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Real Estate Exam > Class 16 > Flashcards

Class 16 Flashcards

1
Q

A loss of value

A

depreciation

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2
Q

Changing the sale price of a comparable

A

adjustment

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3
Q

present worth of a future benefit

A

Value

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4
Q

Period of profitability

A

economic life

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5
Q

the amount a property is sold for

A

market value

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6
Q

What a property sells for

A

market price

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7
Q

Bringing all facts together

A

reconciliation

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8
Q

An approach that combines land and improvement value

A

Cost approach

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9
Q

An analysis of alternative conclusions to arrive at a value is…

A

recociliation

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10
Q

An appraiser would most likely consider the principle of regression if he discovered that….

A

an expensive home was built in an area of lower priced homes

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11
Q

A home that lacks sufficient wiring, has a 30 year old furnace, and an insufficient floor plan for today’s modern living is most likely suffering from

A

Functional obsolescence

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12
Q

Why would the cost approach NOT be used to estimate the value of a vacant lot?

A

because the cost approach separates land and improvements. If land only, then there are no improvements

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13
Q

Economic obsolescence would most likely occur when….

A

there is a downturn in market conditions

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14
Q

The expectation of a future event would be applicable ot the principal of….

A

anticipation

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15
Q

A separation of improvement and land value would be used if an appraiser were estimating value by using the…

A

cost approach

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16
Q

An appraisal is an….

A

opinion of value

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17
Q

Appraisers must be __________

A

licensed

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18
Q

In Kentucky we assess based on __________

A

market value

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19
Q

Standards that the appraisers must follow are the ….

A

US PAP (professional Appraisal Practice )

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20
Q

By definition, ________ is the present worth of a future benefit

A

Value

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21
Q

To have value, a property or good must have the characteristics of DUST:

A

Demand
Utility
Scarcity
Transferability

22
Q

NOTE: Market value has many definitions. For appraisal purposes, market value is usually defined as “ the most probably price, as of a specified date, in cash or terms equivalent to cash, for which the specified property rights should sell after reasonable exposure in a competitive market, with the buyer and seller acting prudently, knowledgeably, and for self-interest and assuming neither is under duress.

A
23
Q

___________ is what a property actually sold for

A

Market price

24
Q

What is book value?

A

The value of a property + improvements - depreciation

25
Q

____________ is the perception that value is created by expected future benefits

A

Anticipation

26
Q

Anticipation (expected future value) is viewed heavily in the ______ approachs

A

Income

27
Q

Competition is the interaction between _______ and ________

A

supply and demand

*An appraiser needs to be aware of competition and how it affects value.

28
Q

The principal of conformity states that value is created when….

A

property conforms to the demands of its market

29
Q

The concept of ______ states that value is added or removed depending on how a component adds or detracts from the whole of a property. As an example, an in-ground pool may add or detract from the value of a property depending on how the pool is viewed by the market participants

A

Contribution

30
Q

_________ is considered to be the most important economic principal when determining value of property

A

highest and best use

31
Q

________ refers to the combining of two or more lots. When this happens, the value of the whole is normally greater than the value of the separate parts.

A

Assemblage

32
Q

The value created when land is assembled is called ____________ value

A

plottage

33
Q

The principal of ______ is a theory that higher priced property located in a lower priced neighborhood will reduce in value

A

Regression

34
Q

The principal of __________ states that lower priced property placed in an area of higher priced property will increase in value

A

Progression

35
Q

Considered to be the foundation for the approaches to appraisal, the principal of _______ states that a property with the lowest price attracts the greatest demand.

A

Substitution

36
Q

A _______ sale analysis is used to find the appropriate dollar value or percent value that will be used in the adjustment process.

A

Paired

37
Q

A minimum of ___ comparables are used to make adjustments

A

3

38
Q

Under the cost approach, the _____ and _________ are valued separately. This approach is used more often for new buildings and special purpose buildings such as churches and schools.

A

land

improvements

39
Q

To find the value using the cost approach, what formula would you use

A

Cost Approach =
Reproducing/replacing improvements
- accrued depreciation
+ Lane value

40
Q

Reproduction vs. Replacement costs

A

Reproduction cost - construct an EXACT duplicate using the same materials, design, layout, etc. Most appraisers strive for reproduction cost when using the cost approach
*Notre Dam

Replacement cost - construct with the same utility/use but use modern materials. Same utility but not always the same look

41
Q

______ is a loss of value from any cause . The difference between reproduction cost and the market value

A

Depreciation

42
Q

______ depreciates, the ________ does NOT depreciate

A

Improvements depreciate

land does NOT depreciate

43
Q

The three forms of depreciation are below. describe each:
Physical deterioration
Functional deterioration
External obsolescence

A

Physical deterioration - poor maintenance or wear and tear; peeling paint, weak floor joists…physical deterioration may be curable or incurable

Functional deterioration - results from outdated items, poor floor plans or items of superadequacy; outdated kitchen or bath fixtures, an old furnace; may be curable or incurable

External obsolescence - results from factors outside the property that cause a loss of value; high interest rates; declining property next door; incurable

44
Q

____________ is the time period over which an improvement contributes to the land value

A

economic life

45
Q

The age of a building indicated by its overall condition

A

effective age

46
Q

The process of bringing together all the facts form all approaches to estimate the value of a property

A

Reconciliation

47
Q

The date of inspection is usually the ______ on the appraisal form/report

A

date of valuation

48
Q

What factors are used when applying the income approach?

A

Annual net operating income
cap rate
annual gross income

49
Q

The market value of a parcel of real estate is….

A

an estimate of the most probable price it should bring

50
Q

Depreciation is the…..

A

loss of value for any reason

51
Q

Who completes a comparative market analysis

A

a real estate agent/professional

52
Q

Value is the most probable price a property will bring. What are some of the basic principles?

A

change
contribution
plottage
substitution

Real Estate Exam (19 decks)

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