Chapter 20 - Property Appraisal

Question 1

Appraisal

Answer 1

A professional estimate or opinion of the value of a piece of property or parcel of land, as of a certain date, that’s supported by an objective, or pertaining to appraising and related functions, such as appraisal practice or appraisal services.

Question 2

Capitalization Rate

Answer 2

Rate of interest considered a reasonable return on investment; commonly used in the process of determining value based on net income.

Question 3

Comparables

Answer 3

Other similar properties that have sold in a certain area.

Question 4

Cost Approach

Answer 4

An appraisal method which estimates the value of real estate by figuring the cost of building the house or other improvement on the land, minus depreciation, plus the value of the vacant land. Also called reproduction cost approach

Question 5

Depreciation

Answer 5

1. A loss in property value for any reason. 2. For taxes, the expensing of the cost of business or investment property over a set number of years, determined by IRS to be an asset’s useful life.

Question 6

External Obsolescence

Answer 6

Any influence that falls outside the actual property site and negatively affects a property’s value.

Question 7

Functional Obsolescence

Answer 7

Loss in property value resulting from changes in tastes, preferences, or market standards

Question 8

Gross Living Area (GLA)

Answer 8

Residential space that is finished, heated, and above grade. Garages, finished basements, and storage areas do not count in GLA

Question 9

Gross Rent Multiplier (GRM)

Answer 9

A number derived from comparable rental properties in an area, which is then used to estimate the value of real estate. The GRM is only used for one to four unit residential properties.

Question 10

Income Approach

Answer 10

An appraisal method which estimates the value of real estate by analyzing the amount of revenue, or income, the property currently generates, or could generate, often comparing the subject property to other similar properties. also called capitalization approach

Question 11

IRV Formula

Answer 11

A simple calculation for finding the net operating income, the Rate, or the Value of an in-vestment property. When any two factors are known, the third can be determined. Also called capitalization rate formula

Question 12

Matched Pair Analysis

Answer 12

The process of determining the value of specific property characteristics or features by comparing pairs of similar properties

Question 13

Net Operating Income

Answer 13

Income left after all all operating costs are paid

Question 14

Reconciliation

Answer 14

1. The appraisal process of analyzing the values derived from the different appraisal approaches to arrive at a final value estimate or opinion. 2. Verifying the debits and credits have been added and subtracted correctly on a real estate settlement statement.

Question 15

Sales Comparison Approach

Answer 15

An appraisal method which estimates the value of real property by performing a market analysis of the area where the subject property is located. Data are collected and adjustments made for differences. also called market data approach

Question 16

Subject Property

Answer 16

The property being appraised or for which a value opinion is being sought.

Question 17

URAR

Answer 17

Uniform Residential Appraisal Report - A standard appraisal report form used by lenders and appraisers and developed and approved by secondary mortgage market players Fannie Mae and Freddie Mac

Question 18

USPAP

Answer 18

Uniform Standards of Professional Appraisal Practice - Professional appraisal standards developed by the Appraisal Foundation, and now recognized throughout the United States as accepted standards of appraisal practice.