CH. 9- Real Estate Appraisal Flashcards
Appraisal Foundation
A nonprofit educational organization formed by the appraisal profession in 1987.
Financial Institutions Reform, Recovery, and Enforcement Act [FIRREA]
Law that establishes a regulatory framework for appraisers.
Appraisal Qualification Board [AQB]
Under FIRREA, established minimum education and experience guidelines that states must use to issue appraisal licenses and certifications.
Appraisal Standards Board [ASB]
Set forth the rules appraisers must follow when developing an appraisal and reporting its results.
Trainee Appraiser
A beginning appraiser who must work under the supervision of a licensed or certified appraiser who is responsible for the work of the trainee.
Licensed Real Property Appraiser
A person licensed by the state to perform noncomplex residential appraisals.
Certified Residential Appraiser
An appraiser who is certified by the state to perform residential appraisals regardless of complexity.
Certified General Appraiser
An appraiser who is certified by the state to perform appraisals on all property types.
Market Value
The most probable price that 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 and 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
1) buyer and seller are typically motivated;
2) both parties are well informed or well advised and acting in what they consider their best interests;
3) a reasonable time is allowed for exposure in the open market;
4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions by anyone associated with the sale.
Investment Value
The worth of a property to a particular investor, based on that investor’s personal standards of investment acceptability.
Price
Actual amount paid for a property in a particular transaction.
Assessed Value
The estimated value of a property for tax purposes.
Insurable Value
An estimate of value for insurance purposes.
Principle of Anticipation
The anticipated utility or income that will accrued to the property owner in the future.
Principle of Change
The notion that economic, social, political, and environmental forces are constantly causing changes that affect the value of real property.
Principle of Substitution
The principle that holds that a prudent buyer will pay no more for property than the cost of acquiring an equally desirable substitute.
Principle of Contribution
The principle that the value of a component part of a property depends on the amount it contributes to value of the whole.
Appraisal Process
A systematic procedure employed to arrive at an estimate of value and convey that estimate to the appraisal user.
Highest and Best Use
That use, found to be legally permissible, physically possible, and financially feasible, that results in the highest land value; that use of land most likely to result in the greatest long-term economic return to the owner.
Sales Comparison Approach
A method used to estimate value by comparing property to the other properties that have recently sold for known prices.
Cost Approach
A method used to estimate value by implementing the following steps:
1) estimate the value of the site as though it were vacant,
2) estimate the cost to produce the improvements,
3) subtract accrued depreciation, and
4) add site value to the estimated depreciation cost of the improvements.
Income Approach
A method used to estimate value by discounting or capitalizing the expected future income that is expected to accrue to the property owner.
Physical Deterioration
Loss in value that occurs from ordinary wear and tear, vandalism, or neglect.
Functional Obsolescence
Loss in value that occurs because a property has less utility or ability to generate income than a new property designed for the same use.
Economic Obsolescense
Loss in value resulting from factors outside the property that affect its income-producing ability or degree of use.
Gross Income Multiplier
The relationship between income and value, where the gross income multiplier equals value divided by gross income.
–> Gross Income Multiplier = Value / Gross Income
Capitalization Rate
The relationship between income and value, where the capitalization rate equals net operating income divided by property value.
–> Cap. Rate = N.I. / Value
Depreciation
The amount by which the value of a building has declined since it was built as a consequence of physical deterioration, functional obsolescence, and economic obsolescence.
