RESIDENTIAL APPRAISAL REPORT (BUSI 330, Project No. 2)

LETTER OF TRANSMITTAL INFORMATION

9603 88th Avenue NW

Legal Description

Plan 3737AI Block 3 Lots 15 & 16

Prepared For:

Jordan River Credit Union

1405 58^th Street

Vancouver, BC, A4F 6T6

The purpose of this appraisal is to estimate the current market value of the Fee Simple Estate to aid in obtaining mortgage financing. The Effective Date of this analysis coincides with the Date of Inspection, that being November 15, 2017.

The subject property entails a two-storey 2,700 sq. ft single family dwelling sitting on a 25,000 sq. ft lot located in the south west of Edmonton within the Bonnie Doon Neighbourhood. The subject site features full-municipal servicing, extensive rear and front landscaping and a rear garden area. The subject property is currently being utilized as a single family dwelling.

The highest and best use for the subject property is considered to be a single family dwelling. The property currently exhibits an RF3 – Small Scale Infill Development land use classification. The valuation techniques undertaken will include the Cost Approach and Direct Comparison Approach.

The exposure time for the subject property has been estimated at 20 days. As a result of my analysis, I have formulated the opinion that the subject has an estimated market value of $1,400,000.00.

Respectfully submitted,

PHOTOGRAPHS OF SUBJECT

Section

Page Number

Table of Contents

Summary of Salient Facts and Important Conclusions

ii

iii

Part I – Preface

Assumptions and Limiting Conditions

Regional and Area Analysis (optional)

Neighbourhood Analysis and Trends (optional)

Land Description and Analysis  (optional)

Description of Improvements (optional)

Description of Improvements: Observed Depreciation

2

Part II – Analysis and Conclusions

Cost Approach – Land Value

– Cost Analysis of Improvements

– Depreciation

– Summary

Direct Comparison Approach

Reconciliation of Value Indications and Final Estimate of Value

Certification

Schedules

Addenda Item/

Page No.

Neighbourhood Map

Site/Plot Plan (optional)

Floor Plan(s) (optional)

Comparable Land Sales Map

Cost Summary; Cost Manual/Service Excerpts and Worksheets

Comparable Improved Sales Map

Photographs of Improved Sales

Additional Photographs of Subject (optional)

Neighbourhood Photographs (optional)

Transfer and Mortgage Documents for Comparables (optional)

Other Materials (list)

outstanding

payments

Included?

due

rate

period

Appraisal of Real Estate (3^rd Canadian edition)

ASSUMPTIONS AND LIMITING CONDITIONS

2. Every effort has been made to verify the information received from others which is believed reliable and correct.

3. Sketches, drawings, diagrams, photographs, etc., are included for the sole purpose of illustration and serve to assist the reader in visualizing the property.

4. The distribution of land and building as stated in this report, apply only under the program of utilization as identified in the report.

5. This report is not a real appraisal. It is a project required for the AIC 330 course as part of the AACI program offered by UBC.

6. Due to insufficient market data the paired sales analysis used in the cost approach is based off hypothetical data. The findings of this component are used again when making an adjustment during the direct comparison approach.

7.

and oven

Living area exhibits a large upper floor family room.

Main floor exhibits open concept design, large living room and dining area, and luxury style kitchen.

DESCRIPTION OF IMPROVEMENTS: OBSERVED DEPRECIATION

Physical depreciation represents a loss in market value due to physical wear and tear that occurs over the lifetime of an improvement. Incurable physical depreciation represents a depreciated item which it does not make financial sense to fix. The subject properties front door has become slightly warped but still provides the needed function of a front door. The cost to replace the large custom door is greater than the utility or value the replacement would add as the door still functions.

