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AZ Real Estate Sales Licensing Exam Prep > AZ Real Estate - Appraisal B5 > Flashcards

AZ Real Estate - Appraisal B5 Flashcards

0
Q

Value is like…?

A

Worth

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1
Q

Who creates value?

A

People

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2
Q

Present worth of future benefits is?

A

Value

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3
Q

Market price is…?

A

Amount of $ given in exchange for property.

The value exchange.

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4
Q

Types of appraisal licenses are?

A
  1. Licensed Residential less than $1 mil
  2. Certified Residential more than $1 mil
  3. Certified General any type of app
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5
Q

Two types of appraisers?

A
  1. Staff - on staff at co or bank

2. Fee - independent

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6
Q

For maximum value, what must be present?

A

The 4 kinds or elements of value.

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7
Q

Appraisers calculate value using the
4 characteristics of value.

They are?

Hint: DUST

A
  1. Demand
  2. Utility
  3. Scarcity
  4. Transferability
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8
Q

Value of an asset (how much sold for) at end of it’s economic life is?

A

Salvage or residual value

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9
Q

Insured value, Assessed value, Mortgage value and Salvage/Residual value are?

A

The 4 kinds or elements of value.

They must be present to gain max value.

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10
Q

Unit in place, quantity survey, cubic and sq ft used in what type of app method?

A

Cost approach

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11
Q

2 categories of value are?

A
  1. Objective

2. Subjective

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12
Q

Principal factors of adjustment in a market data aka comparative analysis?

A
  1. Date of sale/age of property
  2. Location
  3. Physical features
  4. Terms of sale
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13
Q

Increase in value created by joining smaller land parcels together is…?

A

Plottage

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14
Q

An increase in value having nothing to do with owner is?

A

Unearned increment

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15
Q

What app method do you use to app a single fam house?

A

Market data

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16
Q

Physical deterioration is…?

A

Deferred maintenance

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17
Q

3 Appraisal Approaches are…?

A
  1. Market Data aka comparative analysis
  2. Cost Approach aka summation
  3. Income Approach aka capitalization
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18
Q

If app uses all 3 app methods to estimate value, what method does she use to estimate value?

A

Reconciliation aka correlation

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19
Q

What app approach est value based on reproduction or replacement cost minus depreciation and plus (separate) value of land?

A

Cost approach

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20
Q

Appraisal approach that compares property w/ recent sales of similar properties? Listings set ceiling, sales set floor.

A

Market data

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21
Q

How is improved land appraised for cost approach method?

A

Market data (comps).

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22
Q

New construction, custom homes, special use or service property (church) are appraised using what approach?

A

Cost approach

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23
Q

Cost of updating property using current materials and standards is aka?

A

Replacement cost

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24
Q

Cost of materials to produce exact replica is aka?

A

Reproduction cost

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25
Q

Types of depreciation include?

A
  1. Physical
  2. Functional
    (functional obsolescence)
  3. Economic
    (social obsolescence)
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26
Q

Loss of value for any reason and the diff btw construction cost and present value is?

A

Depreciation

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27
Q

Loss of value from causes inside property that make it hard or expensive to adapt it to modern standards, is?

A

Functional depreciation aka functional obsolescence.

Curable, Incurable.

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28
Q

Loss of value from wear and tear is?

A

Physical depreciation.

it is wear and tear. Incurable, curable.

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29
Q

Depreciation term that says how long a property can be profitably utilized, is?

A

Economic life

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30
Q

Loss of value aka depreciation from causes outside of property (noise pollution or factory) is?

A

Economic aka social obsolescence. Not curable.

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31
Q

Depreciation term that means subjective age or how old it looks, is?

A

Effective age

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32
Q

Depreciation term that means chronological or numerical age, is?

A

Actual age

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33
Q

What appraisal approach assumes that net income from property determines value?

A

Income approach aka capitalization.

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34
Q

Appraisal method used for commercial properties and when dealing w/ investors is?

A

Income approach aka capitalization.

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35
Q

The rate of return made on capital investments is?

A

CAP Rate

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36
Q

What is net operating income aka NOI?

A

Total income minus vacancies/bad debts = Adjusted or Effective Gross Income minus Operating Expenses of property taxes, insurance, utils, payroll EXCLUDING depreciation and loans = NOI

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37
Q

Income Approach divides CAP Rate into NOI for what purpose?

A

To determine estimated capitalized value of property. This % used in income approach.

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38
Q

What does CAP rate measure?

A

CAP Rate measures risk involved in an investment.

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39
Q

Factors influencing CAP Rate are?

A

Operating conditions of investment, avail of funds, risk and interest rates

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40
Q

Higher the CAP Rate, the higher the?

A

Risk

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41
Q

CAP Rate x Price =

A

NOI

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42
Q

NOI / Price =

A

CAP Rate

44
Q

The higher the risk of investment, the higher the?

A

CAP Rate

47
Q

Of the 2 categories of value - objective and subjective, which one is more important?

A

Subjective

ie amenities like pools, carpet, fresh paint, fireplace

Objective value is created by object itself.

52
Q

Higher the value the lower the?

A

CAP Rate

53
Q

Higher the CAP Rate the lower the?

A

Value

54
Q

Special influences on value are?

