CHAPTER 16: Real Estate Appraisal

Question 1

Real estate licensees may prepare appraisal repots…▶️

Answer 1

• On NON federal related transactions
• -Must abide by USPAP
• NOT refer to a BPO or CMA as an appraisal
• NOT present themselves as an appraiser

Question 2

Define (COST)

Answer 2

Total amount to create an improvement

• Materials
• Labor
• Land

Question 3

Define (PRICE)

Answer 3

Transaction price (Contract Price)

Question 4

Define (VALUE)

Answer 4

Total worth of something between many market participants

Question 5

What is Liquidation Value?

Answer 5

Value associated with a RAPID SALE

Question 6

What is Going-concern value?

Answer 6

Value of an INCOME PRODUCING PROPERTY or business with operating history

Question 7

What is Assessed value?

Answer 7

Value used a basis for PROPERTY TAXATION

Question 8

Characteristics of value (DUST)

Answer 8

D-emand
U-tility
S-carcity
T-ransferability

Question 9

Three relevance of approaches

Answer 9

Sales comparison- Valuing VACANT lots

Cost approach- SPECIAL PURPOSE property

Income approach- used for APARTMENT COMPLEXS

Question 10

Features in Sales comparison approach

Answer 10

• Used for SINGLE family RESIDENTIAL and VACANT land
• Study sale prices of (Comparable properties)
• If the comparable is SUPERIOR vs the subject (SUBTRACT)
• If the comparable in INFERIOR vs the subject (ADD)

Question 11

Steps in Cost approach

Answer 11

• Used for SPECIAL-USE properties
• Estimate reproduction cost of improvements
• Estimate accrued depreciation (age-life method)
• Estimate value of new site
• Add land value to the depreciation of the structure

Question 12

What are the three types of depreciation in cost approach?

Answer 12

Physical Deterioration- Ordinary wear and tear caused by use
Functional Obsolescence- Poor design, obsolete equipment, etc
External Obsolescence- Neighborhood influences EXTERNAL to the property

Question 13

Define Income approach

Answer 13

• Used for Apartments
• Measures flow of income projected into the future
• Value is created by expectation of an income stream into the future

Question 14

Gross income multiplier (GIM)

Answer 14

• Appropriate for SMALL INCOME producing property
• Refers to ALL income a property produces
• Annual income

Question 15

Comparative market analysis (CMA) looks at

Answer 15

• Recently sold and expired listings
• Currently on the market
• Common elements comparison
• Computer generated CMAs