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Advantage Consulting & Training
commercial lenders, CRE lenders, credit analysts, lending managers and credit officers, loan review specialists, mortgage bankers, private bankers, small business lenders, special assets officers
10:30 am-12:00 pm CT
An important part of the commercial real estate (CRE) lending process is the review and interpretation of the property appraisal. This program focuses on the three approaches to value that drive the report. We’ll look at both direct capitalization and discounted cash flow (DCF) for the income approach, including key variables and ways an appraiser’s work may differ from your bank underwriting. The cost approach has benefits to the lending process – benefits that seldom are used. Comparables seem simple, but most bankers do not pose a key question that drives the selection of comps. Finally, some reports develop valuations based on the total enterprise.
Specific subjects that will be covered during the seminar:
• Key variables in the direct capitalization methodology as an income approach to value
• Why the appraisers cash flow may not (and probably should not) match your underwriting and subsequent reports or financial statement from your customer
• The role of “rules of thumb” in direct capitalization
• Identify situations where discounted cash flow (DCF) is appropriate, with an income-producing property and a residential subdivision as examples
• Three key aspects of depreciation within the cost approach
• Two items in the cost approach that can enhance your bank’s underwriting
• The key question that underpins all other factors with comparables
• Valuation approaches that include the entire business, not just the bricks and mortar