Chapter 16 - Appraisal Flashcards
Appraisal
An estimate of value by someone who has specific training as an appraiser.
Amenity
Some extra that contributes to owner satisfaction: clean air, view, etc.
Appraiser
Independent person trained to estimate value.
Capitalization rate
The rate of return a property produces on the owner’s investment.
Comparables
Properties listed in an appraisal report or a CMA that are substantially equivalent to the subject property. Also called comps.
Cost approach
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.
Depreciation
In appraisal, a loss in value in property due to ant cause including physical deterioration, functional obsolescence, and locational obsolencense.
External obsolescence
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.
Gross Income multiplier (GIM)
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.
Highest and best use
The possible use of land that would produce the greatest income and thereby develop the highest land value.
Income approach
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.
Market price
What a property actually sells for - its selling price.
Market value
An estimate based on analysis of comparable sales and other pertinent market data.
Physical deterioration
Represents normal wear and tear. It may be curable, or incurable.
Reconcilaition
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.
Replacement cost
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.
Reproduction cost
The construction cost at current prics of an exact duplicate of the subject property.
Sales comparison approach
The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
Situs
The location of a particular property and people’s preferences for particular locations, is a major factor affecting value. Location, location location.
Subject property
Property being appraised.
Substitution
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.
Value
The power of a good or service to command other goods in exchange for the present worth of future rights to income or amenities.
