Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Real Estate Appraisal > Exam 3 Appraisal > Flashcards

Exam 3 Appraisal Flashcards

1
Q

Cost approach

A

Value is derived by reproducing a new subject property and depreciating it to be comparable to the subject

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sales Comparison Approach

A

Value is derived by comparing the subject property through adjustments made to units of comparison to sales of similar properties in the area

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Income approach

A

Value is derived by analyzing a property’s capacity for earnings and capitalizing the income into an indication of present value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

contribution and substitution are

A

Basic principles used in this approach to value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Contribution

A

each part contributes to the whole

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Substitution

A

building a substitute for the subject

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

does cost equal value

A

NO

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Common uses for cost approach

A
  1. Special purpose commercial properties (doctor’s office, laboratory, car wash, church)
  2. New residential homes
  3. Property insurance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

factors that effect the cost approach

A

use type, quality of construction, size, shape, height, site improvements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Quality of construction CA

A

good construction is more expensive than average, average is more expensive than fair

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

size CA

A

higher is more expensive but bigger tends to be less per square foot

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

shape CA

A

weird shapes are more expensive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

height CA

A

higher you build the more expensive it is because of steel

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

site improvements CA

A

commercial has higher cost site improvements (need more parking, sidewalk, possibly covered sidewalks), residential a ranch house will be more than a 2 story

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Reproduction cost:

A

reproducing the subject with the original materials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Replacement cost:

A

replacing the subject with todays materials, Do a lot more of these in appraisal because its cheaper

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Direct cost (hard cost):

A

materials and labor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Indirect cost (soft cost):

A

profit, overhead, engineering, architects, appraisals, surveys

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

There are three major ways to compute the cost approach to value are as follows:

A
  1. Quantity-survey method
  2. Unit-in-place/segregated cost method
  3. Comparative-unit method
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Comparative Unit Method:

A
  • easiest
  • Appraiser estimates dollars per unit of area based upon known costs of similar structures.
  • This method is the most widely used method for this approach to value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Unit-In-Place Method:

A

Appraiser estimates the cost of the major components of construction using subcontractor quotes or cost handbooks.
- This method is very useful for industrial buildings as they are often shells.
- Break it up into parts of a building (Ex: foundation, framing, roofing, plumbing, heating and air)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Quantity-Survey Method:

A
  • hardest
  • Appraiser estimates quantities of all the materials in the construction process (ex: 2 x 4 wood beams, roofing nails)
  • It is the most precise method but takes more time and detail. General Contractors use this more than appraisers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Depreciation

A

loss in value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Physical deterioration or depreciation:

A

wear and tear, use and age

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Functional obsolescence or deprecation:

A

becoming out dated, Ex: one bathroom isn’t acceptable anymore, window air conditioners or space heaters aren’t acceptable anymore

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

External obsolescence or depreciation:

A

externalities affect your properties or how your neighbors affect you, Do a 360 before you buy a property, don’t want to be next to the airport or railroad, ugly neighboring houses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Physical Depreciation: Cure Incure

A
  • Curable deprecation: it adds more value than it costs (example: fixing a roof with greatly increase house value because it is a major component)
  • Incurable depreciation: it costs more then the value it adds (example: pool because it is a luxury item and may not add much value to a home)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Functional obsolescence: Cure Incure

A
  • Curable (can it be?): adding a bathroom to an outdated one-bathroom home
  • Incurable (can it be?): changing height of ceiling – lower ceiling in an old home in order to add more inculcation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

External obsolescence: Cure Incure

A
  • Curable (can it be?): Can never be curable – hard to change your neighbors and surrounding properties
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Total economic life:

A

total life expectancy of a property that it remains economically feasible (usefulness)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Effective age:

A

age that considers remodeling and renovation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Remaining economic life:

A

total economic life – effective age

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Estimate of Accrued Depreciation:

A

Effective age and remaining economic life are determined by the appraiser and the depreciation calculation is as follows:
o (EA/(EA + REL) or (EA/TEL)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Physical inspection:

A

walk them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Plat/Survey:

A

gives boundaries and shows acreage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Plot Plan:

A

map that the county approves, shows lots size, proposed improvements, and utilities locations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Topographical Map:

A

shows elevations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Soil Survey:

A

different soils

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

how do we examine sites

A

Physical inspection, Plat, plot plan, topographical map, soil survey

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

onsite improvements

A

utilities, parking, driveways, landscaping

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

offsite improvements

A

road, streetlights, curb, storm swear, sidewalks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

assemblage

A

put two lots together to value them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

plottage

A

an increase in value when you assemble lots, commercial has plottage value (because you can increase the rent), residential doesn’t have this value because average buyer doesn’t need more land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

excess land

A

second lot in residential would be excess land, decrease in value per square acre

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Sales comparison method

A

Sales of Similar vacant lots are examined and compared, and adjustments are made for differences. This is the most commonly used approach to valuing vacant sites

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Appraise based on the front foot when doing

A

retail

47
Q

Appraise in front foot residential for

A

waterfront or golf course lots

48
Q

Anything over 5 acres should be measured in

A

acreage, especially when considering mobbing from residential to agricultural

49
Q

Small lots should be in

A

square foot

50
Q

Financing Differences:

A

tends to be negative

51
Q

Time Adjustment (Date of Sale):

A

markets can change

52
Q

Physical Attributes:

A

size, road frontage, utilities, topography, etc.

