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Real Estate Appraisal > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Real estate appraisal is

A

the act or process of developing an opinion of value

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2
Q

A real estate appraiser is

A

the person that derives estimates of value on real property (must be licensed)

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3
Q

Appraisal reports are

A

Document providing an opinion of value, These are usually in writing, but may be given orally, The appraiser must have documentation in his/her files for any appraisal

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4
Q

keys to being an effect appraiser

A

o Competent (education and experience)
o Independent, impartial, and objective
o Must be an apprentice

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5
Q

different report forms:

A
  • Oral: Ex: court
  • Form: this is considered to be a summary report, Ex: uniform residential appraisal report
  • Narrative: Ex: self-contained report (long written commercial report)
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6
Q

what other fields can appraisers work with

A
  • Accountant: taxation
  • Attorney: court
  • Mortgage lender/banker: biggest need for appraisals
  • Developer: borrow tons of money
  • Real estate salesman/broker: get homes sold and financed
  • Forester: become appraisers of land (trees)
  • Surveyor: mapping
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7
Q

appraisal fees:

A
  • are negotiable in most cases (not with veteran admin and DOT)
  • Commercial brings higher fees than residential
  • Fees cannot be subject to a predetermined value (would be a conflict of interest)
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8
Q

trainee

A

you have to apprentice

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9
Q

licensed

A

first real license where you can do your own job, 2,000 hours of work
- Can appraise: Noncomplex: up to $1,000,000, simple properties (ex: 3 properties on the same lot)|Complex: up to $250,000, not easy to find data on

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10
Q

certified residential

A

can do any residential property

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11
Q

certified commercial

A

can do any commercial property, 3,000 hours of work, half must be in commercial

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12
Q

appraisal became a real profession

A

July 1st, 1991

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13
Q

real estate is

A

land and its attachments

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14
Q

Uniform appraisal dataset (UAD)

A

Supports improved “standardization” of residential appraisals, So “condition” and “quality of construction” are more specific

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15
Q

Freehold estates

A

Fee simple estate
Life estate

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16
Q

Life estate

A

ownership is tied to life
 Used for children and elderly
 Cannot transfer the title

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17
Q

Fee simple estate

A

when you own the property

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18
Q

Non-freehold estates

A

Leasehold estate: tenant based interest
Leasehold fee estate: landlord based interest

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19
Q

Leasehold estate

A

tenant based interest

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20
Q

Leasehold fee estate

A

landlord based interest

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21
Q

value is

A

what its really worth

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22
Q

price is

A

what you sell it for

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23
Q

cost is

A

what you build it for

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24
Q

valuation principles:

A
  • Anticipation
  • Competition
  • Conformity
  • Contribution
  • Externalities
  • Substitution
  • Supply and Demand
  • Highest and best use
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25
Q

Anticipation

A

you anticipate future benefits to get the value
o Rent is the benefit

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26
Q

Competition

A

can raise prices during inflation, can also lower them

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27
Q

conformity

A

better to conform, the average buyer wants what is typical
o Don’t add onto your home in a cookie cutter neighborhood

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28
Q

contribution

A

every component contributes to the value

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29
Q

externalities

A

outside of the property affect the value
o Progression: you get more per square foot because your house is smaller
o Regression: you get less per square foot because you have a bigger house

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30
Q

substitution

A

principle behind sales and cost approach, no one will pay more than the cost of the equal substitute

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31
Q

supply and demand

A

o More demand value increases, less demand value decreases
o More supply value decreases, less supply value increases

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32
Q

Market Value

A

most probable sales price

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33
Q

sales price

A

the price a property sells for on the open market (ex: transaction price)

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34
Q

THE DEAL HAS TO BE

A

ARMS LENGTH

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35
Q

HOW ARE VALUES CONSIDERED ARMS LENGTH

A

5 WAYS (EXAM QUESTIONS)

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36
Q

BUYER AND SELLER ARE

A

TYPICALLY MOTIVATED

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37
Q

BOTH PARTIES ARE ___ ___ AND ACTING IN THEIR BEST INTERESTS

A

WELL INFORMED

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38
Q

THE PROPERTY HAS A REASONABLE

A

EXPOSURE TIME ON THE MARKET (Appraiser should be able to tell if a property is priced right)

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39
Q

PAYMENT IS MADE IN ___ OR ____ ____ THAT ARE COMPARABLE

A

CASH OR FINANCIAL ARRANGEMENTS
- Loan, commercial real estate
- People try and wrap the business loan in with the real estate loan
- Can’t have personal property involved

40
Q

CREATIVE FINANCING OR SALES DID NOT

A

AFFECT THE PRICE

41
Q

investment value

A

the value to one given investor, can be different than market value

42
Q

Assessed value

A

what the town thinks the property is worth, Value for property taxation, on a county level

43
Q

Business value

A

can be different than real estate value:
- Includes patents, trademarks, copyrights, and equipment
- Going concern value is the same thing
- Includes personal property

44
Q

Book value =

A

cost – depreciation, Used for taxation

45
Q

Quick sale value

A

selling the property quick, Also called liquidation value (Likely during foreclosures)

46
Q

Growth

A

increase in value of property

47
Q

EQUILIBRIUM

A

: when neighborhoods or commercial are 10-30 years old
- SLIGHT INCREASE DURING THIS PERIOD BECAUSE OF INFLATION
- SLIGHT INCREASE DURING THIS PERIOD BECAUSE OF INCREASING POPULATION AND DEMAND
- Or still desirable so still demand (location, location, location)
- mature propertties
- offices still stay good in commercial

