the value of real estate with an upgrade in services.

Industries

Growing cities tend to attract large industries or companies. This results in the growth of jobs and improves the local economy. There are certain industries that can significantly raise the value of your house. When a major company opens its unit in a newly incorporated city, property values in that area increase. There are certain industries that may not increase property values. 

One of the powerful influences on the values of homes in a particular area is public perception. It is, therefore, absolutely necessary that you stay updated on the developments in your neighbourhood. It can be a great way to improve and protect the value of your property.

Walkability

New cities tend to invest more in the development of downtown areas. This would mean having a lot of small shops and places for enjoying a quick snack. Cities with historic areas are also revitalizing their downtowns and becoming a part of the ‘new urbanism’. If your house is located in or around these walkable areas, your property value would increase substantially. 

When the real estate market near your property improves, you might witness an improvement in your home equity. Such improvements are both a source of convenience and price-rise. If you can walk from one coffee shop to another in your neighbourhood, your house has a significant value. Walkability is often a big driver of property values. 

Neighbourhoods that have walkability above the average can add thousands of dollars more to the value of the properties. Considering this fact, it would be easy for you to see why people prefer walkable neighbourhoods. The presence of sidewalks and coffee shops do not always guarantee higher property values. Such features act more like positive signs that you have increased your home equity.

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Your mortgage lender uses the house appraisal to gauge the risks involved in providing the loan. Property is used as collateral by a lender in case the borrower defaults. The lender needs to make sure that the loan is not too big compared to the property’s value. 

Value

The value of your house is its estimated worth in the current market. It also includes the future benefits that can be derived from owning the house. Of course, these benefits would come over a certain period of time. It is quite possible that the benefits would be gained over the loan’s full term. 

The value of your house is influenced by several factors. Some of them are the economic trends, government regulations, and social factors impacting the real estate market. The value of your house is not equivalent to its cost. The latter is derived by considering the current expenditures. 

They may include labour and material expenses incurred to build the house. If it cost $100,000 to build your home, its value would be lower if its foundation has major problems.

How lenders use AMCs

Many lenders use the services of appraisal management companies (AMCs). The AMCs employ licensed local appraisers to get the appraisals and determine the current value of properties. The lenders can thus eliminate the cost of maintaining a panel of investors. 

The AMCs help lenders in providing unbiased values and make sure that they adhere to federal appraisal requirements. In this process, the lender is still responsible for reviewing the appraisal. The lender also has to monitor the AMCs for accuracy. A mortgage company must ensure that the value provided by the appraiser is supported by due diligence investigation. 

In cases where the conclusion of an appraisal report does not have sufficient support, additional reviews are needed. Most lenders use tools for appraisal evaluation, which identify the appraisals that need additional reviews.

Asset valuation model (AVM)

Many mortgage companies use asset valuation models (AVMs) to find out property value for second mortgages. Values driven by technology are calculated by the AVMs based on mathematical modelling. It generally involves an analysis of tax assessor valuation, public record data, recent sales history, and comparable sales analysis. 

A price based on the current market is determined as a result. This model does not take the actual condition of your house into consideration. AVMs are proprietary and thus prevents the owners of the models from sharing what data they use. They also do not share information about how the data is weighted. You would not have much insight into what exactly contributes to the value of your house.

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Among them is the current market price, availability of fewer comparable properties, and costs involved in maintaining the property. Besides, the question of how much the buyer is willing to pay always remains. Here, we’ve listed the methods that the appraisers use to determine the value of commercial properties:

1. Cost approach

The cost involved in rebuilding the structure from scratch is considered during the valuation. The current value of the land, the construction material, and other costs are also taken into consideration. Generally, the cost approach is used in the absence of appropriate comparable properties. 

Besides, certain properties may contain some specialized improvements. The cost approach is also applied when the value of the underlying land has been raised owing to upgraded structures.

2. Income capitalization

This method of valuation is primarily based on the income an investor can expect from the property. This can be derived partly by comparing the property with other similar properties in the area. It can also be derived from an expected decrease in the costs of maintenance. 

For instance, let us take an example of a building purchased for $1 million. Based on local market research, the expected yield from the building is 5%. This expected income of $50,000 every year can be enhanced by passing other associated costs to the tenant. It can also be enhanced by tightening inefficiencies.

3. Sales comparison

This method is also called the ‘market approach’. It relies heavily on the latest sales data of comparable properties. The appraiser seeks buildings with similar features that have been sold recently in the same market area. By comparing the properties, a fair market value is ascertained for the property in question. 

This method of valuation is typically used for residential property valuation. It can be difficult to find comparable properties when it comes to commercial real estate.

4. Value per door

This method of commercial property valuation is primarily used for apartment buildings rather than single-unit buildings. It determines the value of the entire building based on the number of units. For example, a building with 20 apartments priced at $4 million would be valued at $200,000 ‘per door’. This would be irrespective of the size of each unit.

5. Value per Gross Rent Multiplier

The Gross Rent Multiplier (GRM) is a valuation method that measures and compares a property’s potential valuation. This is done by taking the property’s cost and dividing it by the gross income. Let us understand this with an example. You have purchased a commercial property that is worth $500,000. 

It generates $70,000 every year in gross rents. In this case, your GRM would be 7.14 or 500,000/70,000. The GRM method is used to identify properties with a low price relative to their market-based potential income.

6. Cost per rentable square foot

Rentable square foot is the combination of usable square foot and the common areas tenants benefit from. They include elevators and stairwells. You can estimate the cost per rentable square foot using this method. You can also compare it to the average lease cost per square foot. The evaluation of the commercial property’s value is done based on these factors.

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