DISCLAIMER: The opinions set forth herein reflect the viewpoint of the Appraisal Institute and Appraisal

Institute of Canada at the time of publication but do not necessarily reflect the viewpoint of each individual
member. While a great deal of care has been taken to provide accurate and current information, neither the
Appraisal Institute, the Appraisal Institute of Canada, the UBC Real Estate Division, nor its editors and staff
assume responsibility for the accuracy of the data contained herein. Further, the general principles and
conclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases,
and any revisions of the same. This publication is sold for educational purposes with the understanding that the
publisher is not engaged in rendering legal, accounting, or other professional advice.

© Copyright 2010 by the Appraisal Institute of Canada and the Appraisal Institute. All rights reserved. No part
of this book may be reproduced in any form without written permission from the Appraisal Institute of Canada.
Published by the UBC Real Estate Division. Printed in Vancouver, Canada.
 CHAPTER 1

REAL PROPERTY AND

ITS APPRAISAL

Š—ȱ ™›˜Ÿ’Žœȱ ‘Žȱ ˜ž—Š’˜—ȱ ˜›ȱ ‘Žȱ œ˜Œ’Š•ȱ Š—ȱ ŽŒ˜—˜–’Œȱ ŠŒ’Ÿ’’Žœȱ ˜ȱ ™Ž˜™•Žǯȱ ȱ ’œȱ
‹˜‘ȱŠȱŠ—’‹•Žȱ™‘¢œ’ŒŠ•ȱŒ˜––˜’¢ȱŠ—ȱŠȱœ˜ž›ŒŽȱ˜ȱ ŽŠ•‘ǯȱ’—ŒŽȱ•Š—ȱ’œȱŽœœŽ—’Š•ȱ˜ȱ
•’ŽȱŠ—ȱœ˜Œ’Ž¢ǰȱ’ȱ’œȱ’–™˜›Š—ȱ˜ȱ–Š—¢ȱ’œŒ’™•’—Žœǰȱ’—Œ•ž’—ȱ•Š ǰȱŽŒ˜—˜–’Œœǰȱꗊ—ŒŽǰȱ
œ˜Œ’˜•˜¢ǰȱ Š—ȱ Ž˜›Š™‘¢ǯȱ ŠŒ‘ȱ ˜ȱ ‘ŽœŽȱ ’œŒ’™•’—Žœȱ –Š¢ȱ Ž–™•˜¢ȱ Šȱ œ˜–Ž ‘Šȱ ’쎛Ȭ
Ž—ȱŒ˜—ŒŽ™ȱ˜ȱ›ŽŠ•ȱ™›˜™Ž›¢ǯ
’‘’—ȱ ‘Žȱ ŸŠœȱ ˜–Š’—ȱ ˜ȱ ‘Žȱ •Š ǰȱ ’œœžŽœȱ œžŒ‘ȱ Šœȱ ‘Žȱ ˜ —Ž›œ‘’™ȱ Š—ȱ ‘Žȱ žœŽȱ
˜ȱ •Š—ȱ Š›Žȱ Œ˜—œ’Ž›Žǯȱ —ȱ ŽŒ˜—˜–’Œœǰȱ •Š—ȱ ’œȱ ›ŽŠ›Žȱ Šœȱ ˜—Žȱ ˜ȱ ‘Žȱ ˜ž›ȱ ŠŽ—œȱ ˜ȱ
™›˜žŒ’˜—ǰȱ Š•˜—ȱ  ’‘ȱ •Š‹˜ž›ǰȱ ŒŠ™’Š•ǰȱ Š—ȱ Ž—›Ž™›Ž—Žž›’Š•ȱ Œ˜˜›’—Š’˜—ǯȱ Š—ȱ
™›˜Ÿ’Žœȱ –Š—¢ȱ ˜ȱ ‘Žȱ —Šž›Š•ȱ Ž•Ž–Ž—œȱ ‘Šȱ Œ˜—›’‹žŽȱ ˜ȱ Šȱ —Š’˜—Ȃœȱ  ŽŠ•‘ǯȱ ’—Š—ŒŽȱ
Š™™•’Žœȱ ‘Žȱ ™›’—Œ’™•Žœȱ ˜ȱ ŽŒ˜—˜–’Œœȱ  ’‘’—ȱ Šȱ –Š›”Žȱ ŽŒ˜—˜–¢ȱ ˜ȱ ž›—’œ‘ȱ ŒŠ™’Š•ȱ ˜›ȱ
‘Žȱ Ž¡Œ‘Š—Žȱ ˜ȱ ™›˜™Ž›¢ǰȱ Š—ȱ ’ȱ ‘Ž•™œȱ –Š›”Žȱ ™Š›’Œ’™Š—œȱ ŠŒȱ ”—˜ •ŽŽŠ‹•¢ȱ Š—ȱ
™›žŽ—•¢ǯȱ˜Œ’˜•˜¢ȱ˜ŒžœŽœȱ˜—ȱ‘ŽȱžŠ•ȱ—Šž›Žȱ˜ȱ•Š—DZȱ
yȱ œȱŠȱ›Žœ˜ž›ŒŽȱ˜ȱ‹Žȱœ‘Š›Žȱ‹¢ȱŠ••ȱ™Ž˜™•Žȱ
yȱ œȱŠȱŒ˜––˜’¢ȱ‘ŠȱŒŠ—ȱ‹Žȱ˜ —Žǰȱ›ŠŽǰȱŠ—ȱžœŽȱ‹¢ȱ’—’Ÿ’žŠ•œ
Ž˜›Š™‘¢ȱ ˜ŒžœŽœȱ ˜—ȱ ŽœŒ›’‹’—ȱ ‘Žȱ ™‘¢œ’ŒŠ•ȱ Ž•Ž–Ž—œȱ ˜ȱ •Š—ȱ Š—ȱ ‘Žȱ ŠŒ’Ÿ’’Žœȱ ˜ȱ
‘Žȱ™Ž˜™•Žȱ ‘˜ȱžœŽȱ’ǯ
Š ¢Ž›œǰȱŽŒ˜—˜–’œœǰȱœ˜Œ’˜•˜’œœǰȱŠ—ȱŽ˜›Š™‘Ž›œȱ‘ŠŸŽȱŠȱŒ˜––˜—ȱž—Ž›œŠ—Ȭ
’—ȱ˜ȱ‘ŽȱŠĴ›’‹žŽœȱ˜ȱ•Š—DZ
yȱ ŠŒ‘ȱ™Š›ŒŽ•ȱ˜ȱ•Š—ȱ’œȱž—’šžŽȱ’—ȱ’œȱ•˜ŒŠ’˜—ȱŠ—ȱŒ˜–™˜œ’’˜—ǯ
yȱ Š—ȱ’œȱ™‘¢œ’ŒŠ••¢ȱ’––˜‹’•Žǯ
yȱ Š—ȱ’œȱž›Š‹•Žǯ
yȱ ‘Žȱœž™™•¢ȱ˜ȱ•Š—ȱ’œȱꗒŽǯ
yȱ Š—ȱ’œȱžœŽž•ȱ˜ȱ™Ž˜™•Žǯ Land is investigated and
ŽŠ•ȱ ŽœŠŽȱ Š™™›Š’œŽ›œȱ Ÿ’Ž ȱ ‘ŽœŽȱ ŠĴ›’‹žŽœȱ Šœȱ ‘Žȱ ˜ž—ŠȬ analyzed in a variety of
disciplines – government, the
’˜—ȱ ˜ȱ ›ŽŠ•ȱ ŽœŠŽȂœȱ ŸŠ•žŽǯȱ ˜—›ŠœŽȱ  ’‘ȱ ‘Žȱ ™‘¢œ’ŒŠ•ȱ
law, economics, geography,
Œ‘Š›ŠŒŽ›ȱ˜ȱ•Š—ǰȱŸŠ•žŽȱ’œȱŠ—ȱŽŒ˜—˜–’ŒȱŒ˜—ŒŽ™ǯȱ™™›Š’œŽ›œȱ
and environmental studies.
›ŽŒ˜—’£Žȱ ‘Žȱ Œ˜—ŒŽ™œȱ ˜ȱ •Š—ȱ žœŽȱ ’—ȱ ˜‘Ž›ȱ ’œŒ’™•’—Žœǰȱ

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R1ARE10.indb 1 10/4/2010 10:35:11 AM

 1.2 The Appraisal of Real Estate – Third Canadian Edition

‹žȱ Š›Žȱ –˜œȱ Œ˜—ŒŽ›—Žȱ  ’‘ȱ ‘˜ ȱ ‘Žȱ –Š›”Žȱ –ŽŠœž›Žœȱ ŸŠ•žŽǯȱ Š›”Žœȱ ›ŽĚŽŒȱ ‘Žȱ
ŠĴ’žŽœȱ Š—ȱ ŠŒ’˜—œȱ ˜ȱ ™Ž˜™•Žȱ ’—ȱ ›Žœ™˜—œŽȱ ˜ȱ œ˜Œ’Š•ȱ Š—ȱ ŽŒ˜—˜–’Œȱ ˜›ŒŽœȱ Š—ȱ ‘Žȱ
Œ˜—œ›Š’—œȱ˜ȱ•Š ȱŠ—ȱ•ŽŠ•ȱŽ—Œž–‹›Š—ŒŽœǯ

CONCEPTS OF LAND
•‘˜ž‘ȱ ˜—Žȱ ŒŠ—ȱ Ÿ’Ž ȱ •Š—ȱ Š—ȱ ’–™›˜ŸŽ–Ž—œȱ ’—ȱ Šȱ ™‘¢œ’ŒŠ•ȱ œŽ—œŽǰȱ ‘Ž›Žȱ Š›Žȱ ˜‘Ž›ȱ
Œ˜—ŒŽ™œȱ˜ȱ•Š—ȱ‘ŠȱŠ›Žȱ•Žœœȱ˜‹Ÿ’˜žœǯȱ‘ŽœŽȱŒ˜—ŒŽ™œȱ‘Ž•™ȱ˜ȱŒ‘Š›ŠŒŽ›’£Žȱ‘Žȱ’–™˜›Ȭ
Š—ŒŽȱ˜ȱ•Š—ȱŠ—ȱ™›˜Ÿ’Žȱ‘Žȱ˜ž—Š’˜—ȱ˜›ȱ•Š—ȱŸŠ•žŽȱœ¢œŽ–œǯ

Geographic and Environmental

‘Žȱ œž¢ȱ ˜ȱ •Š—ȱ ’—Œ•žŽœȱ Œ˜—œ’Ž›Š’˜—ȱ ˜ȱ ’œȱ ’ŸŽ›œŽȱ ™‘¢œ’ŒŠ•ȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ Š—ȱ
‘˜ ȱ‘ŽœŽȱŒ‘Š›ŠŒŽ›’œ’ŒœȱŒ˜–‹’—Žȱ’—ȱŠȱ™Š›’Œž•Š›ȱŠ›ŽŠǯȱŠŒ‘ȱ•Š—ȱ™Š›ŒŽ•ȱ’œȱž—’šžŽǰȱŠ—ȱ
•˜ŒŠ’˜—ȱ’œȱŠȱŸŽ›¢ȱ’–™˜›Š—ȱŠĴ›’‹žŽǯȱ‘Žȱž’•’¢ȱ˜ȱ•Š—ȱŠ—ȱ‘Žȱ‘’‘ŽœȱŠ—ȱ‹ŽœȱžœŽȱ
˜›ȱ•Š—ȱŒŠ—ȱ‹Žȱœ’—’ęŒŠ—•¢ȱŠěŽŒŽȱ‹¢ȱ‘Žȱ™‘¢œ’ŒŠ•ȱŠ—ȱ•˜ŒŠ’˜—Š•ȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ
‘Žȱ•Š—ȱŠ—ȱ˜‘Ž›ȱ›Ž•ŠŽȱŒ˜—œ’Ž›Š’˜—œȱǻ‹›˜Š•¢ȱ›ŽŽ››Žȱ˜ȱŠœȱŽ˜›Š™‘¢Ǽǯ
Š—ȱ ’œȱ ŠěŽŒŽȱ ‹¢ȱ Šȱ —ž–‹Ž›ȱ ˜ȱ ™›˜ŒŽœœŽœǯȱ —˜’—ȱ ™‘¢œ’ŒŠ•ȱ Š—ȱ Œ‘Ž–’ŒŠ•ȱ
™›˜ŒŽœœŽœȱ–˜’¢ȱ‘Žȱ•Š—Ȃœȱœž›ŠŒŽǰȱ‹’˜•˜’ŒŠ•ȱ™›˜ŒŽœœŽœȱŽŽ›–’—Žȱ‘Žȱ’œ›’‹ž’˜—ȱ˜ȱ
•’Žȱ ˜›–œǰȱ Š—ȱ œ˜Œ’˜ŽŒ˜—˜–’Œȱ ™›˜ŒŽœœŽœȱ ’›ŽŒȱ ‘ž–Š—ȱ ‘Š‹’Š’˜—ȱ Š—ȱ ŠŒ’Ÿ’¢ȱ ˜—ȱ ‘Žȱ
•Š—ǯȱ˜Ž‘Ž›ǰȱ‘ŽœŽȱ™›˜ŒŽœœŽœȱ’—ĚžŽ—ŒŽȱ‘ŽȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ•Š—ȱžœŽǯ
Š—ȱŒŠ—ȱ‹ŽȱžœŽȱ˜›ȱ–Š—¢ȱ™ž›™˜œŽœDZ
yȱ ›’Œž•ž›Ž
yȱ ˜––Ž›ŒŽ
yȱ —žœ›¢
yȱ
Š‹’Š’˜—
yȱ ŽŒ›ŽŠ’˜—
—ȱŠ’’˜—ǰȱ•Š—ȱžœŽȱŽŒ’œ’˜—œȱ–Š¢ȱ‹Žȱ’—ĚžŽ—ŒŽȱ‹¢ȱ–Š—¢ȱŠŒ˜›œDZ
yȱ •’–ŠŽ
yȱ ˜™˜›Š™‘¢
yȱ ‘Žȱ’œ›’‹ž’˜—ȱ˜ȱ—Šž›Š•ȱ›Žœ˜ž›ŒŽœǰȱ™˜™ž•Š’˜—ȱŒŽ—›ŽœǰȱŠ—ȱ’—žœ›¢
yȱ ›Ž—œȱ’—ȱŽŒ˜—˜–’Œœǰȱ™˜™ž•Š’˜—ǰȱŽŒ‘—˜•˜¢ǰȱŠ—ȱŒž•ž›Ž
‘Žȱ’—ĚžŽ—ŒŽȱ˜ȱŽŠŒ‘ȱ˜ȱ‘ŽœŽȱŠŒ˜›œȱ˜—ȱŠȱ™Š›’Œž•Š›ȱ™Š›ŒŽ•ȱ˜ȱ•Š—ȱŸŠ›’Žœǯȱ Ž˜›Š™‘’Œȱ
Œ˜—œ’Ž›Š’˜—œȱ Š›Žȱ ™Š›’Œž•Š›•¢ȱ œ’—’ęŒŠ—ȱ ˜ȱ Š™™›Š’œŽ›œǯȱ ‘Žȱ ’–™˜›Š—ŒŽȱ ˜ȱ ™‘¢œ’ŒŠ•ȱ
Œ‘Š›ŠŒŽ›’œ’Œœȱ œžŒ‘ȱ Šœȱ ˜™˜›Š™‘¢ǰȱ œ˜’•œǰȱ  ŠŽ›ǰȱ Š—ȱ ŸŽŽŠ’˜—ȱ ’œȱ ˜‹Ÿ’˜žœǰȱ ‹žȱ ‘Žȱ
’œ›’‹ž’˜—ȱ ˜ȱ ™˜™ž•Š’˜—ǰȱ ŠŒ’•’’Žœǰȱ Š—ȱ œŽ›Ÿ’ŒŽœȱ Š—ȱ ‘Žȱ –˜ŸŽ–Ž—ȱ ˜ȱ ™Ž˜™•Žȱ Š—ȱ
˜˜œȱ Š›Žȱ ŽšžŠ••¢ȱ ’–™˜›Š—ǯȱ ‘Žȱ Ž˜›Š™‘’Œȱ Œ˜—ŒŽ™ȱ ˜ȱ •Š—ǰȱ  ‘’Œ‘ȱ Ž–™‘Šœ’£Žœȱ
—Šž›Š•ȱ›Žœ˜ž›ŒŽœǰȱ‘Žȱ•˜ŒŠ’˜—ȱ˜ȱ’—žœ›¢ǰȱŠ—ȱŠŒžŠ•ȱŠ—ȱ™˜Ž—’Š•ȱ–Š›”Žœǰȱ™›˜Ÿ’Žœȱ
–žŒ‘ȱ˜ȱ‘Žȱ‹ŠŒ”›˜ž—ȱ”—˜ •ŽŽȱ›Žšž’›Žȱ’—ȱ›ŽŠ•ȱŽœŠŽȱŠ™™›Š’œŠ•ǯ

