Chapter 15 Flashcards
Is the value of a particular property to a particular investor
Investment value
Characteristics of value?
(DUST) Demand, utility, scarcity, and transferability.
Is the amount that can be received from the sale of the parts from a demolished structure
Salvage value
Is the amount remaining after all assets of a business have been sold in a hurried but not forced sale and all liabilities have been paid
Liquidation value
Is the value assigned by the property appraiser for as valorem tax purposes
Assessed value
Recognizes that one would pay more for a property than the amount necessary to acquire and acceptable substitute
Principle of substitution
When a lower priced property is built in an area of more expensive property
Principle of progression
When a higher priced property is constructed in an area of lower priced properties
Principle of regression
Purpose of an appraisal
The purpose of an appraisal is to estimate some type of defined value and that’s it.
Function of an appraisal to a client
The way in which the appraiser’s client will use the appraisal for its work. To whetter sell or not, to buy or not.
If the subject property is superior to the comparable property, the comparable price is
Adjusted upward
If the subject property is inferior to the comparable property, the comparable sales price is
Adjusted downward
The cost depreciation approach is base on the
Principle of substitution
A detailed inventory and precise cost for each item required to construct the main improvement is compiled
Quantity survey method
The cost of each component estimated by using square foot
Unit in place method
Unit of comparison is cost per square foot or per cubic foot of an entire building. (Benchmark building)
Unit of comparison method
Loss of value due to normal wear and tear from use, negligence or aging of the building. Can be incurable or curable
Physical deterioration
Is a loss in value due to the failure of a property to meet current consumer preferences due to changes in building design or standards. It can be curable or incurable.
Functional obsolence
Is a loss in value caused by factors beyond the boundaries of the subject property. Landfill, wastewater. Is considered incurable.
External obsolescence
The cost-depreciation approach may be only approach to estimate value of special purpose such as
Schools and churches
Is based on the assumptions that the value of a property can produce in the future using substitution and acticipation
The income capitalization approach
Four elements interact to create or affect the value of real estate? (DUST)
Demand- need
utility- use
scarcity- rare to find
transferability- has to be transferable
Replacement cost
To contract a comparable building with equal utility to the subject building, but using modern materials, design, features
Reproduction cost
To construct at current prices an exact duplicate of the building being appraised.
