Appraisal and Land Use Flashcards
Book Value
The initial cost of the property plus capital improvements and minus the total accrued depreciation
Capital Improvements
Any permanent improvement made to real estate for the purpose of increasing the useful life of the property or increasing the property’s value
Income approach
A method of appraising property based on the property’s anticipated future income.
Economic age
Age of a building determined by its condition and usefulness.
Condemnation
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
Market Rent
The rent a property should bring in the open market
Appraisal Report
A written report setting forth an appraiser’s estimates of value of a subject property
Market Value
The price the property would bring if freely offered on the open market with both a willing buyer and a willing seller
Eminent Domain
The right of the government to take private property from the owner, for public use, and paying for the fair market value
Cul-de-Sac Lot
A lot on a dead-end street
Accrued
Accumulated over a period of time
Effective Demand
The desire coupled with purchasing power.
Actual Depreciation
That depreciation occurring as a result of physical, functional, or economic forces that cause loss in value to a building
Effective Age
The years or age shown by the condition and utility of a structure, rather than its actual or chronological age
Cost approach
An appraisal method that estimates replacement cost of the improvements, deducts estimated accrued depreciation, and then adds market value of the land.
Accrued Depreciation
The difference between the cost to replace the property and the property’s current appraised value
Front Footage
The width of a property along the street
Gross income multiplier (GIM)
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.
Transferability
The ability to transfer ownership of an item from one person or entity to another.
Cost
Represents expenses in money, labor, material, or sacrifices in acquiring or producing something
Appreciation
An increase in value
Assessed Value
Value placed on property by a public tax assessor as a basis for taxation.
Improvements
Additions to real property; can be natural (e.g., trees or a lot feature), but usually are man-made; substantial fixtures, such as buildings
Corner lot
Corner lot
Subdivision
A plot of land divided into smaller portions for the purpose of building
Value
The power of goods or services to command other goods in exchange for the present worth of future benefits arising from ownership
Gross rent multiplier (GRM)
A figure which, when multiplied by the monthly rental income, equals the property’s market value.
Economic Life
The estimated period over which an improved property may be profitably used to yield a return
Reproduction Cost
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
Capitalization
The process of calculating the present worth of a property on the basis of its capacity to continue to produce an income stream
Effective Gross Income
The anticipated income resulting from estimated potential gross income from a rental property less an allowance for vacancy and bad debts
Scarcity
Less availability of a commodity in the marketplace resulting in increased value when demand exceeds supply.
Ad Valorem
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.
Deferred Maintenance
Negligent care of a building
“DUST”
The 4 elements that create value: Demand, Utility, Scarcity, Transferability
Environmental Impact Report
A study of how a development will affect the ecology of its surroundings
Demand
The desire to buy or obtain a commodity
Vacancy Factor
Lost income because of a vacant unit
Comps
A term used by real estate agents and appraisers to mean comparable properties
Gross Rent
Income (figured annually) received from rental units before any expenses are deducted
Cap Rate
A term sometimes used to refer to capitalization rate. Calculated by dividing a property’s net operating income by the current market value
Supply
The total amount of an item that is for sale or lease, at various prices, at any given point in time.
Functional Utility
The combined factors of usefulness with desirability.
Calendar Year
This starts on January 1 and continues through December 31 of the same year.
Reconciliation
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.
Principle of Substitution
The market value of a property is affected by the cost of obtaining an equally desirable and valuable property as a substitute.
Principle of Anticipation
The market anticipates the future benefits that are to be derived from the property.
Utility Value
The usefulness of the property
Actual Age
The real age of a building
Net Income
Sometimes known as net operating income. The remaining income after operating expensed have been subtracted from the gross income of a property
Depreciation
Loss in value from any cause
Variance
An exception granted to existing zoning regulations for special reasons
Sales Comparison Approach
An appraisal method using the principles of substitution to compare similar properties
Contract Rent
The amount of rental income due from the tenant as agreed in the lease agreement
Price
What is paid for something
Operating expenses
Expenditures necessary to the operation of an income-producing building
Appraisal
An act or process of developing an opinion of value.
Replacement Cost
The cost of replacing improvements with modern materials and techniques
Assemblage
Putting several smaller, less valuable parcels together under one ownership to increase value of total property
Fiscal Year
A year as reckoned for taxing or accounting purposes