Government and Legal

Š—ȱ žœŽȱ Ž›’ŸŽœȱ ›˜–ȱ ‘Žȱ –Š—ŠŽœȱ ˜ȱ ˜›Š—’£Žȱ œ˜Œ’Ž¢ǯȱ —ȱ Œ˜ž—›’Žœȱ  ‘Ž›Žȱ ‘Žȱ
˜ —Ž›œ‘’™ȱ Š—ȱ –Š›”ŽŠ‹’•’¢ȱ ˜ȱ •Š—ȱ Š›Žȱ —˜ȱ ›ŽŽǰȱ ˜ŸŽ›—–Ž—ȱ ˜Ž—ȱ ’ŒŠŽœȱ ‘Žȱ
žœŽȱ ˜ȱ •Š—ǯȱ ›ŽŽȱ –Š›”Žȱ ŽŒ˜—˜–’Žœȱ ›Žž•ŠŽȱ •Š—ȱ žœŽȱ ‹¢ȱ Šȱ ›Š–Ž ˜›”ȱ ˜ȱ •Š œǯȱ ˜ȱ

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 Chapter 1 - Real Property and Its Appraisal 1.3

ž—Ž›œŠ—ȱ‘˜ ȱ‘ŽȱŸŠ›’˜žœȱ˜›ŒŽœȱŠěŽŒ’—ȱ•Š—ȱ˜™Ž›ŠŽǰȱ‘Žȱ‹Šœ’Œȱ›˜•Žȱ˜ȱ•Š ȱ–žœȱ
‹Žȱ›ŽŒ˜—’£Žǯ
˜Œ’Ž¢ȱ›ŽĚŽŒœȱ’œȱŒž•ž›Š•ǰȱ™˜•’’ŒŠ•ǰȱ˜ŸŽ›—–Ž—Š•ǰȱŠ—ȱŽŒ˜—˜–’ŒȱŠĴ’žŽœȱ’—ȱ’œȱ
•Š œǯȱ‘Žȱ•Š ȱ˜Žœȱ—˜ȱ˜Œžœȱ˜—ȱ‘Žȱ™‘¢œ’ŒŠ•ȱŒ‘Š›ŠŒŽ›’œ’Œœȱ˜ȱ•Š—ȱ‹žȱ˜—ȱ‘Žȱ›’‘œȱ
Š—ȱ ˜‹•’Š’˜—œȱ Šœœ˜Œ’ŠŽȱ  ’‘ȱ ŸŠ›’˜žœȱ ’—Ž›Žœœȱ ’—ȱ •Š—ǯȱ Š—ŠŠȱ ™›’–Š›’•¢ȱ žœŽœȱ
›’’œ‘ȬŽ›’ŸŽȱ Œ˜––˜—ȱ •Š ǰȱ  ‘’Œ‘ȱ ™›˜Ÿ’Žœȱ ‘Šȱ ‘Žȱ ‘˜•Ž›œȱ ˜ȱ ‘Žȱ •Š—ȱ ŠŒžŠ••¢ȱ
‘ŠŸŽȱ •Š—ȱ Ž—ž›Žȱ ǻ™Ž›–’œœ’˜—ȱ ›˜–ȱ ‘Žȱ ›˜ —ȱ ˜ȱ ‘˜•ȱ •Š—Ǽȱ ›Š‘Ž›ȱ ‘Š—ȱ Š‹œ˜•žŽȱ
˜ —Ž›œ‘’™ǯȱ
—ȱ ‘Žȱ —’Žȱ ŠŽœǰȱ ’—’Ÿ’žŠ•œȱ –Š’—Š’—ȱ ‘Žȱ ›’‘ȱ ˜ȱ ˜ —ȱ Š—ȱ žœŽȱ •Š—ȱ ˜›ȱ
–ŠŽ›’Š•ȱ Š’—ǰȱ  ‘’•Žȱ ‘Žȱ •Š ȱ ’ŸŽœȱ ™Ž˜™•Žȱ ˜ȱ ›’‘ȱ ˜ȱ žœŽȱ ‘Žȱ •Š—ǯȱ —ȱ ˜‘Ž›ȱ  ˜›œǰȱ
‘Žȱ•Š ȱ›ŽŒ˜—’£Žœȱ‘Žȱ™˜œœ’‹•ŽȱŒ˜—Ě’Œȱ‹Ž ŽŽ—ȱ™›’ŸŠŽȱ˜ —Ž›œ‘’™ȱŠ—ȱ™ž‹•’ŒȱžœŽǯȱ—ȱ
–Š—¢ȱž—ŽŸŽ•˜™Žȱ™Š›œȱ˜ȱ‘Žȱ ˜›•ǰȱ•Š—ȱŒŠ——˜ȱ‹Žȱ™›’ŸŠŽ•¢ȱ˜ —Žǰȱ ’‘ȱ’œȱ›’‘œȱ
›ŽŠ’—Žȱ‹¢ȱ˜‘Ž›œǯȱ˜›ȱŽ¡Š–™•Žȱ’—ȱ’“’ǰȱ•Š—œȱŠ›ŽȱŒ˜—œ’Ž›Žȱ˜ȱ‹Žȱ‘Ž•ȱ‹¢ȱ‘ŽȱŸ’••ŠŽǰȱ
 ’‘ȱŽŒ’œ’˜—œȱ›Žœ™ŽŒ’—ȱ’œȱžœŽȱ–ŠŽȱ‹¢ȱŠȱ‘Ž›Ž’Š›¢ȱŒ‘’ŽǯȱŒŒž™Š—œȱ˜ȱœžŒ‘ȱ’—’Ȭ
Ž—˜žœȱ•Š—œȱ•ŠŒ”ȱœŽŒž›’¢ȱ˜ȱŽ—ž›ŽǰȱŠ—ȱ‘žœȱ›’œ”ȱ•˜œ’—ȱ’–™›˜ŸŽ–Ž—œȱ–ŠŽȱ˜ȱ•Š—ǯȱ
‘Žȱ Œ‘˜’ŒŽȱ ˜ȱ ŽŠ›•¢ȱ Š—Š’Š—œȱ ˜ȱ ›Ž–Š’ȱ —ȱ Œ•˜œŽ•¢ȱ ’Žȱ ˜ȱ ‘Žȱ ›’’œ‘ȱ –™’›Žȱ ‘Šȱ
Šȱ–Š“˜›ȱ’–™ŠŒȱ˜—ȱ‘ŽȱŽŸŽ•˜™–Ž—ȱ˜ȱ™›˜™Ž›¢ȱ›’‘œȱ’—ȱ‘’œȱŒ˜ž—›¢ǯȱ‘ŽȱŠ—Š’Š—ȱ
œ¢œŽ–ȱ˜ȱ•Š—ȱ˜ —Ž›œ‘’™ǰȱ–˜›ŽȱŠŒŒž›ŠŽ•¢ȱŒŠ••Žȱ›ŽŠ•ȱ™›˜™Ž›¢ȱ˜ —Ž›œ‘’™ǰȱ˜Žœȱ—˜ȱ
™Ž›–’ȱ‘ŽȱœŠ–Žȱ•ŽŸŽ•ȱ˜ȱ›’‘œȱŠ—ȱ›ŽŽ˜–œȱ˜ŸŽ›ȱ•Š—ȱŠœȱ‘Žȱȱœ¢œŽ–ȱŠ••˜ œǯ
—ȱ ‘Žȱ —’Žȱ ŠŽœǰȱ •Š—˜ —Ž›œȱ žœžŠ••¢ȱ ‘˜•ȱ ’•Žȱ ˜ȱ ‘Žȱ –’—Ž›Š•ȱ ›Žœ˜ž›ŒŽœȱ
•˜ŒŠŽȱ‹Ž—ŽŠ‘ȱ‘Ž’›ȱ•Š—Dzȱ’—ȱŠ—ŠŠǰȱ‘’œȱ’œȱ—ŽŸŽ›ȱ‘ŽȱŒŠœŽǯȱ
›’’—Š••¢ǰȱ ‘Žȱ ›’’œ‘ȱ –˜—Š›Œ‘¢ȱ ‘Ž•ȱ ‘Žȱ ›’‘œȱ ˜ȱ ‘Žȱ •Š—ǰȱ Š—ȱ —˜ ȱ ‘Žȱ
Š—Š’Š—ȱ ˜ŸŽ›—–Ž—ȱ ‘˜•œȱ ‘Žȱ ›’‘œȱ ˜ȱ –˜œȱ Š—Š’Š—ȱ •Š—ǯȱ ••ȱ Š—Š’Š—ȱ •Š—ȱ
’œȱ œž‹“ŽŒȱ ˜ȱ ‘Žȱ ›’‘œȱ ˜ȱ ‘Žȱ ›˜ —ȱ ǻ‘Žȱ ŽŽ›Š•ȱ ˜ŸŽ›—–Ž—Ǽǯȱ Š œȱ ˜ŸŽ›—’—ȱ ›ŽŠ•ȱ
™›˜™Ž›¢ȱ ˜ —Ž›œ‘’™ȱ ‘ŠŸŽȱ ‹ŽŽ—ȱ ž—Ž›ȱ ™›˜Ÿ’—Œ’Š•ȱ Œ˜—›˜•ȱ œ’—ŒŽȱ ‘Žȱ ˜—ŽŽ›Š’˜—ȱŒȱ
˜ȱ ŗŞŜŝǯȱ Š—˜ —Ž›œȱ ™Š¢ȱ ›˜¢Š•’Žœȱ ˜›ȱ –’—Ž›Š•ȱ Ž¡™•˜›Š’˜—ȱ ˜ȱ ‘Žȱ ™›˜Ÿ’—ŒŽœǰȱ  ‘’Œ‘ȱ
˜›–œȱŠȱ–Š“˜›ȱ™Š›ȱ˜ȱ™›˜Ÿ’—Œ’Š•ȱ›ŽŸŽ—žŽǯȱŠ—˜ —Ž›œȱ—ŽŸŽ›ȱ™›˜ęȱ›˜–ȱ‘Žȱ’œŒ˜ŸŽ›¢ȱ
˜ȱ–’—Ž›Š•ȱ›Žœ˜ž›ŒŽœȱž—Ž›—ŽŠ‘ȱ‘Ž’›ȱ™›˜™Ž›¢ǯ
Ȉ‘˜œŽȱ’œȱ‘Žȱ•Š—ǰȱ‘’œȱ’ȱ’œǰȱ˜ȱ‘Žȱœ”¢ȱŠ—ȱ‘ŽȱŽ™‘œȈǯȱ‘’œȱŠ—Œ’Ž—ȱ–Š¡’–ȱ’œȱ‘Žȱ
‹Šœ’œȱ˜ȱ‘Žȱ˜••˜ ’—ȱ•ŽŠ•ȱŽę—’’˜—DZ

Š—ȱdzȱ’—Œ•žŽœȱ—˜ȱ˜—•¢ȱ‘Žȱ›˜ž—ǰȱ˜›ȱœ˜’•ǰȱ‹žȱŽŸŽ›¢‘’—ȱ‘Šȱ’œȱŠĴŠŒ‘Žȱ˜ȱ‘Žȱ
ŽŠ›‘ǰȱ ‘Ž‘Ž›ȱ‹¢ȱŒ˜ž›œŽȱ˜ȱ—Šž›ŽǰȱŠœȱŠ›Žȱ›ŽŽœȱŠ—ȱ‘Ž›‹ŠŽǰȱ˜›ȱ‹¢ȱ‘Žȱ‘Š—ȱ˜ȱ–Š—ǰȱ
Šœȱ Š›Žȱ ‘˜žœŽœȱ Š—ȱ ˜‘Ž›ȱ ‹ž’•’—œǯȱ ȱ ’—Œ•žŽœȱ —˜ȱ ˜—•¢ȱ ‘Žȱ œž›ŠŒŽȱ ˜ȱ ‘Žȱ ŽŠ›‘ȱ ‹žȱ
ŽŸŽ›¢‘’—ȱž—Ž›ȱ’ȱŠ—ȱ˜ŸŽ›ȱ’ǯȱ‘žœȱ’—ȱ•ŽŠ•ȱ‘Ž˜›¢ǰȱ‘Žȱœž›ŠŒŽȱ˜ȱ‘ŽȱŽŠ›‘ȱ’œȱ“žœȱ
™Š›ȱ˜ȱŠ—ȱ’—ŸŽ›Žȱ™¢›Š–’ȱ‘ŠŸ’—ȱ’œȱ’™ǰȱ˜›ȱŠ™Ž¡ǰȱŠȱ‘ŽȱŒŽ—›Žȱ˜ȱ‘ŽȱŽŠ›‘ǰȱŽ¡Ž—Ȭ
’—ȱ˜ž Š›ȱ‘›˜ž‘ȱ‘Žȱœž›ŠŒŽȱ˜ȱ‘ŽȱŽŠ›‘ȱŠȱ‘Žȱ‹˜ž—Š›¢ȱ•’—Žœȱ˜ȱ‘Žȱ›ŠŒǰȱŠ—ȱ
Œ˜—’—ž’—ȱ˜—ȱž™ Š›ȱ˜ȱ‘Žȱ‘ŽŠŸŽ—œǯŗ

‘’œȱ Žę—’’˜—ȱ œžŽœœȱ ‘Šȱ •Š—ȱ ˜ —Ž›œ‘’™ȱ ’—Œ•žŽœȱ Œ˜–™•ŽŽȱ ™˜œœŽœœ’˜—ȱ ˜ȱ •Š—ȱ
›˜–ȱ ‘Žȱ ŒŽ—›Žȱ ˜ȱ ‘Žȱ ŽŠ›‘ȱ ˜ȱ ‘Žȱ Ž—œȱ ˜ȱ ‘Žȱ ž—’ŸŽ›œŽǯȱ —ȱ ™›ŠŒ’ŒŽǰȱ ‘˜ ŽŸŽ›ǰȱ ‘Žȱ
Ž¡Ž—ȱ˜ȱ›’‘œȱŠŸŠ’•Š‹•Žȱ˜ȱ™›’ŸŠŽȱ˜ —Ž›œ‘’™ȱ’œȱ•ŽŠ••¢ȱ•’–’ŽȱžŽȱ˜ȱ˜ŸŽ›—–Ž—Š•ȱ
Œ˜—›˜•œǰȱŠȱ‘ŽȱŽŽ›Š•ǰȱ™›˜Ÿ’—Œ’Š•ǰȱꛜȱ—Š’˜—ǰȱŠ—ȱ–ž—’Œ’™Š•ȱ•ŽŸŽ•ǯȱ’—ŒŽȱ•Š—ȱ˜ —Ž›Ȭ

1
Werner, R.J. and Kratovil, R. 1993. Real Estate Law, 10th ed. Englewood Cliffs, N.J.: Prentice-Hall, Inc. p4.

©Copyright 2010 by the Appraisal Institute of Canada and the Appraisal Institute. All rights reserved.

R1ARE10.indb 3 10/4/2010 10:35:11 AM

 1.4 The Appraisal of Real Estate – Third Canadian Edition

œ‘’™ȱ ŒŠ—ȱ ‹Žȱ •’–’Žǰȱ ˜ —Ž›œ‘’™ȱ

Figure 1.1: Land to the Sky and Depths
›’‘œȱ Š›Žȱ ‘Žȱ œž‹“ŽŒȱ ˜ȱ •Š ǯŘȱ ‘Žȱ
ŸŠ•žŽȱ ˜ȱ ‘ŽœŽȱ ›’‘œȱ ’œȱ ‘Žȱ ˜Œžœȱ ˜ȱ
›ŽŠ•ȱ™›˜™Ž›¢ȱŠ™™›Š’œŠ•ǯ
‘Žȱ •Š œȱ ‘Šȱ ˜ŸŽ›—ȱ ‘Žȱ
žœŽȱ Š—ȱ ŽŸŽ•˜™–Ž—ȱ ˜ȱ •Š—ȱ ’—ȱ
Š—ŠŠȱ ’ŸŽȱ •Š—˜ —Ž›œȱ ›ŽŠȱ
›ŽŽ˜–ȱ ’—ȱ ŽŒ’’—ȱ ‘˜ ȱ ˜ȱ žœŽȱ
‘Ž’›ȱ •Š—ǯȱ
˜ ŽŸŽ›ǰȱ ‘’œȱ ›ŽŽ˜–ȱ
’œȱ—˜ȱ ’‘˜žȱ›Žœ›’Œ’˜—œǯȱ‘Žȱ‹Šœ’Œȱ
Œ˜—ŒŽ™ȱ ˜ȱ ™›’ŸŠŽȱ ˜ —Ž›œ‘’™ȱ ŒŠ••œȱ
˜›ȱ ž—›Žœ›’ŒŽȱ žœŽȱ œ˜ȱ •˜—ȱ Šœȱ œžŒ‘ȱ
žœŽȱ ˜Žœȱ —˜ȱ ž—›ŽŠœ˜—Š‹•¢ȱ ‘Š›–ȱ
‘Žȱ ›’‘œȱ ˜ȱ ˜‘Ž›œǯȱ —ȱ ‘Žȱ ™Šœǰȱ ‘Žȱ
Žœȱ ˜ȱ ‘Š›–ȱ ˜ŒžœŽȱ ˜—ȱ ˜ —Ž›œȱ ˜ȱ
Š“ŠŒŽ—ȱ ™›˜™Ž›’Žœǯȱ ‘Žȱ Œ˜—ŒŽ™ȱ ˜ȱ
‘Š›–ȱ‘Šœȱ›ŽŒŽ—•¢ȱ‹ŽŽ—ȱŽ¡™Š—Žȱ˜ȱ
Ž—Œ˜–™Šœœȱ ‹›˜ŠŽ›ȱ œ˜Œ’Š•ȱ Š—ȱ Ž˜›Š™‘’Œȱ Œ˜—ŒŽ›—œǯȱ Š—¢ȱ Œ˜ž›ȱ ŒŠœŽœȱ ‘ŠŸŽȱ Š›žŽȱ
‘ŽȱŽę—’’˜—ȱ˜ȱ›ŽŠœ˜—Š‹•ŽȱžœŽǯ
ŽŠ•ȱ–ŠĴŽ›œȱ˜ȱ™Š›’Œž•Š›ȱŒ˜—ŒŽ›—ȱ˜ȱŠ™™›Š’œŽ›œȱ’—Œ•žŽȱ‘Žȱ˜••˜ ’—DZ
yȱ ŠœŽ–Ž—œ
yȱ ŒŒŽœœȱ›Žž•Š’˜—œ
yȱ œŽȱ›Žœ›’Œ’˜—œ
yȱ ‘Žȱ›ŽŒ˜›’—ȱŠ—ȱŒ˜—ŸŽ¢Š—ŒŽȱ˜ȱ’•Žœ
—ȱŠ’’˜—ǰȱŠ™™›Š’œŽ›œȱ–žœȱ‹ŽȱŠ–’•’Š›ȱ ’‘ȱ•˜ŒŠ•ȱŠ—ȱ™›˜Ÿ’—Œ’Š•ȱ•Š œǰȱ ‘’Œ‘ȱŒ˜—œ’Ȭ
ž’˜—Š••¢ȱ‘ŠŸŽȱ™›’–Š›¢ȱ“ž›’œ’Œ’˜—ȱ˜ŸŽ›ȱ•Š—ǯ

