chapter 19 Flashcards
what is CMA?
assists seller clients in arriving reasonable asking price for sellers
what is a appraisal?
is opinion of value based on supportable evidence and approved methods. Appraisal report is an opinion of market value on property given to a lender or client with detailed and accurate information.
who is a appeaser?
is person trained to provide an unbiased opinion of value in impartial and objective manner, according to the appraisal process. appraising is a professional service perform for a fee.
what is regulation of appraisal activities?
Title X of the federal financial institution reform recovery and enforcement Act of 1989 (FIRREA) require that most appraisals used in connection with a federal related transaction be performed by someone licensed or certified by law.
who is associate real estate trainee appraiser?
entry level appraiser, all reports must be consigned by a state certified residential real estate appraiser or state general real estate appraiser.
who is certified residential estate appraiser?
qualified to appraiser residential property of one unit to four units without regard to transaction value or complexity buy with restrictions in accordance
who is certified general real estate appraiser?
qualified to appraise all types of real property without restrictions as to the scope of practice subject to USPAP
what is appraisal report and what is in it?
this is prepared by an appraiser recognized untie act must ID on the report, by name, the person who ordered or origination the appraisal assignment. the appraiser must retain the original copy all contacts engaging his searches as an appraiser and all appraisal report, including any sporting data used to develop the appraiser all the report, including and supporting ate used to develop the appraisal report, for a period of not less then five years or two years.
what does CMA stand for?
comparative market analysis
what is CMA base on?
- recently sold property
- properties currently on the market
- properties that did not sell
what is value?
in real estate market- that have monetary worth based on desirability the for characteristics
what is does DUST standard for value?
- demand
- utility
- scarcity
- transferability
what is market value?
is most probable price that property should bring in a sale
what are three assumptions for market value?
- it presumer a competitive and open market
- the buy and seller are both assumed to be acting prudently and knowledgeably
- market value depends on the price not being affected by unusual circumstances
what is second definition of market value?
is an opinion of value based on an analysis of data. the data may include not only an analysis of comparable sale but also analysis of potential income
what is market price?
on the hand, is what property actually sell for, its sale price
what is anticipation?
according the principle of anticipation, value is created by the expectation that certain even will occur. value can increase or decrease in anticipation of some future benefits
what is change for value?
no physical or economic condition remains constant
what is competition for value?
is the interaction of supply and demand.
what is conformity?
mean that max value is created when a property is in harmony with it’s surrounding. Max value is realized if the use of the land conforms to existing neighborhood.
what is contribution?
the value of any part of a property is measured by if effect on the value of the whole.
what is highest and best use?
the most profitable single use to which a property may be put, or the use that most likely to be in demand in the near future
what is increasing and diminishing?
addition of more improvement to land and structures increasing total value only to asset’s max value, beyond that point, additional improvement no longer affect a property value
what is law of increasing returns?
as long as money spent on improvement produces an increase in income
what is the law of diminishing returns?
at the point where additional improvements don’t increase income
what is regression and progression?
the worth of a better quality property is adversely be the presence of a lesser quality property this is know as regression
thus, in neighborhood of modest homes, a structure that is larger, better maintained. this would be progression, the value of modest home would be higher if it were located among larger, fancier properties
what is substitution?
the max value of a property tends to be by how much it would cost to purchase an equally desirable and valuable substitute property
what is the sale comparison approach?
an estimate of value is obtained by comparing the property being appraised with recently sold comparable property
what is elements comparison approach?
- property rights
- market conditions
- conditions of sale
- market condition since the data of sale
- physical features and amenities
what is the cost approach?
to value also is based on the principle of substation.
what is approach consists of five steps?
- estimate the value of the land as if were vacant and available to be put to its highest and best use
- estimate the current cost of construction the building and improvement
- estimate the amount of accrued depreciation resulting from the property’s physical deterioration, functional obsolescence and external depreciation
- deduct the accrued deprecation from the current construction cost
- add the estimated land value to the depreciated cost of the building and site improvement to arrive at eh total property value
what is reproduction cost?
is the construction cost at current prices of an exact duplicate of the subject improvement including both the benefits and drawbacks of the property
what is replacement cost?
is frequently used in appraising older structure because it eliminates obsolete feature and take advantage of current material and techniques
what is determining reproduction or replacement cost new?
an appraiser using the cost approach computer the reproduction or replacement sot of building using one of the following four methods
what are the four methods for determining reproduction?
- square foot method
- unit in place method
- quantity survey method
- index method
what is depreciation?
is a loss in value due to any cause compare with today’s cost of replacement.
what is does depreciation is considered to be?
curable or incurable, depending on the contribution of the expenditure to the value of the property.
what are three point for depreciation?
- physical deterioration: a curable item is one need of repair
- functional obsolescence
- external obsolescence
what is functional obsolescence?
mean a loss in value from the market’s response to the item.
out modes or unacceptable physical or design feature that are no longer considered desired by purchase are considered curable
What is external obsolescence?
if caused by negative factor not on the subject property the easiest but lest precise way determine depreciation is the straight line method. depreciation is assumed to occur at an even rate over structure economic life, the period during which it is expected to remain useful for it original intended purpose. the property’s cost is divided by the number of years of it’s expected economic life to derive the amount of annual depreciation
what is the income approach?
is based on the present value of the rights to future income. it assumes that the income generate by a property will determine the property value.
how do you use the income approach?
- estimate annual potential gross income. An estimate of economic rental income must be made based on market studies
- deduct an appropriate allowance for vacancy and rent loss, based on the appraiser’s experience and arrive at effective gross income.
- deduct the annual operating expenses
- estimate the price a typical investor would pay for the income produce by this particular type and class property. this done by estimating the rate of return that an investor will demand for the investment of capital in this type of building. this rate is called capital rate.
- apply the cap rate to the property’s annual net operation income to arrive the the estimate of the property
what is gross rent or gross income multipliers?
if a buyer is interested in purchasing a one-four unit residential rental property, the gross remit multiplier would be used for the appraisal value. if the buyer is interested in purchasing five or more units, a commercial gross income multipliers often used in the appraisal process
how do you establish an Gross rent or gross income multiplies?
an appraiser must have recent sale and rental date least our property that are similar to the subject property. the resulting GRM then can be applied to the estimated fare market rental of the subject property to arrive at its market value.
