Chapter 16: Real Estate Appraisal

Question 1

Cost, Price, and Value

_______ is defined as the actual or estimated amount required to create, produce, or obtain a property including labor, materials, financing etc.

Answer 1

Cost

Question 2

Cost, Price, and Value

_______ is defined as the amount that is actually paid in a real estate transaction; it is not necessarily the asking amount or amount offered

Answer 2

Price

Question 3

Cost, Price, and Value

_______ is defined as an opinion of the worth of a property at a given time.

Answer 3

Value

Question 4

Characteristics of Value

What are the four elements that interact to create or affect the value of real estate?

DUST

Answer 4

Demand

Utility

Scarcity

Transferability

Question 5

Type of Value

________ value is the value assigned by property appraiser for ad valorem taxes

Answer 5

Assessed

Question 6

Type of Value

________ value is the value used by insurance companies as the basis for insurance coverage

Answer 6

Insurable

Question 7

Type of Value

________ value is the value of a property to a particular investor

Answer 7

Investment

Question 8

Type of Value

________ value is the amount that remains after all assets of a business have been sold in a hurried but not forced sale and all liabilities have been paid

Answer 8

Liquidation

Question 9

Type of Value

________ value is the value to a typical buyer and a typical seller

Answer 9

Market

Question 10

Type of Value

________ value is the amount that can be received from the sale of the parts from a demolished structure

Answer 10

Salvage

Question 11

Type of Value

________ value is the increase in value resulting from am assemblage, or combining, of two or more adjacent parcels of land under one owner

Answer 11

Plottage

Question 12

Type of Value

________ is the net present value (income) which is generated by the property in a certain use for a certain owner

Answer 12

Value-in-use

Question 13

Principles of Value

_________ states that the value of a property today is the sum of its future benefits

Answer 13

Principle of anticipation

Question 14

Principles of Value

_________ states that circumstances can cause changes to occur in the market which may in turn affect the value of real estate

Answer 14

Principle of change

Question 15

Principles of Value

_________ recognizes that sellers compete with other sellers and buyers compete with other buyers

Answer 15

Principle of competition

Question 16

Principles of Value

_________ states that the value of a property is sustained when it is in conformity with other properties in the same area

Answer 16

Principle of conformity

Question 17

Principles of Value

_________ states states that the value of a component of the property is the amount it adds to the total value of the property

Answer 17

Principle of contribution

Question 18

Principles of Value

_________ states that the best use for the property, known as the highest, best, and most profitable use, is that which most likely produce the greatest net return to the land over a given period of time

Answer 18

Principle of highest and best use

Question 19

Principles of Value

_________ applies when a lower-priced property is built or an existing property is inadequate (under-improved) in an area that consists of property that is more expensive

Answer 19

Principle of progression

Question 20

Principles of Value

_________ applies when a higher-priced property is constructed or an existing property is over-improved in a an area that consists of lower-priced properties

Answer 20

Principle of regression

Question 21

Principles of Value

_________ recognizes that no one would pay more for a property that the amount necessary to acquire an acceptable substitute; it is the basis for mathematical methods used by appraisers

Answer 21

Principle of substitution

Question 22

Cost-Depreciation

The cost-depreciation approach is best used to _________ ____ ______ of newer properties, property proposed for renovation, insurance purposes, and properties infrequently exchanged or sold

Answer 22

estimate the value

Question 23

Functional Obsolescence

How can functional obsolescence be caused?

Answer 23

Either a deficiency or an over-improvement

Question 24

Functional Obsolescence

What is over-improvement?

Answer 24

An investment made to a property that does not make the best use of the property or is excessive in comparison with the improvement of similar properties

Question 25

Gross Multiplier Technique

Gross Rent Multiplier (GRM)

What is the gross rent multiplier formula?

Answer 25

Comparable sales price/Gross monthly rent = GRM