Economic
Š—ȱ’œȱŠȱ™‘¢œ’ŒŠ•ȱŽ—’¢ȱ ’‘ȱ’—‘Ž›Ž—ȱ˜ —Ž›œ‘’™ȱ›’‘œȱ‘ŠȱŒŠ—ȱ‹Žȱ•ŽŠ••¢ȱ•’–’Žȱ˜›ȱ
‘Žȱ˜˜ȱ˜ȱœ˜Œ’Ž¢ǯȱŠ—ȱ’œȱŠ•œ˜ȱŠȱ–Š“˜›ȱœ˜ž›ŒŽȱ˜ȱ ŽŠ•‘ǰȱ ‘’Œ‘ǰȱ’—ȱŽŒ˜—˜–’ŒȱŽ›–œǰȱ
ŒŠ—ȱ‹Žȱ–ŽŠœž›Žȱ’—ȱ–˜—Ž¢ȱ˜›ȱŽ¡Œ‘Š—ŽȱŸŠ•žŽǯȱŠ—ȱŠ—ȱ’œȱ™›˜žŒœȱ‘ŠŸŽȱŽŒ˜—˜–’Œȱ
ŸŠ•žŽȱ˜—•¢ȱ ‘Ž—ȱ‘Ž¢ȱŠ›ŽȱŒ˜—ŸŽ›Žȱ’—˜ȱ˜˜œȱ˜›ȱœŽ›Ÿ’ŒŽœȱ‘ŠȱŠ›ŽȱžœŽž•ǰȱŽœ’›Š‹•Žǰȱ
™Š’ȱ ˜›ȱ ‹¢ȱ Œ˜—œž–Ž›œǰȱ Š—ȱ •’–’Žȱ ’—ȱ œž™™•¢ǯȱ ‘Žȱ ŽŒ˜—˜–’Œȱ Œ˜—ŒŽ™ȱ ˜ȱ •Š—ȱ Šœȱ Šȱ
œ˜ž›ŒŽȱ˜ȱ ŽŠ•‘ȱŠ—ȱŠ—ȱ˜‹“ŽŒȱ˜ȱŸŠ•žŽȱ’œȱŒŽ—›Š•ȱ˜ȱŠ™™›Š’œŠ•ȱ‘Ž˜›¢ǯ
‘Žȱ ŽŒ˜—˜–’Œȱ Œ˜—ŒŽ™ȱ ˜ȱ •Š—ȱ ›ŽĚŽŒœȱ Šȱ •˜—ȱ ‘’œ˜›¢ȱ ˜ȱ ‘˜ž‘ȱ ˜—ȱ ‘Žȱ œ˜ž›ŒŽœȱ
Š—ȱ‹ŠœŽœȱ˜ȱŸŠ•žŽǰȱ ‘’Œ‘ȱ’œȱ›ŽŽ››Žȱ˜ȱŠœȱŸŠ•žŽȱ‘Ž˜›¢ǯřȱŠ•žŽȱ‘Ž˜›¢ȱŒ˜—›’‹žŽœȱ˜ȱ
‘ŽȱŸŠ•žŽȱŽę—’’˜—œȱžœŽȱ’—ȱŠ™™›Š’œŠ•œȱŠ—ȱŠ™™›Š’œŠ•ȱ•’Ž›Šž›ŽǰȱŠ—ȱ’ȱ’œȱŠ—ȱ’–™˜›Š—ȱ
™Š›ȱ˜ȱ‘Žȱ™‘’•˜œ˜™‘¢ȱ˜—ȱ ‘’Œ‘ȱ™›˜Žœœ’˜—Š•ȱŠ™™›Š’œŠ•ȱ™›ŠŒ’ŒŽȱ’œȱ˜ž—Žǯ

2 See "1991 Analysis of Property Rights and the Constitution - Government of Canada Collection"
dsp-psd.tpsgc.gc.ca/Collection-R/LoPBdP/BP/bp268-e.htm
3 Wendt, P.F. 1974. Real Estate Appraisal: Review and Outlook. Athens, Ga.: University of Georgia Press. p. 17.

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R1ARE10.indb 4 10/4/2010 10:35:12 AM

 Chapter 1 – Real Property and Its Appraisal 1.5

Social
˜Ž›—ȱ œ˜Œ’Ž¢ȱ ‘Šœȱ ‹ŽŒ˜–Žȱ ’—Œ›ŽŠœ’—•¢ȱ Œ˜—ŒŽ›—Žȱ  ’‘ȱ ‘˜ ȱ •Š—ȱ ’œȱ žœŽȱ Š—ȱ ‘˜ ȱ
›’‘œȱ Š›Žȱ ’œ›’‹žŽǯȱ ‘Žȱ œž™™•¢ȱ ˜ȱ •Š—ȱ ’œȱ ę¡Žǰȱ œ˜ȱ ’—Œ›ŽŠœŽȱ Ž–Š—ȱ ˜›ȱ •Š—ȱ
Ž¡Ž›œȱ ™›Žœœž›Žȱ ˜›ȱ •Š—ȱ ˜ȱ ‹Žȱ žœŽȱ –˜›Žȱ ’—Ž—œ’ŸŽ•¢ǯȱ ˜—Ě’Œœȱ ˜Ž—ȱ Š›’œŽȱ ‹Ž ŽŽ—Ȭ
›˜ž™œȱ‘Šȱ‘˜•ȱ’쎛Ž—ȱŸ’Ž œȱ˜—ȱ™›˜™Ž›ȱ•Š—ȱžœŽǯȱ‘˜œŽȱ ‘˜ȱ‹Ž•’ŽŸŽȱ‘Šȱ•Š—ȱ’œȱŠȱ
›Žœ˜ž›ŒŽȱ˜ȱ‹Žȱœ‘Š›Žȱ‹¢ȱŠ••ȱ Š—ȱ˜ȱ™›ŽœŽ›ŸŽȱ‘Žȱ•Š—ȂœȱœŒŽ—’Œȱ‹ŽŠž¢ȱŠ—ȱ’–™˜›Š—ȱ
ŽŒ˜•˜’ŒŠ•ȱ ž—Œ’˜—œǯȱ ‘Ž›œȱ Ÿ’Ž ȱ •Š—ȱ ™›’–Š›’•¢ȱ Šœȱ Šȱ –Š›”ŽŠ‹•Žȱ Œ˜––˜’¢ǯȱ ‘Ž¢ȱ
‹Ž•’ŽŸŽȱœ˜Œ’Ž¢ȱ’œȱ‹ŽœȱœŽ›ŸŽȱ‹¢ȱ™›’ŸŠŽǰȱž—›Žœ›’ŒŽȱ˜ —Ž›œ‘’™ǯȱ
˜›ȱ Ž¡Š–™•Žǰȱ ‘Žȱ ŽŸŽ•˜™Ž›ȱ ˜ȱ Šȱ ™›˜™˜œŽȱ œ‘˜™™’—ȱ ŒŽ—›Žȱ ˜›ȱ Šȱ ‹žœ’—Žœœȱ ™Š›”ȱ
–Š¢ȱ Ÿ’Ž ȱ Šȱ ™Š›’Œž•Š›ȱ ™Š›ŒŽ•ȱ ˜ȱ •Š—ȱ Šœȱ ŽŸŽ•˜™Š‹•Žȱ ›ŽŽ—ȱ œ™ŠŒŽȱ ’—ȱ Šȱ Žœ’›Š‹•Žȱ Š—ȱ
Šě˜›Š‹•Žȱ •˜ŒŠ’˜—ȱ œŽ›Ÿ’—ȱ Šȱ Žę—Š‹•Žȱ –Š›”Žȱ Š›ŽŠǯȱ —ȱ ‘Žȱ ˜‘Ž›ȱ ‘Š—ǰȱ •˜ŒŠ•ȱ ›Žœ’Ȭ
Ž—œȱ–’‘ȱŠ›žŽȱ‘ŠǰȱŠœȱ‘Žȱœ’Žȱ˜ȱŠȱœ’—’ęŒŠ—ȱ‹ŠĴ•Žȱ’—ȱ‘ŽȱŠ›ȱ˜ȱŗŞŗŘǰȱ‘Žȱ™Š›ŒŽ•ȱ
ŽœŽ›ŸŽœȱ ˜ŸŽ›—–Ž—ȱ ™›˜ŽŒ’˜—ȱ ’ȱ Š¡™Š¢Ž›œȱ Œ˜ž•ȱ ‹Žȱ ™Ž›œžŠŽȱ ˜ȱ œž™™˜›ȱ œžŒ‘ȱ Šȱ
™ž‹•’Œȱ ’—ŸŽœ–Ž—ȱ ’—ȱ ‘’œ˜›’ŒŠ•ȱ ™›ŽœŽ›ŸŠ’˜—ǯȱ ‘ŽœŽȱ Œ˜—Ě’Œ’—ȱ Ÿ’Ž œȱ ˜ȱ —˜ȱ Š•Ž›ȱ ‘Žȱ
Œ˜—œ’ž’˜—Š•ȱ ›’‘œȱ ˜ȱ ˜ —Ž›œ‘’™ȱ ˜›ȱ –Š›”Žȱ Œ˜—ŒŽ™œȱ ˜ȱ •Š—ǯȱ Š‘Ž›ǰȱ ‘Ž¢ȱ ›ŽĚŽŒȱ
Œ˜—›˜ŸŽ›œ’Žœȱ ‘Šȱ Š›’œŽȱ ‹Ž ŽŽ—ȱ ‘Žȱ ™›˜™Ž›¢ȱ ›’‘œȱ ˜ȱ ‘Žȱ ’—’Ÿ’žŠ•ȱ Š—ȱ ‘˜œŽȱ ˜ȱ
œ˜Œ’Ž¢ǯȱœȱŠȱ›Žœ˜ž›ŒŽǰȱ•Š—ȱ–Š¢ȱ‹Žȱ™›˜ŽŒŽȱ˜›ȱ‘Žȱ˜˜ȱ˜ȱœ˜Œ’Ž¢ǯȱœȱŠȱ–Š›”ŽŠ‹•Žȱ
Œ˜––˜’¢ǰȱ‘Žȱ˜ —Ž›œ‘’™ǰȱžœŽǰȱŠ—ȱ’œ™˜œŠ•ȱ˜ȱ•Š—ȱŠ›Žȱ›Žž•ŠŽȱœ˜ȱ‘Šȱ’—’Ÿ’žŠ•ȱ
›’‘œȱŠ›Žȱ—˜ȱŸ’˜•ŠŽǯŚ
‘Žȱ ˜›’’—ȱ ˜ȱ ™›˜™Ž›¢ȱ ›’‘œȱ ’—ȱ ‘Žȱ ˜›’’—Š•ȱ ›’’œ‘ȱ Œ˜•˜—’Žœȱ ˜ȱ ˜›‘ȱ –Ž›’ŒŠȱ
ŽŸ˜•ŸŽȱ ›˜–ȱ ‘Žȱ ›’’œ‘ȱ •ŽŠ•ȱ œ¢œŽ–ǰȱ ’—ȱ  ‘’Œ‘ȱ Š••ȱ •Š—ȱ ›’‘œȱ  Ž›Žȱ ›Š—Žȱ ‹¢ȱ ‘Žȱ
Ȉ›˜ —Ȉǯȱ ‘ŽœŽȱ ›Š—œȱ  Ž›Žȱ —˜ȱ Š‹œ˜•žŽDzȱ ‘Žȱ ›˜ —ȱ ‘Ž•ȱ Š••ȱ ›ŽŠ’—Žȱ ›’‘œǯȱ ‘Žȱ
–Ž›’ŒŠ—ȱ ŽŸ˜•ž’˜—ȱ œŽŸŽ›Žȱ ‘Žȱ •’—”ȱ  ’‘ȱ ‘Žȱ ›’’œ‘ȱ ›˜ —ǰȱ  ’‘ȱ –Š—¢ȱ ˜ȱ ‘Žȱ
›ŽŠ’—Žȱ ›’‘œȱ œž‹œŽšžŽ—•¢ȱ ˜›–’—ȱ ™Š›ȱ ˜ȱ ™›’ŸŠŽȱ ™›˜™Ž›¢ȱ ›’‘œǯȱ —ȱ Š—ŠŠǰȱ ‘Žȱ
Š—Š’Š—ȱ ˜ŸŽ›—–Ž—ȱ ‘Šœȱ Šœœž–Žȱ ‘Žȱ ›˜•Žȱ ˜ȱ ‘Žȱ ›˜ —ȱ ’—ȱ Š”’—ȱ ›Žœ™˜—œ’‹’•’¢ȱ
˜›ȱŠ—ȱ›ŽŠ™’—ȱ‘Žȱ‹Ž—Žęœȱ˜ȱ˜ —Ž›œ‘’™ȱ›’‘œȱ‘Šȱ Ž›Žȱ˜›’’—Š••¢ȱ‘Žȱ™›’Ÿ’•ŽŽȱ˜ȱ
‘Žȱ–˜—Š›Œ‘¢ǯȱ˜—œŽšžŽ—•¢ǰȱ™›˜™Ž›¢ȱ›’‘œȱ’—ȱŠ—ŠŠȱŠ›Žȱ•Žœœȱ‘Š—ȱ‘˜œŽȱŠŸŠ’•Š‹•Žȱ
’—ȱ ‘Žȱ —’Žȱ ŠŽœǰȱ Š—ȱ ‘’œȱ ’œ’—Œ’˜—ȱ ‘Šœȱ Š—ȱ ’–™•’ŒŠ’˜—ȱ ’—ȱ ‘Žȱ ž—Ž›œŠ—’—ȱ ˜ȱ
™›˜™Ž›¢ȱ›’‘œȱ’—ȱ˜›‘ȱ–Ž›’ŒŠ—ȱŠ™™›Š’œŠ•ǯ
—ȱ ŗŞŝŜǰȱ ‘Žȱ ȱ ž™›Ž–Žȱ ˜ž›ȱ ŽœŠ‹•’œ‘Žȱ ‘Žȱ ˜ŸŽ›—–Ž—Ȃœȱ ›’‘ȱ ˜ȱ ›Žž•ŠŽȱ
Ȉ‘Žȱ –Š——Ž›ȱ ’—ȱ  ‘’Œ‘ȱ ǽŠȱ Œ’’£Ž—Ǿȱ œ‘Š••ȱ ˜ —ȱ ‘’œȱ ˜ —ȱ ™›˜™Ž›¢ȱ  ‘Ž—ȱ œžŒ‘ȱ ›Žž•Š’˜—ȱ
‹ŽŒ˜–Žœȱ —ŽŒŽœœŠ›¢ȱ ˜›ȱ ‘Žȱ ™ž‹•’Œȱ ˜˜Ȉǯȱ ‘Žȱ Œ˜ž›ȱ šž˜Žȱ ‘Žȱ  ˜›œȱ ˜ȱ —•Š—Ȃœȱ
˜›ȱ ‘’Žȱ žœ’ŒŽȱ
Š•ŽDZȱ Ȉ‘Ž—ȱ ™›’ŸŠŽȱ ™›˜™Ž›¢ȱ ’œȱ ȇŠěŽŒŽȱ  ’‘ȱ Šȱ ™ž‹•’Œȱ ’—Ž›Žœȇǰȱ
’ȱŒŽŠœŽœȱ˜ȱ‹Žȱ“ž›’œȱ™›’ŸŠ’ȱ˜—•¢ǯȈśȱ‘›˜ž‘˜žȱ–Ž›’ŒŠ—ȱ‘’œ˜›¢ǰȱ•Š—ȱ˜ —Ž›œ‘’™ȱ‘Šœȱ
‹ŽŽ—ȱ ›ŽŒ˜—’£Žȱ Šœȱ ž—Š–Ž—Š•ǯȱ ˜‘—ȱ Š–œȱ  ›˜Žǰȱ Ȉȱ ‘Žȱ –ž•’žŽȱ ’œȱ ™˜œœŽœœŽȱ
˜ȱ ›ŽŠ•ȱ ŽœŠŽǰȱ ‘Žȱ –ž•’žŽȱ  ’••ȱ Š”Žȱ ŒŠ›Žȱ ˜ȱ ‘Žȱ •’‹Ž›¢ǰȱ Ÿ’›žŽǰȱ Š—ȱ ’—Ž›Žœȱ ˜ȱ ‘Žȱ
–ž•’žŽȱ’—ȱŠ••ȱŠŒœȱ˜ȱ˜ŸŽ›—–Ž—ǯȈŜ
—ȱ ‘Žȱ Řŗœȱ ŒŽ—ž›¢ǰȱ ‘Žȱ ™›’—Œ’™•Žȱ ›Žœ›’Œ’˜—œȱ ˜—ȱ •Š—ȱ žœŽȱ ’—ȱ Š—ŠŠȱ Š›’œŽȱ ›˜–ȱ
‘Žȱ ™•Š——’—ȱ Š—ȱ £˜—’—ȱ ™›˜Ÿ’œ’˜—œȱ ˜ȱ ™ž‹•’Œȱ Šž‘˜›’¢ǯȱ ¢ȱ ‘Žȱ ’–™˜œ’’˜—ǰȱ ›Ž–˜ŸŠ•ǰȱ

4
See also Roe, C.E. 2000. "Land Use: The Second Battle of Gettysburg". The Appraisal Journal. October 2000.
pp441-449.
5
94 U.S. 113 (1896). Quoted in Babcock, R.F. and Feurer, D.A. "Land as a Commodity Affected with a Public Interest" in
Andrews, R.N.L. 1979. Land in America. Lexington, Mass.: D.C. Heath and Company. p110.
6
Ibid., 31.

