Key Terms (Ch.3) 14%

Question 1

BPO

Answer 1

Broker Price Opinion; an agents opinion of a property’s fair market value based on comparable sales.

Question 2

Capitalization Approach

Answer 2

Appraisal method used by an appraiser to arrive at a property’s value based on present worth of property’s future net income

Question 3

Capitalization Rate

Answer 3

(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.

Question 4

Comparable Sales

Answer 4

Sales of properties recently sold which have similar characteristics of as subject property

Question 5

Comparison Approach

Answer 5

Method for comparing a given property with similar surrounding properties, aka market comparison

Question 6

Depreciation

Answer 6

Loss of property value

Question 7

Economic Life

Answer 7

Period of time over which a property will yield a return on capital invested to own it

Question 8

Economic Obsolescence

Answer 8

Loss in value of property due to external factors and not the condition of property itself.

Question 9

Elements of Value

Answer 9

Factors that must be present for real estate to have value: DEMAND, UTILITY, SCARCITY and TRANSFERABILITY

Question 10

Financial Analysis

Answer 10

Consideration of the income and expenses generated and incurred by an income producing property

Question 11

Functional Obsolescence

Answer 11

Loss of value due to adverse factors within the structure which affect the utility of the structure

Question 12

Gross Rent Multiplier

Answer 12

factor multiplied by gross income to estimate the properties value

Question 13

Highest and Best Use

Answer 13

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

Question 14

Income Approach

Answer 14

One of 3 methods used in the appraisal process applied to income producing property

Question 15

Influence on Value

Answer 15

An aspect of the principle change recognizing changes on real estate value due to outside forces.

Question 16

Narrative Report

Answer 16

Summary of all factual materials, techniques and appraisal methods used by the appraiser to establish property value

Question 17

Opportunity Cost

Answer 17

Cost of an action that is forgone when choosing to take an alternative action, usually a consideration when making one investment over another.

Question 18

Physical Life

Answer 18

Total number of years a building is presumed to potentially exist in a productive capacity

Question 19

Principles of value

Answer 19

The Application of several appraisal principles to arrive at the final value.