National Chapter 7 Flashcards
estimate or opinion of value
appraisal
the goal of the appraiser is to determine
- market value, insurance value, salvage value or the tax value of a property
- compensation is baed on time and effort never on the established price of the property
appraiser’s ground rule
- payment must be in cash or its equivalent
- buyer and seller must be unrelated and acting without undue influence, menace, or duress
- property must be marketable for a reasonable time in an open and free-flowing market
- both buyer and seller must be well-informed consumers
steps of the appraisal process
- state the problem
- gather, record and verify the necessary data
- analyze and interpret
- estimate land value
- estimate the value of the property
- reconcile estimated values for the final value estimate
ways to analyze and interpret
neighborhood analysis, neighborhood cycle, and site analysis
ways to estimate the value of the property
market data (sales comparison), cost (or summation) and income
types of appraisal reports
letter, short or form, narrative
short business letter stating all essential data but not including supporting data
letter appraisal
contains all basics of a regular appraisal and is used primarily for homes
short or form appraisal
most comprehensive of all reports, used for commercial and investors
narrative appraisal
the possible use of a property that would produce the greatest net income and thereby develop the highest value
highest and best use
the max value of a property tends to be set by the cost of purchasing an equally desirable and valuable property
substitution
value of a property increases when the supply is short and decreases when there is too much - value increases when the supply is short and decreases when there is little demand
law of supply and demand
more a property or its components are in harmony with the surrounding properties or components, the greater the contributory value
conformity
occur between dissimilar properties - the value of the better quality property is affected adversely by the presence of the lessor quality property and a lesser house will benefit from a larger house
regression and progression
property can increase or decrease in value in expectation of something in the future such as appreciation or rezoning
anticipation
means the value of any component of a property is what it gives to the value of the whole or what is absence detracts from the whole
contribution
is the combining of 2+ adjoining lots into one larger tract to increase their total value
assemblage
when one business attracts another business of similar types - together they may make more money than they would have singularly
competition
real property is constantly changing - expanded, stabilizing, declining or rebirth
change
sales comparison approach is used for
appraising residential property and vacant land
holds that if a buyer will pay a certain price for a property, they will pay a similar price for a “substitute” property of similar characteristics
principle of substitution
steps in the sales comparison approach
- ID comparable sales
- compare comparables to the subject and make adjustments to comparables -
- reconcile values indicated by adjusted comparables for the final value estimate of the subject
used for properties with limited comparable data or income data or for properties where the original cost is particularly applicable
cost approach
cost can be determined by
square foot cost, unit in place, quality survey method
using outside measurement, how many square feet times a cost for either replacement or reproduction of the improvement
square foot cost
based on the construction cost per unit of measure of individual building components
unit in place
quality. and quality of all materials and labor are estimated on a unit costs basis - these factors are added to indirect costs to arrive at the total cost of the structure
quantity survey method
steps of the cost approach
- estimate the value of the land alone as if vacant
- determine the replacement or reproduction cost of the improvements
- deduct all accrued depreciation from the replacement cost
- add the estimated land value to the depreciated replacement or reproduction cost
land _ depreciated
NEVER
3 classes of depreciation
- physical
- functional
- economic
form of depreciation caused by the action of the physical elements
physical
loss of value of an improvement due to functional inadequacies, often caused by age or poor design
functional depreciation
loss of value resulting from extraneous factors that exist outside of the property itself’ environmental, social or economic forces over which an owner has little or no control
economic depreciation
actual age in years of the building, based on building date - cannot be changed
chronological age
differs from the actual age by such variable factors as depreciation, quality of maintenance and the like
effective age
actual age or life of a structure that is considered habitable - defined by the durability of its structural components
physical life
estimated period where an improved property will yield a return over and above economic rent
economic life
the deterioration of an improvement that is not economically feasible to repair is
incurable
based on the present value of the rights to future income
income approach to value
steps in the income approach h
- estimate the annual potential gross income
- deduct an allowance for vacancies to arrive at effective gross income
- deduct annual operating expense from effective gross income to = NOI
- estimate the rate of return that an investor would demand for this investment - cap rate
- divide cap rate into NOI = property’s value
ratio number reflecting the relationship between a property’s price or value and its income
GRM
GRM = _ rent
monthly
GIM = _ income
annual
grantor =
seller
grantee =
buyer
state things you can never do
limiting restrictions
state things you must abide by
affirmative restrictions
grantor decides how the grantee can use the property and creates deed restrictions,(encumbrances) which limit the use of the property
private land use controls
US government is empowered to control land for the benefit of all citizens
public land use controls
right of the US government to make laws to control local property
enabling acts
statement of policies, presentation of how it will be implemented once adopted
master plan
controls density and avoids overcrowding
bulk zoning
requires that new buildings conform to specific types of architecture
aesthetic zoning
encourages zoning as a planning tool to use land for tis highest and best use
directive zoning
reclassification of one piece of property in an area for a specific purpose
spot zoning
describe the positioning of a structure on a lot so that one side rests directly on the lot’s boundary line
zero lot line zoning
produces a high density of housing chapters while max the use of open space
PUD
exemptions to zoning
buffer zones and nonconforming use
may be sought to provide deviation from an ordinance so long as it is before the construction or reconstruction takes place
variance
for a property deemed to be in the public interest contrary to the zoning that exists
conditional use permit
lot and block system
- used to describe properties in residential, commercial and industrial subdivisions
- in a large subdivision, lots may be grouped together into blocks
- surveyor incorporates the survey data into a plat of survey
metes and bounds system
- must begin and end at the point of beginning
2. monuments are fixed objects that serve as markers for the property and are used to establish the parcel’s boundaries
rectangular survey system
- based on intersecting lines
- principal meridians run north and south
- base lines run east and west
- township lines are lines running east and west, parallel with the base line and 6 miles apart
lines on either side of a principal meridian and are divided into 6 mile wide strips by lines that run north and south parallel to the meridian
range lines
townships are _ miles areas formed by the intersection of a township and range line
36
each township is divided into what
36 sections each 1 mile square
one section is equal to _ acres
640
plat survey is used under what method?
lot block