The economic life refers to the period of time over which the improvements will contribute to the overall property. An appraiser should take physical age, quality and the condition of the building into account when calculating economic age. The appraiser should also consider the current economic cycle, when similar buildings undergo major renovation, when similar lands have been rezoned to more intensive uses and when demolition permits are issued for similar buildings. The home is considered in very good condition as regular maintenance is evident. As mentioned above, the exhibits modern features which include a luxury style kitchen, hardwood flooring, and high-quality windows. The subject also exhibits a stylish exterior design, high quality exterior materials, and is in equal or superior condition to when compared to similar houses in the immediate market. The current economic conditions in the Bonnie Doon neighbourhood and region are positive as GDP is expected to grow in 2017, rebounding from the prior year’s contraction. Demand in the neighborhood is also strong, most homes stay on the market for under 30 days, and the neighbourhoods close location to the Edmonton downtown core provides residents access to upper-middle class employment. Similar homes in the neighbourhood have not needed renovations or demolition, as they are not that old. When analyzing similar homes of a greater age, the renovation of the roof is often required around 15 years of age. No homes of similar age have required demolition; however, 1950’s bungalows in the neighbourhood have undergone significant renovation or demolition. Taking this into account, and assuming similar quality of construction, the subject is deemed to have an economic life of 75 years.

Therefore the remaining economic life is 64 years, or the difference between the effective age and the economic life. (75 – 7= 64)

HIGHEST AND BEST USE ESTIMATE

Definition

Analysis and support of highest and best use of the site, as if vacant

The writers analysis of what is physically possible to build on the subject site took into account the following factors: size, shape, topography, soil bearing capacity, servicing, exposure, location and access. The analysis concluded the site is of rectangular shape, exhibiting a generally flat topography and full municipal servicing. The soil was concluded to have the needed bearing capacity to support a typical 2-storey structure single-family or multi-family structure, as the current improvements represent a large single-family home. In regards to access and exposure, the site is located at the end of a dead-end interior residential road which provides sufficient access, though some traffic congestion and lack of parking is evident due to the roads use as an access point into Mill Creek Ravine. To conclude, the site fully supports a single-family development. Development of a multi-family structure would risk causing traffic congestion and a shortage of parking for residence, but may still be considered.

The writer’s analysis of what legally permissible developments could take place on the subject site took into account the current land-use zoning. The subject falls under RF3 zoning, which states an allowance of: “Single Detached Housing and Semi-detached Housing while allowing small-scale conversion and infill redevelopment to buildings containing up to four Dwellings under certain conditions.” Therefore, the site could be developed into a two dwelling, three dwelling or four dwelling multi-family structure, as well as its current use as a single-family structure. Research into the possibility of a rezoning scenario which would allow a higher density development, found no indication of any planned zoning changes taking place in the foreseeable future (1).

The writer also took into account the principle of conformity, which states land must be utilized in a manner that reasonably conforms with the existing standards of the area in order to maintain maximum value (2). The subject’s neighbourhood exhibits a wide range of single-family housing styles, as well as some small multi-dwelling structures. The variations in style can attributed to the age of the neighbourhood, as it is a mature area that has been undergoing infill development for many years. In applying the principle of conformity to the subjects land, it is noted that multi-dwelling developments have only been approved on corner lots that exhibit sufficient traffic flow and provide a large enough area to building a parking area. This eliminates the probability of a multi-dwelling development and lends itself to the notion that the subjects land would be developed as a single-family residence.

(1) http://webdocs.edmonton.ca/zoningbylaw/ZoningBylaw/Part2/Residential/140_(RF3)_Small_Scale_Infill_Development_Zone.htm

(2) http://www.century21.ca/cheryl.sebrins/blog/Principles_of_Value

The development of the vacant land as a single-family residence or multi-dwelling residence is considered financially feasible. This is because the subject neighbourhood is highly desired and the demand for such a development is strong. The comparables used in the direct comparison approach are examples of large single-family homes that sold recently, all of which spent less than a month on the market. As the city grows and the region returns to favorable economic conditions, the demand for such a development is only anticipated to increase.

Lastly, the writer took into account the maximally productive criteria, which looks to identify the type of improvement which would offer the greatest value, or that is the most profitable. Developing a multi-dwelling condo structure would most likely create the most profit for a developer, but it has already been concluded that this type of development would most likely not be approved by council given the subjects location. Therefore, if the site was vacant a single-family home development would provide the greatest value or profit to a developer.

Discussion of adequacy of the existing improvement(s)

The demand for properties such as the subjects is very high at the moment, evident as most comparable properties have spent less than 30 days on the market. Furthermore, economic conditions in the region have continued to improve over the last year, increasing anticipated future demand.

