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Unit 19: Real Estate Appraisal > Key Terms > Flashcards

Key Terms Flashcards

1
Q

The act or process of developing an opinion of value

A

Appraisal

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2
Q

The written or oral communication of an appraisal.

A

Appraisal report

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3
Q

A person trained to provide valuation services competently in an impartial and objective manner according to the appraisal process

A

Appraiser

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4
Q

Any real estate related financial transaction in which a federal financial institution or regulatory agency engages in, contracts for, or regulates and requires the services of an appraiser

A

Federally related transaction

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5
Q

A national body composed of representatives of some of the major appraisal and related organizzations

A

The Appraisal Foundation

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6
Q

Appraisers are expected to follow the ___ established by the foundation’s appraisal standards board

A

Uniform Standards of Professional Appraisal Practice (USPAP)

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7
Q

A set of standards that details information required of an appraisal of residential property, and is required by many government agencies

A

Uniform Standards of Professional Appraisal Practice (USPAP)

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8
Q

An entry level appraiser that is a recognized category in IL

A

Associate real estate trainee appraiser

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9
Q

IL recognized category of appraisers who are qualified to appraise residential property of 1 to 4 units without regard to transaction value or complexity; but with restrictions in accordance with Title XI, USPAP, and other criteria established by the AQB.

A

Certified residential real estate appraiser

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10
Q

IL recognized category of appraisers who are qualified to appraise all types of real properties without restrictions as to the scope of practice subject to USPAP requirements.

A

Certified general real estate appraiser

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11
Q

In IL, the ___ established a fee structure and disciplinary and enforcement mechanism for appraisers

A

Real Estate Appraiser Licensing Act of 2002

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12
Q

A(n) ___ is a less expensive alternative of valuating properties often used by lenders working with home equity lines, refinancing, portfolio management, foreclosures, loss mitigation, and collections.

A

Broker’s price opinion (BPO)

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13
Q

Many ___ simply consist of a “drive by” that verifies the existence of the property, along with a listing of comparable sales

A

Broker’s price opinion (BPO)

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14
Q

The power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities

A

Value

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15
Q

Characteristic of value meaning the need or desire for possession or ownership backed by the financial means to satisfy that need

A

Demand

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16
Q

Characteristic of value meaning the property’s usefulness for its intended purposes

A

Utility

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17
Q

Characteristic of value meaning a finite supply

A

Scarcity

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18
Q

Characteristic of value meaning the relative ease with which ownership rights are transferred from one person to another

A

Transferability

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19
Q

DUST is an acronym for the 4 characteristics of ___, which are…

A

Characteristics of Value
1) Demand
2) Utility
3) Scarcity
4) Transferibility

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20
Q

The ___ of real estate is the most probable price that a property should bring in a fair sale.

A

Market value

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21
Q

A(n) ___ is also known as an arms length transaction

A

Fair sale

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22
Q

The most probable price that property would bring in an arm’s length transaction (fair sale) under normal conditions on the open market

A

Market value

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23
Q

The definition of market value makes what 3 assumptions?

A

1) Presumes competitive and open market
2) Buyer & seller both assumed to be acting prudently and knowledgeably
3) Market value depends on the price not being affected by unusual circumstances

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24
Q

An opinion of value based on an analysis of data, which may include an analysis of comparable sales as well as analysis of potential income, expenses, and replacement costs (less any depreciation)

A

Market value

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25
Q

What a property actually sells for - the sale price.

A

Market price

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26
Q

According to the principle of ___, value is created by the expectation that certain events will occur.

A

Anticipation

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27
Q

The principle of ___ relates to the economic and social forces that affect value. It holds that no physical or economic condition remains constant.

A

Change

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28
Q

___ is the interaction of supply and demand

A

Competition

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29
Q

Excess profits generate ___.

A

Competition

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30
Q

The principle of ___ means that maximum value is created when a property is in harmony with its surroundings

A

Conformity

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31
Q

The principle of conformity means that maximum value is created when….

A

a property is in harmony with its surroundings

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32
Q

Under the principle of ___, the value of any part of a property is measured by its effect on the value of the whole.

A

Contribution

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33
Q

Appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value.

A

Contribution

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34
Q

The most profitable single use to which a property may be put, or the use that is most likely to be in demand in the near future, is the property’s ___.

A

Highest and best use

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35
Q

Law that applies as long as money being spent on improvements produces an increase in income or value

A

Law of Increasing returns

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36
Q

Law that applies when additional improvements do NOT increase income or value

A

Law of diminishing returns

37
Q

The principle of ___ holds that merging or consolidating adjacent lots into a single, larger one produces a greater total land value than the sum of the 2 sites valued separately

A

Plottage

38
Q

The process of merging 2 seperately owned lots under one owner

A

Assemblage

39
Q

Plottage is the amount that value is increased by successful ___

A

Assemblage

40
Q

___ is the amount that value is increased by successful assemblage

A

Plottage

41
Q

Appraisal principle stating that between dissimilar properties, the value of the better quality property is affected adversely by the presence of the lesser quality property

A

Regression

42
Q

Appraisal principle stating that between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better quality property

A

Progression

43
Q

Under the principle of ___, the maximum value a property tends to be set by how much it would cost to purchase an equally desirable and valuable property.

