AAS Flashcards
What is an Ad Valorem tax?
A tax based on the principle that the amount of tax paid should depend on the value of the property owned.
When the quantity of one productive service is increased in equal increments, while the quantities of other productive services remain fixed, the resulting increment of product will decrease after a certain point.
The principle of variable proportions (law of decreasing returns):
Net income remaining after the cost of labor, management and capital have been paid.
Surplus productivity:
The amount of goods that producers are willing to sell under various conditions during a given period.
Supply:
Market value of a property tends to be set by the cost of acquiring an equally desirable and valuable property.
The principle of substitution:
Quantities of various goods that people are willing and able to buy during some period, given the choices available to them
Demand:
States that the property must be valued with a single use for the entire property.
The principle of consistent use:
The basis for applying the adjustments in the sales comparison approach.
The principle of contribution:
The value of property depends in part, on its relationship to its surroundings.
The principle of conformity:
Availability must be in harmony with demand. If one or the other is in excess, prices will increase or decrease.
The principle of competition:
The tendency of social and economic forces affecting supply and demand to alter overtime.
The principle of change:
Maximum value is obtained when the four agents of production attain a state of equilibrium.
The principle of balance:
The present worth of future benefits.
The principle of anticipation:
After reaching a certain point, the addition of successive increments of one agent of production will decrease future incomes or amenities.
The principle of increasing/decreasing returns:
The value of a lower price property is increased by its association with better properties of the same type.
The principle of progression/regression:
A concept an appraisal and in assessment law requiring that each property be appraised as though it were being put to its most profitable use, given probable legal, physical and financial constraints. The concept is most commonly discussed in connection with underutilized land.
The principle of highest and best use:
The loss in value from all causes, of property having a limited economic life.
Depreciation:
Loss in value due to wear and tear, services and the forces of nature.
Physical depreciation:
Repairs will cost less than the value it adds to the property.
Curable physical depreciation:
Repairs will cost more than the value it adds to the property.
Incurable physical depreciation:
Loss in value due to an inability of the structure to adequately perform the function for which it is used.
Functional depreciation:
Also known as external obsolescence.
It is a loss in value due to something outside the control of the property; and always incurable!
Economic or locational obsolescence:
How to calculate external or economic obsolescence:
By capitalization of rent loss.
Rent loss multiplied by the GRM equals The amount of depreciation due to loss of value.
Uses map/plan; small urban units. Four example, Lot 10 located in the King subdivision.
Lot and block land description system:
Uses: sections, townships and ranges.
Rectangular survey method land description system:
Bass lines run east and west; meridians run north and south.
One Township equals 36 sections.
Each section contains 640 acres and measures 1 mile x 1 mile or one square-mile.
Townships
Required rate of return on equity capital.
Equity yield rate:
Annualized yield rate on capital that is generated by an asset over a period of ownership.
Internal rate of return:
Return on investment. Can be calculated using sales for the band of investment method.
Discount rate:
Return of investment.
Calculated by taking the annual amount that can be captured from an investment divided by the original investment.
Recapture rate:
Is calculated by annualizing market rent at 100% occupancy.
Potential gross income:
Maintenance, supplies, insurance, utilities, employees salary/benefits and minor miscellaneous.
Allowable operating expenses:
Property tax, depreciation, income tax, capital improvements, franchise fees, debt service and owners personal expenses.
Property taxes are handled as part of the total capitalization rate (effective tax rate).
Non-allowable operating expenses:
Rent that will be collected if property is 100% occupied at market rent.
Potential gross rent:
Rent prevailing in the market for comparable properties and is used in calculating market value by the income approach.
Market rent:
The actual amount agreed to by the landlord and the tenant. (leased fee)
Contract rent:
The difference between contract and market rents; implies the tenant is paying more rent than us being paid for comparable properties.
Excess rent:
The tenant portion that is the difference between market rent and contract rent when the tenant is paying less than market rent.
Lease hold:
Sale price divided by gross annual income.
This is typically used with commercial properties.
Gross income multiplier; GIM:
Sales price divided by monthly rent.
This is typically used with residential properties and makes no allowance for expenses or vacancy. Often it is used as a benchmark to measure potential profitability.
Gross rent multiplier; GRM:
Develops, publishes, interprets and amends USPAP.
Appraisal standards Board (ASB)
Must hold all records for five years or two years after any judicial action.
USPAP Record-keeping:
Must have knowledge and experience necessary to complete an assignment or gain required knowledge and experience during an assignment if the client allows.
