ch12 Flashcards
An appraisal is best defined as:
an estimate or opinion of value as of a specific date.
An appraisal may be defined as “the preparation, completion, and issuance of an opinion or conclusion as to the value on a given date, or at a given time of real property or any interest in real property, whether performed in connection with a federally related transaction or not performed in connection with a federally related transaction.”
Highest and best use of a property is the use that:
complies with zoning and deed restrictions and results in the highest net income for the owner.
The zoning and deed restrictions will always govern the determination of highest and best use. Within the confines of those boundaries, the highest and best use then will be the use that, at the time of the appraisal, is most likely to produce the greatest net return from the property over a given period of time.
Sean hired an appraiser to prepare a feasibility study for adding a swimming pool to a 12-unit apartment building. What basic appraisal principle would be used?
Contribution
The principle of contribution will be used to determine whether the cost of the investment will add sufficient value to the whole property to justify the cost.
Which of the following is not a characteristic of value?
Cost
Cost is not a determining factor in establishing value. Utility, scarcity, and transferability are all characteristics of value.
Bob bought a lot in a neighborhood of houses valued at $290,000. He constructed a house costing $400,000. In appraisal terminology, Bob’s house would experience an immediate loss in value due to the principle of:
regression.
The principle of regression holds that a valuable property surrounded by properties of lesser value will tend to be worth less than if the property were in a different location.
The appraisal method that carries the most weight in the valuation of residential property is known as the:
market data approach.
The market data or sales comparison approach is the most effective and most weighted approach in the appraisal of residential property.
In a properly developed community, values are upheld by:
conformity to land use objectives.
The principle of conformity holds that the maximum value of property is realized when there is social and economic conformity within a neighborhood.
When applying the market data or sales comparison approaches to value, the appraiser would most likely use:
properties that have sold in the same geographic area.
An appraiser looks for similar properties sold within the prior six months that are located near the property to be appraised.
Market value is:
the price a willing seller will accept and a willing buyer will pay.
Market value is the price a willing seller will accept and a willing buyer will pay.
The things that usually increase the value of residential property, such as a mountain view, nice landscaping, quiet neighborhood, etc. are known as:
amenities.
An amenity is any feature that contributes to the pleasure or convenience, and therefore value, of a property.
Analyzing the separate value estimates obtained by using the three approaches to value in order to determine the final estimate of the value of a property is called:
correlation or reconciliation.
Correlation or reconciliation is the final step in the appraisal process whereby the appraiser assembles and interprets the gathered data to arrive at a final estimate of value.
Depreciation is best defined as loss in value due to:
any reason.
Depreciation is a loss in value for any reason. Also used for the purpose of income tax deductions apportioning the cost of an item over a period of time.
Effective age is:
the age the appraiser believes reflects the condition of the improvement.
Effective age is the age the appraiser believes reflects the condition of the improvement. A home that has been well maintained will always have a higher effective age than one that has not.
In which of the following approaches to value would an appraiser be concerned with the present worth of future potential benefits?
Income approach
One of the elements an appraiser considers in the income approach is the gross potential income or future income potential.
The cost method of appraisal would use all of the following, EXCEPT:
plottage reduction.
Plottage is the combining of two or more parcels to produce greater value and is a consideration in the valuation of undeveloped industrial or commercial land. It is not an appraisal term referring to the cost method.