A

Substitution

44
Q

___ is the foundation of the sales comparison approach

A

Substitution

45
Q

The principle of ___ holds that the value of a property depends on the number of properties available in the market place.

A

Supply & demand

46
Q

When supply ___, value ___

A

Supply increases
Value decreases

47
Q

When demand ___, value ___

A

Demand increases
Value increases

48
Q

In the ___ approach, an estimate of value is obtained by comparing the property being appraised (the subject property) with recently sold comparable properties.

A

Sales comparison

49
Q

Element of comparison meaning that the financing terms must be considered, including adjustments for differences such as mortgage loan terms and owner financing

A

Financing concessions

50
Q

Element of comparison meaning that interest rates, supply and demand, and other economic indicators must be analyzed

A

Market conditions

51
Q

Element of comparison meaning that adjustments must be made for motivational factors that would affect the sale, such as foreclosure, a sale between family members, or some nonmonetary incentive

A

Conditions of sale

52
Q

Element of comparison meaning that an adjustment must be made if economic changes occur between the date of sale of the comparable property and the date of the appraisal

A

Market conditions since the date of sale

53
Q

Element of comparison meaning that similar properties might differ in price from neighborhood to neighborhood or even between locations within the same neighborhood

A

Location or area preference

54
Q

Element of comparison meaning that physical features such as the structure’s age, size, and condition may require adjustments

A

Physical features and amenities

55
Q

CBS

A

Comp better subtract

56
Q

CPA

A

Comp poorer add

57
Q

The ___ approach to value is the process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the reporduction or replacement cost of the building, less depreciation

A

Cost approach

58
Q

___ cost is the construction cost at current prices of an exact duplicate of the subject improvement.

A

Reproduction

59
Q

___ cost is the cost to construct an improvement similar to the subject property using current construction methods and materials, but not necessarily an exact duplicate

A

Replacement

60
Q

Appraisal cost approach method of estimating building costs by multiplying the number of square feet in the improvements being appraised by the cost per square foot for recently constructed similar improvements

A

Square-foot method

61
Q

Cost approach method that is also called the comparison method

A

Square-foot method

62
Q

Appraisal cost approach method of estimating building costs by calculating the costs of all the physical components in the structure, with the cost of each item including its proper installation, connection, and so forth.

A

Unit in place method

63
Q

Appraisal cost approach method of estimating building costs that is also called the segregated cost method

A

unit-in-place method

64
Q

Appraisal cost approach method of estimating building costs by calculating the cost of all the physical components in improvements (lumber, brick, plaster, etc), adding the cost to assemble them (labor), and then including the indirect costs associated with such construction (permits, survey, payroll, taxes, builder’s profit, etc)

A

Quantity-survey method

65
Q

Appraisal cost approach method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs

A

Index method

66
Q

A loss in value due to any cause compared with today’s cost of replacement

A

Depreciation

67
Q

Refers to a condition that adversely affects the value of an improvement to real property

A

Depreciation

68
Q

Class of depreciation meaning a reduction in a property’s value resulting from a decline in physical condition. Can be caused by action of the elements or ordinary wear and tear

A

Physical deterioration

69
Q

A(n) ___ item is one in need of repair, such as painting (deferred maintenance), that is economically feasible and would result in an increase in value equal to or exceeding the cost

A

Physical deterioration

70
Q

An item is ___ if it is a defect caused by physical wear and tear if its correction would not be economically feasible or contribute a comparable value to the building, such as a crack in the foundation.

A

Incurable

71
Q

Class of depreciation meaning a loss in value from the market’s response to the item

A

Functional obsolescence

72
Q

Class of depreciation meaning a loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design

A

Functional obsolescence

73
Q

Class of depreciation meaning the reduction in value caused by factors outside a property, such as zoning, environmental, social, or economic forces.

A

External obsolescence

74
Q

___ obsolescence was previously known as economic or environmental obsolescence

A

External

75
Q

A method of calculating depreciation for tax purposes, computed by dividing the adjusted basis of a property by the estimated number of years of remaining useful life

A

Straight-line method

76
Q

Also called the economic age-life method

A

Straight-line method

77
Q

The period during which a property is expected to remain useful for its original intended purpose

A

Economic life

78
Q

The ___ approach to value is based on the present value of the rights to future income

A

Income approach

79
Q

The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life

A

Income approach

80
Q

The income projected for an income-producing property after deducting losses for vacancy, collection, and operating expenses

A

Net operating income (NOI)

81
Q

The rate of return a property will produce on the owner’s investment

A

Capitalization rate

82
Q

The ___ is determined by comparing the relationship of NOI to the sales prices of similar properties that have sold in the current market

A

Capitalization rate

83
Q

GRM

A

Gross rent multiplier

84
Q

The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property’s value

A

Gross rent multiplier (GRM)

85
Q

GIM

A

Gross income multiplier

86
Q

A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property’s value

A

Gross income multiplier

87
Q

The act of analyzing and effectively weighing the findings from all 3 appraisal approaches

A

Reconciliation

88
Q

When the appraiser combines estimates of value received from the sales comparison, cost, and income approaches to arrive at a final estimate of market value for the subject property

A

Reconciliation

Unit 19: Real Estate Appraisal (5 decks)

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