Procedures Key Terms Flashcards

1
Q

PGI

– The income that could be produced by a property in an ideal situation, with no
vacancy or collection losses.

A

Potential Gross Income

i.e., ALL the income produced from a property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

EGI

– Potential gross income, less vacancy and collection losses.

A

Effective Gross Income

EGI = PGI less
Vacancy & Collection loss only.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

– Day-to-day costs of running a building, such as repairs and maintenance, but not including
debt service or depreciation.

A

Operating Expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

NOI

– Income after expenses.

A

Net Operating Income

NOI = EGI less operating expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

GRM

  • A number derived from comparable rental property in an area, which is then used in
    an income method for indicating a value conclusion.
A

Gross Rent Multiplier

GRM is determined by dividing the sold price of the comparable by the gross market rent.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Age Life Method

– Estimates depreciation as a ratio of the effective age of the improvements to the total economic life.

A

Effective age divided by the total economic life = depreciation percentage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Adjustment application

– Adjustments are only made to the comparable sale price and are made in sequence.

A

When the comparable is superior, subtract –

When the comparable is inferior, add.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Sequence of Adjustments:

A
  1. Property rights conveyed
  2. Financing terms
  3. Conditions of sale
  4. Market conditions
  5. Location
  6. Physical characteristics

(the % of 5 and 6 can be combined into one sum before subtracting the sum from adjusted price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

– A method for determining the cost of a building that uses the cost of recently built
comparable buildings as a basis for estimating the cost of replacing the subject property.

A

Comparative Unit Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

IRV (Income, Rate, and Value)

– The formula to determine real estate value can always be found with IRV.

The IRV formula is:

A

Net Operating Income/Rate = Value

By rearranging the IRV formula, you can solve for any one variable if you have the other two.

For Example: Net Operating Income/Capitalization Rate = Value

Income/Value = Rate
Income/Rate = Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q
  • Process of converting property income into a value estimate.
A

Capitalization

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

– Expressed as a percentage; net operating income divided by effective gross
income.

A

Net Income Ratio (NIR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

– Used to interpret a property’s single year net operating income to the property’s value
using direct capitalization (symbolized by RO).

A

Overall Capitalization Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

– An appraisal procedure that is used in the income analysis of a property. Cash flows are
converted to present values using a rate of return that would be required to attract an investor.

A

Discounted Cash Flow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

– Analyzing the conclusions within each approach that was developed; analyzing the values derived from the different appraisal approaches to arrive at a final opinion of value.

A

Reconciliation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the two reporting options permitted by USPAP?

A

Appraisal Report and Restricted Appraisal Report.

(AKA Reporting Options)

17
Q

– Any dwelling unit built on a permanent chassis and attached to a permanent
foundation system. Reported on 1004C Form

A

Manufactured Housing

18
Q

– Factory built such as pre-fabricated, panelized or sectional housing. Is not considered manufactured.
Report on 1004 URAR Form

A

Modular