Conclusion and support of highest and best use as improved

COST APPROACH – LAND VALUE

Data Comparison Chart

COST APPROACH – LAND VALUE (continued)

Adjustment Chart

($10,818.18 fr. ft.)

($11,406.24 fr. ft.)

($11,899.99 fr. ft.)

($12,546.86 fr. ft.)

COST APPROACH – LAND VALUE (continued)

Adjustment Analysis in Order:   1. Property Rights   2. Financing   3. Motivation   4. Expenses made immediately after purchase   5. Time   6. Other

• No adjustments were made for: 1. Property Rights   2. Financing   3. Motivation   4. Expenses made immediately after purchase.
• All three comparables represent real market data.
• Historical Edmonton real estate market data was used to derive time adjustments for all three comparables, the data used is comprised of improved property sales. It will be assumed that the changes in improved property sale prices can be used as a fair representation of any change in land price that would have occurred over that same time period.
• The comparables used in the paired sales analysis to justify the location adjustments represent hypothetical sales.

Time Adjustments (Market Conditions):

• Comparable 1: No adjustment was warranted for this comparable, market data shows Edmonton improved property prices slipped approximately -3.0% from September 2017 to October, then increased approximately 3.0% from October 2017 to the start of  November 2017 (*).
• Comparable 2: Market data shows that improved property sales increased approximately 2.0% from end of March 2017 to the start of November 2017 (*). Taking this data into consideration, a 2.0% upward adjustment is warranted for this comparable.
• Comparable 3: Market data shows home prices in Edmonton decreased approximately -0.9% in 2016 (**). From January 2017 to November 2017, market data shows Edmonton home prices increased approximately 3.4%. Taken these changes into consideration, a 2.5% upward adjustment is warranted for this comparable.

(*) https://www.zolo.ca/edmonton-real-estate/trends

(**) https://globalnews.ca/news/3159670/edmonton-home-sale-prices-drop-slightly-in-2016-realtors-association/

Location Adjustment:

• Comparable 1: This comparable exhibits similar characteristics to the subject as both properties back on to the ravine, and sit adjacent (on opposite ends) to the same school yard. No adjustment is warranted for this comparable.
• Comparable 2 & 3: These properties differ from the subject as they do not back onto the ravine. Backyard ravine access is viewed as a desirable characteristic and has a positive impact on value. A paired sale analysis was used to justify the 10% adjustments made to both comparables.

Paired Sales Analysis:

The four sales used in the paired sales analysis were similar to both the subject and each other. There was no time adjustment made because the sales dates were within a month of each other.

The paired sales analysis indicates that purchasers are willing to pay 7.5% to 12.5% more for a property that backs onto the ravine. A 10% adjustment is therefore warranted for the inferior location of comparables 2 & 3.

Reconciliation:

The comparable sales have indicated a price per front foot range varying from $11,899.99 to $15,428.57. Overall, in recognizing all adjustments as discussed, a value per front foot towards the upper end of this range, between $14,000.00 and $15,500.00, is applicable to the subject.

In recognizing the similarities between comparable 1 and the subject, as no adjustment was warranted for location or time, the subject’s value per front foot should be similar to this comparable. The subject’s value per front foot is estimated at $15,000.00. Therefore, the market value of the subject is calculated to be $990,000.00 (66” front feet x $15,000.00).

COST APPROACH – COST ANALYSIS OF IMPROVEMENTS

Roof/Shingles

Central Air

Exterior Doors/ Windows

Kitchen Cabinet & Counter Tops

$7,325.00

$11,200.00

$21,485.00

$3,050.00

11

11

11

11

25

15

25

45

44%

73.3%

44%

24.4

$3,223.00

$8,209.60

$9,453.40

$744.20

DIRECT COMPARISON APPROACH (continued)

$979,944.08

(+390,000.00)

(+270,000.00)

(+240,000.00)

 ($606 sq. ft.)

($484 sq. ft.)

($407 sq. ft.)

