Chapter 16 Appraising and Estimating Market Value Vocab Flashcards
Transferability:
How readily or easily title or rights to real estate can be transferred.
Anticipation:
The benefits a buyer expects to derive from a property over a holding period.
Substitution:
An appraisal principle that holds that a buyer will pay no more for a property than the buyer would pay for an equally desirable and available substitute property. Forms the foundation for the sales comparison approach to value.
Contribution:
The increment of market value added to a property through the addition of a component or improvement to the property. Not to be confused with the cost of the component.
Highest and Best Use:
A theoretical use of a property that is legally permissible, physically possible, financially feasible, and maximally productive, usually in terms of net income generation.
Conformity:
This principle holds that a property’s maximal value is attained when its form and use are in tune with surrounding properties and uses.
Progression:
If a property is surrounded by properties with higher values, its value will tend to rise.
Regression:
If a property is surrounded by properties with lower values, its value will tend to fall.
Assemblage:
A combining of contiguous parcels of real estate into a single tract, performed with the expectation that increased value will result.
Subdivision:
The division of a single property into smaller properties can also result in a higher total value. For instance, a one-acre suburban site appraised at $50,000 may be subdivided into four quarter-acre lots worth $30,000 each. This principle contributes significantly to the financial feasibility of subdivision development.
Reproduction Value:
The value based on the cost of constructing a precise duplicate of the subject property’s improvements, assuming current construction costs.
Replacement Value:
The value based on the cost of constructing a functional equivalent of the subject property’s improvements, assuming current construction costs.
Market Value:
An opinion of the price at which a willing seller and buyer would trade a property at a given time, assuming a cash sale, reasonable exposure to the market, informed parties, marketable title, and no abnormal pressure to transact.
Appraisal:
An opinion of value of a property developed by a professional and disinterested third party and supported by data and evidence.
Broker’s Opinion of Value:
An estimate of a property’s value rendered by a party who is not necessarily licensed, objective, or qualified. The estimate may not be a complete appraisal.
