Appraisal - Economic Principle Flashcards
Change
The only constant variable in real estate
Basis of Market Condition Analyst
Land - Highest & Best Use
the four CELL in Harmony
Production - 4 agents
C - Capital
E - Entrepreneurship
L - Land
L - Labor
Principle of Substitution
When markets are in BALANCE, market rent is established by what a typical and prudent tenant would pay for an equally desirable substitute
Principle of change
closely related to broad forces of value (P-E-G-S)
Progression
- “worst” house of the “best area”
- Value of home helped up by other home in the area
- An increasing return result
Regression
“Best”house in a “worst” area
Principles - Balance
supply & demand
the 4 agents of production are in optimal balance
Principles - Change
constant physical & economic change that influence value
Principles -Conformity
property is in harmony with surrounding properties
progress and regression
Principles -Contribution
an item is only worth what is contributes in value to the whole
Principles - Substitution
Knowledge buyer will pay no more for one item than for a comparatively equivalent substitute
Principles - Plottage
Increased value by combining smaller lots in to one large lot for greater money
Principles - Assemblage
Combining smaller lots in to one large lot for greater money
Loan -Acceleration Clause
if borrower defaults, then entire amount due
Loan - Alienation Clause
full mortgage balance due upon the transfer of title (prevent buyer from assuming loan)
Loan - Assignment
Changes who owes the debt of mortgage, without changing loan terms
Mortgage - ARM
IR is periodically adjusted
Mortgage - Graduated PMT
PMT starts low and rises over time
Mortgage - Open-End
Mortgagor can re-borrow against principal that has been paid so far
Mortgage - Package
includes home, furniture & other personal property
Mortgage - Purchase Money
seller/owner financing
Mortgage - Reverse Annuity
owner borrows against equity in home & receives monthly tax-free pmt from the lender
Principle of Contribution - Decreasing Return
cost > return = forego the conversion or improvement
Principle of Competition
Comparing the properties against each other by observing the principle of competition.
Mortgage - Blanket
covers more than 1 property, with partial releases issued for the individual parcels as they are sold or paid-off
Surplus productivity
Net Income to the land that remains after cost of AGENTS OF PRODUCTION have been satisfied
Surplus Productivity
Analysis
Used for highest & best use determies an alternative land use for the highest return
Demographic
Income
Age
Owner vs Tenant
Size of household
Market Segmentation Analysis
breaking the market down to sub market
i.e. Condo users into 2 apt and 3 apt units
