Appraisal

Question 1

supply

Answer 1

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

Question 2

demand

Answer 2

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

Question 3

supply and demand

Answer 3

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

Question 4

value

Answer 4

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

value is specific to a marketplace

Question 5

Five attributes of land

Answer 5

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

Question 6

improvement value

Answer 6

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

Question 7

situs

Answer 7

a real estate property’s location, for legal purposes

Question 8

Economic characteristics of Real estate

Answer 8

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

Question 9

market value

Answer 9

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

Question 10

appraisal

Answer 10

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

Question 11

appraiser

Answer 11

an independent person trained to provide an unbiased estimate of value

Question 12

market price

Answer 12

what a property actually sells for

ideally the same as market value, but not always

Question 13

market value vs cost

Answer 13

market value can be affected by factors external to the house

cost is price to build the property

Question 14

highest and best use

Answer 14

most profitable use to which the property can be adapted

Question 15

amenity

Answer 15

tangible/intangible benefit to the property

Question 16

substitution

Answer 16

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

Question 17

conformity

Answer 17

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

can stabilize value in a neighborhood, making appraisal easier

Question 18

sales comparison approach

Answer 18

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

Question 19

subject property

Answer 19

property under appraisal

Question 20

comparables

Answer 20

similar properties compared to a subject property to determine value

Question 21

Principal factors for which adjustments must be made

Answer 21

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

Question 22

cost approach

Answer 22

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

Question 23

reproduction cost

Answer 23

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

helps in cost approach appraisal

Question 24

replacement cost

Answer 24

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

Question 25

four methods used to determine reproduction/replacement cost

Answer 25

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

Question 26

depreciation

Answer 26

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

Question 27

physical deterioration

Answer 27

normal wear and tear

Question 28

functional obsolescence

Answer 28

physical or design features that are no longer considered desirable

Question 29

external obsolescence

Answer 29

depreciation caused by factors not on the subject property often incurable

Question 30

income approach

Answer 30

income derived from a property controls the value of that property used in income-producing properties

Question 31

capitalization rate

Answer 31

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

Question 32

gross rent multiplier

Answer 32

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

Question 33

reconciliation

Answer 33

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

Question 34

before-and-after method

Answer 34

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

Question 35

examples of when appraisals may be required

Answer 35

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

Question 36

two classes of data for appraisals

Answer 36

1. general data 2. specific data

Question 37

general data

Answer 37

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

Question 38

specific data

Answer 38

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

Question 39

certified general appraiser

Answer 39

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

Question 40

the real estate market is an _____

Answer 40

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

Question 41

value vs price vs cost

Answer 41

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

Question 42

regression

Answer 42

less expensive neighboring houses hold down value of a better property

Question 43

progression

Answer 43

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

Question 44

anticipation

Answer 44

principle that holds that the expectation of future benefits creates value

Question 45

law of increasing returns

Answer 45

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

Question 46

law of decreasing returns

Answer 46

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

Question 47

contribution

Answer 47

addition that increases value absence which decreases value

Question 48

competition

Answer 48

profits attract competition excess profits attract ruinous competition

Question 49

change

Answer 49

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

Question 50

square-foot method

Answer 50

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

Question 51

unit-in-place method

Answer 51

replacement cost estimated based on constriction cost per unit

Question 52

apprentice/trainee

Answer 52

90 hours of appraisal study and successful examination

Question 53

licensed as a residential appraiser

Answer 53

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

Question 54

certification as a residential appraiser

Answer 54

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

Question 55

certified general appraiser

Answer 55

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