Appraisal Flashcards
How long is an appraisal valid for?
One day
Is the act or process of developing an opinion of value; an opinion of value
Appraisal
Are professional standards accepted and copywrited in 1987 by the Appraisal Foundation
USAP (Uniform Standards of Professional Appraisal Practice
What is ad valoruem?
Assessed value of property taxes
The act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal, appraisal review, or appraisal consulting assignment
appraisal review
What are the qualifications to become an appraiser?
- At least 18 years old
- Acquire some level of college of edu
- Take necessary pre-licensing courses
- Apprenticeship of 2 or more years
- Pass a rigorous licensing/certification
This rule requires appraisers to have the knowlded and experience necessary to complete assignments competently
Competency Rule
May appraise residential land, single-family homes, and 2 to 4 unit residential properties valued up to $1 million that are non-complex in nature. May also appraise residential land or single - family or 2 to 4 unit residential properties with a transaction value of up to $250,000that are complex in nature
Licensed residential appraiers
Have no limit on value or complexity of land, single family homes or 2 to 4 unit residential properties they may appraise
Certified residential appraisers
May appraise any type of property (eg, residential, investment, commerial) with no limit on value (top level appraisers)
Certified general appraisers
This includes personal obligations and responsibilities of the individual appraiser, as well as practices that are unacceptable or could be considered misleading or fraudulent. One section of the rule details an appraiser’s obligation to perform assignments with impartiality, obectivity, independence, and without bias
Ethics rule
What are the four USPAP rules?
Ethics Rule
Competency Rule
Scope of work rule
Jurisdictional exception rule
This rule provides guidance and obligations for appraisers when law or public policy contradicts an obligation or prohibition or USPAP
Jurisdiction Exception rule
Is Earnest money consideration in a contract?
no
What should an agent do once they are in position of earnest money?
Do what the contract says to do
Is the person who owned the item as personal property and brought it onto the real property, making it part of the real property
The Annexer
This runs with the land; stays with the land forever
Appurtenance
What are the bundle of rights ?
Right to Use
Right to Enjoy
Right of disposal
The greatest estate one can have in real property. It is freely transferable and inheritable, and of indefinite duration, with no conditions on the title.
Fee Simple
Defined as the right of ownership in an object, such as the right to use, posses, transfer, or encumber it. Thus, ___________ can be anything that is owned, either real or personal.
Property
Is defined as not only the physical land and everything attached to it, but also the rights of ownership (bundle of rights) in real estate
Real property
Is defined as tangible items (usually) not permanently attached to or part of the real estate—-or any property that is not real property
Personal property
What is a synonym for personal property?
chattel
Tangible items not permanently attached to or part of real estate, Any property that is not real property, movable property not affixed to land is what?
Personal property
The constitutional power of state and local governments to enact and enforce laws that protect the public’s health, saftey, morals and general welfare.
Police Power
________ is the actual physical land and everything both natural and man made, attached to it. _____________ is not only the physical land and everything attached toit, but also the rights of ownership (bundle of rights) in the real estate.
Real Estate
Real Property
Is equipment a tenant installs for use of his trade or business and that can be removed by the tenant before the lease expires(unless the document forbids it)
Trade fixture
Fee simple ownership includes such other items as access rights, surface rights,subsurface rights, mineral rights, some water rights and limited air rights. The legal term for these rights that go along with ownership of real property is
appurtenances
___________ are limitations on real property use, imposed by a former owner through language included in the deed .
Deed restrictions
Restrictive covenants or restrictive conditions are synonyms for?
Deed restrictions
When there is NO ONE is left to be deeded property so it goes to probate
Escheat
Examples of police power are:
Land use controls (zoning laws)
Environmental protection laws
Eminent domain
Escheat
Are local ordinances dividing a city, county, etc. into zones, specifying different types of land use in different areas
Zoning laws
_________ is the government’s constitutional power (right) to take (or appropriate or condemn) private property for public use, as long as the owner is paid just compensation.
