Chapter 16: Appraisal

Question 1

some extra that contributes to owner satisfaction; clean air, view, etc.

Answer 1

amenity

Question 2

an estimate of a property’s value by someone who has specific training as an appraiser

Answer 2

appraisal

Question 3

independent person trained to estimate value

Answer 3

appraiser

Question 4

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

Answer 4

capitalization rate

Question 5

properties listed in an appraisal report of a CMA that are substantially equivalent to the subject property (aka comps)

Answer 5

comparables

Question 6

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

Answer 6

cost approach

Question 7

in appraisal, a loss of value in property due to any cause including physical deterioration, functional obsolescence, and locational obsolescence. For income tax purposes, yearly write-off of percentage of the cost of a building as an expense

Answer 7

depreciation

Question 8

reduction in a property’s value caused by factors outside the subject property such as social or environmental forces or objectionable neighboring property.

Answer 8

external obsolescence

Question 9

a loss of value to an improvement to real estate due to becoming outdated, often caused by age or poor design

Answer 9

functional obsolescence

Question 10

analysis of income including rental and other factors

Answer 10

gross income multiplier (GIM)

Question 11

a figure used as a multiplier of the gross rental income of a property to produce an estimate of the property’s value

Answer 11

gross rent multiplier

Question 12

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

Answer 12

highest and best use

Question 13

analysis of value of property using return on investment

Answer 13

income approach

Question 14

what a property actually sells for

Answer 14

market price

Question 15

the probably price a ready, willing, able, and informed buyer would pay and a ready willing, able, and informed seller would accept, neither being under any pressure to act, and after allowing for a reasonable exposure on the market

Answer 15

market value

Question 16

loss of value due to wear and tear or action of the elements

Answer 16

physical deterioration

Question 17

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

Answer 17

reconciliation

Question 18

the construction cost at current prices of a property that is not exactly duplicate of the subject property but serves the same purpose or function as the original

Answer 18

replacement cost

Question 19

the construction cost at current prices of an exact duplicate of the subject property

Answer 19

reproduction cost

Question 20

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

Answer 20

sales comparison approach

Question 21

location; buyer’s willingness to pay more for certain locations

Answer 21

situs

Question 22

parcel of real estate being appraised

Answer 22

subject property

Question 23

an appraisal principle stating that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property

Answer 23

substitution

Question 24

the power of a good or service to command other goods in exchange for the present wort of future rights to its income or amenities

Answer 24

value