Chapter 16 Flashcards
What is the price
Amount actually paid in a real estate transaction
What is the value of a failing business that will not reopen
Liquidation value
What is market value
Price at which specified property rights should sell
What are the ways market value is assumed
Property has been exposed to market
Buyer and seller acting on self interest
Neither party under duress
Seller has ability to convey marketable title
Payment is US dollars
Principle of highest and best use
Use that will produce the greatest net return to the land over a given period of time
Principle of substitution
Why would I buy a house for 490k when there is an equal house for 400k
If a comp house is superior to a subject house what do you do
Subtract
If a comp house is inferior to a subject house what do you do
Add
What is most effective way to estimate the value of a special purchase property such as library and courthouse
Cost depreciation approach
What is functional obsolence
Over improvement to a property that does not make use of the property or is in excess compared to similar properties
External obsolescence
When value is affected by houses nearby that
You have no control over
How do appraisers estimate the total economic life of a building
Economic age life method
What are fixed expenses
Property taxes
Hazard insurance
Do not change w occupancy
What type of expense is a water bill
Variable expense
What approach is best for special purpose properties such as libraries and court houses
Cost depreciation approach
