Property & Valuation Flashcards
Physical Characteristics of Real Property
immobility
indestructability
nonhomogenity (uniqueness)
Economic Characteristics of Real Property
availability (or scarcity) = supply and demand
modification by improvement
permanence of investment (because of physical properties)
location (situs) - GREATEST EFFECT ON PROPERTY VALUE
Physical factors affecting land use
natural: location, topography, soil, size, shape, flooding, minerals
artificial: streets, highways, surrounding land, availability of sewage systems, water (utility services), etc
Economic factors affecting land use
property tax, tax rates, wage/employment levels, financing availability, community growth, government regulations, etc.
highest and best use
consideration of all physical and economic factors to determine the use of the land that will provide a residual income to the land that results in the highest present value of the land.
rollover rule
provision in tax law no longer in effect that provided that the tax on any gain realized in the sale of a principal residence would be postponed if the sale and purchase qualified.
Types of Value (5)
market value assessed value insurance value mortgage value condemnation value
basic valuation principles (8)
highest and best use substitution supply and demand conformity anticipation contribution competition change
Causes of depreciation (3)
physical deterioration
functional obsolescence
economic obsolescence
market data/comparison approach
value estimate most relevant for single family, owner-occupied dwellings, and vacant land
income approach
aka appraisal by capitalization
most appropriate for rental income property
cost approach
aka appraisal by summation
primary appraisal method for all other types of property
gross rent multiplier
may be appropriate for income property; income approach is preferred
appraisal report
value estimate based on correlation of estimates obtained by all three approaches (CMA, cost and income)
rental interest
both concepts of contracts and estates