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R1ARE10.indb 5 10/4/2010 10:35:12 AM

 1.6 The Appraisal of Real Estate – Third Canadian Edition

˜›ȱ Š•Ž›Š’˜—ȱ ˜ȱ •Š—ȱ žœŽȱ Œ˜—›˜•œǰȱ Šȱ ™ž‹•’Œȱ Šž‘˜›’¢ȱ –Š¢ȱ ›Š–Š’ŒŠ••¢ȱ ’—Œ›ŽŠœŽȱ ˜›ȱ
ŽŒ›ŽŠœŽȱ‘ŽȱŸŠ•žŽȱ˜ȱ•Š—ȱ‹¢ȱŒ‘Š—’—ȱ‘Žȱ™Ž›–’ĴŽȱžœŽœȱ‘Šȱ–Š¢ȱ‹Žȱ–ŠŽȱ˜ȱ’ǯȱ
••ȱ •Š œȱ Š—ȱ ˜™Ž›Š’˜—œȱ ˜ȱ ˜ŸŽ›—–Ž—ȱ Š›Žȱ ’—Ž—Žȱ ˜ȱ œŽ›ŸŽȱ ‘Žȱ ™ž‹•’Œǯȱ ‘žœǰȱ
’—ȱ ‘Žȱ ™ž‹•’Œȱ ’—Ž›Žœǰȱ œ˜Œ’Ž¢ȱ –Š¢ȱ ’–™˜œŽȱ ‹ž’•’—ȱ ›Žœ›’Œ’˜—œǰȱ £˜—’—ȱ Š—ȱ ‹ž’•’—ȱ
˜›’—Š—ŒŽœǰȱ ŽŸŽ•˜™–Ž—ȱ Š—ȱ œž‹’Ÿ’œ’˜—ȱ ›Žž•Š’˜—œǰȱ Š—ȱ ˜‘Ž›ȱ •Š—ȱ žœŽȱ Œ˜—›˜•œǯȱ
‘ŽœŽȱ Œ˜—›˜•œȱ ŠěŽŒȱ  ‘Šȱ –Š¢ȱ ‹Žȱ ŽŸŽ•˜™Žǰȱ  ‘Ž›Žȱ ŽŸŽ•˜™–Ž—ȱ –Š¢ȱ ˜ŒŒž›ǰȱ Š—ȱ
 ‘Šȱ ŠŒ’Ÿ’’Žœȱ –Š¢ȱ ‹Žȱ ™Ž›–’ĴŽȱ œž‹œŽšžŽ—ȱ ˜ȱ ŽŸŽ•˜™–Ž—ǯȱ —ȱ ›ŽŒŽ—ȱ ŽŒŠŽœǰȱ ‘Žȱ
Š—Š’Š—ȱ˜ŸŽ›—–Ž—ȱ‘Šœȱ’—Œ›ŽŠœŽȱ’œȱŽě˜›œȱ˜ȱ›Žž•ŠŽȱ‘ŽȱŠ’›ȱŠ—ȱ ŠŽ›ȱŽ–’œœ’˜—œȱ
›˜–ȱ–Š—žŠŒž›’—ȱ™›˜ŒŽœœŽœȱŠ—ȱ˜ȱ›ŽžŒŽȱ™˜••ž’˜—ȱŒŠžœŽȱ‹¢ȱ’›ǰȱŒ‘Ž–’ŒŠ•œǰȱŠ—ȱ
—˜’œŽǯȱ ›˜ŽŒ’ŸŽȱ Œ˜—›˜•œȱ ˜ŸŽ›ȱ •Š—ȱ žœŽȱ Ž¡Ž—ȱ ˜ȱ  Ž•Š—œǰȱ ‹ŽŠŒ‘Žœǰȱ Š—ȱ —ŠŸ’Š‹•Žȱ
 ŠŽ›œȱŠ—ȱ˜ȱ‘Žȱ™›ŽœŽ›ŸŠ’˜—ȱ˜ȱ‘Žȱ‘Š‹’Šœȱ˜ȱŽ—Š—Ž›Žȱœ™ŽŒ’Žœǯŝ
œȱ‘Žȱ—Šž›ŽȱŠ—ȱŽ¡Ž—ȱ˜ȱ•Š—ȱžœŽȱŒ˜—›˜•œȱŒ‘Š—Žǰȱœ˜ȱ˜ȱ‘Žȱ—Šž›ŽȱŠ—ȱŽ¡Ž—ȱ
˜ȱ™›’ŸŠŽȱ•Š—ȱ˜ —Ž›œ‘’™ǯȱžŒ‘ȱŒ‘Š—Žœȱ’—ĚžŽ—ŒŽȱ–Š›”ŽœȱŠ—ȱž•’–ŠŽ•¢ȱ›ŽŠ•ȱŽœŠŽȱ
ŸŠ•žŽœǯȱ ˜—œŽšžŽ—•¢ǰȱ ›ŽŠ•ȱ ŽœŠŽȱ Š™™›Š’œŽ›œȱ –žœȱ ‹Žȱ Š–’•’Š›ȱ  ’‘ȱ ‘Žȱ ›Žž•Š’˜—œȱ
Š—ȱ›Žœ›’Œ’˜—œȱ‘ŠȱŠ™™•¢ȱ˜ȱ•Š—ȱžœŽȱŠ—ȱž—Ž›œŠ—ȱ‘˜ ȱ‘ŽœŽȱ›Žž•Š’˜—œȱŠěŽŒȱŠȱ
œ™ŽŒ’ęŒȱ™›˜™Ž›¢ǯ

REAL ESTATE, REAL PROPERTY, AND PERSONAL

PROPERTY
ŽŠ•ȱ ŽœŠŽȱ Š™™›Š’œŠ•ȱ –Š”Žœȱ Š—ȱ ’–™˜›Š—ȱ ’œ’—Œ’˜—ȱ ‹Ž ŽŽ—ȱ ‘Žȱ Ž›–œȱ ›ŽŠ•ȱ ŽœŠŽȱ
Š—ȱ ›ŽŠ•ȱ ™›˜™Ž›¢ǯȱ•‘˜ž‘ȱ ‘ŽœŽȱ Œ˜—ŒŽ™œȱ Š›Žȱ ’쎛Ž—ǰȱ œ˜–Žȱ ™›˜Ÿ’—Œ’Š•ȱ •Š œȱ Š—ȱ
Œ˜ž›ȱ ŽŒ’œ’˜—œȱ ›ŽŠȱ ‘Ž–ȱ œ¢—˜—¢–˜žœ•¢ȱ ˜›ȱ •ŽŠ•ȱ ™ž›™˜œŽœǯȱ ‘Žȱ œŽ™Š›ŠŽȱ Žę—’Ȭ
’˜—œȱ ‘Šȱ ˜••˜ ȱ ›ŽŒ˜—’£Žȱ ‘Žȱ ›Š’’˜—Š•ȱ ’œ’—Œ’˜—ȱ ’—ȱ Š™™›Š’œŠ•ȱ ‘Ž˜›¢ȱ ‹Ž ŽŽ—ȱ
‘Žȱ ˜ȱŒ˜—ŒŽ™œǯȱ
ŽŠ•ȱŽœŠŽȱ’œȱ•Š—ǰȱ‹ž’•’—œǰȱŠ—ȱ˜‘Ž›ȱŠĜ¡Žȱ’–™›˜ŸŽ–Ž—œȱŠœȱŠȱŠ—’‹•ŽȱŽ—’¢ǯȱ
‘Žȱ Ž›–ȱ ™Ž›Š’—œȱ ˜ȱ ‘Žȱ ™‘¢œ’ŒŠ•ȱ •Š—ȱ Š—ȱ Š™™ž›Ž—Š—ŒŽœȱ ŠĜ¡Žȱ ˜ȱ ‘Žȱ •Š—ǰȱ Žǯǯǰȱ
œ›žŒž›Žœǯȱ ŽŠ•ȱ ŽœŠŽȱ ’œȱ ’––˜‹’•Žȱ Š—ȱ Š—’‹•Žǯȱ ‘Žȱ •ŽŠ•ȱ Žę—’’˜—ȱ ˜ȱ ›ŽŠ•ȱ ŽœŠŽȱ
’—Œ•žŽœȱ‘Žȱ˜••˜ ’—ȱŠ—’‹•ŽȱŒ˜–™˜—Ž—œDZ
yȱ Š—
yȱ ••ȱ‘’—œȱ‘ŠȱŠ›ŽȱŠȱ—Šž›Š•ȱ™Š›ȱ˜ȱ•Š—ǰȱœžŒ‘ȱŠœȱ›ŽŽœȱŠ—ȱ–’—Ž›Š•œ
yȱ ••ȱ ‘’—œȱ ‘Šȱ Š›Žȱ ŠĴŠŒ‘Žȱ ˜ȱ •Š—ȱ ‹¢ȱ ™Ž˜™•Žǰȱ œžŒ‘ȱ Šœȱ ‹ž’•’—œȱ Š—ȱ œ’Žȱ
’–™›˜ŸŽ–Ž—œ
—ȱ Š’’˜—ǰȱ Š••ȱ ™Ž›–Š—Ž—ȱ ‹ž’•’—ȱ ŠĴŠŒ‘–Ž—œȱ œžŒ‘ȱ Šœȱ ™•ž–‹’—ǰȱ Ž•ŽŒ›’ŒŠ•ȱ  ’›’—ǰȱ
Š—ȱ ‘ŽŠ’—ȱ œ¢œŽ–œȱ Šœȱ  Ž••ȱ Šœȱ ‹ž’•Ȭ’—ȱ ’Ž–œȱ œžŒ‘ȱ Šœȱ ŒŠ‹’—Žœȱ Š—ȱ Ž•ŽŸŠ˜›œȱ Š›Žȱ
žœžŠ••¢ȱ Œ˜—œ’Ž›Žȱ ™Š›ȱ ˜ȱ ‘Žȱ ›ŽŠ•ȱ ŽœŠŽǯȱ ŽŠ•ȱ ŽœŠŽȱ ’—Œ•žŽœȱ Š••ȱ ŠĴŠŒ‘–Ž—œǰȱ ‹˜‘ȱ
Š‹˜ŸŽȱŠ—ȱ‹Ž•˜ ȱ‘Žȱ›˜ž—ǯ
ŽŠ•ȱ ™›˜™Ž›¢ȱ ’—Œ•žŽœȱ ‘Žȱ ’—Ž›Žœœǰȱ ‹Ž—Žęœǰȱ Š—ȱ ›’‘œȱ ’—‘Ž›Ž—ȱ ’—ȱ ‘Žȱ ˜ —Ž›Ȭ
œ‘’™ȱ˜ȱ™‘¢œ’ŒŠ•ȱ›ŽŠ•ȱŽœŠŽǯȱȱ›’‘ȱ˜›ȱ’—Ž›Žœȱ’—ȱ›ŽŠ•ȱŽœŠŽȱ’œȱŠ•œ˜ȱ‹›˜Š•¢ȱ›ŽŽ››Žȱ˜ȱ
Šœȱ Š—ȱ ŽœŠŽǯȱ ™ŽŒ’ęŒŠ••¢ǰȱ Š—ȱ ŽœŠŽȱ ’—ȱ •Š—ȱ ’œȱ ‘Žȱ Ž›ŽŽǰȱ —Šž›Žǰȱ ˜›ȱ Ž¡Ž—ȱ ˜ȱ ’—Ž›Žœȱ

7
For more information on the government’s control of land use, see Anne Warner La Forest. 2009. Anger & Honsberger
Law of Real Property, Third Edition. Aurora, ON: Canada Law Book, and Eaton, J.D. 1995. Real Estate Valuation in
Litigation, 2nd ed. Chicago, IL: Appraisal Institute.

©Copyright 2010 by the Appraisal Institute of Canada and the Appraisal Institute. All rights reserved.

R1ARE10.indb 6 10/4/2010 10:35:12 AM

 Chapter 1 – Real Property and Its Appraisal 1.7

‘ŠȱŠȱ™Ž›œ˜—ȱ‘Šœȱ’—ȱ’ǯȱ˜ȱšžŠ•’¢ȱŠœȱŠ—ȱŽœŠŽȱ’—ȱ•Š—ǰȱ‘Žȱ•ŽŠ•ȱ’—Ž›ŽœǻœǼȱ–žœȱŠ••˜ ȱ
™˜œœŽœœ’˜—ȱȮȱ—˜ ȱ˜›ȱ’—ȱ‘Žȱžž›ŽȱȮȱŠ—ȱœ™ŽŒ’¢ȱž›Š’˜—ǯȱœŠŽœȱŠ›Žȱ’œ’—ž’œ‘Žȱ‹¢ȱ
‘Ž’›ȱž›Š’˜—ȱŠ—ȱŠ••ȱ’—˜ȱ ˜ȱŒŠŽ˜›’ŽœDZȱ›ŽŽ‘˜•ȱŠ—ȱ•ŽŠœŽ‘˜•ȱŽœŠŽœȱŠœȱœ‘˜ —ȱ’—ȱ
’ž›ŽȱŗǯŘǯ
ȱ ‹ž—•Žȱ ˜ȱ ›’‘œȱ ›Ž™›ŽœŽ—œȱ ‘Žȱ ˜Š•ȱ ›Š—Žȱ ˜ȱ
The distinction between real estate and
™›’ŸŠŽȱ ˜ —Ž›œ‘’™ȱ ’—Ž›Žœœȱ ’—ȱ ›ŽŠ•ȱ ™›˜™Ž›¢ǯȱ –Š’—Žȱ
real property is fundamental to appraisal.
Šȱ ‹ž—•Žȱ ˜ȱ œ’Œ”œȱ  ‘Ž›Žȱ ŽŠŒ‘ȱ Ȉœ’Œ”Ȉȱ ›Ž™›ŽœŽ—œȱ Šȱ
real estate
’œ’—Œȱ Š—ȱ œŽ™Š›ŠŽȱ ›’‘ȱ ˜›ȱ ’—Ž›Žœǯȱ ‘Žȱ ‹ž—•Žȱ
Land, buildings, and other affixed
˜ȱ ›’‘œȱ Œ˜—Š’—œȱ Š••ȱ ‘Žȱ ’—Ž›Žœœȱ ’—ȱ ›ŽŠ•ȱ ™›˜™Ž›¢ǰȱ
improvements, as a tangible entity.
’—Œ•ž’—ȱ ‘Žȱ ›’‘ȱ ˜ȱ žœŽȱ ‘Žȱ ›ŽŠ•ȱ ŽœŠŽǰȱ œŽ••ȱ ’ǰȱ •ŽŠœŽȱ
real property
’ǰȱ Ž—Ž›ȱ ’ǰȱ Š—ȱ ’ŸŽȱ ’ȱ Š Š¢ǰȱ Š—ȱ ŽŠŒ‘ȱ Ȉœ’Œ”Ȉȱ ŒŠ—ȱ ‹Žȱ
The interests, benefits, and rights
œŽ™Š›ŠŽȱ ›˜–ȱ ‘Žȱ ‹ž—•Žȱ Š—ȱ ›ŠŽȱ ’—ȱ ‘Žȱ –Š›”Žǯȱ inherent in the ownership of real estate.
‘ŽœŽȱ ›’‘œȱ Š›Žȱ œž‹“ŽŒȱ ˜ȱ ŒŽ›Š’—ȱ ›’‘œȱ ›ŽŠ’—Žȱ ‹¢ȱ Source: Canadian Uniform Standards of
˜ŸŽ›—–Ž—ǰȱ œž‹“ŽŒȱ ˜ȱ •’–’Š’˜—œȱ Š—ȱ ›Žœ›’Œ’˜—œǰȱ Professional Appraisal Practice, 2010.
 ‘’Œ‘ȱŠ›Žȱ’œŒžœœŽȱ’—ȱ‘Š™Ž›ȱŜǯ

