APR 106 Flashcards by Ryan Deleon

The Valuation Process is

“a systematic set of procedures an appraiser
follows to provide answers to a client’s questions about real property
value.”

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The process begins with the _____________ and concludes with an _____________

appraisal assignment, appraisal

report

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use of the appraisal ad valorem

property taxation

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client for ad valorem

county treasurer

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Appraisal Date Ad Valorem Colorado

June 30, even year by CRS

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When appraising for ad valorem, the type of value, property interests, date of
value opinion (level of value), and data collection period are provided by

Colorado Revised Statutes and the Colorado Constitution

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The client definition

“the party or parties who engage, by employment or

contract, an appraiser in a specific assignment.”

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“The type and extent of research and analyses in an appraisal or
appraisal review assignment”.

Scope of Work

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HBU tests

physically possible,

legally permissible, financially feasible, and most profitable

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_______ is the

analysis of conclusions from the three approaches to arrive at a final value opinion

Reconciliation

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The final step in the valuation process is

Report of Defined Value

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Individual appraisal reporting = USPAP STANDARD __

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The report must be written in a manner that is not ________

misleading.

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For a mass appraisal the \_\_\_\_\_\_ may include:
 property records
 sale ratios and other statistical studies
 appraisal manuals and documentation
 market studies
 model building documentation
 regulations
 statutes and other acceptable forms.

work-file

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“the process of valuing a universe of properties as of
a given date using standard methodology, employing common data, and allowing for
statistical testing.”

MASS APPRAISAL

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“Improved land or a lot in a finished state so that it is ready
to be used for a specific purpose.”

a site

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“A development right that cannot be used by the landowner, or that
the owner chooses not to use, but can be conveyed to landowners
in another location or leased for a period of years to then revert
back to the original owner;

TDR

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The ________________ technique is the most reliable and common method of land
valuation.

sales comparison

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“The characteristics or attributes of properties and transactions that
cause the prices of real property to vary.”

Elements of Comparison

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Transactional Adjustments

 Real property rights
 Financing
 Conditions of the sale
 Expenditures made immediately after the purchase
 Market conditions (time)

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Property Adjustments

 Location
 Physical characteristics
 Economic characteristics
 Use
 Non-realty components

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_________ is defined as:
“Land that is not needed to serve or support the existing use. The
highest and best use of the excess land may or may not be the same
as the highest and best use of the improved.

Excess land

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_________ is defined as:
“Land that is not currently needed to support the existing use but
cannot be separated from the property and sold off for another use.
Surplus land does not have an independent highest and best use
and may or may not contribute value to the improved parcel.”

Surplus land

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The ______ technique involves determination of the contributory value of the
improvements as part of the total sales price of an improved property. The
balance of the sales price is attributed to the land.

extraction

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Using the_______ technique, a portion of the total property value is assigned to the land. It establishes relationships based on the economic principles of balance and conformity.

allocation

“The procedure in which a discount rate is applied to a set of projected income streams and a reversion.

DCF

When adjusting for the elements of comparison using the paired sales technique, the appraiser should first adjust for ______adjustments, and then ______adjust for adjustments

transactional, property

STEPS TO IDENTIFYING A PROBLE

 Identify client and intended users  Identify the intended use  Identify the purpose of the assignment (type of value)  Identify the effective date of the opinion  Identify the relevant characteristics of the property  Assignment conditions

“A set of procedures through which an appraiser derives a value indication for an income-producing property by converting its anticipated benefits (cash flows and reversion) into property value.

income approach

“The term of ownership of an investment is known as the __________! The presumed period of ownership; a period of time over which expected net operating income is projected for purposes of analysis and valuation is known as the _________!”

holding period, projection period

The duration of the income stream is expected to be at least as long as necessary to recover invested capital. This period is known as the _____________.

capital recovery period

There are three primary sources of data used to analyze and determine correct vacancy and collection rates:

 The historical record of the subject.  Market studies of comparable and similar properties.  Published studies in periodicals and other publications.

“The conversion of income into value.”

Capitalization

“A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, either by dividing the net income estimate by an appropriate capitalization rate or by multiplying the income estimate by an appropriate factor.

