Chapter 16: Real Estate Appraisal Flashcards
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.
Cost
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
Price
Cost, Price, and Value
_______ is defined as an opinion of the worth of a property at a given time.
Value
Characteristics of Value
What are the four elements that interact to create or affect the value of real estate?
DUST
Demand
Utility
Scarcity
Transferability
Type of Value
________ value is the value assigned by property appraiser for ad valorem taxes
Assessed
Type of Value
________ value is the value used by insurance companies as the basis for insurance coverage
Insurable
Type of Value
________ value is the value of a property to a particular investor
Investment
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
Liquidation
Type of Value
________ value is the value to a typical buyer and a typical seller
Market
Type of Value
________ value is the amount that can be received from the sale of the parts from a demolished structure
Salvage
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
Plottage
Type of Value
________ is the net present value (income) which is generated by the property in a certain use for a certain owner
Value-in-use
Principles of Value
_________ states that the value of a property today is the sum of its future benefits
Principle of anticipation
Principles of Value
_________ states that circumstances can cause changes to occur in the market which may in turn affect the value of real estate
Principle of change
Principles of Value
_________ recognizes that sellers compete with other sellers and buyers compete with other buyers
Principle of competition
Principles of Value
_________ states that the value of a property is sustained when it is in conformity with other properties in the same area
Principle of conformity
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
Principle of contribution
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
Principle of highest and best use
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
Principle of progression
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
Principle of regression
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
Principle of substitution
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
estimate the value
Functional Obsolescence
How can functional obsolescence be caused?
Either a deficiency or an over-improvement
Functional Obsolescence
What is over-improvement?
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
Gross Multiplier Technique
Gross Rent Multiplier (GRM)
What is the gross rent multiplier formula?
Comparable sales price/Gross monthly rent = GRM
