Appraisals Con't

Question 1

Conformity

Answer 1

property is at its highest value when it conforms with and fits into its surroundings.

Question 2

Competition

Answer 2

This principle holds that when several businesses of a similar type are close to one another, together they may make more money than they would have individually.

Question 3

Contribution

Answer 3

This is what the market recognizes as the change in value an improvement makes to a property, rather than what that improvement actually cost.

Question 4

Diminishing Return

Answer 4

This condition is a result of continuing to add improvements to a property when those improvements will have no effect on increasing the value of the property.

Question 5

Progression and Regression

Answer 5

This principle holds that a property is affected by the surrounding properties. The value of the “smallest house on the block” will tend to increase if the other homes on the street have more value – progression. On the other hand, the value of the “largest home on the block” may decrease if the other homes on the street are much lower in value – regression

Question 6

Substitutions

Answer 6

According to this principle, a buyer will not pay more for a home than what he or she would pay for another home that is equally attractive and available.

Question 7

Supply and Demand

Answer 7

How many properties are available in an area
Property prices
Number of prospective buyers
Price buyers are willing to pay

Question 8

Market Value

Answer 8

the market value of a property is the highest price a buyer is willing to pay and the lowest price the seller will accept,

Question 9

Market Price

Answer 9

is an amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding the transactions, in other words, the actual sales price.

Question 10

Direct Cost

Answer 10

Direct costs are also called hard costs. This includes the cost of labor and materials.

Question 11

Indirect Costs

Answer 11

These are the costs that support a given project. They include any or all of the following:

Administration costs
Appraisal fees
Architectural and engineering fees
Attorneys' fees
Filing fees

Question 12

Sales Comparison Approach

Answer 12

based on the principle of substitution – which says that a buyer will not pay more for the subject property than he or she would pay for a property that is similar in characteristics and amenities.

Most Reliable for Single Family Homes

Question 13

Sales Comparison Adjustments

Answer 13

Date of Sale, Location, Physical Characteristics, Transactional Characteristics, Sales Condition

Question 14

Cost Approach

Answer 14

most reliable for properties that were built recently, since the appraiser can get access to the actual costs of the development and construction.

Question 15

Cost Approach Steps

Answer 15

Estimate Land Value
Estimate cost of improvements
Estimate Depreciation

Question 16

Income Approach

Answer 16

(also called the income capitalization approach) to estimate the value of properties that produce income, usually from rent paid on leases.

Question 17

Income Approach Steps

Answer 17

Estimate potential gross income
Estimate effective gross income
Estimate the net operating income
Select and apply capitalization rate

Question 18

The sales comparison approach is thought to be the most reliable appraisal approach for what kind of property?

Answer 18

The sales comparison approach is thought to be the most reliable for appraisals of single-family homes.

Question 19

What’s the difference between reproduction cost and replacement cost?

Answer 19

Reproduction cost is the cost at today’s prices of producing an exact duplicate of the current building, including its improvements and its flaws. Replacement cost is the construction cost at today’s prices of producing a similar or equivalent structure.

Question 20

The income approach is based on which two principles of value?

Answer 20

Anticipation and Substitution

Question 21

GRM Gross Rent Multiplier

Answer 21

Sales Price ÷ Gross Rent = Gross Rent Multiplier

Question 22

GIM Gross Income Multiplier

Answer 22

Sales Price ÷ Gross Annual Income = Gross Income Multiplier

Question 23

USPAP

Answer 23

set of standards, guidelines and provisions for the appraisal industry. It resulted from the cooperation of nine national appraisal organizations in 1985.

Question 24

For what types of property would an appraiser use a gross rent multiplier?

Answer 24

Properties such as single-family homes and duplexes that could produce income, but are not primarily income-producing properties.

Question 25

What are the five levels of real property appraisal classification?

Answer 25

Appraiser Trainee
Provisional Licensed Real Estate Appraiser
Licensed Real Estate Appraiser
Certified Residential Real Estate Appraiser
Certified General Real Estate Appraiser