Eminent domain
What are two types of improvements to property?
natural or man-made
_____________ refers to a parcel of land with enhancements that make it ready for a building or structure.
site
________ refers to surface of the earth and _________ refers to a parcel of land with enhancements that make it ready for a building or structure
Land; site
What are the four value characteristics of real estate?
- Demand
- Utility
- Scarcity
- Transferability
Which two type of listings will the licensee not get paid if the seller procures the buyer?
Exclusive agency listing and open listing
Which listing does ohio court heavily frown upon?
Net listing
Normal real estate deal is called:
Arm’s length transaction
A situation in the real estate market in which buyer have a large selection of properties from which to choose
Buyer’s Market
The dollars needed to develop, produce,or build something
cost
The main business or industry in area that a community uses to support and sustain itself
Economic base
An economic principle that says beyond a certain point, the added value of an additional feature, addition, repair,etc. is less than the actual cost of the item.
Law of diminishing returns
The price property sold for in an actual transaction
Market price
What is the diff between market price and market value?
Value is an opinion and price means there is a price SOMEWHERE
This is the need or desire for a specific good or service by others.
demand
This is the ability f a good or service to satisfy human wants,needs or desires(must have value to a potential buyer)
Utility
Value of property may go up if perceived supply is low
scarcity
Is the ability to freely buy, sell, encumber or dispose of property in any way that the owner sees fit—and the fewer the restrictions on real estate the higher the perceived vlaue.
transferability
What are the 3 physical characteristics of real estate?
Immobility, indestrcutabilily , and uniqueness
A principle that says the value of a home is negatively affected by the other homes in an area. Usually said about the “best” home in the “worst” area
Regression
What are the four broad forces that affect all aspects of life and the economy?
PEGS (Physical, Economic, governmental, social )
What are the 5 economic forces?
- Business Cycles
- Economic base
- Supply and demand
- Inflation
- Cost of Money (interest rates)
_______ ________ cycles typically trail behind ___________cycles because they depend on many elements of ____________ cycles.
Real estate; business; business
what are the 5 Governmental forces?
- Revenue generating laws
- Right to regulate laws
- Fiscal and monetary policy
- Secondary mortgage markets
- Government programs
What are the two main federal government housing programs ?
FHA (Federal Housing Administration) and VA (Veterans administration)
What are the four Social forces?
Demographic changes
Migrations of the Population
Social trends
Buyer Tastes and standards
Changes in general population are?
Demographic changes
What do you own when you own a condo?
Just the air space
What are the 5 physical forces?
Topography, water, Location, Popularity and Environment
Is the most profitable, legally permitted feasible and physically possible use of a property.
Highest and best use
A term used to describe the place where something exists, and area of preference, or preference by people for a certain location.
situs
This is where an informed buyer would not pay more for a house that was similar on the next street over.
Substitution
This says that a particular home achieves its maximum value when it is surrounded by homes that are similar in style and function.
Conformity
This says that a particular item or feature of a property is worth only what it actually contributes in value to that pice of real estate.
Contribution
This law says that beyond a certain point, the added value of an additional feature addition, repair, etc is less than the actual cost of that titme.
The law of diminishing returns
This law says that the added value of an additional feature , repair, etc. is more than the actual cost of that item
The law of increasing returns
what are the four main types of Value?
- Market value
- Loan value
- Insurance value
- Assessed Value
This is the most probable price that a property should bring in a competitive and open market (eg typical transaction)
Market value
Insurance normally covers only _______________ _______ —the cost of building a functional equivalent of the original buidling, usually one that is the same size and utility as the origina, but with modern materials
Replacement cost
__________________ ________ is a type of insurance which is the cost of building an exact replica of the original building, giving a new structure the same look and feel as the original. This has a very high premium
Reproduction cost
__________ __________ is the amount of value used to calculate taxes due, and usually represents a percentage of the market value
Assessed value
The real estate market is said to be balanced when there are more….
