13 Appraisal Flashcards
Three Approaches
Sales comparison approach - market data
Cost Approach - principle of substitution
Income approach - capitalization approach
Appraisal
Opinion of value supported by evidence.
Characteristics of Value
Demand - desire for possession of ownership
Utility - the properties usefulness for the intended purpose
Scarcity - a finite supply
Transferability - the ease of transferring owners rights
Market Value
What a buyer offers, and what a seller accepts.
Market Price
What a property actually sells for.
Anticipation
The value is created by the expectation that certain events will occur.
Change
The one constant you can count on is change.
Competition
High levels of profit tends to increase competition from competitors which results in less profit for everyone.
Conformity
The value will be maximized if the property is in harmony with existing properties in the neighborhood.
Contribution
The value of any part of a property is measured by the value of the whole.
Highest and Best Use
The most profitable use for a property.
Increasing or Diminishing Returns
Improvements increase until a period of time where there is no longer an increase.
Substitution
What would it cost to purchase a similar property.
Supply and Demand
The price will increase is supply is low and demand is great.
Plottage
This is assemblage of 2 properties where the value is greater than if they stood apart.
Progression/regression
Value of properties will decrease if surrounded by houses of lower value, and vice versa.
Reconciliation
Appraisers never average. More weight would be given to one of the approaches over another.
Adjusted Basis
Refers to the original cost of the property reduced by deductions and increased by certain improvement costs.
Appreciation
Increase in value.
Basis
The cost of the property plus the value of capital improvements.
Boot
Money or something else of value to make up the difference in an exchange of properties.
Capital Gain
The taxable profit realized from the sale of a capital asset.
Cash Flow
The spendable income generated from an investment after deducting expenses.
Depreciation
Loss of value.
Exchanges
Used to defer capital gains on investment properties.
Inflation
The rate at which the general level of prices for goods and services is rising, and subsequently purchase power is falling.
Intrinsic Value
A persons individual preference for a given geographical area based on amenities the area has to offer.
Joint Venture
Group of investors coming together for a specific project only.
Leverage
The use of borrowed funds for an investment.
Liquidity
The ability to sell an asset and turn it into cash.
REIT
Real estate investment trust - a group of at least 100 investors who transfer title to real estate to a trustee, who manages the property on behalf of the investors.
Syndicate
A joint venture that sticks around for more than 1 project.