Figure 1.2: Estates in Land

Indeterminate Estates Defined

Duration Duration

Freehold Leasehold
Includes a Future
Interest or Possession
Estate for Years

Fee Simple Life

Estate Estate Estate from Period to Period

Estate at Will

Fee Simple Fee Simple Leased Fee

Absolute Defeasible Interest Estate at Sufferance

™™›Š’œŽ›œȱ —˜ȱ ˜—•¢ȱ ’œ’—ž’œ‘ȱ ‹Ž ŽŽ—ȱ ›ŽŠ•ȱ ŽœŠŽȱ Š—ȱ ›ŽŠ•ȱ ™›˜™Ž›¢ǰȱ ‘Ž¢ȱ Š•œ˜ȱ
’쎛Ž—’ŠŽȱ ‹Ž ŽŽ—ȱ ›ŽŠ•ȱ ŽœŠŽǰȱ ™Ž›œ˜—Š•ȱ ™›˜™Ž›¢ǰȱ Š—ȱ ›ŠŽȱ ę¡ž›Žœǰȱ Šœȱ ’••žœ›ŠŽȱ
’—ȱŠ‹•ŽœȱŗǯŗȱŠ—ȱŗǯŘǯȱ™™›Š’œŽ›œȱ–žœȱ”—˜ ȱ ‘Ž‘Ž›ȱŠ—ȱ’Ž–ȱ’œȱ™Ž›œ˜—Š•ȱ™›˜™Ž›¢ȱ˜›ȱ
Šȱ ę¡ž›Žȱ ˜ȱ ŽŽ›–’—Žȱ  ‘Ž‘Ž›ȱ ’ȱ  ’••ȱ ‹Žȱ ’—Œ•žŽȱ ’—ȱ ‘Žȱ ™›˜™Ž›¢ȱ ŸŠ•žŽȱ ’—’ŒŠ’˜—ǯȱ
ȱ Š—ȱ ’Ž–ȱ ’œȱ Œ•Šœœ’ꮍȱ Šœȱ Šȱ ę¡ž›Žǰȱ ’ȱ ’œȱ ™Š›ȱ ˜ȱ ‘Žȱ ›ŽŠ•ȱ ŽœŠŽǯȱ ’—ŒŽȱ ‘Žȱ ’œ’—Œ’˜—ȱ
‹Ž ŽŽ—ȱę¡ž›ŽœȱŠ—ȱ™Ž›œ˜—Š•ȱ™›˜™Ž›¢ȱ’œȱ—˜ȱŠ• Š¢œȱ˜‹Ÿ’˜žœǰȱŠ™™›Š’œŽ›œȱœ‘˜ž•ȱ›ŽŠȱ

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 1.8 The Appraisal of Real Estate – Third Canadian Edition

•ŽŠœŽœȱ ŒŠ›Žž••¢ȱ Š—ȱ ”—˜ ȱ ‘˜ ȱ ‘ŽœŽȱ ’Ž–œȱ Š›Žȱ ›ŽŠŽȱ ’—ȱ ‘Ž’›ȱ –Š›”Žȱ Š›ŽŠȱ Š—ȱ ’œȱ
•ŽŠ•ȱ™›ŽŒŽŽ—œǯȱŽ›œ˜—Š•ȱ™›˜™Ž›¢ȱ‘Šȱ’œȱ›Ž•ŠŽȱ˜ȱ›ŽŠ•ȱŽœŠŽȱŠ—ȱ’œȱ˜ȱ‹Žȱ’—Œ•žŽȱ
’—ȱ‘Žȱ˜™’—’˜—Şȱ˜ȱŸŠ•žŽȱ–žœȱ‹Žȱ’Ž—’ꮍȱ’—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ™›˜ŒŽœœȱŠ—ȱŽœŒ›’‹Žȱ’—ȱ
‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ȱǻœŽŽȱ‘Š™Ž›ȱŘŜǼǯ

Table 1.1: Distinctions Between Real Estate, Personal Property, and Trade Fixtures

Real Estate Characteristics Items that have been installed or attached to the land
or building in a rather permanent manner. All real estate
improvements were once personal property; when
attached to the land, they become real estate.

Examples y Land
y Buildings
y Fixtures – e.g., plumbing, lighting, heating, and air-
conditioning in a residential property

Personal Property Characteristics Movable items of property that are not permanently
affixed to, or part of, the real estate. Personal property is
not endowed with the rights of real property ownership.

Examples y Furniture and furnishings not built into the structure

such as refrigerators and freestanding shelves
y Items such as bookshelves and window treatments
installed by a tenant that, under specific lease terms,
may be removed at the termination of the lease

Trade Fixtures Characteristics Unlike fixtures, which are regarded in law as part of the
real estate, trade fixtures are not real estate endowed
with the rights of real property ownership. They are
personal property regardless of how they are affixed. A
trade fixture is to be removed by the tenant when the
lease expires unless this right has been surrendered in
the lease. Also known as a chattel fixture.

Examples y Restaurant booths

y Gasoline station pumps
y Storage tanks
y Fitness equipment in a health club
y Plumbing, lighting, heating, and air-conditioning in an
industrial building
y Industrial equipment such as air hoses, water
pipelines, craneways, and bus ducts

8
Personal Property is "identifiable portable and tangible objects which are considered by the general public as being
"personal", e.g. furnishings, artwork, antiques, gems and jewellery, collectibles, machinery and equipment; all property,
tangible and intangible, that is not classified as real estate." (CUSPAP 2008)

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 Chapter 1 – Real Property and Its Appraisal 1.9

Table 1.2: Criteria for Distinguishing Between Personal Property and Fixtures

Criteria Explanation

The manner in which the item is Generally an item is considered personal property if it can be
affixed removed without serious injury to the real estate or to itself.
There are exceptions to this rule.

The character of the item and its Items that are specifically constructed for use in a particular
adaptation to the real estate building or installed to carry out the purpose for which the
building was erected are generally considered permanent parts
of the building.

The intention of the party who Frequently the terms of the lease reveal whether the item is
attached the item permanent or is to be removed at some future time.

Source: Werner, R.J. and Kratovil, R.J. 1993. Real Estate Law, 10th ed. Englewood Cliffs, N.J.: Prentice-Hall, Inc. pp11-17.

APPRAISAL PRACTICE
—ȱ˜ž›ȱŒ˜–™•Ž¡ȱœ˜Œ’Ž¢ǰȱ‘Žȱ ˜›œȱŠ™™›Š’œŽ›ȱŠ—ȱŠ™™›Š’œŠ•ȱŒŠ—ȱŠ”Žȱ˜—ȱ–Š—¢ȱ–ŽŠ—’—œǯȱ
ȱ’œȱ’–™˜›Š—ȱ˜ȱžœŽȱ‘ŽœŽȱŽ›–œȱŒ˜››ŽŒ•¢ȱŠ—ȱ˜ȱ’œ’—ž’œ‘ȱŠ–˜—ȱ‘Žȱ’—’Ÿ’žŠ•œȱ
’—Ÿ˜•ŸŽȱ’—ȱ‘ŽȱŸŠ•žŠ’˜—ȱ™›˜ŒŽœœǯ
ž¢Ž›œȱ Š—ȱ œŽ••Ž›œȱ ™ž›Œ‘ŠœŽȱ Š—ȱ œŽ••ȱ ›ŽŠ•ȱ ŽœŠŽȱ Š—ȱ –Š”Žȱ ŽŒ’œ’˜—œȱ ›Ž•Š’—ȱ ˜ȱ
™›’ŒŽœȱŠ—ȱ˜‘Ž›ȱ›ŽŠ•ȱŽœŠŽȱ–ŠĴŽ›œǯȱ
˜–Žȱ‹ž¢Ž›œȱ˜Ž—ȱ‘ŠŸŽȱ•’Ĵ•Žȱ˜›ȱ—˜ȱ‹ŠŒ”›˜ž—ȱ
’—ȱ ›ŽŠ•ȱ ŽœŠŽȱ Š—ȱ –žœȱ ›Ž•¢ȱ ˜—ȱ ˜‘Ž›œȱ ˜ȱ –Š”Žȱ ‘Ž’›ȱ ŽŒ’œ’˜—œǯȱ ‘Žȱ ˜—•¢ȱ ȈŠ™™›Š’œŠ•Ȉȱ
‘Ž¢ȱ –Š”Žȱ ’œȱ Š—ȱ ŽŸŠ•žŠ’˜—ȱ ˜ȱ ‘Žȱ Œ˜—’’˜—œȱ ‘Ž¢ȱ ˜‹œŽ›ŸŽȱ ˜›ȱ ŠŒœȱ ‘Šȱ Š›Žȱ –ŠŽȱ
”—˜ —ȱ˜ȱ‘Ž–ǯȱȱ‘Žȱ˜™™˜œ’ŽȱŽ—ȱ˜ȱ‘Žȱœ™ŽŒ›ž–ǰȱ’—œ’ž’˜—Š•ȱ’—ŸŽœ˜›œȱ–Š¢ȱ‘ŠŸŽȱ
™Ž›œ˜——Ž•ȱ ‘˜ȱŠ›Žȱ›Š’—Žȱ’—ȱŠ™™›Š’œ’—ǯ
ŽŠ•ȱ ŽœŠŽȱ œŠ•Žœ™Ž˜™•Žȱ Š›Žȱ •’ŒŽ—œŽȱ ˜ȱ œŽ••ȱ ›ŽŠ•ȱ ŽœŠŽǯȱ ‘Ž¢ȱ ‘ŠŸŽȱ ›Š’—’—ȱ ’—ȱ
‘Ž’›ȱꎕǰȱ‹žȱ–Š¢ȱ˜›ȱ–Š¢ȱ—˜ȱ‘ŠŸŽȱŽ¡Ž—œ’ŸŽȱŠ™™›Š’œŠ•ȱ›Š’—’—ǯȱ‘Ž¢ȱŠ›ŽȱŽ—Ž›Š••¢ȱ
Š–’•’Š›ȱ ’‘ȱ™›˜™Ž›’Žœȱ’—ȱŠȱ’ŸŽ—ȱ•˜ŒŠ•ŽȱŠ—ȱ‘ŠŸŽȱŠŒŒŽœœȱ˜ȱ–Š›”Žȱ’—˜›–Š’˜—ǯȱ‘Ž¢ȱ
›ŽšžŽ—•¢ȱžœŽȱœŠ•ŽœȱŠ—ȱ˜‘Ž›ȱ–Š›”Žȱ’—˜›–Š’˜—ȱ˜›ȱ™›˜™Ž›¢ȱŒ˜–™Š›’œ˜—ȱ™ž›™˜œŽœȱ
’—ȱ™›’Œ’—ǯȱ˜–Žȱ–Š¢ȱŽŸŽ•˜™ȱŠ™™›Š’œŠ•ȱŽ¡™Ž›’œŽǯȱœȱŠȱ›˜ž™ǰȱ›ŽŠ•ȱŽœŠŽȱœŠ•Žœ™Ž˜™•Žȱ
ŽŸŠ•žŠŽȱ œ™ŽŒ’ęŒȱ ™›˜™Ž›’Žœǰȱ ‹žȱ ‘Ž¢ȱ ¢™’ŒŠ••¢ȱ ˜ȱ —˜ȱ Œ˜—œ’Ž›ȱ Š••ȱ ‘Žȱ ŠŒ˜›œȱ ‘Šȱ
™›˜Žœœ’˜—Š•ȱŠ™™›Š’œŽ›œȱ˜ǯ
ŽŠ•ȱ ŽœŠŽȱ ꗊ—Œ’Š•ȱ ˜ĜŒŽ›œȱ Š—ȱ Ž¡ŽŒž’ŸŽœȱ ’—Œ•žŽȱ •˜Š—ȱ ˜ĜŒŽ›œǰȱ Œ•˜œ’—ȱ ŠŽ—œǰȱ
ŠŽ—œȱ Šȱ ’•Žȱ Œ˜–™Š—’Žœǰȱ ›Ž•˜ŒŠ’˜—ȱ ˜ĜŒŽ›œȱ Š—ȱ ŠŽ—œǰȱ Š—ȱ ˜‘Ž›œǯȱ ‘’œȱ ›˜ž™ȱ
Š•œ˜ȱ ’—Œ•žŽœȱ ˜ŸŽ›—–Ž—ȱ ˜ĜŒ’Š•œȱ  ‘˜ȱ ŽŠ•ȱ  ’‘ȱ •Š—ȱ ˜›ȱ •Š—ȱ ŸŠ•žŽœȱ ’—ȱ ‘Žȱ ™›’ŸŠŽȱ
–Š›”Ž™•ŠŒŽǯȱ‘ŽœŽȱ™›˜Žœœ’˜—Š•œȱŸŠ›¢ȱ’—ȱ‘Ž’›ȱŠ‹’•’¢ȱ˜ȱž—Ž›œŠ—ȱ–Š›”Žȱ˜›ŒŽœȱ’—ȱ
Šȱ ’ŸŽ—ȱ •˜ŒŠ•Žǰȱ ŽŸŽ•˜™ȱ ˜™’—’˜—œȱ ˜ȱ ŸŠ•žŽǰȱ Š—ȱ Š™™•¢ȱ Š™™›Š’œŠ•ȱ Œ˜—ŒŽ™œǯȱ ŽŠ•ȱ ŽœŠŽȱ
’—ŸŽœ–Ž—ȱ ŠŸ’œ˜›œȱ –Š¢ȱ ‘ŠŸŽȱ Ž¡Ž—œ’ŸŽȱ ›Š’—’—ȱ ’—ȱ ž—Ž›œŠ—’—ȱ Š™™›Š’œŠ•œȱ ŽŸŽ—ȱ
’ȱ ‘Ž¢ȱ ˜ȱ —˜ȱ ŽŸŽ•˜™ȱ Š™™›Š’œŠ•œȱ ‘Ž–œŽ•ŸŽœǯȱ Ž–‹Ž›œȱ ˜ȱ ‘’œȱ ›˜ž™ȱ  ˜›”ȱ  ’‘ȱ ˜›ȱ
›ŽŸ’Ž ȱŠ™™›Š’œŠ•œȱŽŸŽ•˜™Žȱ‹¢ȱ˜‘Ž›œǯȱ‘’•Žȱ‘Ž¢ȱŠ›Žȱ”—˜ •ŽŽŠ‹•ŽȱŠ‹˜žȱŠ™™›Š’œȬ
Š•œǰȱ‘Ž¢ȱŠ›Žȱ›Š›Ž•¢ȱ›Š’—ŽȱŠ™™›Š’œŽ›œǯ

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 1.10 The Appraisal of Real Estate – Third Canadian Edition

