Key Terms (Ch.3) 14% Flashcards
BPO
Broker Price Opinion; an agents opinion of a property’s fair market value based on comparable sales.
Capitalization Approach
Appraisal method used by an appraiser to arrive at a property’s value based on present worth of property’s future net income
Capitalization Rate
(cape rate) Annual rate of return on an investment. Calculated by dividing the net operating income by the price asked or offered for income property.
Comparable Sales
Sales of properties recently sold which have similar characteristics of as subject property
Comparison Approach
Method for comparing a given property with similar surrounding properties, aka market comparison
Depreciation
Loss of property value
Economic Life
Period of time over which a property will yield a return on capital invested to own it
Economic Obsolescence
Loss in value of property due to external factors and not the condition of property itself.
Elements of Value
Factors that must be present for real estate to have value: DEMAND, UTILITY, SCARCITY and TRANSFERABILITY
Financial Analysis
Consideration of the income and expenses generated and incurred by an income producing property
Functional Obsolescence
Loss of value due to adverse factors within the structure which affect the utility of the structure
Gross Rent Multiplier
factor multiplied by gross income to estimate the properties value
Highest and Best Use
appraisal phrase addressing the use of a property that is likely to produce the greatest net return on the land and/ or buildings over a specific time period
Income Approach
One of 3 methods used in the appraisal process applied to income producing property
Influence on Value
An aspect of the principle change recognizing changes on real estate value due to outside forces.