USPAP competency:
Composed of one dependent variable; (what is being estimated) and one or more independent variables (items used to predict or explain the dependent variable).
Mass appraisal models:
MV = IV + LV.
Basic mass appraisal model:
A model that adds and multiplies. these models have more freedom in specification and are more flexible however they cannot be calibrated directly and have no unique solutions. Used for cost models.
Hybrid model:
The entity that is statutorily responsible for the taxes.
Legal incidence:
The entity that pays the taxes.
Economic incidence:
Power is constitutionally divided between national and subnational divisions; such as, states and provinces. Promotes competition, accountability and innovation.
Federalist model of government:
Tax efficiency:
Resource allocation.
Tax elasticity:
Response to changing economic issues.
Tax acceptability:
Citizens believe the tax is reasonable.
Basic managerial functions:
Planning, organizing, directing and controlling.
Single-family newer/Homogenous must be between five and 10; single-family older/heterogeneous must be within 5 to 15; other residential must be between five and 20. Income property/large area must be between five and 15 income property/small area must be between five and 20.
Vacant land must be between five and 25.
IAAO standards for coefficient of dispersion:
Requires the identification of goals in the various ways of achieving them. ______ provides the basis for all other managerial functions.
Planning:
Requires deciding how to structure in staff the organization.
Also requires developing an organizational structure that shows the allocation of resources, authority relationships and structure of the organization; including staffing patterns.
Organizing:
Requires the manager to provide a leadership role to the subordinates in the workgroup. The manager must find ways to provide guidance, to involve the group in decision-making and to be a mentor to individual performance.
Directing:
Requires monitoring performance of departments, divisions, sections in individuals. Having well-designed system controls can assist in identifying problems in a timely manner and allow the manager to implement corrective actions quickly.
Controlling:
Chain of command; subordinates are seen as robots and are expected to follow orders without question.
Classical style of management:
Recognizes employees as individuals, that are responsible, willing to learn and with proper incentives motivated to be self-starters in creative.
Behavioral perspective style of management:
New were approach; premised on a set of interrelated parts that work together to achieve goals.
Organized into subsystems the perform certain tasks to ensure completion of the end product.
Systems school style of management:
Technical information and processes required to transform inputs into outputs and related specialized management techniques.
Technical subsystem:
Organizations formal structure as expressed in the organization chart. Concerned with both formal and informal patterns of authority in communication as well as how labor, capital, information and materials are used.
Structural subsystem:
Includes development of comprehensive strategic and operational plans, feedback structures and budget control processes.
Planning subsystem:
Contains four key principles; functional, scaler, line/staff and span of control.
Classical school of management:
Subjective; starting point includes a value judgments.
Normative statements or analysis:
Objective; purely factual, without judgments.
Positive statements for analysis:
Income model structure
I\R=V
Standard deviation
Find mean
Subtract and square differences
Sum and divide by n-1
Find sq rt
COV
Divide SD by mean
Multiply by 100
PRD FORMULA
Mean/weighted mean
Most common measure of appraisal uniformity
COD
A measure of vertical equity
PRD
Divide appraisal value by
Sales Price
Calculating COD
Find median Calculate absolute deviation Sum differences Divide by # of sales Divide by median
A PROPERTY HAS A NET OPERATING INCOME OF 10,000, INTEREST PAYMENTS OF 8000 AND PRINCIPAL PAYMENTS OF 1000. WHAT IS THE DEBT COVERAGE RATIO?
1.11
If the land to building ratio had been used to establish land value, what valuation method would this have been?
allocation
An interior inspection of a property shows it is suffering from extreme deferred maintenance. What would be the best way to measure this depreciation?
determine cost to cure
From tenants standpoint, when economic rent exceeds contract rent the difference is known as
leasehold income
If an income property has an annual effective gross income of 64000 with total expenses of 30000 and variable expenses of 17000, what is the operating expense ratio?
.47 (total is 30, dont add 17) EGI/TOTAL
apartment complex, PGI is 500000, vacancy 6%, operating expenses 205000, what is operating expense ratio
44% (205/500*.94)
Building cap rate- .11, land cap rate- .09, land value as percent of total 35%
.103
PGI 1545000, vacancy 5%, operating expenses 543068, EGI multiplier 7. What is overall cap rate Ro?
.09 (NOI/EGI, EGI=1467750, NOI=924682) NIR/EGIM
A property has a land value of 1000000, a net operating income of 350000, a land cap rate of 10%, and a bldg cap rate of 12.5%. What is the value of the subject?