Houses for sale than buyers
A nice, well-kept house located in the heart of an all -residential are, surrounded by other well kept houses of similar style and value,is an example of
Conformity and highest and best use
Maximum value for a property can be achieved only when….
Demand, utility, scarcity, transferability, (DUST) and purchase ability are present
What are the 6 elements appraisers use to “Define the Problem” ?
- Client and intended users
- Intended use
- Purpose of the appraisal
- Date of value opinion
- relevant property characteristics
- Other assignment conditions
_____________ __ ___ __________ is always to determining a value opinion for a defined type of value and is very different from the intended use of the appraisal
Purpose of an Appraisal
A deed for the life of another is a ?
life estate pur autre vie
____________ __________ is a freehold estate that lasts only as long as a specific person lives.
Life estate
_______ __ ________ is an outline of a plan for an appraiser
Scope of work
What is one of the most important steps in appraisal process?
Determining the highest and best use
What four tests does an appraiser look at to determine highest and best use?
Legally permitted, Physically possible, Economically feasible, The most profitable
Which is not an approach to value?
a. comparative market analysis
b. cost approach
c. income approach
d. sales comparison approach
A
Which type of data covers forces that affect a property’s value but are not directly related to a particular piece of property
General
which type of data covers all information relevant to the subject property itself or specific comparable properties
Specific
What is the name of the standard appraisal report form used by lenders and appraisers. It has been developed and approved by secondary mortgage market participants Fannie Mae and Freddie Mac
Uniform Residential appraisal report (URAR)
Any constant, contiguous area that maybe identified by similar characteristics r physical boundaries is called ?
Neighborhood
Anything outside property boundaries that interferes with the right of quiet enjoyment is called a?
Nuisance
What are the four life cycle stages of a neighborhood?
- Growth
- Stability/equilibrium
- Decline
- Revitalization
What is the epa’s safe level of random gas in the US?
4
The process of rapid revitalization of properties in a neighborhood which causes current resident to be displaced is called?
Gentrification
A property made undesirable to most people by a past event, often a crime or environmental hazard is called a ___________ property.
Stigmatized
A stigmatized property is ____________ impacted not physically impacted.
psychologically
What environmental hazard do we need a disclosure form on a property before 1978?
Lead based form
Which underground storage tanks are exempt from regulation requirements?
100 gallon or less
The combining of two or more parcels of land into one larger parcel is called?
Assemblage
A legal description for land, referencing principal meridians and base lines designated throughout the country is called ….
Government Survey System
A legal description that starts at an easily identifiable point of beginning (POB), then describes the property boundaries in terms of courses (compass directions) and distances, ultimately returning to the POB.
Metes and Bounds
Define metes and bounds measurments?
The ending point has to stop at the beginning point
Apart from the fact that sometimes the subject of appraisal is vacant land or site, site valuation is necessary for developing the _______ ____________
cost approach
What three terms describe the inherent value of land?
- Scarcity
- Indestructibility
- Immobility
Which one is done for monetary gain: assembly or plottage?
Plottage
Combining two or more parcels int o one, with an increase in value over the value of the two parcels individually is called…..
Plottage
Which adds more value to a land: adding frontage or depth ?
frontage
Note: The first number in a lot’s size is its frontage measurement (eg 150’x200’)
A _______ is one square mile (640 acres)
section
How many sections are needed to make one township?
36
Sections are numbered right to left or left to right?
Right to left
1 township =?
1 section = ?
1 Sq. mile = ?
1 Acre = ?
36 sections
640 acres
640 acres
43,560 sq ft.
____________ _____ __________ ____________is a type of legal description used for platted property.
lot and block system
A ________ ______ is a detailed survey map of a subdivision, or other grouped lots of land, recorded in the county where the land is located
plat map
A ____________ __________ is the process of verifying that an improvement properly sits within the boundaries of the property and there are no encroachment from neighboring land onto the subject property.
location survey
what are governmental factors that affect property value?