—ȱ Š—ŠŠǰȱ ˜ž›ȱ ™›˜Ÿ’—ŒŽœȱ Œž››Ž—•¢ȱ ›Žž•ŠŽȱ ŸŠ›’˜žœȱ Šœ™ŽŒœȱ ˜ȱ Š™™›Š’œŠ•DZȱ

˜ŸŠȱ Œ˜’Šǰȱ Ž ȱ ›ž—œ ’Œ”ǰȱ žŽ‹ŽŒǰȱ Š—ȱ •‹Ž›Šǯȱ ‘ŽœŽȱ ™›˜Ÿ’—ŒŽœȱ ‘ŠŸŽȱ ŽœŠ‹Ȭ
•’œ‘Žȱ Ž—’’Žœȱ ‘Šȱ ‹ŽŒ˜–Žȱ ’—Ÿ˜•ŸŽȱ ’—ȱ œžŒ‘ȱ ™›˜Žœœ’˜—Š•ȱ –ŠĴŽ›œȱ Šœȱ ŽžŒŠ’˜—ȱ Š—ȱ
œŠ—Š›œǯȱ ‘Ž›ȱ ‘Š—ȱ ‘Žȱ ˜ž›ȱ ›Žž•Š’—ȱ ™›˜Ÿ’—ŒŽœǰȱ Š™™›Š’œŽ›œȱ ˜ȱ —˜ȱ —ŽŽȱ Š—¢ȱ
™›˜Žœœ’˜—Š•ȱ•’ŒŽ—œŽǰȱ›Ž’œ›Š’˜—ǰȱ˜›ȱ–Ž–‹Ž›œ‘’™ǯ
—ȱžŽ‹ŽŒǰȱ•Ȃ››ŽȱŽœȱ·ŸŠ•žŠŽž›œȱŠ›··œȱžȱž·‹ŽŒȱǻ‘Žȱ›Ž›Ǽȱ ŠœȱŽœŠ‹•’œ‘Žȱ
‹¢ȱ ‘Žȱ ™›˜Ÿ’—Œ’Š•ȱ ˜ŸŽ›—–Ž—ȱ ’—ȱ ‘Žȱ ŗşŝŖœȱ Šœȱ Šȱ Œ˜›™˜›Š’˜—ȱ ›ŽŒ˜—’£’—ȱ ™›˜Žœœ’˜—Š•ȱ
Š™™›Š’œŽ›œDzȱ’ȱ›Š—œȱ–Ž–‹Ž›œȱšžŠ•’ꮍȱ’—ȱŠ™™›Š’œŠ•ȱ ’‘ȱ‘ŽȱŽœ’—Š’˜—ȱȈȈȱǻ·ŸŠ•žȬ
ŠŽž›œȱ Š›··œǼǯȱ ‘Žȱ ›Ž›ȱ ’œȱ —˜ȱ Šȱ ˜›–Š•ȱ •’ŒŽ—œ’—ȱ ‹˜¢ǰȱ Š•‘˜ž‘ȱ ’—ȱ ˜›Ž›ȱ ˜ȱ ‹Žȱ Šȱ
Œ‘’ŽȱŠœœŽœœ’—ȱ˜ĜŒŽ›ȱŠ—ȱœ’—ȱŠ—ȱŠœœŽœœ–Ž—ȱ›˜••ǰȱ‘ŽȱȱŽœ’—Š’˜—ȱ’œȱ–Š—Š˜›¢ǯ
—ȱ •‹Ž›Šǰȱ ‘Žȱ ™›˜Ÿ’—ŒŽȱ –Š—ŠŽȱ Š—ȱ Ž¡’œ’—ȱ ™›˜Ÿ’—Œ’Š•ȱ ›Žž•Š˜›ǰȱ ‘Žȱ ŽŠ•ȱ
œŠŽȱ˜ž—Œ’•ȱ˜ȱ•‹Ž›ŠȱǻǼǰȱ˜ȱ›Žž•ŠŽȱŠ™™›Š’œŽ›œǯȱȱ‘Šœȱ˜›–Š•ȱ™›˜Ÿ’—Œ’Š•ȱ
Šž‘˜›’¢ȱ’—ȱ‘’œȱ–Š—ŠŽǰȱœ˜ȱŸ’˜•Š˜›œȱ˜ȱ’œȱ™˜•’Œ’ŽœȱŒŠ—ȱ‹Žȱ‹›ŽŠ”’—ȱ‘Žȱ•Š ǯ
—ȱ˜ŸŠȱŒ˜’ŠȱŠ—ȱŽ ȱ›ž—œ ’Œ”ǰȱ›Ž’œ›Š’˜—ȱ˜ȱŠ™™›Š’œŽ›œȱ’œȱ›Žšž’›Žȱ‘›˜ž‘ȱ
‘Žȱ˜ŸŠȱŒ˜’ŠȱŽŠ•ȱœŠŽȱ™™›Š’œŽ›œȱœœ˜Œ’Š’˜—ȱŠ—ȱŽ ȱ›ž—œ ’Œ”ȱœœ˜Œ’Š’˜—ȱ
˜ȱ ŽŠ•ȱ œŠŽȱ ™™›Š’œŽ›œȱ ›Žœ™ŽŒ’ŸŽ•¢ǯȱ ȱ ™›’ŸŠŽȱ –Ž–‹Ž›œȱ ‹’••ȱ ’—ȱ ‘Žȱ ™›˜Ÿ’—Œ’Š•ȱ
•Ž’œ•Šž›Žȱ ŽœŠ‹•’œ‘Žȱ ‘ŽœŽȱ œŽ•Ȭ›Žž•Š’—ȱ Šœœ˜Œ’Š’˜—œDzȱ ‘žœǰȱ ‘Ž¢ȱ ˜ȱ —˜ȱ ˜›–Š••¢ȱ
›Ž™›ŽœŽ—ȱ ˜ŸŽ›—–Ž—ȱ ™˜•’Œ¢ǯȱ ‘Žȱ ›Ž’œŽ›’—ȱ ˜›Š—’£Š’˜—œȱ ˜ȱ —˜ȱ ›ŽŒŽ’ŸŽȱ ˜ŸŽ›—Ȭ
–Ž—ȱ ž—’—ǰȱ ‹žȱ ‘ŠŸŽȱ ™›˜Žœœ’˜—Š•ȱ œŠ—Š›œȱ Š—ȱ Ž‘’Œœȱ ˜ȱ  ‘’Œ‘ȱ ‘Ž’›ȱ –Ž–‹Ž›œȱ
–žœȱ Š‘Ž›ŽDzȱ Šȱ Š’•ž›Žȱ ˜ȱ ˜ȱ œ˜ȱ Œ˜ž•ȱ •ŽŠȱ ˜ȱ Ž›Ž’œ›Š’˜—ǯȱ —ȱ Š™™›Š’œŽ›ȱ •ŠŒ”’—ȱ
›Ž’œ›Š’˜—ȱŒŠ——˜ȱ™›ŠŒ’ŒŽȱ’—ȱ‘ŽœŽȱ™›˜Ÿ’—ŒŽœǯ
—ȱ –ŠĴŽ›œȱ œžŒ‘ȱ Šœȱ ™›˜Žœœ’˜—Š•ȱ šžŠ•’ęŒŠ’˜—œȱ Š—ȱ Š™™›Š’œŠ•ȱ œŠ—Š›œǰȱ ˜ŸŽ›—Ȭ
–Ž—ȱ ›Žž•Š˜›œȱ ŒŠ—ȱ ›Ž•¢ȱ ˜—ȱ ™›˜Žœœ’˜—Š•ȱ Š™™›Š’œŠ•ȱ Šœœ˜Œ’Š’˜—œDZȱ ‘Žȱ ™™›Š’œŠ•ȱ
—œ’žŽȱ ˜ȱ Š—ŠŠȱ ǻǼȱ –Š”Žœȱ ŠŸŠ’•Š‹•Žȱ –Ž–‹Ž›œ‘’™ȱ ˜—ȱ Šȱ —Š’˜—Š•ȱ ‹Šœ’œDzȱ Š•–˜œȱ
Š••ȱ ™›˜Žœœ’˜—Š•ȱ ›ŽŠ•ȱ ŽœŠŽȱ Š™™›Š’œŽ›œȱ ŠŒ›˜œœȱ ‘Žȱ Œ˜ž—›¢ȱ ‹Ž•˜—ȱ ˜ȱ ’ǯȱ ȱ –Ž–‹Ž›ȱ ˜ȱ
‘Žȱ™™›Š’œŠ•ȱ—œ’žŽȱ˜ȱŠ—ŠŠȱ–ŽŽœȱŽžŒŠ’˜—Š•ǰȱŽ¡™Ž›’Ž—ŒŽǰȱŠ—ȱŽœ’—ȱ›Žšž’›ŽȬ
–Ž—œȱ œŽȱ ‹¢ȱ ‘Žȱ —œ’žŽȱ Š—ȱ ŒŠ—ȱ ™Ž›˜›–ȱ Š™™›Š’œŠ•œȱ ŠŒ›˜œœȱ ‘Žȱ Œ˜ž—›¢ǰȱ œž‹“ŽŒȱ ˜ȱ
™›˜Ÿ’—Œ’Š•ȱ›Žšž’›Ž–Ž—œǯȱ‘Ž¢ȱ–žœȱŒ˜—˜›–ȱ˜ȱœŠ—Š›œȱŽŸŽ•˜™Žȱ‹¢ȱ‘Žȱ—œ’žŽǰȱ
‘Žȱ ˜›Ž–˜œȱ ˜ȱ  ‘’Œ‘ȱ ’œȱ Š—Š’Š—ȱ —’˜›–ȱ Š—Š›œȱ ˜ȱ ›˜Žœœ’˜—Š•ȱ ™™›Š’œŠ•ȱ
›ŠŒ’œŽȱǻǼǯ
‘Žȱ ¢™Žȱ ˜ȱ ™›˜™Ž›’Žœȱ ‘Šȱ ’—’Ÿ’žŠ•œȱ ŒŠ—ȱ Š™™›Š’œŽȱ Ž™Ž—œȱ ˜—ȱ ‘Žȱ •ŽŸŽ•ȱ ˜ȱ
šžŠ•’ęŒŠ’˜—ȱ ‘Ž¢ȱ ‘˜•ǯȱ ˜›ȱ Ž¡Š–™•Žǰȱ ‘Žȱ ™™›Š’œŠ•ȱ —œ’žŽȱ ˜ȱ Š—ŠŠȱ ›Š—œȱ  ˜ȱ
™›˜Žœœ’˜—Š•ȱ Žœ’—Š’˜—œDZȱ ǰȱ  ‘’Œ‘ȱ ’—’ŒŠŽœȱ Ž—Ž›Š•ȱ Œ˜–™ŽŽ—ŒŽǰȱ Š—ȱ ǰȱ
 ‘’Œ‘ȱ Ž—˜Žœȱ œ’—•ŽȬŠ–’•¢ȱ ›Žœ’Ž—’Š•ȱ Œ˜–™ŽŽ—ŒŽǯȱ ‘Žȱ ™™›Š’œŠ•ȱ —œ’žŽȱ ˜ȱ
Š—ŠŠȱ›Žšž’›Žœȱ’œȱŽœ’—ŠŽȱ–Ž–‹Ž›œȱ˜ȱ–ŽŽȱŒ˜—’—ž’—ȱŽžŒŠ’˜—ȱ›Žšž’›Ž–Ž—œȱ
Š—ȱ –žœȱ Š‘Ž›Žȱ ˜ȱ ‘Žȱ Š—Š’Š—ȱ —’˜›–ȱ Š—Š›œȱ ˜ȱ ›˜Žœœ’˜—Š•ȱ ™™›Š’œŠ•ȱ
›ŠŒ’ŒŽȱ ˜›ȱ ›’œ”ȱ ’œŒ’™•’—Š›¢ȱ ŠŒ’˜—ǰȱ ’—Œ•ž’—ȱ ™˜œœ’‹•Žȱ •˜œœȱ ˜ȱ Žœ’—Š’˜—ǯȱ ‘Žȱ •Ž’œȬ
•ŠŽȱ ™›˜Ÿ’—Œ’Š•ȱ Š™™›Š’œŠ•ȱ ‹˜’Žœȱ ŒŠ—ȱ ’–™˜œŽȱ œŠ—Š›œȱ Š—ȱ Ž‘’ŒŠ•ȱ ›Žšž’›Ž–Ž—œȱ ˜›ȱ
‘Ž’›ȱ–Ž–‹Ž›œǯȱ‘ŽœŽȱ›Žšž’›Ž–Ž—œȱŠ›Žȱ’—Ž—Žȱ˜ȱ™›˜Ÿ’ŽȱŽŸŽ—ȱ‘’‘Ž›ȱ™›˜ŽŒ’˜—ȱ˜ȱ
‘Žȱ™ž‹•’ŒȱœŽ›ŸŽȱ‹¢ȱ‘ŽœŽȱ™›˜Žœœ’˜—Š•œǯ
ȱ ǻ‘Žȱ –Ž›’ŒŠ—ȱ ™™›Š’œŠ•ȱ Š—Š›Ǽȱ Žę—Žœȱ Š—ȱ Š™™›Š’œŽ›ȱ Šœȱ Ȉ˜—Žȱ  ‘˜ȱ ’œȱ
Ž¡™ŽŒŽȱ˜ȱ™Ž›˜›–ȱŸŠ•žŠ’˜—ȱœŽ›Ÿ’ŒŽœȱŒ˜–™ŽŽ—•¢ȱŠ—ȱ’—ȱŠȱ–Š——Ž›ȱ‘Šȱ’œȱ’—Ž™Ž—Ȭ
Ž—ǰȱ’–™Š›’Š•ǰȱŠ—ȱ˜‹“ŽŒ’ŸŽȈǯȱ¢ȱ‘ŠȱŽę—’’˜—ǰȱŠ—¢ȱ™˜Ž—’Š•ȱŒ•’Ž—ȱ˜ȱ‘ŽȱŠ™™›Š’œŽ›ȱ
œ‘˜ž•ȱ‹ŽȱŠ‹•Žȱ˜ȱŽ¡™ŽŒȱŠȱŒŽ›Š’—ȱ•ŽŸŽ•ȱ˜ȱ™›˜Žœœ’˜—Š•’œ–ȱ›˜–ȱŠ—¢˜—Žȱ›Ž™›ŽœŽ—’—ȱ
‘’–œŽ•ȱ˜›ȱ‘Ž›œŽ•ȱŠœȱŠ—ȱŠ™™›Š’œŽ›ǯ

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 Chapter 1 – Real Property and Its Appraisal 1.11

CANADIAN UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (CUSPAP)

Current standards of the Appraisal Institute of Canada (AIC), developed for appraisers and the users
of appraisal services by the Standards Committee of the AIC. The intent of the Standards is to promote
and maintain a high level of public trust in professional appraisal practice by establishing requirements
for appraisal, review, and consulting assignments. These Standards begin with the Ethics Standard,
which sets out the requirements for integrity, impartiality, objectivity, independent judgement, and
ethical conduct. The Standards apply to all activities of any member involving an analysis, opinion
or conclusion relating to the nature, quality, utility, or value of a specified interest in – or aspects of –
identified real estate.
Adherents must develop and communicate his or her analysis, opinions, and advice in a manner that will
be meaningful to the client, that will not be misleading in the marketplace, and that will be in compliance
with these Standards.