I R V
B-250k .125 2000000
L-100k .10 1000000
T- 350k
3000000
Staff costs account for approximately what percentage of the budget for most jurisdictions
80-85
TARGET (WHERE YOU WANT TO BE)/ACTUAL(WHERE YOU ARE)=
Trend
Budget: 200,000,000 Total market value: 10,000,000,000 Assess Ratio:30% Non property tax revenues: 25,000,000 Find tax rate
EAT:subtract non tax revenue from budget, multiply market value by asses rate. divide budget by assess value. .0583
80 MILLS=
.08
ETR= ASSESS RATIOX
TAX RATE (MILL LEVY)
BUDGET: 2000000000
MKT VALUE:10000000000
ASSESS VALUE: 2500000000
TAX RATE: 80 MILLS
ASSESS RATIO= .25
ETR=.25*.08=.02
GIVEN THE FOLLOWING COMPUTE A TAX RATE USING DOLLARS PER HUNDRED BUDGET 6000000 MKT VALUE 800000000 ASSESS LEVEL 50% NON TAX REVENUE 1000000
1.25
DEFERRED MAINTENANCE, ITEMS 100% PHYS DEPRECIATED AND IN NEED OF REPAIR, MEASURED BY COST TO CURE
CURABLE PHYS DEPR
SHORT LIVED, ITEMS NOT READY TO BE REPLACED BUT WILL NEED TO BE IN FORESEEABLE FUTURE. USEFUL LIVES LESS THAN TOTAL IMPROVEMENT (LONG LIVED ITEMS). MEASURED BY AGE LIFE RATIO
INCURABLE PHYS DEPR. CARPET/WATER HEATER/ROOF
CARPET/WATER HEATER/ROOF ARE EXAMPLES OF
INCUR PHYS DEPR
BROKEN WINDOW AND CRACKED TOILET ARE EXAMPLES OF
CURABLE PHYS DEPR
long lived items, bones, measured by age-life
phys deterioration incurable
loss in value due to inability of the structure to adequately perform. changes in demand, design, tastes, need for modernization, superadequacy
functional obsolescence
an item classified as short lived item has a cost new of 5000. its actual age is 5 years and the total useful liufeis 20 years. The dollar amount of depr would be
$1250.
A residence is located on a street that has become a thoroughfare. It rents for $800, residences not located on the busy street rent for $825. GRM is 150 and land to building is 1:4. External obsolescence is
25150.8=3000
A residence has an RCN of 200,000. Curable phys deter have an RCN of 10,000 and cost to cure of 12,000. Inc phys deter (short lived), have an RCN of 40,000 and a depr amount of 18,000. Actual age is 6 and total useful life is 60 years. Total amount of phys depr is
45,000.
Electrical outlets are inadequate. RCN for exisintg outlets is 3600. Depr is 50%. Cost to remove and install new is 4200. Increase in mkt value will offset cost. What is the amount of depr?
3600*.5=1800
3600-1800=1800
1800+4200=6000
external obsolescence calculated by GRMxrent lossx?
% building
Rent loss is
external obsolescence
what lease is the landlord required to pay for all operating expenses?
gross lease
what type of rent per sq ft includes the entire area of the building
Gross leasable area (GLA)
includes only the floor area occupied by the tenant
net leasable area
PGI-_+_=EGI
vacancy and collection+misc income
EGI-___=NOI
allowable expenses (op exp and reserves)
deprec and debt serv, real estate taxes are/are not allowed as expenses
not allowed
___ are often used by oversite agencies to determine compliance with laws
ratio studies
___ are also used for internal qc in an effective assessment system
ratio studies
one of the first mgmt theories was ____. Primary an authoritarian approach with top down decision making.
Classical theory of mgmt
Classical managers formed the chain of command, but subordinates were seen as
robots
the ____ recognized employees as individuals, that were responsible and willing to learn
behavorial perspective
a set of interrelated parts that work together
systems school
Classical principles: assignment of various portions of particular tasks among a number of members
division of labor
the authority and responsibility should flow in a direct line, vertically from the highest level to the lowest level of the organization.
