Ch 10 Flashcards
Principle of Anticipation is defined as:
“the perception that value is created by the expectation of benefits to be derived in the future.”
The principle of substitution is defined as:
“The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.”
The principle of opportunity cost is defined as:
“The cost of options forgone or opportunities not chosen.”
The principle of contribution is defined as:
- The amount a component of a property adds to the total value of the property. Contribution may or may not be equivalent to the cost to add the component.
- The concept that the value of a particular component is measured in terms of the amount it adds to the value of the whole property or as the amount that its absence would detract from the value of the whole.
Amenity is defined as:
“A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user. Natural amenities may include a pleasant location near water or a scenic view of the surrounding area; man-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.”
More important for homeowners.
Market value is most commonly defined as:
“the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
buyer and seller are typically motivated;
both parties are well informed or well advised, and acting in what they consider their own best interests;
a reasonable time is allowed for exposure in the open market;
payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
Real estate is defined
“An identified parcel or tract of land, including improvements, if any.”
The physical land and attached improvements.
“Land and all things that are a natural part of the land, e.g., trees and minerals, as well as things that are attached to the land by people, e.g., buildings and site improvements. All permanent building attachments such as plumbing, heating and cooling systems; electrical wiring; and built-in items like elevators or lifts are also a part of real estate. Real estate includes all attachments, both below and above the ground.”
Real property is defined as
“An interest or interests in real estate.”
Real property is often referred to as the “bundle of rights”.
A leasehold interest is defined as
“The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease.”
A leased fee interest is defined as
“The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.”
A lease that is below Market Rent could have a xx effect on value. A lease that is above Market Rent could have a xx effect on value.
Negative
Postive
Investment value is defined as:
“The value of a property interest to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market.”
Insurable value is defined as:
“A type of value for insurance purposes”.
does not include the land
Assessed value is defined as:
“The value of a property according to the tax rolls in ad valorem taxation; may be higher or lower than market value, or based on an assessment ratio that is a percentage of market value.”
Use value is defined as:
“In real estate appraisal, the value a specific property has for a specific use; may be the highest and best use of the property or some other use specified as a condition of the appraisal.”
For commercial and industrial properties.
