Appraisal and Land Use

Question 1

Book Value

Answer 1

The initial cost of the property plus capital improvements and minus the total accrued depreciation

Question 2

Capital Improvements

Answer 2

Any permanent improvement made to real estate for the purpose of increasing the useful life of the property or increasing the property’s value

Question 3

Income approach

Answer 3

A method of appraising property based on the property’s anticipated future income.

Question 4

Economic age

Answer 4

Age of a building determined by its condition and usefulness.

Question 5

Condemnation

Answer 5

A common name for eminent domain, or the right of the government to take private property from an owner for public use, paying fair market value

Question 6

Market Rent

Answer 6

The rent a property should bring in the open market

Question 7

Appraisal Report

Answer 7

A written report setting forth an appraiser’s estimates of value of a subject property

Question 8

Market Value

Answer 8

The price the property would bring if freely offered on the open market with both a willing buyer and a willing seller

Question 9

Eminent Domain

Answer 9

The right of the government to take private property from the owner, for public use, and paying for the fair market value

Question 10

Cul-de-Sac Lot

Answer 10

A lot on a dead-end street

Question 11

Accrued

Answer 11

Accumulated over a period of time

Question 12

Effective Demand

Answer 12

The desire coupled with purchasing power.

Question 13

Actual Depreciation

Answer 13

That depreciation occurring as a result of physical, functional, or economic forces that cause loss in value to a building

Question 14

Effective Age

Answer 14

The years or age shown by the condition and utility of a structure, rather than its actual or chronological age

Question 15

Cost approach

Answer 15

An appraisal method that estimates replacement cost of the improvements, deducts estimated accrued depreciation, and then adds market value of the land.

Question 16

Accrued Depreciation

Answer 16

The difference between the cost to replace the property and the property’s current appraised value

Question 17

Front Footage

Answer 17

The width of a property along the street

Question 18

Gross income multiplier (GIM)

Answer 18

A conversion factor derived from the sales price of a comparable rental property divided by its gross rent and any other miscellaneous income. This factor is multiplied by the estimated gross rent of the subject to estimate its value.

Question 19

Transferability

Answer 19

The ability to transfer ownership of an item from one person or entity to another.

Question 20

Cost

Answer 20

Represents expenses in money, labor, material, or sacrifices in acquiring or producing something

Question 21

Appreciation

Answer 21

An increase in value

Question 22

Assessed Value

Answer 22

Value placed on property by a public tax assessor as a basis for taxation.

Question 23

Improvements

Answer 23

Additions to real property; can be natural (e.g., trees or a lot feature), but usually are man-made; substantial fixtures, such as buildings

Question 24

Corner lot

Answer 24

Corner lot

Question 25

Subdivision

Answer 25

A plot of land divided into smaller portions for the purpose of building

Question 26

Value

Answer 26

The power of goods or services to command other goods in exchange for the present worth of future benefits arising from ownership

Question 27

Gross rent multiplier (GRM)

Answer 27

A figure which, when multiplied by the monthly rental income, equals the property’s market value.

Question 28

Economic Life

Answer 28

The estimated period over which an improved property may be profitably used to yield a return

Question 29

Reproduction Cost

Answer 29

The current cost of building a replica of the subject structure using similar quality materials; refers to exact duplication of the buildings; usually costs more than replacement costs

Question 30

Capitalization

Answer 30

The process of calculating the present worth of a property on the basis of its capacity to continue to produce an income stream

Question 31

Effective Gross Income

Answer 31

The anticipated income resulting from estimated potential gross income from a rental property less an allowance for vacancy and bad debts

Question 32

Scarcity

Answer 32

Less availability of a commodity in the marketplace resulting in increased value when demand exceeds supply.

Question 33

Ad Valorem

Answer 33

A Latin prefix meaning according to value. Local governments levy real property tax based on the assessed value. Property taxes are known as ad valorem taxes.

Question 34

Deferred Maintenance

Answer 34

Negligent care of a building

Question 35

“DUST”

Answer 35

The 4 elements that create value: Demand, Utility, Scarcity, Transferability

Question 36

Environmental Impact Report

Answer 36

A study of how a development will affect the ecology of its surroundings

Question 37

Demand

Answer 37

The desire to buy or obtain a commodity

Question 38

Vacancy Factor

Answer 38

Lost income because of a vacant unit

Question 39

Comps

Answer 39

A term used by real estate agents and appraisers to mean comparable properties

Question 40

Gross Rent

Answer 40

Income (figured annually) received from rental units before any expenses are deducted

Question 41

Cap Rate

Answer 41

A term sometimes used to refer to capitalization rate. Calculated by dividing a property's net operating income by the current market value

Question 42

Supply

Answer 42

The total amount of an item that is for sale or lease, at various prices, at any given point in time.

Question 43

Functional Utility

Answer 43

The combined factors of usefulness with desirability.

Question 44

Calendar Year

Answer 44

This starts on January 1 and continues through December 31 of the same year.

Question 45

Reconciliation

Answer 45

Sometimes called correlation, this is the adjustment process of weighing the results of all three appraisal methods to arrive at a final estimate of market value for the subject property.

Question 46

Principle of Substitution

Answer 46

The market value of a property is affected by the cost of obtaining an equally desirable and valuable property as a substitute.

Question 47

Principle of Anticipation

Answer 47

The market anticipates the future benefits that are to be derived from the property.

Question 48

Utility Value

Answer 48

The usefulness of the property

Question 49

Actual Age

Answer 49

The real age of a building

Question 50

Net Income

Answer 50

Sometimes known as net operating income. The remaining income after operating expensed have been subtracted from the gross income of a property

Question 51

Depreciation

Answer 51

Loss in value from any cause

Question 52

Variance

Answer 52

An exception granted to existing zoning regulations for special reasons

Question 53

Sales Comparison Approach

Answer 53

An appraisal method using the principles of substitution to compare similar properties

Question 54

Contract Rent

Answer 54

The amount of rental income due from the tenant as agreed in the lease agreement

Question 55

Price

Answer 55

What is paid for something

Question 56

Operating expenses

Answer 56

Expenditures necessary to the operation of an income-producing building

Question 57

Appraisal

Answer 57

An act or process of developing an opinion of value.

Question 58

Replacement Cost

Answer 58

The cost of replacing improvements with modern materials and techniques

Question 59

Assemblage

Answer 59

Putting several smaller, less valuable parcels together under one ownership to increase value of total property

Question 60

Fiscal Year

Answer 60

A year as reckoned for taxing or accounting purposes