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Real Estate > Appraisal > Flashcards

Appraisal Flashcards

1
Q

Appraising

A

Estimate of value for lenders, sellers, buyers, insurance co. etc.

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2
Q

Fair Market Value Requirements

A

Knowledgeable buyers and sellers AND an arm’s length transaction (no undue pressure)

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3
Q

Supply and Demand Effects

A

value of homes and rental rates.
Factors: Interest rates, economy, and age demographics.
Sellers Market - Low supply, high demand.

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4
Q

Characteristics of Value (DUST)

A

Demand, Utility, Scarcity, Transferability.

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5
Q

Value Depreciation

A

Homes goes down in value due to age, wear and tear. Depreciable base - depreciation + land

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6
Q

3 Types of Depreciation

A
  1. Physical Deterioration
  2. Functional Obsolescence
  3. External (economic) Obsolescence
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7
Q

Physical Deterioration

A

Caused by neglect or deferred maintenance. Usually curable

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8
Q

Functional Obsolescence

A

Items inside property lines that are no longer wanted, useful, or outdated. Ex. Out house. Usually curable except for a bad floor plan (Incurable)

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9
Q

External (economic) Obsolescence

A

Items outside property lines. Almost always incurable. Road or zoning changes; smokestacks, paper factory, railway, race track, etc

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10
Q

Principals of Value - Highest and Best

A

Use that provides the greatest net return on the land. The value of today’s use.

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11
Q

Principals of Value - Substitution (Comparables)

A

Property only worth what one can get another one for that is just like it. Best indicator of value.

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12
Q

Principals of value- Conformity

A

Properties should be similar to surrounding properties for greatest value.

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13
Q

principals of Value - Anticipation

A

Look to the future for value

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14
Q

Principals of Value - Competition

A

High profits attract the competition

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15
Q

Principals of value - Contribution

A

The cost of an improvement adds that much to the toal value of property

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16
Q

Principals of value - Increasing Returns

A

The cost of an improvement adds more to the total value of propertyP

17
Q

Principals of Value - Decreasing Returns

A

The cost of an improvement does not add that much to the total value of property

18
Q

Principals of value - Regression

A

Over built home in subdivision of modest homes. Lowers appreciation rate (maybe value) of over built home.

19
Q

Principals of value - Progression

A

Modest home in subdivision of luxurious homes. Increases appreciation rate (value) of modest home.

20
Q

Principals of value - Unlearned Increment

A

Increase value to external factors - not the owner’s effort. New infrastructure nearby

21
Q

Principals of value - Plottage Increment

A

Total value of the combined properties exceeds the total value of the individual properties. Achieved from performing an assemblage (combining properties into one for resale)

22
Q

3 types of approaches to estimate value

A
  1. Market Data
  2. Cost (Replacement) Approach
  3. Income Approach
23
Q

Market Data (sales Comparison)

A

Residential and vacant land with comparables (Substitution); make adjustments to the comparable; calculate estimate of value using weighted average of the comparables.

24
Q

Cost (Replacement) Approach (Summination)

A

New, no comps, special purpose property, insurance; Estimate current replacement cost then subtract depreciation, add current land value = estimate of value.

25
Q

2 types of the Income Approach

A
  1. Capitalization
  2. Gross Rent Multiplier (GRM)
26
Q

Capitalization

A

Income properties, apartments, shopping centers.

27
Q

Capitalization Rate

A

The return on one’s investment (%)

28
Q

Effective Gross income (EGI)

A

Gross potential income minus vacancy rates and collections.

29
Q

Net Operating Income (NOI)

A

Money available to pay debt and provide profit. EGI minus operating expenses
NOI/Cap rate = Estimate of Value

30
Q

Gross Rent Multiplier (GRM)

A

Single family investment properties.
Comparable sold price and divide by monthly rent for GRM

31
Q

Competitive Market Analysis (CMA)

A

what agents use to estimate a list price, make an offer or reevaluate an existing listing.

32
Q

Three types of Comps

A
  1. Sold - best, near-by, location, recently sold
  2. Active - competition
  3. expired - listing expired because of price
33
Q

Steps in the Appraising process

A

State the problem
Gather the data
Analyze and Interpret
Reconcile
Issue the report

Real Estate (7 decks)

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