ž••Ȭ’–Žȱ ™›˜Žœœ’˜—Š•ȱ ›ŽŠ•ȱ ™›˜™Ž›¢ȱ Š™™›Š’œŽ›œȱ œ™Ž—ȱ ‘Žȱ –Š“˜›’¢ȱ ˜ȱ ‘Ž’›ȱ
’–Žȱ Š™™›Š’œ’—ǯȱ ‘ŽœŽȱ ’—’Ÿ’žŠ•œȱ ‘ŠŸŽȱ Ž¡Ž—œ’ŸŽȱ ›Š’—’—ȱ Š—ȱ Ž¡™Ž›’Ž—ŒŽȱ Š—ȱ Š›Žȱ
Œ˜––’ĴŽȱ ˜ȱ ‘Žȱ ™›˜Žœœ’˜—ǯȱ ‘’œȱ ›˜ž™ȱ ’—Œ•žŽœȱ ‘˜œŽȱ  ‘˜ȱ ™Ž›˜›–ȱ Š—ȱ ›ŽŸ’Ž ȱ
›ŽŠ•ȱ™›˜™Ž›¢ȱŠ™™›Š’œŠ•œǯȱ›˜Žœœ’˜—Š•ȱŠ™™›Š’œŽ›œȱŠ›Žȱ‹˜ž—ȱ˜ȱœ›’ŒȱŒ˜–™•’Š—ŒŽȱ ’‘ȱ
›Žž•Š˜›¢ȱ ›Žšž’›Ž–Ž—œDzȱ ’—ȱ Š—ŠŠǰȱ ‘Ž¢ȱ Š›Žȱ –Ž–‹Ž›œȱ ˜ȱ ‘Žȱ ™™›Š’œŠ•ȱ —œ’žŽȱ ˜ȱ
Š—ŠŠȱŠ—ȱ‘Žȱ›Ž›ǰȱ˜›Š—’£Š’˜—œȱ‘Šȱ˜œŽ›ȱ™Š›’Œ’™Š’˜—ȱ’—ȱ™›˜Žœœ’˜—Š•ȱŠŒ’Ÿ’’Žœȱ
Š—ȱŽžŒŠ’˜—Š•ȱŽŸŽ•˜™–Ž—ǯȱŽ–‹Ž›œȱŠ›ŽŽȱ˜ȱ™ŽŽ›ȱ›ŽŸ’Ž ȱ˜ȱ‘Ž’›ȱŽ‘’ŒŠ•ȱŒ˜—žŒȱ
˜›ȱ ˜›”ȱ™Ž›˜›–Š—ŒŽǰȱ ‘’Œ‘ȱ›ŽĚŽŒœȱ‘Ž’›ȱœ›˜—ȱŒ˜––’–Ž—ȱ˜ȱ™›˜Žœœ’˜—Š•’œ–ǯ
˜—’—ž’—ȱŽžŒŠ’˜—ȱ’œȱ‘ŽȱŒ˜›—Ž›œ˜—Žȱ˜ȱ™›˜Žœœ’˜—Š•ȱŽŸŽ•˜™–Ž—ǯȱ¢ȱ™ž›œž’—ȱ
Œ˜—’—ž’—ȱ ŽžŒŠ’˜—ǰȱ Š™™›Š’œŽ›œȱ Ž–˜—œ›ŠŽȱ ‘Ž’›ȱ Œ˜––’–Ž—ȱ ˜ȱ –Š’—Š’—’—ȱ ‘Ž’›ȱ
œ”’••œȱ Šȱ Šȱ •ŽŸŽ•ȱ Š›ȱ Š‹˜ŸŽȱ ‘Žȱ ‹Š›Žȱ –’—’–ž–ȱ ›Žšž’›Žȱ ˜ȱ œŠ’œ¢ȱ ™›˜Ÿ’—Œ’Š•ȱ •’ŒŽ—œ’—ȱ
›Žšž’›Ž–Ž—œǯȱ —’Ÿ’žŠ•œȱ  ‘˜ȱ Œ˜–™•ŽŽȱ Šȱ ›’˜›˜žœȱ ŽžŒŠ’˜—Š•ȱ ™›˜›Š–ȱ Š—ȱ ŽŠ›—ȱ
›ŽŒ˜—’£Žȱ ™›˜Žœœ’˜—Š•ȱ Žœ’—Š’˜—œȱ Ž—‘Š—ŒŽȱ ‘Ž’›ȱ Ž–™•˜¢–Ž—ȱ Š—ȱ ‹žœ’—Žœœȱ ™›˜œȬ
™ŽŒœǯȱ ȱ Œ˜––’–Ž—ȱ ˜ȱ ™›˜Žœœ’˜—Š•’œ–ȱ ‘Ž•™œȱ ›Žž•ŠŽȱ ‘Žȱ ’—žœ›¢ȱ Š—ȱ Ž—œž›Žœȱ
šžŠ•’¢ȱŠ™™›Š’œŠ•ȱ ˜›”ǯ
ŒŒ˜›’—ȱ ˜ȱ ǰȱ Š™™›Š’œŠ•ȱ ™›ŠŒ’ŒŽȱ ’—Œ•žŽœǰȱ ‹žȱ ’œȱ —˜ȱ •’–’Žȱ ˜ǰȱ ‘›ŽŽȱ
¢™Žœȱ˜ȱŸŠ•žŠ’˜—ȱœŽ›Ÿ’ŒŽœDZ
yȱ ™™›Š’œŠ•
yȱ ™™›Š’œŠ•ȱŽŸ’Ž 
yȱ ™™›Š’œŠ•ȱ˜—œž•’—
™™›Š’œŽ›œȱ Ž—ŠŽȱ ’—ȱ Š™™›Š’œŠ•ȱ ™›ŠŒ’ŒŽȱ Ȯȱ ’ǯŽǯǰȱ ȈŠŒ’—ȱ Šœȱ Š—ȱ Š™™›Š’œŽ›Ȉǰȱ Šœȱ ‘Žȱ
Žę—’’˜—ȱ œŠŽœȱ Ȯȱ  ‘’•Žȱ Šȱ ŸŠ›’Ž¢ȱ ˜ȱ ™›˜Žœœ’˜—Š•œȱ –Š¢ȱ ™›˜Ÿ’Žȱ ŸŠ•žŠ’˜—ȱ œŽ›Ÿ’ŒŽœǰȱ
ŠŒŒ˜›’—ȱ˜ȱ‘ŽȱŽę—’’˜—œȱ’—ȱ‘Žȱ™›˜Žœœ’˜—Š•ȱœŠ—Š›œǯȱȱ ’Žȱ›Š—Žȱ˜ȱŠŒ’Ÿ’’Žœǰȱ
›˜–ȱ–ŽŠœž›’—ȱ‘Žȱœ’£Žȱ˜ȱŠȱ‹ž’•’—ȱ˜ȱŽŸŽ•˜™’—ȱŠȱŽŠ’•Žȱ–Š›”Žȱœž¢ǰȱšžŠ•’¢ȱ
Šœȱ Š™™›Š’œŠ•ȱ ™›ŠŒ’ŒŽȱ ‹žȱ ˜ȱ —˜ȱ ęȱ ‘Žȱ Žę—’’˜—œȱ ˜ȱ ‘Žȱ ‘›ŽŽȱ ¢™Žœȱ ˜ȱ ŸŠ•žŠ’˜—ȱ
œŽ›Ÿ’ŒŽœǯȱ Š‹•Žȱ ŗǯřȱ Œ˜–™Š›Žœȱ ‘Žȱ Œ‘Š›ŠŒŽ›’œ’Œœȱ ˜ȱ ŸŠ•žŠ’˜—ȱ œŽ›Ÿ’ŒŽœǰȱ Š—ȱ ’ž›Žȱ ŗǯřȱ
’••žœ›ŠŽœȱ ‘Žȱ ›Ž•Š’˜—œ‘’™ȱ ˜ȱ ‘Žȱ ™›˜Žœœ’˜—Š•ȱ œŠ—Š›œȱ ˜ȱ ‘Žȱ ŸŠ›’˜žœȱ ™›˜Žœœ’˜—Š•ȱ
ŠŒ’Ÿ’’ŽœȱŠ—ȱŠ™™›Š’œŽ›ȱ–’‘ȱŽ—ŠŽȱ’—ǯ

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 1.12 The Appraisal of Real Estate – Third Canadian Edition

‘ŽȱŠ™™•’ŒŠ’˜—ȱ˜ȱŠ™™›Š’œŠ•ȱ™›˜ŒŽž›ŽœȱŠ—ȱ‘Žȱ•ŽŸŽ•ȱ˜ȱŽŠ’•ȱ’—ȱ‘Žȱ›Ž™˜›ȱ‘Šȱ
Œ˜––ž—’ŒŠŽœȱ ‘Žȱ Š™™›Š’œŽ›Ȃœȱ Œ˜—Œ•žœ’˜—œȱ Š›Žȱ ž’Žȱ ‹¢ȱ ‘Žȱ —Šž›Žȱ ˜ȱ ‘Žȱ ™›˜™Ž›¢ǰȱ
‘Žȱ ¢™Žȱ ˜ȱ ˜™’—’˜—ȱ ˜ȱ ‹Žȱ ŽŸŽ•˜™Žǰȱ ‘Žȱ ’—Ž—Žȱ žœŽǰȱ Š—ȱ ‘Žȱ ’—Ž—Žȱ žœŽ›œǯȱ ˜ȱ
ŠŸ˜’ȱ –’œž—Ž›œŠ—’—œǰȱ ’ȱ ’œȱ ’–™Ž›Š’ŸŽȱ ‘Šȱ ‘Žȱ Œ•’Ž—ȱ Š—ȱ ‘Žȱ Š™™›Š’œŽ›ȱ Š›Žœœȱ
‘ŽœŽȱ’œœžŽœȱŠȱ‘Žȱ˜žœŽȱ˜ȱ‘ŽȱŠœœ’—–Ž—ǯ

Table 1.3: Comparison of Appraisal, Appraisal Consulting, and Appraisal Review

Appraisal
Definition A formal opinion of value: prepared as a result of a retainer; intended
for reliance by identified parties, and for which the appraiser assumes
responsibility; the act or process of developing an opinion of value.

Characteristics Appraisal involves selective research into appropriate market areas, the
assemblage of pertinent data, the use of appropriate analytical techniques,
and the application of knowledge, experience, and professional judgement
to develop an appropriate solution to an appraisal problem. The appraiser
provides the client with an opinion of real property value that reflects all
pertinent market evidence.

Examples y An opinion of market value for a fee simple estate, leasehold estate or other
estate (i.e., to assist in mortgage lending decisions, to assist in purchase or
sale decisions)
y An opinion of investment value or some other properly defined value of
an identified interest in real estate as of a given date (i.e., for insurance
purposes, for relocation purposes, for property tax appeal work)

Appraisal Consulting
Definition The act or process of developing an analysis, recommendation, or opinion to
solve a problem, where an opinion of value is a component of the analysis
leading to the assignment results.
Characteristics Current market activity and evidence are studied to form a conclusion that is
not in itself a value indication. An appraiser develops a value opinion in an
appraisal consulting assignment as part of the process of answering some
other question about real estate, such as whether a proposed use of a given
property is economically feasible.

Appraisal Review

Definition The act or process of developing and communicating an opinion about all or
part of an appraisal.

Characteristics A reviewer examines the work of another appraiser and expresses an opinion
about the quality of that work.

Definitions cited from the Definitions section of the Canadian Uniform Standards of Professional Appraisal Practice
(2010 edition)

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 Chapter 1 – Real Property and Its Appraisal 1.13

Figure 1.3: Valuation Services and Appraisal Practice

Valuation Services
Other
Roles (e.g., Appraisal,
brokerage, Appraisal Review,
property Other and Appraisal
management) Services Consulting
Pertains to aspects of value 9 9 9
Performed by individual acting as an appraiser 9 9
Obligation to comply with USPAP 9 9
Performance and reporting requirements 9
(Standards 1-10)
Record keeping and workfile requirements 9
Source: Uniform Standards of Professional Appraisal Practice, 2008-2009 ed., Advisory Opinion 21, A-69

Appraisal Reporting Options

™™›Š’œŠ•ȱ›Ž™˜›œȱŠ›ŽȱŽ—Ž›Š••¢ȱ˜ȱ‘›ŽŽȱ¢™ŽœDZ
yȱ Š››Š’ŸŽȱȮȱŒ˜–™›Ž‘Ž—œ’ŸŽȱŠ—ȱŽŠ’•Ž
yȱ ‘˜›ȱŠ››Š’ŸŽȱȮȱŒ˜—Œ’œŽȱŠ—ȱ‹›’ŽĚ¢ȱŽœŒ›’™’ŸŽ
yȱ ˜›–ȱȮȱŠȱœŠ—Š›’£Žȱ˜›–ŠȱŒ˜–‹’—’—ȱŒ‘ŽŒ”Ȭ˜ěȱ‹˜¡ŽœȱŠ—ȱ—Š››Š’ŸŽȱŒ˜––Ž—œ
‘Žȱ –˜œȱ œ’—’ęŒŠ—ȱ ’쎛Ž—ŒŽœȱ ’—ȱ ‘Žȱ ›Ž™˜›’—ȱ ˜™’˜—œȱ Š›Žȱ ’—ȱ ‘Žȱ •ŽŸŽ•ȱ ˜ȱ ŽŠ’•ȱ
›Ž™˜›Žȱ ˜—ȱ ‘Žȱ ’—˜›–Š’˜—ȱ Š—Š•¢£Žǰȱ ‘Žȱ Š™™›Š’œŠ•ȱ –Ž‘˜œȱ Š—ȱ ŽŒ‘—’šžŽœȱ
Ž–™•˜¢Žǰȱ Š—ȱ ‘Žȱ ›ŽŠœ˜—’—ȱ ‘Šȱ œž™™˜›œȱ ‘Žȱ Š—Š•¢œŽœǰȱ ˜™’—’˜—ǰȱ Š—ȱ Œ˜—Œ•žœ’˜—œǯȱ
—ȱ Šȱ —Š››Š’ŸŽȱ Š™™›Š’œŠ•ȱ ›Ž™˜›ǰȱ ‘Ž›Žȱ ’œȱ ž••ȱ ŽœŒ›’™’˜—ȱ ˜ȱ ‘Žȱ ŠŠȱ Š—ȱ Š—Š•¢œŽœȱ
žœŽȱ’—ȱ‘ŽȱŠœœ’—–Ž—ǯȱ—ȱŠȱœ‘˜›ȱ—Š››Š’ŸŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ǰȱŠȱœž––Š›¢ȱ˜ȱ‘ŽȱŠŠȱ
Š—ȱ Š—Š•¢œŽœȱ žœŽȱ ’—ȱ ‘Žȱ Šœœ’—–Ž—ȱ ’œȱ ’ŸŽ—ǯȱ ‘Ž›Žȱ ’œȱ •Žœœȱ ŽŠ’•ȱ ™›˜Ÿ’Žȱ ’—ȱ ‘Žȱ
œž––Š›¢ȱŠ™™›Š’œŠ•ȱ›Ž™˜›ȱ‘Š—ȱ’—ȱ‘Žȱ—Š››Š’ŸŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›ǯȱ—ȱŠȱ˜›–ȱŠ™™›Š’œŠ•ȱ
›Ž™˜›ǰȱ‘ŽȱŒ˜—Œ•žœ’˜—œȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱŠ›ŽȱœŠŽǰȱŠ—ȱ‘ŽȱŠŠȱǻ˜›ȱŠ—Š•¢œŽœǼȱžœŽȱ’—ȱ
‘ŽȱŠ™™›Š’œŠ•ȱ’œȱ™›ŽœŽ—Žȱ’—ȱœž––Š›¢ȱ˜›–ȱ˜—•¢ǯȱȱ’œȱ—˜ȱ—ŽŒŽœœŠ›¢ȱ˜›ȱ‘ŽȱŠ™™›Š’œŽ›ȱ
˜ȱ ™›˜Ÿ’Žȱ ‘Žȱ ŠŠȱ Š—ȱ Š—Š•¢œ’œȱ —ŽŽŽȱ ˜ȱ ž••¢ȱ ŽŸŽ•˜™ȱ ‘˜œŽȱ Œ˜—Œ•žœ’˜—œȱ  ’‘’—ȱ
‘Žȱ›Ž™˜›ȱ ‘Ž›Žȱ‘ŽȱŠ™™›Š’œŽ›ȱŠ—ȱŒ•’Ž—ȱ‘ŠŸŽȱŠ›ŽŽȱ‘ŠȱŠȱ˜›–ȱŠ™™›Š’œŠ•ȱ›Ž™˜›ȱ’œȱ
Š™™›˜™›’ŠŽȱ˜›ȱ‘ŽȱŠœœ’—–Ž—ǯ
™™›Š’œŠ•ȱ›Ž™˜›œȱ–Š¢ȱŠ•œ˜ȱ‹ŽȱŽ•’ŸŽ›Žȱ˜›Š••¢ǯȱ›Š•ȱ˜›ȱŸŽ›‹Š•ȱ›Ž™˜›œȱŠ›Žȱ’ŸŽ—ȱ’—ȱ
Œ˜ž›ȱŽœ’–˜—¢ȱŠ—ȱ’—ȱ›’‹ž—Š•œȱœžŒ‘ȱŠœȱŠ™™›Š’œŠ•œǰȱŠœȱ Ž••ȱŠœȱ’—ȱ˜‘Ž›ȱŒ’›Œž–œŠ—ŒŽœȱ
ǻ‘Š™Ž›ȱŘŜȱ’œŒžœœŽœȱŠ™™›Š’œŠ•ȱ›Ž™˜›’—ȱ˜›–Šœȱ’—ȱ–˜›ŽȱŽŠ’•Ǽǯ
‘Žȱ ’œ’—Œ’˜—ȱ ‹Ž ŽŽ—ȱ ‘Žȱ Š™™›Š’œŠ•ȱ Š—ȱ ‘Žȱ Š™™›Š’œŠ•ȱ ›Ž™˜›ȱ ’œȱ ’–™˜›Š—ǯȱ ‘Žȱ
œŽ›Ÿ’ŒŽȱ‘ŽȱŠ™™›Š’œŽ›ȱœž™™•’Žœȱ˜ȱŠȱŒ•’Ž—ȱ’œȱ˜ȱ™›˜Ÿ’ŽȱŠȱŒ›Ž’‹•Žȱ˜™’—’˜—ȱ˜ȱŸŠ•žŽǰȱŠœȱ˜ȱ
Šȱœ™ŽŒ’ꮍȱŠŽǰȱŠŒŒ˜›’—ȱ˜ȱŠȱœ™ŽŒ’ꮍȱŽę—’’˜—ȱ˜ȱŸŠ•žŽǰȱ˜›ȱŠȱœ™ŽŒ’ꮍȱ’—Ž—Žȱ
žœŽǯȱ‘ŽȱœŽ›Ÿ’ŒŽȱ’œȱ—˜ȱœ’–™•¢ȱ˜ȱŽ•’ŸŽ›ȱŠ—ȱŠ™™›Š’œŠ•ȱ›Ž™˜›ǯȱ‘Žȱ›Ž™˜›ȱ’œȱ–Ž›Ž•¢ȱ‘Žȱ
–ŽŠ—œȱ‹¢ȱ ‘’Œ‘ȱ‘ŽȱŠ™™›Š’œŽ›Ȃœȱ˜™’—’˜—ȱ˜ȱŸŠ•žŽȱ’œȱŒ˜––ž—’ŒŠŽǯ

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 1.14 The Appraisal of Real Estate – Third Canadian Edition

—ȱŠ’’˜—ǰȱ‘ŽȱŒ˜–™•Ž¡’¢ȱ˜ȱ‘ŽȱŠ™™›Š’œŠ•ȱ™›˜‹•Ž–ȱ—ŽŽȱ—˜ȱŠěŽŒȱ‘Žȱ™‘¢œ’ŒŠ•ȱ
œ’£Žȱ ˜ȱ Šȱ  ›’ĴŽ—ȱ ›Ž™˜›ǯȱ ȱ ŸŠ•žŽȱ ˜™’—’˜—ȱ ŽŸŽ•˜™Žȱ ‘›˜ž‘ȱ ‘Žȱ Š™™•’ŒŠ’˜—ȱ ˜ȱ Šȱ
Œ˜–™•Ž¡ȱ Š™™›Š’œŠ•ȱ ™›˜ŒŽœœȱ –’‘ȱ ‹Žȱ Œ˜––ž—’ŒŠŽȱ ’—ȱ Šȱ ˜›–ȱ Š™™›Š’œŠ•ȱ ›Ž™˜›ǯȱ ‘Žȱ
Š™™›Š’œŠ•ȱŽŸŽ•˜™–Ž—ȱ™›˜ŒŽœœȱŠ—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ›Ž™˜›’—ȱ™›˜ŒŽœœȱŠ›ŽȱœŽ™Š›ŠŽǰȱŠ—ȱ
˜—Žȱ’œȱ—˜ȱŽ™Ž—Ž—ȱ˜—ȱ‘Žȱ˜‘Ž›ǯ