scalar principle
relates to the optimal number of employees a manager can supervise
span of control principle
in a ___ organization, a manager supervises few subordinates, in a ___ organization a manager supervises many subordinates
tall, flat
coordination process, equipment, and people to achieve goals and results
management
process of influencing individuals and groups to set and achieve goals
leadership
___ plan, organize, direct, and control
managers
the ability to empower and inspire others to plan effectively, visionaries
leadership
A process of setting goals through the following resources: Human Financial Material Information
management
REQUIRES MANAGER TO PROVIDE LEADERSHIP, GUIDANCE
directing
requires monitoring performance of departments, divisions, sections, and individuals
controlling
processes, techniques and practices of an area of specialty
technical skills
abilities to communicate and interact with other individuals
human skills
managers ability to create and manipulate new ideas and communicate those ideas to others
conceptual skills
todays organizations tend to be ___ with less layers of mgmt
flatter
controlling and problem solving
MGMT
motivating and inspiring
leadership
determining how an organization can accomplish its objectives
planning
planning requires the manager to work
backwards
methods or processess required in total, in part, or in some combination to achieve the goals
strategies or activities
measurable specifics
objectives
goals developed by top and middle mgmt
strategic long range plans
developed by middle and first time mgmt
operational short range
graphical device used for sequencing significant events based on yes or no
flow chart
this type of chart promotes analytical thinking
flow chart
graphical scheduling technique using an x and y grid
gantt chart
formula for determing personell requirements
S=P/(RT)
parcels/rate x time
The ___ is the final step in the planning process
budget
expenditures based on categories (personell, contracs, capital outlay)
line-item budget
use cost efficiency to make spending decisions
performance budget
centralizes budgeting to examine net public benefits
program budget
addresses the fact that gov fiscal resources are limited
zero based budget
planning and coordinating of efforts for a common purpose
organizing
grouping of activities, allocation of responsibilities, specifying lines of authority
organizing
size of the organization, diversity of operations, and characteristics of personell
internal factors
environment, technology, external pressure
external factors
unique group of resources established to perform certain tasks
department
divisions that categorize jobs according to the activity
functional
sub units within a division
sections
when interviewing talk no more than % of the time
25
entrust ones authority to a competent subordinate
delegation
report findings to supervisor
low delegation
advise their supervisor
moderate delegation
employees report their action to their supervisor
high delegation
job security, salary, working conditions, are examples of
dissatisfiers
achievement, recognition, responsibility, advancement, personal are examples of
satisfiers
subjective probability that one thing will lead to another
expectancy
job instructions, office memos, policy statements, group meetings are examples of
downward communication
sugestion boxes, grievances, and proposals are examples of
upward communication
communication that takes place among people on different levels in the organization
lateral
PRD below one, low valued properties are under appraised
Progressivity
PRD above one, low valued properties over appraised
regressivity
divide target level by current level to get
calculated factor
in ratio studies what is the most widely used measure of appraisal level
median
power divided between national and subnational divisions
federalism
specific tax is
unit based
ad velorem is
value based
existence of public goods is en example of
market failure
non-rival, nonexcludable, are examples of
public goods
lack of information, bureucratic costs, special interest groups lead to
government failures
high elastic tax systems rely more heavily on what type of taxes?
income
of Roman origin, emphasis on codes
civil law
greater emphasis on cases
common law
___ is the taxpayer, and the ___ is the thing taxes
subject, object
___ holds that the thing that is taxed is responsible
in rem
the liability is on the taxpayer
in personum
states derive power from national government
unitary
layer cake, national and states have seperate areas of responsibility
dual federlaism
marble cake, federal government and states interdependent
cooperative federalism
pyramid, federal mandates may preempt state authority
coercive federalism
taxes, fees, and grants are
main sources of gov revenue
general gov revenue is all sources except
licquor store, insurance trust, and utility
intergov revenue
grants
sin taxes
sumptuary
normative
subjective
positive
objective
own source revenue
taxes, current charges, misc general revenue
___ is the magnitude of the tax while ___ reflects who pays it
burden, incidence
changes in tax collections given changes in rate or tax base
tax elasticity
property tax is ___, it will not fall when income falls
inelastic
income elasticity =change in tax collections/?
% change in income
rate elasticity=% change in tax collections/?
% change in tax rate
who is statutorily responsible for tax
legal incidence
focus on the long term behavorial effects of the tax
general equilibrium
tax elasticity less than 1 means
tax changes slower than income
Sales tax tends to be ___ elastic
less
used to attract business and promote residential use
abatement
matters ought to be handled at the smallest competent authority
subsidiarity
not policy making
ministerial
develops, interprets, and amends USPAP
ASB appraisal standards board
AQB provides
education
ASB provides
USPAP
BOT
oversees operation
APB
consistency
TAF
AQB, ASB, BOT
promulgates appraisal standards
ASB
oral appraisal report
summary
COV
SD/mean