53
Q

adjustments are typically made for

A

financing differences, location, time adjustment, and physical attributes

54
Q

adjust the comp to be like the

A

subject

55
Q

adjustments are

A

positive or negative, if the subject is superior we add to the comp, if the subject is inferior we subtract from the comp

56
Q

abstraction method

A

When the sales price of a comparable home is known, the “depreciated” cost of the improvements are subtracted to get the land value.

57
Q

extraction method

A

Typically used when finding land values where the improvements are reasonably new, or they contribute very little to the market value

58
Q

allocation method

A

Develop a ratio of land and building value for improved property sales using historical data (in a given county or city) and apply this ratio to the subject property, may not be accurate to the location, used in old cities

59
Q

common uses for the sales comparison approach

A
  • land
  • residential homes (any age)
  • commercial properties in an active market
60
Q

land SCA

A

not much cost to dirt and not much land is rented

61
Q

residential homes SCA

A

any sales that show the market, within a mile

62
Q

commercial SCA

A

if you have sales use them

63
Q

SCA uses a

A

grid to make comparisons between the subject property and comp sales

64
Q

SCA can be physical comparisons or income comparisons

A

-physical: brick to brick
- income: price per bedroom

65
Q

what is the difference with having 3 comp sales and 1 comp listing

A

comp listing hasn’t sold (listings are more current) sale has sold

66
Q

why bracket comps?

A

bracket by size, having something bigger and something smaller

67
Q

why have 1 comp outside the subdivision with new construction

A

because a contractor could take control

68
Q

some adjustments are not

A

quantitate (age, better location)

69
Q

how do you choose comps

A
  • location: most important, tells you most about the property
  • size: how much use you can get
  • age: how long before renovations
  • design: 1 story to 1 sort
  • significant features: something weird like a swimming pool
70
Q

gross adjustments:

A

cannot exceed 25%

71
Q

net adjustments

A

cannot exceed 15%

72
Q

line item adjustments

A

one adjustment cannot be more than 10% of the sales price

73
Q

Paired sales

A

easiest way to calculate adjustments, identical sales with a few adjustments

74
Q

why are commercial buildings more difficult to find paired sales for

A

they are not the same

75
Q

why is it hard in rural va

A

not enough buildings and not enough new ones

76
Q

Depreciated Cost

A

Adjustments are made by using the depreciated cost of the item being adjusted

77
Q

where do you find depreciation costs

A

Marshall evaluation services

78
Q

typical units of comparison

A

price per sqft, PGIM, EGIM, NIM

79
Q

problems with the SCA

A
  • Comparable sales are seldom identical or “paired”.
  • There can be a lack of sales in the subject neighborhood or area.
  • This is not a mechanical exercise and requires judgment.
  • Very reliable specific data can be hard to obtain on every sale.
80
Q

The market value should be between the

A

final “adjusted” prices of the comparable sales or between the multiplier ratio values of the comparable sales

81
Q

Appraisal judgment is required in

A

choosing the final value estimate in this approach

82
Q

The concept of anticipation is

A

fundamental here as we are basing a value on future benefits of a piece of property

83
Q

lessor

A

landlord

84
Q

lessee

A

tenant

85
Q

property manager

A

manages property and deals with the people

86
Q

leasing agent

A

finds tenants to rent

87
Q

market rent

A

rent we use for appraisal, from your markets competition

88
Q

contract rent

A

rent on your lease

89
Q

overage rent

A

used in percentage leases, paying over a base rent

90
Q

gross lease

A

landlord pays operating expenses (highest lease)

91
Q

net lease (triple net, double net)

A

tenant pays operating expense (cheapest), triple net pays 3 operating expenses (most common lease)

92
Q

step-up (graduated payment) lease

A

your lease goes up regularly (usually annual

93
Q

index lease

A

lease is indexed for inflation, increases with inflation

94
Q

percentage lease

A

pays a base rent and percentage of sales, common in retail (benefits tenants having cash flow problems: pay more when busy, less when business is slow)

95
Q

Direct Capitalization:

A

Used to convert a single year’s cash flow (CF) estimate into an indication of value

96
Q

Yield Capitalization : This is often called Discounted Cash Flow Analysis (DCF)

A

Used to convert a stream of income estimates, including reversion from resale, into an indication of value

97
Q

potential gross income (PGI)

A

maximum rent possible (fully occupied)

98
Q

Vacancy and collection

A
  • space not occupied or rented
  • collection loss, when someone can’t pay you
  • natural vacancy or turnover, space being fixed or remodeled between tenants
99
Q

effective gross income (EGI)

A

income - vacancy

100
Q

operating expenses

A

mandatory expenses to run/use real estate

101
Q

net operating income (NOI)

A

income after vacancy and operating expenses

102
Q

capitalization rate (Cap Rate)

A

NOI/Value, annual return

103
Q

fixed expenses

A

expense that doesn’t vary (property taxes)

104
Q

variable expenses

A

expenses varies based upon occupancy

105
Q

replacement reserves

A

cash saved for future repairs and expenditures

106
Q

reversion

A

cash you bring home from the sale

107
Q

holding period

A

the period you had onto property

108
Q

discount rate

A

the rate you discount the cash flows

109
Q

going-in cap rate

A

year 1 cap rate

110
Q

terminal or exit cap rate

A

cap rate when you sell

111
Q

leasing commission

A

commission you pay the leasing agent when tenant signs

112
Q

tenant improvements

A

start of the holding period, doing improvements for the tenants

113
Q

return on the investment

A

profit

114
Q

return of the investment

A

capital recapture (break-even)

Real Estate Appraisal (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions