Apraisels Flashcards
Band of investment approach
(NOI) Net operating income divided by the investors capitalization rate equals value
Book value
Is the depreciation cost basis. For accounting and tax purposes, the book value is used by corporations
Gross rent multiplier
The gross rent multiplier is determined by dividing the average selling price by the annual income 300÷30 equals gross multiplier of 10, gross multiplier of 10×40,000 = 400,000
USPAP
uniform standards of professional appraisal practices
Theory of distribution
The four factors include land, labor, capital and management. Property value is at the highest if these factors are balanced
Cost approach
The cost approach is preferable when appraising unique properties
Highest and best use
Produces the greatest value over all alternative uses
Elements of value
Utility, scarcity, and demand all elements of value
Market data
The market data approach is essential in almost every appraisal
Reconciliation
Is the process of applying all three methods of appraisal approaches
Real estate
Is physical tangible and inmobile
Physical obsolescence
Wear and tear would be physical obsolescence
Gross lease
Is a lease in which the rent includes all the operating expenses to a tenant
FIRREA
Stands for financial institutions Reform recovery, and enforcement act of 19/89 or the bailout bill that established new regulations to become an appraiser and develop an appraisal report
Cost approach
This method is used because damage would be determined by the replacement cost
Appraisal reports
Appraisal reports may be in writing all verbal but must always be in conformance with uniform standards of professional appraisal practice. USPAP
Three types of properties
The three types of properties include real estate, real property, and personal property
Capitalization rate
Cap rate is an analysis of how much investors are willing to spend in a certain neighborhood in return for a certain amount of income
Appraisar
At minimum an appraiser must hold an appraisal license although many banks preferred certification
Effective gross income
Effective Gross income is gross rents less an amount for vacancy and collection expenses
URAR forms
Uniform Residential Appraisal Report and is required by various agencies and organizations.( Single - family residential appraisals are reported on this form.
Sales, income, and cost approaches
These three approaches are required by the US government as a basis for valuation and final mythology
Market or sales data approach to appraisal
Sell prices of comparable properties are adjusted match the specifications of the subject property
Capitalization approach
Also known as the income approach
Formula for determining the value of investment property
Net operating income is divided by the appropriate capitalization rate to arrive at the value of the property (Net operating income divided by Capitalization rate= Value)
Real property
Real property includes rights, interests, and benefits that are inherited with real estate
An appraisal report must be presented
The client dictates how the appraisal will be delivered. It could be verbal, such as court testimony services, or maybe In writing
Market value
Market value is affected by supply and demand of the marketplace, which includes the number of buyers and sellers at the time of the appraisal
Comps
Comps short for comparables meaning other like kind properties sales in the neighborhood that could assist in establishing the market value of the subject property
All appraisal reports must be
Appraisal reports may be in writing or verbal but must always be in conformance with uniform standards of professional appraisal practice. USPAP
In arriving at the final opinion of value, the appraiser
The appraiser does not average. He will analyze and place the weight on the most appropriate approach
If investor was using factors of annual gross income average selling prices of properties in a community, this would be an example of
Gross rent multiplier would be the method utilizing these seconds
