CH 15 - The Real Estate Market & Analysis / CH 16 - RE Appraisal Flashcards
CELL
C- capital
E- entrepreneurial ability
L- land
L- labor
4 phases of biz cycle
expansion, peak, contraction, trough
what is the correct sequential order of the 4 criteria applied to determine highest and best use of a parcel of real estate?
legally permissible, physically possible, financially feasible, maximally productive
what are the four elements that interact to create or affect the value of real estate?
Demand, utility, scarcity and transferability
How is an appraiser compensated?
A fee based on the time and difficulty involved
method used by appraisers to estimate amount of accrued depreciation
Economic Age-Life Method
Economic Age-Life Method FORMULA
Effective age/Total economic life = total depreciation rate for entire time period
Total depreciation (%) x Reproduction cost ($) =
Total accrued depreciation amount for entire time period ($)
PGI
Projected gross income
V&C
vacancy and collection losses
EGI
effective gross income
OE
operating expenses
NOI
net operating income
how to calculate the EGI (effective gross income)
PGI - V&C + OI =
EGI
OI
other income
how to calculate the OE
OE =
FE (fixed expenses) +
VE (variable expenses) +
R (reserves for replacements)
3 approaches to value
- sales comparison approach
- cost-depreciation approach
- income approach
Please Visit Every Other Night
PGI V&C EGI OE NOI
How is a gross rent multiplier calculated?
Divide comparable property sales price by comparable property rent.
What estimate is a result of income divided by a capitalization rate?
What estimate is a result of income divided by a capitalization rate?
In the income approach, a capitalization rate can be derived from which of the following?
the relationship between sale prices and income of similar properties
As used by an appraiser, what does the term “price” refer to?
The asking price in the listing contract
Complete the statement. Highest and best use of a property is the single use that produces the greatest return on:
the land and any improvements to it.
Which approach to value is typically used to estimate the value of special purpose properties?
Cost Depreciation Approach
What will happen to the value of a property if the capitalization rate remains the same, but the net operating income is reduced?
The value will decrease.
The various approaches to estimating value are based upon which principle?
Substitution
