Chapter 12 Flashcards
4-3-2-1 Rule
A method of estimating the value of lots with more than standard depth; a depth table
Accrual for depreciation
A process for recovery of investment in a building also called return of investment
Accrued depreciation
Past depreciation; the actual depreciation in a property that has already occurred as of a given date
Actual age
The number of years of building has been in existence
Adjusted sales price
The price put on a comparable property after adjustments have been made for differences between it and the subject property
Age-life
A method of estimating accrued depreciation; also called straight line depreciation
Amenities
Intangible benefits to be derived from property ownership, such as Pleasant view, conditions that are pleasant and agreeable for enjoyable living and a beneficial influence arising from a property‘s location
Principle of anticipation
Holds that value is based upon the future benefits to be derive from property ownership
Appraisal
An estimate or opinion of value made by a qualified person
Appraisal process
Systematic procedures used by an appraiser to gather and analyze data in order to arrive at a final conclusion of value
Appraiser
A person qualified by experience, education, and licensing to make estimates of value
Appreciation
Increase in value
Assemblage
The process of combining several individually owned adjoining (contagious) lots into one large track owned by one person
Comparables
Properties with similar characteristics to the subject property used for analysis in the market data approach
Contiguous
Adjoining, next to, an actual contact, with
Correlation
Also called reconciliation
Cost
A historical record of past expenditure necessary to bring a property into being
Cost approach
One of the three approaches to value; it involves estimating the current cost of replacing all improvements, from which the amount of estimated accrued depreciation is deducted, and an estimated value of the land is added
Cost-to-cure
A method of estimating accrued depreciation by calculating the cost to correct all curable depreciation; also called observed condition
Curable depreciation
Items of physical deterioration in functional obsolescence within owners control, which are economically feasible to repair or replace
Debt service
Mortgage payments including principal and interest
Depreciation
Lost in value due to physical deterioration, functional obsolescence, or economic obsolescence
Depth tables
Method of estimating the value of the added depth of a lot, as compared to a standard size lot
Expense ratio
Total expenses divided by the effect of gross income
Front foot
One linear foot on a lots boundary line along a street, highway, or body of water
Economic life
The period of time over which a property is estimated to be profitable or utilized; also called useful life
Economic obsolescence
Loss in value due to adverse conditions external to the property and therefore, beyond the owners control; also called social, locational, or environmental obsolescence
Effective age
A property‘s age based upon its condition and appearance; maybe more, the same, or less than it’s actual age
Effective gross income
The actual gross income a property is expected to produce; determined by projecting a property‘s potential grows income and then making allowances for variances and collecting losses
Functional obsolescence
Lawson value due to improvements there are in adequate, super and adequate, or improperly designed for today’s needs
Gross rent multiplier
A number that, when multiplied by properties estimated gross rent, produces an indication of the properties value
Highest and best use
That use of a property which will yield the greatest return on the property or greatest current value; the most profitable use to which a property is adapted
Income approach
One of three approaches to value; it converts the properties net operating income into an indication of value; also called capitalization
Incurable depreciation
Items of economic obsolescence (sometimes physical deterioration or functional obsolescence) which are beyond the owners control or which cannot be justified by the anticipated increase in value; not economically feasible to correct
Key lot
One that joins the rear of a corner lot. For residential use, such lots are not desirable because of the view of the neighbors backyard. For commercial use, a key lot can be advantageous because of its importance in an attempt to assemble several lots under one ownership, assemblage
Market price
The amount for which a property actually sells
Market value
The price of property would be expected to bring in the open market under normal conditions
Narrative report
An appraisal report summarizing all data, techniques, and appraisal methods used to arrive at a final conclusion of value; the most complete appraisal report supported with such documents as maps, photographs, charts, plat, floorplans, or contracts.
Neighborhood analysis
An analysis of a homogeneous grouping of individuals or businesses, as part of an appraisal, to determine the effect on the subject property of such factors as: growth, stability or decline of the neighborhood or physical, economic, governmental and social forces at work
Net operating income
A property’s income after all operating expenses have been paid; the income used and the income approach to estimating value
Observed condition
Also called cost-to-cure
Operating expenses
Those expenses which are necessary to maintain a property’s production of income
Orientation
Placement of improvements in relation to the positive and negative features of a lot
Over improvement
An improvement which is not the highest and best use for the site on which it is placed due to excessive cost or size
Percolation
The ability for soil to absorb water. Percolation tests are made to determine the rate of absorption when a septic system is to be used on a lot
Physical deterioration
Physical deterioration occurs because of normal wear and tear, by exposure to the elements, or by lack of proper maintenance. Also called deterioration
Plat
A map showing how a property is subdivided into lots
Plottage
An increase in value brought about by the process of assemblage; the result of combining several lots under one ownership, so that’s a large track has more utility in value than some of the lots owned individually. Also called plottage increment
Potential gross income
The expected rental income from a property based upon full occupancy for an entire year
Pro forma statement
A projected annual operating statement which forecast gross income, operating expenses, and net operating income
Quantity survey
A method of estimating the current cost of reconstructing an improvement using a detailed breakdown of all labor, materials services, profit and other overhead
Recapture
Also called return of investment
Reconciliation
The final step in arriving at a final estimate of value. The procedure involves assigning each approach a weighting factor based on the appraisers judgment as to which approach is the most relevant in valuing the property. Also used in the market data approach and in the girls rent multiplier.
Replacement cost
The current cost of replacing a property with one of similar utility, using modern materials, equipment, and construction methods
Reproduction cost
The current cost of constructing an exact replica of the subject property using the same or similar materials
Reserve for replacement
Money set aside each year for the replacement of items that have a useful life of more than one year, such as furniture appliances, carpet, heating systems, air-conditioning systems, or roof
Return of investment
The recovery of an investment in a building which compensates the owner for loss due to depreciation that occurs over the economic life of the building also called recapture or accruel for depreciation
Return on investment
The profit or interest earned on an investment
Sales comparison approach
One of three approaches to value; it compares recently sold properties with similar characteristics to the subject property
Straight line depreciation
A method of measuring depreciation, either past or future, as occurring in equal amounts each year over the useful life of the building; frequently used because of ease of application
Subject property
The property that is being appraised
Principle of substitution
Holds that a property‘s maximum value tends to be set by the cost of purchasing an equally desirable substitute, provided the substitution can be made conveniently and without the lay
Unearned increment
An increase in value due to no effort on the part of the owner
Unit-in-place
A method of estimating the current cost of reconstructing an improvement by estimating the cost of each component part (foundation, walls, roof, heating system, etc) in one place
Utility
The ability of a property to fill a need or create a desire
Utility value
Value to an owner or user of property; a subjective value based upon the ability to use or enjoy a property
Value
The amount of property will bring on the open market
Yield
The interest earned by an investor on the investment; also called return
