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Real Estate > Appraisal > Flashcards

Appraisal Flashcards

1
Q

supply

A

the amount of properties for sale within the market at a given price during a given time period

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2
Q

demand

A

the number of people willing and able to accept the available goods at any given price during a given time period

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3
Q

supply and demand

A

value of a property increases if the supply of such property decreases and the demand increase or stays the same

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4
Q

value

A

the monetary worth of the future benefits arising from the ownership of real estate property

value is specific to a marketplace

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5
Q

Five attributes of land

A
  1. finite in supply
  2. physically immobile
  3. durable
  4. useful
  5. each parcel has unique characteristics
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6
Q

improvement value

A

the difference between the total purchase price of the commercial real estate property and the land value, plus the cost of buildings and other improvements added

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7
Q

situs

A

a real estate property’s location, for legal purposes

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8
Q

Economic characteristics of Real estate

A
  1. demand: being needed
  2. utility: capable of satisfying human needs/desires
  3. scarcity: being only available in limited supply
  4. transferability: having ownership rights easily transferred
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9
Q

market value

A

a price a ready, willing, and able buyer who is not forced to buy will pay a seller who is not forced to sell after property has had exposure on the market

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10
Q

appraisal

A

an estimate/opinion of value based on supportable evidence and approved methods

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11
Q

appraiser

A

an independent person trained to provide an unbiased estimate of value

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12
Q

market price

A

what a property actually sells for

ideally the same as market value, but not always

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13
Q

market value vs cost

A

market value can be affected by factors external to the house

cost is price to build the property

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14
Q

highest and best use

A

most profitable use to which the property can be adapted

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15
Q

amenity

A

tangible/intangible benefit to the property

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16
Q

substitution

A

maximum value of a property tends to be set by the cost of purchasing another

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17
Q

conformity

A

neighborhoods often have houses of similar sizes and house families of similar economic status

can stabilize value in a neighborhood, making appraisal easier

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18
Q

sales comparison approach

A

a real estate appraisal method that compares one property to comparables or other recently sold properties in the area with similar characteristics

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19
Q

subject property

A

property under appraisal

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20
Q

comparables

A

similar properties compared to a subject property to determine value

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21
Q

Principal factors for which adjustments must be made

A
  1. date of sale
  2. location
  3. physical features
  4. terms and conditions of sale
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22
Q

cost approach

A

most helpful for appraisal of special purpose buildings (church, schools, public buildings)

valuation method that estimates the price a buyer should pay for a piece of property is equal the cost to build an equivalent building

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23
Q

reproduction cost

A

dollar amount required to construct an exact duplicate of the subjects building at current prices

helps in cost approach appraisal

24
Q

replacement cost

A

construction cost at current prices of a building that is not necessarily an exact duplicate

used more often than reproduction cost, useful for cost approach

25
Q

four methods used to determine reproduction/replacement cost

A
  1. square foot method
  2. unit-in-place method
  3. quantity-survey method
  4. index method
26
Q

depreciation

A

a loss in value due to any cause or any condition that adversely affects the value of an improvement to a real property

27
Q

physical deterioration

A

normal wear and tear

28
Q

functional obsolescence

A

physical or design features that are no longer considered desirable

29
Q

external obsolescence

A

depreciation caused by factors not on the subject property

often incurable

30
Q

income approach

A

income derived from a property controls the value of that property

used in income-producing properties

31
Q

capitalization rate

A

ratio between the annual rental income produced by a real estate asset to its current market value

32
Q

gross rent multiplier

A

relates the sales price of a property to its rent income (income is monthly for residential, yearly for commercial)

Sales price/rental income = gross rent multiplier
sales price = GRM x rental income
rental income = GRM/sales price

33
Q

reconciliation

A

art of analyzing and effectively weighing the findings from different approaches used

34
Q

before-and-after method

A

the appraiser determines the value of your property before the taking and then determines the value of the property after the taking

used when property is taken under eminent domain

35
Q

examples of when appraisals may be required

A
  1. estate purposes
    2.divorce proceedings
    3.financing
    4.taxation
    5.relocation
    6.condemnation
    7.insurance
    8.damage loss
    9.feasibility
36
Q

two classes of data for appraisals

A
  1. general data
  2. specific data
37
Q

general data

A

affect values on national, state/regional, or neighborhood levels

38
Q

specific data

A

details about the property being appraised (the subject property) and comparable properties that have been sold or leased in the local market

39
Q

certified general appraiser

A

the highest level of licensing. The ability to appraise all types of property – residential or commercial – with no value limit.

40
Q

the real estate market is an _____

A

inefficient market, relatively slow to adjust changes in supply and demand

41
Q

value vs price vs cost

A

value: estimated based on analysis
price: what it sells for
cost: may be relevant only to new construction

42
Q

regression

A

less expensive neighboring houses hold down value of a better property

43
Q

progression

A

worth of a lesser property increases if its neighbors are more valuable

44
Q

anticipation

A

principle that holds that the expectation of future benefits creates value

45
Q

law of increasing returns

A

the value an additional feature adds to a property, will bring a larger return in value than the money spent on making the improvement

46
Q

law of decreasing returns

A

when additional improvements do not produce a proportionate increase in income/value

47
Q

contribution

A

addition that increases value
absence which decreases value

48
Q

competition

A

profits attract competition
excess profits attract ruinous competition

49
Q

change

A

natural disasters, societal changes, political changes all can contribute to the value of a property, and should be taken into account by appraiser

50
Q

square-foot method

A

method to determine reproduction/replacement cost where cost pre square foot

51
Q

unit-in-place method

A

replacement cost estimated based on constriction cost per unit

52
Q

apprentice/trainee

A

90 hours of appraisal study and successful examination

53
Q

licensed as a residential appraiser

A

150 hours of appraisal study, 2000 hours of experience in at least one year

54
Q

certification as a residential appraiser

A

associate degree, 200 hours appraisal training, 2500 hours experience at least two years

55
Q

certified general appraiser

A

bachelors degree, 300 hours appraisal study, 3000 hours experience in at least 2.5 years

Real Estate (21 decks)

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