Appraisal and Land Use Flashcards
Environmental Impact Report
A study of how a development will affect the ecology of its surroundings
Cost Approach
Appraisal Method - estimates replacement cost of the improvements, deducts estimated accrued depreciation and then adds market value of the land
Front Footage
Width of a property along the street
Net Income
NOI - remaining income after operating expensed have been subtracted from the gross income of a property
Ad Valorem
Latin for according to value - Local governments levy real property tax based on the assessed value.
Property taxes are known as what type of tax?
Ad valorem taxes
Cost
Expenses in money, labor, material or sacrifices in acquiring or producing something
Appreciation
Increase in value
Demand
the desire to buy or obtain a commodity
Reproduction Cost
Current cost of building a replica of the subject structure using similar quality materials - exact duplication of the buildings
Which costs more - reproduction or replacement costs?
Reproduction
Contract Rent
Amount of rental income due from the tenant as agreed in the lease agreement
Calendar Year
Jan 1 - Dec 31
Assessed Value
Value placed on property by a public tax assessor as a basis for taxation
Deferred Maintenance
Negligent care of a building
Corner Lot
Lot found at the intersection of 2 streets
Cap Rate
Capitalization Rate
Appraisal Report
Written report setting forth an appraiser’s estimates of value of a subject property
Transferability
Ability to transfer ownership of an item from one person or entity to another
Fiscal Year
a year as reckoned for taxing or accounting purposes
Vacancy Factor
Lost income because of a vacant unit
“DUST”
4 elements that create value - Demand, Utility, Scarcity and Transferability
Assemblage
Putting several smaller, less valuable parcels together under 1 ownership to increase value of total property
Economic Age
Age of a building determined by its condition and usefulness
Supply
Total amount of an item that is for sale or lease, at various prices, at any given point in time
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
Effective Demand
Desire coupled with purchasing power
Value
Power of goods or services to command other goods in exchange for the present worth of future benefits arising from ownership
Sales Comparison Approach
Appraisal Method - using the principles of substitution to compare similar properties
Accrued
Accumulated over a period of time
Reconciliation
AKA correlation - adjustment process of weighing the results of all 3 appraisal methods to arrive at a final estimate of market value for the subject property
Appraisal
Act or process of developing an opinion of value
Income Approach
Appraisal Method - based on the property’s anticipated future income
Gross Rent
Income (figured annually) received from rental units before any expenses are deducted
Capitalization
Process of calculating the present worth of a property on the basis of its capacity to continue to product an income stream
Price
What is paid for something
Scarcity
Less availability of a commodity in the marketplace resulting in increased value when demand exceeds supply
Eminent Domain
Right of the government to take private property from the owner, for public use, and paying for the fair market value
Economic Life
Estimated period over which an improved property may be profitably used to yield a return
Comp
comparable properties
Market Value
Price the property would bring if freely offered on the open market with both a willing buyer and willing seller
Depreciation
Loss in value from any cause
Variance
Exception granted to existing zoning regulations for special reasons
Principal of Anticipation
Market anticipates the future benefits that are to be derived from the property
Cul-de-sac Lot
Lot on a dead end street
Utility Value
Usefulness of the property
Functional Utility
Combined factors of usefulness with desirability
Improvements
Any buildings or structures on a lot
Effective Gross Income
Anticipated income resulting from estimated potential gross income from a rental property less an allowance for vacancy and bad debts
Operating Expenses
Expenditures necessary to the operation of an income-producing building
Effective Age
Years or age shown by the condition and utility of a structure, rather than its actual or chronological age
Book Value
Initial cost of the property plus capital improvements and minus the total accrued depreciation
Actual age
Real age of a building
Condemnation is a common name for what?
Eminent Domain
Replacement Cost
Cost of replacing improvements with modern materials and techniques
Actual Depreciation
Depreciation occurring as a result of physical, functional, or economic forces that cause loss in value to a building
Subdivision
Plot of land divided into smaller portions for the purpose of building
Gross Rent Multiplier (GRM)
Figure which, when multiplied by the monthly rental income, equals the property’s market value
Accrued Depreciation
Difference between the cost to replace the property and the property’s current appraised value
Gross Income Multiplier (GIM)
Figure which, when multiplied by the annual gross income from all sources not just annual rent, equals the property’s market value
Principle of Substitution
Market value of a property is affected by the cost of obtaining an equally desirable and valuable property as a substitute
Market Rent
Rent a property should bring in the open market