Zoning, property taxes, public services
The most important economic factor is the _________ ___________ or ______________ of the lot with regard to market demand for that type of property
specific position
location
What are the five common methods an appraiser uses to determine value of a site?
- Sales and comparison
- Allocation method
- Subdivision analysis method
- Land residual method
- Ground rent capitalization method
What is the most common method appraisers use to valuate homes?
Sales comparison method
Which two appraisal methods can only be used for commercial valuations?
Land residual and Ground rent capitalization method
The Allocation method of appraising uses ______________ to determine comparables.
percentages
The _____________ ____________ _____________ is a method of valuing raw land that will become residential land for subdivision development by taking the total projected sale value of all finished lots and subtracting out all cost of development.
subdivision analysis method
which appraisal method is best if the value of the building or improvement is known and the value of the land is unknown?
Land Residual Method
The rate of return on investment that is typical for that type of investment is called ?
capitalization rate
what is the formula for Gross Rate Multiplier (GRMR)?
GRMR= Sales price / Rent
A tangible or intangible feature that enhances and adds value to real estate is called?
an amenity
A method of determining a recommended listing price and anticipated sale price of a property by comparing the subject property to other properties that have sold, are presently for sale, or did not sell in a given area is called?
Competitive Market Analysis (CMA)
The overall total of all adjustment applied regardless of whether the adjustment is applied as positive or negative is called?
Gross adjustment
The process of developing the contributory value of specific property characteristics or features by comparing pairs of similar properties is called?
Matched pair Analysis
An appraisal method that develops an indication of the value of real property by comparing the property being appraised with other recently sold properties. Date are collected and adjustments made for differences is called?
Sale Comparison Approach
Which appraisal method is considered to be the most dependable in the majority of situations?
Sale Comparison method
A normal transaction is also called a?
Arm’s length transaction
What property is most favorable to a comparible?
The one with the least amount of adjustments
What is the difference between a gross and net adjustment?
A gross adjustment is the overall total of all adjustments applied regardless of whether the adjustment is applied as a positive or negatiave. A net adjustment is the sum of the adjustment taking into account whether the adjustment was a positive or negative.
Can an adjustment be applied for any amenity or condition of a property?
yes
What are examples of financial concessions?
Seller-paid points, interest rate buy downs, assumptions, and owner/seller financing.
This type of land ownership can be held in unequal shares
Tenancy in common
This is the only type of possessoray interest that can have right to survivorship
Joint tenancy
Are Freddie Mac, FHA, etc lenders or insurers?
Insurers
What percentage does Freddie Mac, Ginnie Mae, FHA, etc insure? VA loan?
20-25%
100%
Divide the big number by the little number
How to divide
Who prepares a CMA (Competitive Market Analysis)
Real estate agent
When something outside of a property’s boundaries makes a property less desirable is called?
external obsolescence
When an improvement is less desirable because o something inherentin its design is called?
functional obsolescence
The period of usefulness (physicaly, fukntionally, and externally) that an improvements remaining as of the day of the appraisal is called?
Remaining economic life
An Appraisal method that develops an indication of the value of real property by figuring the cost of building the house or other improvement on the land minus deprecation plus the value of the vacant land is called?
cost approach
Building the functional equivalent (substiute) of the original building using modern materiasl, methods and deign is called?
Replacement
building as exact duplicate (replica) of the original building is called?
Reproduction
What is the most typical method for determnining the cost of replacing a building?
Square foot method
What are the 5 ways to figure the cost of building a house or improvement on land? Which is the least accurate?
- Square foot method
- Comparative Unit Method
- Quantity Survey Method
- Unit-in-place method
- Index method (this one is least accurate)
What is the formula for Economic life?