Purpose and Intended Use of an Appraisal

‘Žȱ™ž›™˜œŽȱ˜ȱŠ—ȱŠ™™›Š’œŠ•ȱ’œȱ˜ȱŽŸŽ•˜™ȱŠ—ȱ˜™’—’˜—ȱ˜ȱœ˜–Žȱ¢™Žȱ˜ȱŸŠ•žŽȱ‘Šȱ–žœȱ
‹ŽȱŽę—ŽȱŠȱ‘Žȱ˜žœŽǯȱ‘ŽȱŽę—ŽȱŸŠ•žŽȱ–Š¢ȱ’—Œ•žŽȱ‘Žȱ˜••˜ ’—DZ
yȱ Š›”ŽȱŸŠ•žŽ
An appraiser produces a report that is yȱ œŽȱŸŠ•žŽ
appropriate for the intended use, and is yȱ —ŸŽœ–Ž—ȱŸŠ•žŽ
incapable of misleading the intended user.
yȱ œœŽœœŽȱŸŠ•žŽ
CUSPAP does not dictate the form, format,
yȱ žœ’—ŽœœȱŸŠ•žŽ
or style of reporting. These are functions
of the needs of users and appraisers. The
yȱ Š’›ȱŸŠ•žŽ
substantive content of a report determines yȱ ‘Ž›ȱ¢™Žœȱ˜ȱŸŠ•žŽ
its compliance. ‘Š™Ž›ȱ Řȱ ’œŒžœœŽœȱ ’œ’—Œ’˜—œȱ Š–˜—ȱ ‘ŽœŽȱ
Ž›–œǯ
‘Žȱ ’—Ž—Žȱ žœŽȱ ˜ȱ Š—ȱ Š™™›Š’œŠ•ȱ ’œȱ ‘Žȱ
The purpose and the intended use of an
Š™™›Š’œŽ›Ȃœȱ’—Ž—ȱŠœȱ˜ȱ‘˜ ȱ‘ŽȱŒ•’Ž—ȱŠ—ȱ˜‘Ž›ȱ
appraisal are related, but distinct, concepts.
’—Ž—Žȱ žœŽ›œǰȱ ’ȱ Š—¢ǰȱ  ˜ž•ȱ žœŽȱ ‘Žȱ Š™™›Š’œŠ•ȱ
Purpose of an Appraisal: The stated reason
for an appraisal assignment, i.e., to develop
›Ž™˜›ǯȱ—ȱ˜‘Ž›ȱ ˜›œǰȱ ‘Šȱ‘ŽȱŒ•’Ž—ȱ—ŽŽœȱ˜ȱ
an opinion of the defined value of any real ”—˜ ȱ˜›ȱ‘ŽȱŒ•’Ž—Ȃœȱ™›˜‹•Ž–ȱ˜ȱ‹Žȱœ˜•ŸŽȱŽŽ›Ȭ
property interest or to conduct an evaluation –’—Žœȱ ‘Žȱ ’—Ž—Žȱ žœŽȱ ˜ȱ Š—ȱ Š™™›Š’œŠ•ǯȱ ˜›ȱ
study (consulting assignment) pertaining to Ž¡Š–™•ŽǰȱŠȱŒ•’Ž—ȱ–Š¢ȱ—ŽŽȱ˜ȱ”—˜ ȱ‘Žȱ–Š›”Žȱ
real property decisions. ŸŠ•žŽȱ ˜ȱ Šȱ ›Žœ’Ž—ŒŽȱ ˜ȱ ŠŸ˜’ȱ ™Š¢’—ȱ ˜˜ȱ –žŒ‘ȱ
Intended Use of an Appraisal: The manner ˜›ȱ ’ȱ ˜›ȱ ŠŒŒŽ™’—ȱ ˜˜ȱ •’Ĵ•Žȱ ˜›ȱ ’ȱ ’—ȱ Šȱ œŠ•Žǯȱ ‘Žȱ
in which a client will employ the information •˜ŒŠ•ȱ ˜ŸŽ›—–Ž—ȱ –Š¢ȱ —ŽŽȱ ˜ȱ ”—˜ ȱ ‘Žȱ ŸŠ•žŽȱ
contained in an appraisal report. ˜ȱ™›˜™Ž›¢ȱŠ”Ž—ȱ‘›˜ž‘ȱŽ¡™›˜™›’Š’˜—ǯ
Appraisals are commonly used in situations ’—ŒŽȱ Š—ȱ Š™™›Š’œŠ•ȱ ™›˜Ÿ’Žœȱ Šȱ ‹Šœ’œȱ ˜›ȱ Šȱ
involving the transfer of ownership,
ŽŒ’œ’˜—ȱŒ˜—ŒŽ›—’—ȱ›ŽŠ•ȱ™›˜™Ž›¢ǰȱ‘Žȱ’—Ž—Žȱ
financing and credit, litigation, taxation,
žœŽȱ˜ȱŠ—ȱŠ™™›Š’œŠ•ȱŽ™Ž—œȱ˜—ȱ‘ŽȱŽŒ’œ’˜—ȱ‘Žȱ
and investment counselling and in other
business decision-making.
Œ•’Ž—ȱ ’œ‘Žœȱ˜ȱ–Š”Žǯȱ—ȱŽę—’—ȱ‘ŽȱŠ™™›Š’œŠ•ȱ
™›˜‹•Ž–ǰȱ ‘Žȱ Š™™›Š’œŽ›ȱ œ‘˜ž•ȱ Œ˜—œ’Ž›ȱ ‘Žȱ
Œ•’Ž—Ȃœȱ ›Žšž’›Ž–Ž—œȱ Š—ȱ ›ŽŠŒ‘ȱ Š—ȱ ž—Ž›œŠ—Ȭ
’—ȱ ‘Šȱ ’œȱ ŠŒŒŽ™Š‹•Žȱ ˜ȱ ‘Žȱ Œ•’Ž—ȱ Š—ȱ ‘Žȱ Š™™›Š’œŽ›ȱ Š—ȱ ’œȱ Œ˜—œ’œŽ—ȱ  ’‘ȱ ŠŒŒŽ™Žȱ
œŠ—Š›œȱ˜ȱ™›˜Žœœ’˜—Š•ȱŠ™™›Š’œŠ•ȱ™›ŠŒ’ŒŽǯ
—ȱ Š™™›Š’œŠ•ȱ –Š¢ȱ ‹Žȱ ›ŽšžŽœŽȱ ’—ȱ Šȱ —ž–‹Ž›ȱ ˜ȱ œ’žŠ’˜—œǯȱ ‘’•Žȱ Š‹•Žȱ ŗǯŚȱ ˜Žœȱ
—˜ȱ ›ŽĚŽŒȱ Š••ȱ ™˜œœ’‹•Žȱ žœŽœȱ ˜›ȱ Š™™›Š’œŠ•œǰȱ ’ȱ ™›˜Ÿ’Žœȱ Šȱ ‹›˜Šȱ œŠ–™•’—ȱ ˜ȱ ™›˜ŽœȬ
œ’˜—Š•ȱŠ™™›Š’œŠ•ȱŠŒ’Ÿ’’Žœǯȱ

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 Chapter 1 – Real Property and Its Appraisal 1.15

Table 1.4: Typical Uses of Appraisals

Transfer of ownership
y To help prospective buyers set offering prices
y To help prospective sellers determine acceptable selling prices
y To establish a basis for real property exchanges
y To establish a basis for reorganizing or merging the ownership of multiple properties
y To determine the terms of a sale price for a proposed transaction
y Financing and credit
y To develop an opinion of the value of the security offered for a proposed mortgage loan
y To provide an investor with a sound basis for deciding whether to purchase real estate mortgages,
bonds, or other types of securities
y To establish a basis for a decision to insure or underwrite a loan on real property
Litigation
Expropriation proceedings
y To develop an opinion of the market value of a property as a whole – i.e., before a taking
y To develop an opinion of the market value of the remainder after a taking
y To estimate the damages to a property created by a taking
Property divisions
y To develop an opinion of the market value of a property in contract disputes
y To develop an opinion of the market value of partnership interests
Environmental litigation
y To estimate damages created by violations of environmental laws
y To estimate damages created by environmental accidents
Tax matters
y To develop an opinion of assessed value
y To separate assets into depreciable (or capital recapture) items such as buildings and non-
depreciable items such as land, and to estimate applicable depreciation (or capital recapture) rates
y To develop an opinion of the value of the real estate component of an estate plan that represents the
foundation for future capital gains, often in the context of an inheritance
y To determine gift tax credits
Investment counselling, decision-making, and accounting
y To set rent schedules and lease provisions
y To determine the feasibility of a construction or renovation program
y To help corporations or third parties purchase homes for transferred employees
y To serve the needs of insurers, adjusters, and policyholders
y To facilitate corporate mergers, the issuance of stock or the revision of book value
y To develop an opinion of liquidation value for forced sale or auction proceedings
y To counsel clients by considering their investment goals, alternatives, resources, constraints, and
the timing of their activities
y To advise planners, zoning authorities, and courts, among others, on the probable effects of
proposed actions
y To assist in arbitrating valuation issues
y To analyze supply and demand trends in a market
y To ascertain the status of real estate markets
y To value fixed assets and assist in asset value allocations

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 1.16 The Appraisal of Real Estate – Third Canadian Edition

Appraiser Liability
œȱ žœŽ›œȱ ˜ȱ Š™™›Š’œŠ•ȱ œŽ›Ÿ’ŒŽœȱ ’—Œ›ŽŠœŽȱ ‘Ž’›ȱ ›Ž•’Š—ŒŽȱ ˜—ȱ ‘Žȱ œŽ›Ÿ’ŒŽœȱ ˜ȱ Š™™›Š’œŽ›œǰȱ
‘Žȱ œŒ˜™Žȱ ˜ȱ Š™™›Š’œŽ›ȱ ›Žœ™˜—œ’‹’•’¢ȱ Š—ȱ ™˜Ž—’Š•ȱ •’Š‹’•’¢ȱ ›˜ œǯȱ™™›Š’œŽ›œȱ –Š¢ȱ
‹Žȱ ‘Ž•ȱ •’Š‹•Žȱ ˜›ȱ —Ž•’Ž—ŒŽǰȱ –’œ›Ž™›ŽœŽ—Š’˜—ǰȱ ›Šžǰȱ ‹›ŽŠŒ‘ȱ ˜ȱ Œ˜—›ŠŒǰȱ ˜›ȱ •ŠŒ”ȱ
˜ȱ Œ˜–™•’Š—ŒŽȱ  ’‘ȱ ‘Žȱ œŠ—Š›œȱ ’–™˜œŽȱ ‹¢ȱ Œ˜ž›ȱ ›ž•’—œǰȱ ˜ŸŽ›—–Ž—ȱ ŠŽ—Œ’Žœǰȱ
Š—ȱ ‘˜œŽȱ ˜ȱ ™›˜Žœœ’˜—Š•ȱ Šœœ˜Œ’Š’˜—œȱ œžŒ‘ȱ Šœȱ ‘Žȱ ™™›Š’œŠ•ȱ —œ’žŽȱ ˜ȱ Š—ŠŠǯȱ
›ŽŠœȱ ˜ȱ ™˜Ž—’Š•ȱ Ž¡™˜œž›Žȱ ’—Œ•žŽȱ –ŠĴŽ›œȱ ’—Ÿ˜•Ÿ’—ȱ ™›’Ÿ’¢ȱ ˜ȱ Œ˜—›ŠŒǰȱ ’œŒ•˜Ȭ
œž›Žǰȱ Š—ȱ •’’Š’˜—ǰȱ Žǯǯǰȱ ’œŒ˜ŸŽ›¢ȱ ™›˜ŒŽŽ’—œǰȱ ’—Ž››˜Š˜›’Žœǰȱ Š—ȱ ŠĜŠŸ’œǯȱ ˜›ȱ
Ž¡Š–™•ŽǰȱŠ—ȱ’—ĚŠŽȱŠ™™›Š’œŠ•ȱŒŠ—ȱ‹ŽȱŠȱŒ˜–™˜—Ž—ȱ˜ȱ™›˜™Ž›¢ȱ̒™™’—ǰȱ˜—Žȱ˜›–ȱ˜ȱ
–˜›ŠŽȱ›Šžǯ
‘Žȱ ŸŠœȱ –Š“˜›’¢ȱ ˜ȱ Š™™›Š’œŽ›œȱ ™Ž›˜›–ȱ ‘Ž’›ȱ Šœœ’—–Ž—œȱ Ž‘’ŒŠ••¢ȱ Š—ȱ Œ˜–™ŽȬ
Ž—•¢ǯȱ
˜ ŽŸŽ›ǰȱ Š™™›Š’œŽ›œȱ Š›Žȱ ŠŸ’œŽȱ ˜ȱ Š”Žȱ –ŽŠœž›Žœȱ ˜ȱ œŠŽžŠ›ȱ ‘Ž–œŽ•ŸŽœȱ
›˜–ȱ ž—’—Ž—’˜—Š•ȱ ˜›ȱ ’—Ÿ˜•ž—Š›¢ȱ
–Š•™›ŠŒ’ŒŽǯȱ ›Ž™Š›’—ȱ  Ž••Ȭ˜Œž–Ž—Žȱ
Appraisers may be held liable for professional
›Ž™˜›œȱ Š—ȱ Ž—œž›’—ȱ Œ˜–™ŽŽ—Œ¢ȱ ‘›˜ž‘ȱ
violations or related misconduct.
Œ˜—’—ž’—ȱ ŽžŒŠ’˜—ǰȱ ‘Žȱ žœŽȱ ˜ȱ Œ‘ŽŒ”•’œœȱ
liability
Š—ȱ ‹ŠŒ”ž™ȱ ›ŽŸ’Ž œǰȱ Š—ȱ œ›’Œȱ Š‘Ž›Ž—ŒŽȱ
In appraisal, a legal obligation to render services
˜ȱ ‘Žȱ Š—Š’Š—ȱ —’˜›–ȱ Š—Š›œȱ ˜ȱ
in compliance with professional standards and
to refrain from malpractice, which includes ›˜Žœœ’˜—Š•ȱ ™™›Š’œŠ•ȱ ›ŠŒ’ŒŽȱ ŒŠ—ȱ ‘Ž•™ȱ
negligence, misrepresentation, fraud, and breach ›ŽžŒŽȱ Š—ȱ Š™™›Š’œŽ›Ȃœȱ Ž¡™˜œž›Žȱ ˜ȱ Œ’Ÿ’•ȱ
of contract. ŠŒ’˜—ǯȱ ›˜Žœœ’˜—Š•ȱ •’Š‹’•’¢ȱ ’—œž›Š—ŒŽȱ ’œȱ
–Š—Š˜›¢ȱ˜›ȱŠ••ȱ–Ž–‹Ž›œȱ˜ȱ‘Žȱ™™›Š’œŠ•ȱ
—œ’žŽȱ ˜ȱ Š—ŠŠȱ Š—ȱ ›Žšž’›Žȱ ‹¢ȱ –˜œȱ
Œ•’Ž—œǯȱ™™›Š’œŽ›œȱŠ›ŽȱŠŸ’œŽȱ˜ȱ›ŽŸ’Ž ȱŠ••ȱŽ¡Œ•žœ’˜—œȱŠ—ȱ›Ž›˜ŠŒ’ŸŽȱŠŽœȱ’—ȱ‘Ž’›ȱ
’—œž›Š—ŒŽȱ™˜•’Œ’ŽœȱŠ—ȱ˜ȱŠ”Žȱ—˜›–Š•ȱ™›ŽŒŠž’˜—œȱ’—ȱ‘Ž’›ȱ‹žœ’—Žœœȱ™›ŠŒ’ŒŽœǯ
˜—ŽœŽȱ ˜™’—’˜—œȱ ˜ȱ ŸŠ•žŽȱ –Š¢ȱ ›Žœž•ȱ ›˜–ȱ ›Š™’ȱ Œ‘Š—Žœȱ ’—ȱ –Š›”Žȱ Œ˜—’Ȭ
’˜—œǰȱ ‘Žȱ ™›ŽœŽ—ŒŽȱ ˜ȱ Œ˜—Š–’—ŠŽȱ –ŠŽ›’Š•œȱ ˜—ȱ Š™™›Š’œŽȱ ™›˜™Ž›’Žœǰȱ Ž—˜›ŒŽ–Ž—ȱ
˜ȱ Ž—Ÿ’›˜—–Ž—Š•ȱ Š—ȱ ™›ŽœŽ›ŸŠ’˜—ȱ ŽŠœŽ–Ž—œǰȱ Š—ȱ Œ‘Š—Žœȱ ’—ȱ •ŽŠ•ȱ Š—ȱ ›Žž•Š˜›¢ȱ
ž’Ž•’—Žœǯȱ‘Žȱ™›˜•’Ž›Š’˜—ȱ˜ȱ•ŽŠ•ȱ™›˜ŒŽŽ’—œȱœžŽœœȱ‘Šȱ•’’Š’˜—ȱ ’••ȱŒ˜—’—žŽȱ
˜ȱ’—Œ›ŽŠœŽȱ’—ȱ‘ŽȱŠ™™›Š’œŠ•ȱꎕȱŠœȱ’ȱ‘Šœȱ’—ȱ˜‘Ž›ȱ™›˜Žœœ’˜—œǯ

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