Chapter 16: Appraising and Estimating Market Value Flashcards
As a component of real estate value, the principle of substitution suggests that…
If two similar properties are for sale, a buyer will purchase the cheaper of the two
The highest and best use of a property is that use which…
Is physically and financially feasible, legal and the most productive
The concept of market value is best described as…
The price that a willing, informed, and unpressured seller and briar agree upon for a property assuming a cash price and the properties reasonable exposure to the market
A significant difference between an appraisal and a broker’s opinion of value is…
The broker may not be a disinterested party
A notable weakness of the sales comparison approach to value is that…
There may be no recent sale price data in the market
The steps in the market data approach are…
Select comparable properties, adjust the comparables, estimate the value
In the sales comparison approach, an adjustment is warranted if…
The seller offers below market seller financing
To complete the sales comparison approach, the appraiser…
Weights the comparables
One weakness of the cost approach for appraising market value is that…
Market value is not always the same as what the property cost
The cost of constructing a functional equivalent of a subject property is known as…
Replacement cost
An office building lacks sufficient cooling capability to accommodate modern computer equipment. This is an example of…
Functional obsolescence
A home is located in the neighborhood where homeowners on the block have failed to maintain their properties. This is an example of…
Incurable economic obsolescence
In appraisal, loss of value in a property from any cars is referred to as…
Depreciation
First two steps in the cost approach to estimate the value of the land and the cost of the improvements. The remaining steps are…
Estimate depreciation, subtract depreciation from cost, and add back the land value
The roof of a property cost $10,000. The economic life of the roof is 20 years. Assuming the straight-line method of depreciation, what is the depreciated value of the roof after three years?
$8500
The income capitalization approach to appraising value is most applicable for which of the following property types?
Apartment buildings
The steps in the income capitalization approach are…
Estimate net income, and apply a capitalization rate to
Net operating income is equal to…
Potential gross income minus vacancy and credit loss minus expenses
If the net income on a property is $20,000 and the Rate is 5%, the value of the property using the income capitalization method is…
$400,000
The principal shortcoming of the gross rent multiplier approach to estimating value is that…
Numerous expenses are not taken into account
If the monthly rent of a property is $3000 and the gross rent multiplier or GRM is 80, what is the value of the property?
$240,000
