Chapter 14 Flashcards
the perception that value is created by the expectation of benefits to be derived in the future.
principle of anticipation
In economic theory, the principle that states that the price of a commodity, good, or service varies directly, but not necessarily proportionately, with demand, and inversely, but not necessarily proportionately, with supply.
Principle of supply and demand
The result of the cause and effect relationship among the forces that influence real property value.
Principle of change
The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.
principle of substitution
the sales comparison approach relies most heavily on:
the principle of substitution
The concept that the value of a particular component is measured in terms of its contribution to the value of the whole property, or as the amount that its absence would detract from the value of the whole.
Principle of contribution
The principle that economies outside a property have a positive effect on its value while diseconomies outside a property have a negative effect on its value.
Principle of externalities
The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium
Principle of balance
The appraisal principle that real property value is created and sustained when the characteristics of a property conform to the demands of its market.
Principle of conformity
These two principles are the result of what happens when the principle of balance is violated.
Progression and regression
n appraisal, the concept that the value of an inferior property is enhanced by its association with better properties of the same type
Progression
In appraisal, the concept that the value of a superior property is adversely affected by its association with an inferior property of the same type
Regression
The cost of options forgone or opportunities not chosen
Principle of opportunity cost
The agents of production are
Land, labor, capital, and entrepreneurial coordination
The return on land
rent
Return on labor
wages
Return on capital
interest
retun on entrepreneurship
profit
The net income that remains after the costs of various agents of production have been paid
Principle of surplus activity
he concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income, in dollars, benefits, or amenities, at an increasing rate until a maximum return is reached.
Principle of increasing and decreasing returns
The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued
Highest and best use
the use for which the property is best suited, will produce the best utility, and will bring the highest return.
Highest and best use
There are four criteria used in determining the highest and best use of a property.
Legally permissible
Physically possible
Financially feasible
Maximally productive
Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements
Highest and best use of a land or a site as though vacant
The use that should be made of a property as it exists. An existing improvement should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.
highest and best use as improved
The principle of supply and demand states that price varies _______ with demand.
directly
When purchasing a home as an owner-occupant, the purchaser’s anticipated benefits are
amenities
Which valuation principle has its strongest application in the valuation of income-producing properties?
anticipation
True or False? When developing an opinion of site value of an improved property, an appraiser needs to consider the highest and best use of the property as though vacant.
True
The net income that is left over after the four agents of production are paid is returned to the
land
If there is anything at all left after satisfying the four agents of production, the excess profit would be returned to the land. This is the principle of
surplus activity
The concept of highest and best use applies to
both vacant land and improved property
Supply and demand will tend to move towards
equilibrium