A
  1. Physical - curb appeal
  2. Social - snob appeal
  3. Economic - job growth
  4. Government - tax amt, light rail
  5. Directional growth - is it growth area
  6. Location - most important
55
Q

Appraisers know that listings establish the ________ of the market and prices establish the _______.

A

Ceiling

Floor

56
Q

Selling price of real estate is based on what value?

A

Market value

57
Q

Adjusted gross income is?

A

Total rents less vacancies and credit losses.

58
Q

What is not a special force influencing property value?

A

Original cost

59
Q

First objective of an appraiser is to?

A

Define the problem and his approach to it.

60
Q

Period during which building contributes to value of land is?

A

It’s economic life

61
Q

Appraisal licensing is required by?

A

FIRREA

62
Q

NOI / CAP Rate gives us

A

Value

63
Q

Why is cost of neighborhood houses important to price of your house?

A

Substitution - Tendency of consumers to substitute lower priced products for similar higher priced ones

64
Q

Highest and best use is….?

A

The most profitable use of a property.

65
Q

A property should not be improved beyond that of its neighbors if maximum profits are to be made when it is sold. This is

A

Conformity

66
Q

“Worth of a lesser object increases when it is among quality objects” is definition of?

A

Progression

67
Q

When a property increases in value but the owner did nothing to cause the increase, this is called:

A

Unearned increment

68
Q

5 bedroom house w/ 1 bath is

A

Functional obsolescence

69
Q

Which appraisal approach considers depreciation?

A

Cost Approach

70
Q

Land that does not always cover the cost of operation is?

A

Marginal land

71
Q

The value one pays today for future rental income is?

A

Capitalization value

72
Q

What does an appraiser look for first?

A

Highest and best use of land

73
Q

An example of functional depreciation is?

A

Outdated interior

74
Q

What does GRM find?

A

A multiple of gross rents to determine price

75
Q

“Value” given in exchange for a property is?

A

Market price

76
Q

Capitalization rates consider

A

Net income

77
Q

Economic depreciation is?

A

Incurable depreciation

78
Q

In the income approach of appraising the most important figure is?

A

Net income

79
Q

The difference btw replacement cost and present value is?

A

Depreciation

80
Q

After gathering all appraisal data, the appraiser?

A

Reconciles and correlates

81
Q

Physical obsolescence is a problem with?

A

Property deterioration

82
Q

If cap rate goes up value goes?

A

down

83
Q

How do you get cap rate?

A

Income divided by Value

84
Q

To get effective gross income we subtract what from scheduled income?

A

Vacancy and loss of credit

85
Q

When we want to convert income to value we use the?

A

Cap Rate

86
Q

If agent leases bdlg w/ 20 yr leases and no escalation clause, how would this affect value?

A

Value would decrease

87
Q

House in poor neighborhood located near factory is?

A

Economic obsolescence

88
Q

You build a home twice as expensive as this around you. Your property realizes?

A

Economic obsolescence

89
Q

What is not an operating expense in the cost method?

A

Principal and interest payments

90
Q

Annual gross multiplier is calculated by?

A

Dividing price paid by gross annual income

91
Q

When appraising rental property we don’t care about?

A

Tax rate

92
Q

Weighing and analyzing of property using all 3 methods of appraising (market data, cost, income).

A

Reconciliation aka correlation

93
Q

Gross Income
- Bad Debt and Vacancies
Equals?

A

Effective Gross Income

94
Q

Effective Gross Income - Operating Expenses =

A

NOI

95
Q

Non allowable expenses in income approach are?

A

DIDI

Depreciation, Income tax, Debt service, capital improvements

96
Q

Assessed Value

A

Value through eyes of tax assessor

97
Q

Insured value

A

Value through eyes of insurance co.

They do not value land only improvements.

98
Q

Loan value?

A

Value perceived by lender

99
Q

Characteristics of value are?

A

Demand
Utility
Scarcity
Transferability

100
Q

Special influences on value or what appraiser looks at?

A 
Physical - curb appeal
Social - snob appeal
Economic - job growth
Governmental - light rail, amt taxes
Directional growth - is it growth area
Location - most imp
101
Q

Highest and best use is?

A

Use of property that brings the greatest net return.

102
Q

Substitution

A

A property is not worth more than an equally desirable repacement

103
Q

Supply and demand

A

Demand increases value

104
Q

Anticipation

A

Value created by future expected benefits.

105
Q

Conformity

A

Similar size, arch, amenities.

Conformity increases value.

106
Q

Conformity

A

Adding something to add value.

107
Q

What makes a good comp?

A

Recent close and similar.

108
Q

Market data approach is always used on?

A

Land and when you have similar properties in neighborhood.

109
Q

Cost Approach

A

Estimate of value based on cost of replacement or reproduction of building less depreciation plus value of land (market data approach used on land).

110
Q

When is cost approach used?

A

New construction
Custom home
Special use or service property
When comparables unavailable

111
Q

3 Types of Depreciation

A

Physical - wear tear. Curable/Internal
Functional - loss of value from things inside property limiting utility
Economic - loss of value from causes outside property. Always Incurable.

112
Q

What does the gross rent multiplier indicate?

A

A factors of rents to price

AZ Real Estate Sales Licensing Exam Prep (6 decks)

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