part 3 unit 19- Economics and Principles of Real Property Valuation

Question 1

the study of the production, distribution, and consumption of goods and services through measurable variables

Answer 1

economics

Question 2

4 basic elements in order to produce good and services

Answer 2

land, labour, capital, entrepreneurial skills

Question 3

capitalistic economies

Answer 3

operate on individual decision making

Question 4

Command economies

Answer 4

-based on gov decisions regarding goods/services

Question 5

measures total production by Canadian residents, corporations and individuals, within and beyond Canadian borders

Answer 5

Gross national Product

Question 6

gauges production located solely within the country.

Answer 6

gross domestic product

Question 7

business indicators (supply)

Answer 7

-national production
-utilization rates
-manufacturing activity

Question 8

consumer indicators (demand)

Answer 8

-retail sales
-consumer confidence
-consumer disposable income
-consumer price index

Question 9

market bubble

Answer 9

rapid increase in market value

Question 10

in order for something to have value:

Answer 10

-be real or perceived need for it
-supply must be scarce
-useful and efficient

Question 11

subjective value, example

Answer 11

-based on individuals perception of an items benefit
-someone selling a family rocking chair may hold value to them

Question 12

objective value, example

Answer 12

-based on the cost of creation and value in the marketplace
-furniture dealer will value the rocking chair by its state

Question 13

“A valuation resulting from the informed, intelligent, and voluntary actions of both the buyer and seller, where neither of them is acting from necessity.”

Answer 13

Market value

Question 14

4 assumptions of market value

Answer 14

-reasonable time
-no pressure
-prudent behaviour
-informed buyer/seller

Question 15

Market value is

Answer 15

price people will pay without having to reproduce the property

Question 16

factors that influence value

Answer 16

physical, social, governmental, economic

Question 17

principle of anticipation

Answer 17

-Buyers see benefit for the future when buying property

Question 18

principle of balance

Answer 18

highest and best use

Question 19

principle of change

Answer 19

indicates an appraiser’s estimate is effective only for a specific time

Question 20

when land is in transition, it cannot be appraised for more than one use.

Answer 20

principle of consistent use

Question 21

-the value of a property is determined by how much the property contributes to a net income (commercial use) or market value (residential use).
-renovating something to increase value by a little bit might not be worth it

Answer 21

principle of contribution

Question 22

principle pf substitution

Answer 22

-buyer will not pay more for a property than the cost of substituting it.