Ch. 16 Appraisal

Question 1

accrued depreciation

Answer 1

loss in value, resulting from the property’s physical deterioration, external depreciation, and functional obsolescence

Question 2

anticipation

Answer 2

value is created by the expectation that certain events will occur

Question 3

appraisal

Answer 3

an opinion of value based on supportable evidence and approved methods

Question 4

assemblage

Answer 4

the process of merging two separately owned lots under one owner

Question 5

Broker’s price opinion (BPO)

Answer 5

less-expensive alternative of evaluating property that is often used by lenders working with home equity lines, refinancing, portfolio management, loss mitigation, and collections.

Question 6

capitalization rate

Answer 6

“cap” rate-determined by comparing the relationship of net operating income with the sales price of similar properties that have sold in the current market

Question 7

conformity

Answer 7

maximum value is created when a property is in harmony with its surroundings

Question 8

cost approach

Answer 8

the process of estimating the value of a property by adding to the estimated land value of the appraiser’s estimate of the reproduction or replacement cost of the bldg, less depreciation

Question 9

depreciation

Answer 9

in a real estate appraisal, depreciation is loss in value for any reason considered curable or incurable, depending on whether it can be corrected economically

Question 10

external obsolescence

Answer 10

If depreciation is caused by negative factors no the subject property such as environmental, social, or economic forces its always incurable.The loss in value cannot be reversed by spending money on the property, ex close proximity to a polluting factory

Question 11

functional obsolescence

Answer 11

obsolescence means a loss in value from the market’s response to the item/outmoded or unacceptable physical or design features that are no longer considered desirable by purchases are considered curable if they can be replaced and redesigned, A four-bedroom home w/only one bathroom is likely to suffer from incurable functional obsolescence

Question 12

income approach

Answer 12

value is based on the present value of the right to future income, assumes that the income generated by a property will determine the property’s value

Question 13

market data approach

Answer 13

aka sales comparison approach, estimate of value obtained by comparing property being appraised w/recently sold comparable properties

Question 14

market value

Answer 14

considered the most probably price that a property should bring in a competitive and open market under all conditions requisite to a fair sale/an opinion of value based on an analysis of data

Question 15

net operating income (NOI)

Answer 15

Deduct the Annual operating expenses from the effective gross income to get the annual NOI

Question 16

physical deterioration

Answer 16

a CURABLE item in one in need of repair such as painting, an item INCURABLE is caused by physical wear and tear and its correction would not be economically feasible such as an extensive crack in the foundation

Question 17

plottage

Answer 17

The individual value of two adjacent properties may be greater if they are combined in an assemblage than if each is sold separately

Question 18

progression

Answer 18

An appraisal principle that the value of a lesser-quality property is favorably affected by the presence of a better-quality property

Question 19

reconciliation

Answer 19

act of analyzing and effectively weighting the findings from the three approaches, an appraiser explains not only the appropriateness of each approach but also the relative reliability of the data within each approach in line with the type of value sought

Question 20

regression

Answer 20

the worth of a better-quality property is adversely affected by the presence of a lesser-quality property

Question 21

sales comparison approach

Answer 21

also known as the market data approach, value is obtained by comparing the property being appraised

Question 22

substitution

Answer 22

the maximum value of a property tends to be set by how much it would cost to purchase an equally desirable and valuable substitute property

Question 23

supply and demand

Answer 23

when the supply of similar properties increases, their value decreases and when demand for such properties increases, their value increases

Question 24

value

Answer 24

DUST- Demand, Utility, Scarcity, Transferability value in the real estate market is monetary worth based on desirability

Question 25

Uniform Standards of Professional Appraisal Practice (USPAP)

Answer 25

Licensed or certified appraisers performing federally related real estate transactions (a value of greater than $250,000) must comply w/the Uniform Standards of Professional Appraisal Practice (USPAP)

Question 26

Market Price

Answer 26

a property’s asking, offer, or sales price

Question 27

economic life

Answer 27

the easiest but least precise way to determine depreciation is the straight-line method called the economic age-life method, the period during which it is expected to remain useful for its original intended purpose