Chapter 16 - Appraisal

Question 1

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

Answer 1

Appraisal

Question 2

Independent person trained to estimate value.

Answer 2

Appraiser

Question 3

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

Answer 3

Capitalization rate

Question 4

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

Answer 4

Comparables

Question 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.

Answer 5

Cost approach

Question 6

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

Answer 6

Depreciation

Question 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.

Answer 7

External obsolescence

Question 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.

Answer 8

Gross Income multiplier (GIM)

Question 9

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

Answer 9

Highest and best use

Question 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.

Answer 10

Income approach

Question 11

What a property actually sells for - its selling price.

Answer 11

Market price

Question 12

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

Answer 12

Market value

Question 13

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

Answer 13

Physical deterioration

Question 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.

Answer 14

Reconcilaition

Question 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.

Answer 15

Replacement cost

Question 16

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

Answer 16

Reproduction cost

Question 17

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

Answer 17

Sales comparison approach

Question 18

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

Answer 18

Situs

Question 19

Property being appraised.

Answer 19

Subject property

Question 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.

Answer 20

Substitution

Question 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.

Answer 21

Value

Question 22

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

Answer 22

Amenity