Chapter 11: Real Estate Appraisal Flashcards
Appraisal
A supported, defended estimate of the value of property rights as of a given date
Assemblage
The bringing together of two adjoining parcels of property under one ownership
Comparative Market Analysis (CMA)
An informal estimate of market value performed by a real estate licensee for the seller to assist in arriving at an appropriate listing price, or if working with the buyer, an informal estimate of market value to assist the buyer in arriving at an appropriate offering price
Cost-Depreciation Approach
A method for estimating the market value of a property based on the cost to buy the site and to construct a new building on the site, less depreciation
Curable
If corrections of a deficiency or defect result in as much added value to a property as the cost to correct the deficiency or defect
Depreciation
A decline or loss in value for any reason
Economic Life
The total period over which improvements to real estate contribute to the value of the property
Federal related transaction
Any loan that is insured, guaranteed or funded by the federal government or a federally chartered institution
Gross rent multiplier (GRM)
The quotient of the sales price by the monthly gross rent
Highest and Best Use
A principle of value that focuses on a property’s most profitable, legal use
Income Capitalization Approach
A method for estimating the market value of a property based on the income the property can be expected to generate
Incurable
When the cost of curing a deficiency or defect is greater than the value added by the cure
Market Value
The most probable price a property will bring from a fully informed buyer, willing but not compelled to buy, and the lowest price a fully informed seller will accept if not compelled to sell
Over-improvement
An addition or change to a property not consistent with its highest and best use, or a betterment that costs more than the value added to the property
Plottage
An increase in value of property experienced through assemblage
Principal of Substitution
A valuation principle that states that a prudent purchaser would pay no more for real property than the cost of acquiring an equally desirable substitute on the open market
Progression
The tendency of a property to increase in value at a faster rate in order to conform to surrounding properties
Reconciliation
The process by which an appraiser evaluates, chooses, weighs, and selects from among two or more alternative conclusions or indications to reach a single answer (final value estimate)
Regression
The tendency of a property to decrease in value or at best appreciate at a slower rate in order to conform to surrounding properties
Sales Comparison Approach
A method for estimating the market value of a property by comparing similar properties to the subject property
Situs
Relationships and influences created by location of a property, which affect value (e.g., accessibility, personal reference)
Special Purpose Property
Properties that are unique and have no comparable, such as a courthouse or church
Subject property
The real property under discussion or appraisal
The gross rent multiplier multiplied by the monthly rent will be equal to:
Value
If a comparable property has a feature that is $5,000 superior to the subject property, how should this difference be reflected in the reconciliation?
The comparable property value should be adjusted by a $5,000 reduction
After seven years, a motel building in Lake City, Florida is worth less money due to wear and tear. This is an example of:
Physical deterioration
Sales associate Tom is hired to perform an appraisal on his neighbor’s house. May Tom perform the appraisal?
Tom may not perform the appraisal unless he is a certified or state licensed appraiser also
Effective gross income less operating expenses (including reserves for replacements) is equal to:
Net operating income
Robert is preparing to sell his residence. The interior needs repainting at a cost of $5,000. However, Robert is encouraged because after the interior is repainted, it will add $10,000 to the property’s value. The status of the interior paint condition is known as:
Curable depreciation
The expenditure of resources necessary to bring a property into existence is known as:
Cost
According to the income capitalization method, if the capitalization rate remains the same, but net operating income is increased, how will value be affected:
Value goes up
The amount of money actually spent to acquire a property is known as its:
Price
The expense of building a property of equal utility that is similar but not identical to the subject property is known as its:
Replacement cost
The concept that an informed buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property is known as:
Principle of substitution
Karen owns a large home with a master bedroom that has only a small, single closet. Karen’s home is suffering from a condition known as:
Functional obsolescence
