Crash Course Appraisal 2 Flashcards
What is the definition of appraisal?
An appraisal is an opinion or estimate of the value of a property at that time on a given date
What is a fee appraiser?
A fee appraiser is an independent businessperson who works on a per job basis
Can a broker do an appraisal on a property yes or no?
Yes a broker can do an appraisal if no claim of expertise is made
What are the three types of appraisal reports?
(Letter form report) which is is used when the client is familiar with the property, (the short form report) used by lending institution’s usually consist of a simple check sheet to be filled in by the appraiser, and the (narrative report). The narrative report is the most comprehensive and complete appraisal report. It includes pertinent information about the area and the subject property. It incorporates all three methods
A commercial acre is an acre minus what?
Streets, sidewalks, curbs and alleys, (buildable acre)
What is the basic principles of value for integration?
Property is being developed and values increase
What is the basic principle of values for equilibrium?
Property values remain static or stable
What is a basic principle for this disintegration?
Area declines in value or decays
What is the principle of progression?
A less expensive residence having been built among more costly residence tends to increase in value by its association with more costly properties. (For example a house built in Coronado)
What is the principle of regression?
The value of a more expensive residence built among less costly residence will be reduced (for example a 2 million-dollar house built in Encanto)
There are four essential elements of value? What are they?
The definition of (DUST) demand, utility, scarcity, and transfer ability. demand desire for the property, utility the usefulness of the property, scarcity abundance decreases value, and transfer ability. The owner must be able to transfer title or use of the property.
What are the forces that affect value?
Physical characteristics such as the climate, economic factors such as employment and price levels, social standards such as population growth, governmental regulation such as zoning taxation and building regulations. Assemblage and Plottage play a role.
What is the concept of combining two or more parcels to increase value?
Either assemblage or plottage
An increase in property value over time is called what?
Appreciation
Our short blocks more expensive? Yes or no
Yes short blocks are more expensive
What is the market data or comparison method approach?
It’s when the value is estimated by analyzing the sales price of similar properties, this is the oldest easiest to learn and quickest method. It’s used by agents and brokers.
When is the market data approach or comparison method used?
Its use mainly in the appraisal of residence and land, raw, urban, and rural.
What is replacement method or cost approach?
This is when the appraiser determines what it will cost to build a new building and then adds in the land residual value (the ongoing value of the land) This method produces the highest appraisal value
An appraisal of a furnished apartment house is being prepared. What would be deducted from gross income to determine the effective gross income?
A) vacancy and credit losses
B) real property insurance and taxes
C) management expenses
D) annual reserves for replacement of equipment and furniture
Answer is A, definition of effective gross income is maximum possible income less credit losses in vacancy
Which of the following the lease importance when appraising for value
A) the assessed value
B) the value of improvements on the land
C) the value of comparable properties
D) the selling price of similar properties
Answer is A, the assessed value refers to County assess’s value in determining property tax basis and may have no relationship to appraised value
A person with knowledge of real estate purchasing a home near a large subdivision would be most interested in a home A) near the center of the subdivision B) on a key lot in the subdivision C) near a major access way D) across from a major shopping center
Answer is A, a home located in the center of a subdivision as a general rule maintains the highest property values
When a percolation test is done it will?
A) find the depth of the water below surface
B) see how well soil will absorb water
C) test water for drink ability
D) determine if there is a proper drainage
Answer is B, tests soil for porosity which is essential for good drainage (i.e. installation of a septic tank)
Unearned increment would most probably result from? A) an increase in population B) capital improvements C) management expenses D) an increase in amenities
Answer is A, an increase in population or inflation produces an unearned increment. An unearned increment is an increase in the value of property which the owner did not earn
An appraisal to place a value on a three-year home for fire insurance purposes would give most emphasis to the? A) cost approach B) market data approach C) income approach D an average of all three A,B,C
Answer is A, on a three-year home reproduction costs are the most important factor arriving at a value for fire insurance purposes
In appraising property using the capitalization approach which of the following would you use to determine the net income? A) payments on mortgage loan B) vacancy allowance C) income tax paid B) reserves for depreciation
Answer is B, a vacancy allowance is the only choice offered that is used to arrive at a net income
The value of apartment building is being determined by the income approach. Under which of the following circumstances with the appraiser making deduction from effective gross income for the cost management?
A) the owner manages the property
B) one of the tenants manage the property and his excuse for making rent payments for his unit
C) one of the tenants who lives in a nearby building owned by the owner manages both properties free of cost
D) all of the above
Answer is D, the expense of management is the most overlooked expense in appraising income property? It should always be included in the capitalization approach
The appraised term of accrude depreciation is best described as
A) the depreciation accrued over the life of the improvement with allowance for later additions
B) an estimate of the accumulated depreciation within allowance for conditions based on effective age
C) total accrude loss of a value based upon replacement cost of figures using chronological age only
D) the depreciation ascertained by using crude methods of appraising
Answer is B) accrued depreciation is all of the depreciation up to the time of the appraisal. One way to arrive at the figure is to determine the depreciation according to the age of the building make allows for effective age of the building. The effective age is influenced by quality for the construction in the care that has been taken of the improvement
The income approach to value, recapture of capital investment in the improvement is provided for by
A) rules for depreciation
B) the cost to cure method
C) observed condition method
D) making deductions from the cost of replacement new at the date of appraisal
Answer is A) accruals for depreciation means setting aside a sum of money to replace the improvements when they are worn out. Answers B), C), D), are all used in the replacement or cost approach to appraising
