Chapter 3 - Foundations Of Appraisal

Question 1

What are the four agents of production?

Answer 1

Land, labor, capital, entrepreneurial coordination.

Question 2

Entrepreneurial coordination

Answer 2

The ability of an entrepreneur to combine land, labor, and capital in the development of real property; a component of real estate value that represents the investment of time, expertise, and equity by an entrepreneur (or developer) and the development of a property

Question 3

What for forces influence real property markets?

Answer 3

Social forces, economic circumstances, governmental controls and regulations, environmental conditions.

Question 4

Externality (externalities)

Answer 4

Factors outside of property, or externalities exert both positive and negative influences on the properties value.

Question 5

Contribution

Answer 5

The concept that the value of a particular component is measured in terms of its contribution to the value of the whole property or as the amount that its abundance would detract from the value of the whole.

Question 6

Surplus productivity.

Answer 6

The net income that remains after the cost of various agents of production have been paid

Question 7

Conformity

Answer 7

The appraisal principle that real property value is created and sustained with the characteristics of a property conform to the demands of its market

Question 8

Balance

Answer 8

The principle that real property value is created and sustained when contrasting, opposing or interacting elements are in a state of equilibrium.

Question 9

Law of decreasing returns

Answer 9

The premise that additional expenditures beyond a certain point (the point of decreasing returns) will not yield a return commensurate with the additional investment; also known as law of diminishing returns.

Question 10

Law of increasing returns

Answer 10

The premise that large amounts of the agents of production produce greater net income up to a certain point (the point of decreasing returns).

Question 11

Competition

Answer 11

Between purchasers or tenants, the interactive efforts of two or more potential purchasers or tenants to make a sale or secure a lease; between sellers or landlords, the interactive efforts of two or more potential sellers or landlords to complete a sale or lease; among competitive properties, the level of productivity and amenities or benefits characteristic of each property considering the advantages or disadvantages position of the property relative to competitors

Question 12

Substitution

Answer 12

The appraisal principle states that one several similar or commensurate commodities, goods, or services are available, the one with the lowest the price will attract the greatest demand and why does distribution