Chapter 16: Appraisal Flashcards
some extra that contributes to owner satisfaction; clean air, view, etc.
amenity
an estimate of a property’s value by someone who has specific training as an appraiser
appraisal
independent person trained to estimate value
appraiser
the rate of return of a property produces on the owner’s investment
capitalization rate
properties listed in an appraisal report of a CMA that are substantially equivalent to the subject property (aka comps)
comparables
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
cost approach
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
depreciation
reduction in a property’s value caused by factors outside the subject property such as social or environmental forces or objectionable neighboring property.
external obsolescence
a loss of value to an improvement to real estate due to becoming outdated, often caused by age or poor design
functional obsolescence
analysis of income including rental and other factors
gross income multiplier (GIM)
a figure used as a multiplier of the gross rental income of a property to produce an estimate of the property’s value
gross rent multiplier
the possible use of land that would produce the greatest net income and thereby develop the highest land value
highest and best use
analysis of value of property using return on investment
income approach
what a property actually sells for
market price
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
market value
loss of value due to wear and tear or action of the elements
physical deterioration
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
reconciliation
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
replacement cost
the construction cost at current prices of an exact duplicate of the subject property
reproduction cost
the process of estimating the value of a property by examining and comparing actual sales of comparable properties
sales comparison approach
location; buyer’s willingness to pay more for certain locations
situs
parcel of real estate being appraised
subject property
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
substitution
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
value
