Appraisal Flashcards
Social: influence value as popuiations
change
- Economic: infiuence value through supply and
demand for goods, services, and real estate
-Political: influence value through legal clirmate
and political actions
•Physical forces: influence value based on the
migration pattern of its population
Social, economic,
political, and
physical forces
Value is created, strengthened, at sustained
when similarity exists
For example, a 3,600 sqft home ina
neighborhood full of 1,200 sqft. ft. homes would
generally be less valuable.
Conformity
The priniple that recognizes that the
value of aproperty is largerly based it’s location and the state af the surrounding
area
Change
The idea that peaple will not pay more for one property if the value of an equally useful property is available at a
lower cost
Substitution
The calculation of the cost of adding other
components to a property and che value these
additions contribute to the real property,For example, adding marble countertops will not
increase the value of the real property as much as
the cost to add the counters would be.
Coneribution
The most profitable, financially affordable, and
legal use of a property
Highest
and best use
The value of a product goes up or down
depending on the populations desire for the
product and the business’s ability to provide it
Supply
and demand
The ability of the seller to transfer the title to a,buyer
Transferability
The available inventory of similar products or
properties
Supply
The benefits of a product to a consumer
Utility
The potential consumer base for a product
or property,When marketing a product, the current market
must be examined and potential customers
identified so that the product will meet the
future needs of the buyers and the ability of the
Buyers to purchase it.
Demand
What a willing and able buyer will pay for a property, assuming the seller will accept it
Once a completed transaction has occurred establishing the market value of future real estate transaction in the same area
Market price
The most probable price that a property would
Sell for in a competitive and open market
Market value
Smaler or under-improved properties increase in
value by having arger, mare-improved properies
nearby
Proggression
Larger or over properties decrease in value when smaller or less- imoroved properties are in the area
Regression
The prediction in today’s dollars of what the future value of the property will be
Anticipation of
value
The potential for profit that attracts new
buyers and sellers to a market,If there is an excess of buyers, the value of buyers
will decrease and give more value to the seilers
seller’s market). If there are too many sellers, the
value of the sellers decreases and will give more
value to the buyers (buyer’s market).
Competition
Combining one or more adjacent lots into one
Larger iot which resuits in increased value
Plottage
Aless expensive and less formal version of an
appraisal that financial institutions can request to
determine relative value of a property, typically
one in foreciosure
Broker Price
Opinion (BPO)
Compares recently listed and sold properties that are similar to the subject property, but the price is adjusted to account for differences between the comparable (combs) and the subject
Sales
comparison
approach
An informal method of determining
estimated value,Real estate agents generate this number by
comparing recently listed and sold properties
in the area to the subject property. This is for
informational purposes and would not be used to
finance a property.
Comparative
Market Analysis
(CMA)
Most comps will be similar to, but not exactly
like, the subject property.,Adjustments must be made to account for
differences between the comp and the subject.
The best comps will have the fewest adjustments
needed
Comparison
with subject
The closing date of comparable properties,The most comps have sold within the last six months
Time of sale
The physical location of a comparable property
should be similar to the subject property: same
zip code, same neighborhood or section of
neighborhood, same high school zone, same
zoning classification, etc.
Location
Adjustments are made to account for any differences between the comps and the subject Examples would include age, lot size,
construction materials, number of bedrooms and
bathrooms, etc.
Physical
characteristics,
Alowances are made for concessians made to
the buyer by the seller, such as paid clasing costs
which effectively teduce the amount the house
actally sold for
Sales concessions
Income approach a comparison approach thar
is appled only to income-producing properties
-Capitalization approach: used to value,commercial and imvestment properties; uses
the income stream to determine present value
Income
approach vs.
capitalization
approach
The formula is:,NOl=GPl-Vacancy-Operating expenses,NOL= Net Operating Income
GPI=Gross Potential income
Net Operating
Income (NOI)
formula
Determines the loss in property value from one or types of deterioration
Estimate the depreciation
,Which process are appraisers
using to determine che estimaced
value of a property?,
A Stabiization
,B Sunvey
,C Application
,D Reconciliation
D: Reconciliation
In which circumstance can CMA be used?
A. As proof for a homeowner to get a home equity loan?
B. As information for a buyer to use when selecting a home
C. As legal proof property value
D As a guarantee of sales price
B. As information for a buyer to use when selecting a home
Which scenario describes
external obsolescence?
A. tree in the front yard that has been hit by lightning
B. Outdated fixtures in the kitchen and bathrooms
C. Poorly maintained properties in the neighborhood
C. Poorly maintained nearby properties in the neighborhood
Which concept is NOT an element of
value?
A. Obsolescence,
B. Transferability
C Utility
D Scarcity
Obsolescenceis
If a buyer wants to estimate the
future profits from the purchase of
an apartment building, which approach to value would an agent use to help the buyer?
A Profit approach,
B income approach
C Cost approach
D. investment approach
B The income approach is applied to
income-producing properties An apartment
Which scenario describes external obsolescence?
A.tree in the front yard that has been hit by lightning
B.Outdated fixtures in the kitchen and bathroom
C.Poorly maintained properties in the neighborhood
D. The convenient access to schools
C.Poorly maintained properties in the neighborhood
Ourdated design or utility,example a house with several bedrooms
only one bathroom, or only a wood-burning Stove for heating
Depreciation Functional
obsolescence
Determines the loss in property value from one more types of deterioration
Some deterioration is curable, meaning it can be easily corrected with cosmetic fixes or basic updates. Other deterioration is incurable and involves large, expensive structural issues
Estimate the accrued
depreciation
Anything
from
normal
wear
and
tear
to maior
structural damage
deterioration
Determines the value of the land. excluding any
Souctures
Estimate
the
value
of the land
NOH Cap Rate = Value
Capitalization
rate formula