48
Q

Decline

A

decrease in the value of the property

49
Q

Revitalization

A

Neighborhoods come back because stuff gets cheap enough for an investor to come in and remodel it to make a return and the cycle starts over

50
Q

highest and best use

A

The reasonable and probable use for a property that will support the highest present value of the land

51
Q

As vacant

A

look at it with what they are gonna do proposed in the future or vacant as in tore down

52
Q

As improved

A
  • is the present improvement the highest and best use
    98% present use is the best because it’s the most profitable and other people did what they did on that lot for a reason
  • if someone destroyed it - would we in turn want to rebuild the same exact thing there
  • constantly changing uses is not good and a red flag (we don’t like those)
53
Q

interim use

A

a use in change → residential is turning into commercial

54
Q

The four test for highest and best use:

A

Physically possible
Legally permissible
Financially feasible
Maximally productive

55
Q

Legally permissible

A

Is the property’s use legally permitted? Does it meet zoning requirements

56
Q

Financially feasible

A

Can you make rent?
Is the present use financially feasible?
Only properties not financially feasible are properties with environmental problems
If you can get a loan or you can rent it, it is financially feasible

57
Q

Maximally productive

A

Is the present use maximally productive?

58
Q

Physically possible

A

Does property fit on the land
Utilities are needed
Access
Over improvement - too big for neighborhood
Under improvement - not big enough for the neighborhood

59
Q

Over improvement

A

too big for neighborhood

60
Q

Under improvement

A

not big enough for the neighborhood

61
Q

Legal Description of appraisal

A

A satisfactory description of the property created by a surveyor and written by an attorney

62
Q

3 types of map drawing

A
  • meat and bounds
  • lock and block
  • governmental survey system
63
Q

meat and bounds

A

original surveying of the 13 colonies

64
Q

lock and block

A

done for cities and neighborhoods, Block bunch of lots between two streets

65
Q

governmental survey system

A

western united states using parallel lines and meridians and lawyer has to write in it

66
Q

zoning

A

Regulation of the size and intensity of the real estate, major areas of zoning ordinances

67
Q

Land use regulation

A

Separation of land uses (commercial v industrial v residential)

68
Q

Height regulation

A

The tallest you can build a building

69
Q

Area regulation

A

Where on the land can you build

70
Q

Why does zoning matter to appraisal?

A

Helps determine prices

71
Q

Taxation:

A

Right of the government to tax real estate for the right to provide public services

72
Q

Tax Assessor

A

Paid appraiser

73
Q

Assessed Value

A

Value for property taxation

74
Q

Ad Valorem Taxes

A

Taxes based on value

75
Q

Mass Appraisal:

A

Appraisal technique of tax assessors, using big data

76
Q

Easements

A

legal right to use and enjoy others land

77
Q

What types of easements are most commonly appraised?

A

Road right of ways
Utilities: putting them in

78
Q

Eminent Domain

A

the taking of land by the government

79
Q

What is the process called of eminent domain

A

condemnation or condemned, Why does this matter to appraisers
- We go to court and value these

80
Q

what do you pay for “Just Compensation”

A
  • Fair market value of the property taken.
  • Damages that occur to the remaining property (remainder) that is not taken
  • Moving expenses if applicable (established by Congress in 1970)
81
Q

total taking

A

taking the whole property (everything), 1 appraisal, all relevant approaches are used, no damages awarded

82
Q

no taking

A

easement, underground (pipelines), power lines, utilities, 1 appraisal, all relevant approaches used, no damages awarded

83
Q

partial taking

A

road, maybe power lines, taking part of the property, 2 appraisals (1 before and 1 after), all relevant approaches used, damages are awarded if the remainder is with less per soft or acre after

84
Q

before and after method

A

This requires two appraisals:
- One appraisal is the value of the original property before there taking
- second appraisal is the value of the remainder after taking and the easement is in place
- Subtract the remainder value from the original property value of the similar sized parcel to obtain the severance damages

85
Q

Urban Sprawl

A

moving out go the city (comes with congestion and pollution)

86
Q

scoring system

A

110 total points, need 40 points to qualify

87
Q

LEED

A

leadership in energy and environmental design

88
Q

What LEED Measures

A

Location and Transportation, Sustainable sites, Water efficiency, Energy and atmosphere, Materials and resources, and Indoor environmental quality

89
Q

Location and Transportation

A
  • Minimize parking lots/ garages
  • Bicycle and electric car facilities
  • Locate near commuter bus and rail stops
  • Avoidance of sensitive land
90
Q

Sustainable sites

A
  • Maximize green space ( open)
  • Minimize heat island effect
  • Storm water design ( rain gardens and basins)
91
Q

Water efficiency

A
  • Cut water efficiency by 20% over the baseline amount in the cetticaiton
  • Efficient water incentives:
    - Sensors on plumbing
92
Q

Energy and atmosphere

A
  • Better energy performance
  • Motion detectors for lighting
  • Energy start light bulbs
  • Manage refrigerants and eliminate CFC
  • Use renewable energy sources such ass solar wind and biomass
93
Q

Materials and resources

A
  • Reuse of original historic building materials
  • Use of materials from rapidly renewable resources
  • Use of regional materials
94
Q

Indoor environmental quality

A
  • Use controls and sensors to regulate temp, ventilation and lighting
  • Day lighting
  • Eliminate VOC’s
  • Limit smoking
95
Q

wood vs concrete vs steels

A

wood is cheaper, steel is stronger on tall buildings (over 4 stories you have to use steel for strength)

Real Estate Appraisal (11 decks)

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