Level 3 Valuation and Market Anaylsis

Question 1

an impartial, qualified appraiser’s opinion of value of a specific property as of a specific date, supported by relevant market information

Answer 1

appraisal

Question 2

increase in value of a property

Answer 2

appreciation

Question 3

the combining of multiple contiguous pieces of real property into a single tract of land, often resulting in an increase in value

Answer 3

assemblage

Question 4

the value placed on a property by a governmental unit for use in calculating property taxes

Answer 4

assessed value

Question 5

any market that is experiencing an excess of sellers or supply, creating more favorable conditions for buyers

Answer 5

buyer’s market

Question 6

property secured by a lender in order to assure payment and protect the lender’s investment

Answer 6

collateral

Question 7

a report that compares the prices of recently sold or listed homes (“comparables”) in order to estimate the market value of a similar property (the “subject property”) located in the same area

Answer 7

comparative market

analysis

Question 8

the amount of market value added to a property by an addition or improvement to the property; not necessarily the same as the cost of the improvement

Answer 8

contribution

Question 9

method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself

Answer 9

cost approach

Question 10

a measure of the general desire for an asset or commodity at a given time

Answer 10

demand

Question 11

a reduction in value for any reason

Answer 11

depreciation

Question 12

the length of time for which an improvement on property is expected to remain functional and useful

Answer 12

economic life

Question 13

a theoretical market condition in which levels of supply and demand are balanced

Answer 13

equilibrium

Question 14

loss of property value caused by negative forces outside the property which are beyond the control of the owner

Answer 14

external (economic)

obsolescence

Question 15

loss of value because a property’s function or appearance has gone out of style or has been replaced by a more appealing or effective version

Answer 15

functional obsolescence

Question 16

the relative difficulty of converting an asset to cash without loss of value

Answer 16

illiquidity

Question 17

method of estimating the value of a property by applying a rate of return to the net income it produces

Answer 17

income capitalization

approach

Question 18

the purchase of an asset with the intention of profiting from it in the future

Answer 18

investment

Question 19

a theoretical construct that isolates the selling and purchasing of any one particular commodity from the economy as a whole

Answer 19

market

Question 20

the price for which a property will theoretically sell under typical conditions

Answer 20

market value

Question 21

a database in which local member brokers share listings so that fellow member brokers can procure buyers for those properties and establish compensation for properties sold jointly

Answer 21

multiple listing service

Question 22

an occasional or continuous expense required for the

operation of an income-producing property

Answer 22

operating expense

Question 23

the loss of value caused by physical wear and tear over time

Answer 23

physical deterioration

Question 24

an increase in overall value resulting from the successful assemblage of multiple plots

Answer 24

plottage

Question 25

the manner in which a price is determined by a buyer and seller (a quantification of value) with respect to the forces of supply and demand

Answer 25

price mechanism

Question 26

an individual authorized to perform appraisals, which estimate the value of real property

Answer 26

real estate appraiser

Question 27

the actual cost of replacement without regard to depreciation of the property

Answer 27

replacement cost

Question 28

the cost of building an exact duplicate of a property, taking today’s material and labor costs into consideration

Answer 28

reproduction cost

Question 29

property appraisal method that estimates value by comparing the subject property to the sales prices of similar properties in the same market area

Answer 29

sales comparison

approach

Question 30

the lack of availability of a commodity in relation to the

demand for it

Answer 30

scarcity

Question 31

a market condition in which the number of properties for sale does not meet the demand (number of people looking to buy)

Answer 31

seller’s market

Question 32

an accounting method in which depreciation expenses are deducted from a property’s income

Answer 32

straight-line cost recovery

Question 33

an economic principle stating that the value of a good or service is affected by the cost of getting a similar (substitute) item elsewhere

Answer 33

substitution

Question 34

in real estate, the amount of properties that are vacant or are available for sale or rent

Answer 34

supply

Question 35

the value placed on a property by a governmental unit for use in calculating property taxes, minus any exemptions

Answer 35

taxable value