Chapter 16: Appraisals

Question 1

Situs

Answer 1

The locations of a particular property and peoples preferences for particular locations. Remember location, location, location.

Question 2

Amenity

Answer 2

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

Question 3

Capitalization rate

Answer 3

The rate of return a property produces on the owners investment.

Question 4

Cost approach

Answer 4

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

Question 5

External Obsolescence

Answer 5

Reduction in a property’s value caused by factors outside the subject’s property such as social or environmental forces or objectionable neighboring property. This is always incurable.

Question 6

Functional Obsolescence

Answer 6

A loss of value to an improvement to real estate due to becoming out dated, often caused by age or poor design. It can be Curable & incurable.

Question 7

Sales Comparison Approach

Answer 7

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

Question 8

Functional Obsolescence: Curable

Answer 8

Outmoded fixtures, such as plumbing, are usually easily replaced.

Question 9

Functional Obsolescence: Incurable

Answer 9

Currently undesirable physical or design features that cannot be easily remedied.

Question 10

Highest & best use

Answer 10

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

Question 11

Market Value

Answer 11

That probable price a ready, willing, able, and informed buyer would pay a ready, willing, able, and informed seller would accept without pressure.

Question 12

Market Price

Answer 12

The actual selling price of the property.

Question 13

Determing Reproduction or Replacement cost

Answer 13

Square Foot Method, Unit-in-place Method, Quantity-Survey Method, Index Method.

Question 14

Appraisals are required…

Answer 14

For all Federally related transactions (any transaction with a value of $250,000)

Question 15

Competitive Market Analysis (CMA)

Answer 15

Used by the broker or the salesperson to help the seller determined a listing price for the property. Also, to help the buyer in formulating an offer.

Question 16

Value

Answer 16

is the present worth of future benefits arising from the ownership of real property.

Question 17

Types of Value

Answer 17

Assessed Value
Insurable Value
Book Value
Salvage Value

Question 18

Assessed Value

Answer 18

A locally determined percentage of market value, which is used by municipality to establish a property tax

Question 19

Insurable Value

Answer 19

Replacement cost of a building minus the land value.

Question 20

Book Value

Answer 20

Value of an asset less depreciation.

Question 21

Salvage Value

Answer 21

Estimated value of an asset at the end of it’s economic life.

Question 22

Characteristics necessary of property to Value in Real Estate

Answer 22

"DUST:
D-Demand
U- Utility
S- Scarcity
T; Transferabiity

Question 23

Demand

Answer 23

Need supported n=by purchasing power.

Question 24

Utility

Answer 24

Capacity to satisfy human wants and needs.

Question 25

Scarcity

Answer 25

Finite Supply

Question 26

Transferability

Answer 26

Transfer ownership rights with relative ease.

Question 27

Substitution

Answer 27

The value of a property tends to set by the cost of purchasing an equally desirable and similar property.

Question 28

Supply and Demand

Answer 28

The price of a property increases if the supply decreases and decreases of the supply increases.

Question 29

Conformity

Answer 29

Maximum value is realized if the land use conforms to the existing neighborhood standards.

Question 30

Increasing and decreasing return

Answer 30

Improvements to land and structures produce a proportionate increase in value until some point beyond which the impact improvements begin to decrease

Question 31

Competition

Answer 31

High levels of profits attract competitors into an industry; increase in competition results in decreased profits through industry.

Question 32

Change

Answer 32

No economic or physical condition remains constant.

Question 33

Contribution

Answer 33

The value of any component of property consists of what is addition contributes to the value of the property.

Question 34

Anticiption

Answer 34

Value can increase or decrease in anticipation of some future benefit or detriment that will affect the property..

Question 35

Balance

Answer 35

Is achieved when adding improvements and structures that will increase the property value.

Question 36

Regression

Answer 36

The principle between dissimilar properties: the worth of the better property is affected adversely by the presence of the lesser-quality property.

Question 37

Progression

Answer 37

The worth of lesser property tends to increase if it is located among better properties.

Question 38

Market date approach (Sales Comparison approach)

Answer 38

A value estimate is obtained by comparing the subject property with resent sales of comparables..

Question 39

Income approach

Answer 39

The process of estimating the 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 40

Amenities

Answer 40

The tangible and non-tangible neighborhood benefits beyond the property’s boundaries descriptions.

Question 41

Capitalization

Answer 41

A mathematical process for estimating a property’s value using a proper rate of return on investment and anticipated annual net income.

Question 42

Comparables

Answer 42

Sold properties listed in the appraisal report generally equivalent to the subject property.