Influences On Values & Economic Principles

Question 1

Four Agents of Production

Answer 1

C.E.L.L.
Land, labor, capital, and entrepreneurial effort (alsoknown as coordination).

Question 2

Four Broad Forces that Influence Value

Answer 2

G.E.E.S. or P.E.G.S.
Governmental
Environmental and Geographic (Physical)
Economic
Social

Question 3

CERCLA stands for? (known as the Superfund law)

Answer 3

Comprehensive Environmental Response, Compensation, and Liability Act

Question 4

Economic Principles
- The result of the cause-and-effect relationship among the forces that influence real property value.

Answer 4

Change

Question 5

Economic Principles
- The perception that value is created by the expectation of benefits to be derived in the future.

Answer 5

Anticipation

Question 6

Economic Principles
- This economic principle as applied within a real estate appraisal context … states that the price of real property varies directly, but not necessarily proportionately, with demand and inversely, but not necessarily proportionately, with supply.

Answer 6

Supply and demand

Question 7

The theoretical balance where demand and supply for a property, good, or service are equal…. Over the long run, most markets move toward equilibrium, but a balance is seldom achieved for any period of time.

Answer 7

Market equilibrium.

Question 8

Economic Principles
- The interaction of supply and demand
- When buyers can choose among multiple properties offering the same or similar amenities and benefits.
- Competitive market forces keep excess profits in check

Answer 8

Competition

Question 9

Economic Principles
- The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution.

Answer 9

Substitution
(The premise is that a buyer will not pay more for a property than for another that is equally desirable.)

Question 10

This is a subprinciple of substitution. It is the cost of options foregone or opportunities not chosen.

Answer 10

Opportunity cost

Question 11

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

Answer 11

Balance

Question 12

• An increasing rate until a maximum return is reached. Beyond a certain point, each additional unit will add less income or value than the unit before it.

Answer 12

Increasing and decreasing returns

Question 13

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

Answer 13

Contribution

Question 14

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

Answer 14

Surplus productivity

Question 15

Economic Principles
- The appraisal principle that real estate value is created and sustained when the characteristics of a property conform to the demands of its market.

Answer 15

Conformity

Question 16

The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties.

Answer 16

Principle of progression

Question 17

The concept that a higher-priced property will be worth less in a lower-priced neighborhood than it would in a neighborhood of comparable properties.

Answer 17

Principle of regression

Question 18

Economic Principles
- The principle that economies outside a property have a positive effect on its value while diseconomies outside a property have a negative effect on its value.

Answer 18

Externalities.

Question 19

The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.

Answer 19

Highest and best use

Question 20

Four tests of highest and best use?

Answer 20

a. Legal permissibility (can swap with b)
b. Physical possibility ( can swap with a)
c. Financial feasibility
d. Maximum productivity
* Steps a and b come before c and d.

Question 21

The temporary use to which a site or improved property is put until a different use becomes maximally productive

Answer 21

Interim use

Question 22

The concept that land cannot be valued on the basis of one use while the improvements are valued on the basis of another use.

Answer 22

Consistent use.

Question 23

Land that is not needed to serve or support the existing use.

Answer 23

Excess land

Question 24

Land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use.

Answer 24

Surplus land