DIRECT COMPARISON APPROACH (continued)

• No adjustments were made for: 1. Property Rights   2. Financing   3. Motivation   4. Expenses made immediately after purchase.
• All three comparables represent real market data.
• Historical Edmonton average home price market data was used to derive time adjustments for all three comparables, the data used is comprised of improved property sales.
• The comparables used in the paired sales analysis to justify the location adjustments represent hypothetical sales.

Comparable #4: $1,456,937.68

Comparable #5: $1,149,611.02

Comparable #6: $1,069,665.35

Indicated Range: $1,070,000.00 to $1,455,000.00

The comparable sales have indicated a value range between $1,070,000.00 and $1,455,000.00. All three comparables represent a reasonable estimate of the market value of the subject property and are all recent sales that required minimal time adjustments.

All three comparables warranted significant lot size adjustments due to the unique size of the subject property. The lot size adjustments applied to these properties were derived from an in-depth analysis of land prices in the surrounding area. Although the warranted adjustments were derived from an aggressive price per front foot value, they should still be considered accurate due to the subject’s unusually large size, backyard ravine exposure and location which present a rare buying opportunity.

Comparable #4 & #5 exhibit improvements that are most similar to the subject and will be given the most weight in estimating the subject’s value. Therefore, a range between $1,200,000.00 and $1,450,000.00 is applicable to the subject.

Overall, in recognizing all adjustments as discussed, the subject’s value estimate would be fall in the upper-end of the above mentioned range. Therefore, the market value of the subject is estimated at $1,400,000.00 or $520.00 sq. ft.

RECONCILIATION OF VALUE INDICATIONS AND FINAL ESTIMATE OF VALUE

Indicated value by Cost Approach:                                    $ 1,367,000.00

Indicated value by Direct Comparison Approach:              $ 1,400,000.00

The appraisal process represents an orderly program in which market data is analyzed and used to estimate the value of the subject property. Generally, there are three main approaches used to estimate market value which include the Cost Approach, Income Approach and Direct Comparison Approach. The Income Approach is more often used for investment properties and derives its estimated market value from the income which the property produces. When estimating residential home values the income approach is not typically used, as like the subject property there is no income stream in place, and therefore was not used in this analysis.

The Cost Approach represents a basic appraisal technique which is helpful in estimating value in all types of properties. When using this approach, the subject’s site and improvements are viewed as separable, and a value is estimated for each. Thereafter, depreciation estimations are calculated and subtracted from the improvements cost estimate. The estimated subject value in this analysis was $1,367,000.00.

The Direct Comparison Approach involves an analysis of the subject and similar properties. The attributes and characteristics of the selected properties are contrasted and compared against the subject. The approach applies the Principle of Substitution, which assumes that a potential buyer would pay no more for a property than the cost of a similar building and site that serves the same utility. Assuming there is sufficient market data to compare the subject to, this approach provides a solid test of value, as it considers the actions of buyers and sellers in the market place. In this analysis the comparables used were taken from MLS (Multiple Listing Service), and therefore represent real market data. Adjustments were made to these comparables using historical average home price market data to adjust for time, as well as, a paired sales analysis to adjust for neighbourhood using actual market transactions. It should be noted that an adjustment was made to account for the subject’s backyard ravine exposure, and this adjustment was based off a hypothetical paired sales analysis. This adjustment was also made to the land sale comparables during the cost approach.

Due to the backyard ravine exposure adjustment being used on both approaches, and the general cost data used by Cost Works, more weight will be given to the Direct Comparison Approach in this analysis.

Overall, in place greatest emphasis on the value estimate derived from the Direct Comparison Approach, the value market value for the subject property as of November 15^th, 2017 is estimated to be $1,375,000.00.

The estimated exposure time for this property is 20 days.

• the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the code of Professional Ethics and the Standards of Professional Appraisal Practice.

• the statements of fact contained in this report are true and correct.

• the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions.

• I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved.

• my compensation is not contingent upon the reporting of a predetermined value or direction in value that favours the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.

• I have made a personal inspection of the property that is the subject of this report, located at                                          , on                                                         .

• no one provided significant professional assistance to the person signing this report.

• the final estimate of market value, as of                                 is estimated to be:

^(Date)