Effective age + Remaining Economic Life
What is the term for the period of usefulness that a building has remaining as of the day of the appraisal?
Remaining economic life
What is the term for the time during which a building can be sued for its intended purpose or generate more income than is paid out for operating expenses?
Economic Life
Is obsolescence a economic or physical concept?
Is depreciation an economic or physical concept?
economic
physical
What are the three types of deprecitaion?
- Straight line depreciation
- Age life method
- Breakdown method
What three categories does the breakdown method break into?
- Physical deterioration
- Functional obsolescence
- External obsolescence
______________ ___________ is actual wear and tear on something due to age, the elements, or other forces.
Physical deterioration
What is the formula for dollar depreciation?
price x depreciation percentage = dollar depreciation?
Basements, foundations, load bearing walls/framing, insulation, roof trusses, floor joists are all examples of what?
Long lived items
Carpet, HVAC system and Paint are examples of what?
short lived items
The cost approach is NOT the most applicable method for
a. determining an insurance replacement value
b. a recently constructed building
c. a residential condo in a complex with 50% occupancy and may recent sales
d. an unusual building for which there are no comparable sales available
C.
Which is the most important consideration in developing the cost approach? effective age or actual age?
effective age
A rate of return stated as a percent used to derive a value opinion from the anticipated net operation income a property could generate. It is used for direct capitalization in the income approach is called?
Direct Capitalization Rate
Potential gross income, less vacancy and collection losses is called?
Effective gross income
the net income after all operating expenses have been deducted is called what ?
Net operating income (NOI)
Operating expenses necessary to the property, but typically dependent on the property’s occupancy level is called?
variable expenses
In Ohio what’s the deal on notice to tenants to vacate?
3 days for bad people (this will be the answer on a question like this on exam)
30 days for good people
_______________ says that an informed buyer will not pay more for a property than for a comparable substitute.
Substitution
An appraisal method that develops an indication of the value of real property by analyzing the amount of rent or income the property could generate using market data is called?
Income approach
__________________ is an income approach technique that converts the income of a property into a value opinion through either the application of a direct capitalization rate or factor such as a multiplier.
Capitalization
What are the 2 ways to derive value using the income approach?
Gross monthly rent multiplier
Direct capitalization rate
What is the formula to find GRMR?
rental home sale price / gross monthly rent = GRMR
What kind of properties is the GMRM most commonly used for?
small residential income
Does the gross monthly rent multiplier take into account expenses, vacanices, collection losses, debt service or depreciation?
NO
What is the formula to find a value of an apartment?
Gross monthly market rent x GMRM = Estimated value
The URAR form is used for ________ ________ properties
single family
An income capitalization method that takes a property’s single-year net operating income (or NOI) divided by a direct capitalization rate is called?
direct capitalization
Can you claim debt service (payment of the builiding) or depreciation as an operating expense?
NO
PGI - Vacancy and collection losses = EGI - Operating expenses = ?
NOI (Net operating income)
A rental property could generate $125,000 in gross annual income. A vacancy factor of 5% is normal for the area and annual expenses for the building total $8,750. Calculate the value of the property using a capitalization rate of 11%.
- $100,000
- $1,056,800
- $12,100
- $1,000,000
4) 1,000,000
$125,000 x 5% = $6,250 (vacancy loss)
$125,000-$6,250 - $8,750 (expenses) = $110,000 (net income)
$110,000 divided by 11% = 1,000,000
A GRMR is applied to _____________ to produce a value indication
a. contract rent
b. effective gross income
c. Market rent
d. net operating income
C
Additional part of an appraisal report. This usually consists of photos of the subject and comparables, a sketch of the subject’s floor plan, a table of calculating the area for the subject, location map or additional necessary comments that do not fit in the space on the appraisal form is called?
Addenda
Analyzing the values derived from the different appraisal approaches to arrive at a final opinion of value is called?
Reconciliation