Direct capitalization

Which of the following is not a correct form of the IRV Formula? a) I = R x V b) R = I x V c) R = I -:- V d) V = I -:- R

An individual has $500,000 to invest and expects a 10 percent overall return for the investment. What net income would a property have to have to meet his return expectations? a) $50,000 b) $500,000 c) $5,000,000 d) $50,000,000

Joel James, MAI. is, developing an income approach for a 18-unit apartment building. He has collected market rent information and determined the PGI. He has been able to collect market vacancy rates but hasn’t located an amount for collection loss. What is the name of the current income he has reached? a) Effective gross income b) Effective gross rents c) Effective net income d) Expected gross rents

A property has an annual net income of $240,000. An investor requires an RO of 8 percent. What should the investor pay for this property? a) $1,920,000 b) $2,400,000 c) $3,000,000 d) $19,200,000

``` In the preceding questions if the income remains the same, but the value decreases, what must happen to RO ? a) Remain the same b) Increases c) Decreases d) none of the above ```

``` What is the effective tax rate when you have a mill levy of 65 and an assessment percentage of 30%? a) .0105 b) .0195 c) .0250 d) .1950 ```

What is the value of a commercial property if you have an effective gross income of $283,500, allowable expenses of $20,500 and a RO of 12.5%? a) $ 164,000 b) $2,104,000 c) $2,140,000 d) $2,268,000

Which of the following does not affect the capitalization rate? a) Reliability of gross income. b) Income and expense ratio. c) Stability of the income stream. d) The gross national product. (GNP).

Which of the following is an allowable expense? a) Capital expenditures. b) Miscellaneous one-time expenses. c) Landscaping. d) Debt service.

Chris McDowell has collected financing information for an appraisal of a duplex. He has obtained a loan-to-value ratio, an equity dividend rate, and a mortgage constant. What can he derive from this information? a) PGI b) OER c) RO d) VM

Characteristics of an income stream are: 1) ______________________________ 2) ______________________________ 3) ______________________________ 4) ______________________________

QUALITY QUANTITY DURATION TIMING

Operating expense ratios … a) should only be used for mass appraisal b) may be used for individual expenses c) may only be used for total operating expenses d) VM represents the mortgage loan amount

Colorado Constitution Article X, Section 20, sometimes called ______________, which was approved by Colorado voters in November 1992, became effective for the 1993 assessment year. This amendment to the Colorado Constitution eliminated consideration of the cost approach to value for the valuation of residential property for ad valorem tax purposes in Colorado.

the taxpayers bill of rights (TABOR)

_____________ is the period over which improvements contribute to property value

Total Economic Life

__________ is the total time a building might last or is expected to last as opposed to its economic life.

Physical life

loss in value for any reason

depreciation

“One cause of depreciation; an impairment of desirability and usefulness caused by new inventions, changes in design, improved processes for production, or external factors that make a property less desirable valuable for a continued use; may be either functional or external.

obsolescence

“Items of physical deterioration or functional obsolescence that are economically feasible to cure.

curable

______________ is that which is not economically feasible or practical to correct; where the cost to remedy the problem would outweigh the value benefit to the property after its correction.

incurable depreciation

“The amount of money it will take to remedy a cause of depreciation.”

cost to cure

___________ cost is the cost of producing an exact replica of a building or improvement.

reproduction

________ cost is the cost to produce a building or improvement having the same utility.

replacement

Which of the following is not a direct cost? a. Lumber b. Labor c. Building permits d. Equipment rental

The __________method is the most comprehensive method of estimating cost, which breaks out materials and labor for each building component.

quantity survey

The __________method is the most common method of estimating cost used in mass appraisal.

comparative unit

``` List the five principal characteristics that influence cost. 1. 2. 3. 4. 5. ```

``` Design type construction type quality shape size (floor area) ```

The __________ ratio is found by dividing the ground area of a building by the perimeter of its outside walls.

area-perimeter

Physical curable deterioration is generally measured by the

cost to cure

Super-adequacy is known as what type of depreciation? a. Functional b. Physical c. External d. Desegmentation

The ________method of measuring depreciation requires separation of depreciation into all its various causes.

breakdown

The economic age-lifemethod assumes straight-line depreciation. TRUE OR FALSE

TRUE

The Real Property Transfer Declaration (TD-1000) is __________ The only persons allowed to review this information are; the grantee, the grantor IF they filed it, the assessor and his/her employees, the PTA and DPT employees and the auditor!

confidential!

highest point of wall

double top plate

between foundation and floor system

sill plate

greater the r value, the greater the degree of

insulation

The ____________ plan shows where an improvement is located in relation to the lot lines.

site/plot

The _________________ view shows the interior of an improvement from the side and may provide types of construction techniques.

section

``` Which type of foundation requires caissons or extended piers to support the improvement? a) Wall b) Deep c) Shallow d) Footing ```

b DEEP

The beam that crosses over the top of a window is called a ______________________

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