Chapter 16 - Appraisal

Question 0

Appraisal

Answer 0

An estimate of value by someone who has specific training as an appraiser.

Question 1

Amenity

Answer 1

Some extra that contributes to owner satisfaction: clean air, view, etc.

Question 2

Appraiser

Answer 2

Independent person trained to estimate value.

Question 3

Capitalization rate

Answer 3

The rate of return a property produces on the owner’s investment.

Question 4

Comparables

Answer 4

Properties listed in an appraisal report or a CMA that are substantially equivalent to the subject property. Also called comps.

Question 5

Cost approach

Answer 5

The process of estimating value of a property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building less depreciation.

Question 6

Depreciation

Answer 6

In appraisal, a loss in value in property due to ant cause including physical deterioration, functional obsolescence, and locational obsolencense.

Question 7

External obsolescence

Answer 7

Reduction in a property’s value caused by factors outside the subject property such as social or economic forces or objectionable neighboring property. also called location obsolescence or economic obsolescence.

Question 8

Gross Income multiplier (GIM)

Answer 8

When property has income from other sources than rent such as concessions it can be used to multiply income with this rate to determine value.

Question 9

Highest and best use

Answer 9

The possible use of land that would produce the greatest income and thereby develop the highest land value.

Question 10

Income approach

Answer 10

The process of estimating value of an income producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.

Question 11

Market price

Answer 11

What a property actually sells for - its selling price.

Question 12

Market value

Answer 12

An estimate based on analysis of comparable sales and other pertinent market data.

Question 13

Physical deterioration

Answer 13

Represents normal wear and tear. It may be curable, or incurable.

Question 14

Reconcilaition

Answer 14

The final step in the appraisal process, in which the appraiser reconciles the estimates of value received from the direct sales comparison data, cost data, and income approaches to arrive at a final estimate of value for the subject property.

Question 15

Replacement cost

Answer 15

The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose as the orginal.

Question 16

Reproduction cost

Answer 16

The construction cost at current prics of an exact duplicate of the subject property.

Question 17

Sales comparison approach

Answer 17

The process of estimating the value of a property by examining and comparing actual sales of comparable properties.

Question 18

Situs

Answer 18

The location of a particular property and people’s preferences for particular locations, is a major factor affecting value. Location, location location.

Question 19

Subject property

Answer 19

Property being appraised.

Question 20

Substitution

Answer 20

Principle that states the maximum value of a property tends to be set by the cost of purchasing another, equally desirable property assuming no undue cost because of delay. For example two houses are for sale in an area, the less expensive one sells first.

Question 21

Value

Answer 21

The power of a good or service to command other goods in exchange for the present worth of future rights to income or amenities.