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CA RE Principles > RE Appraisal > Flashcards

RE Appraisal Flashcards

1
Q

Estate in Land means

A

Right of Possession

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2
Q

6 Rights in the Bundle attached to the fee simple absolute estate

A

Right of quiet enjoyment
Right to give away
Right to sell by deed
Right to will
Right to exclude
Right to control with what’s allowed by law

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3
Q

2 types of fee simple defeasible

A

Determinable
Condition Subsequent

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4
Q

Determinable vs Condition Subsequent

A

reversion of the estate back to the original grantor is not automatic in CS

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5
Q

2 types of life estate & definitions

A

conventional (anyone) and legal (husband/wife/family members)

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6
Q

Partition Suit

A

can terminate a joint tenancy or a tenancy in common

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7
Q

Lucas v. South Carolina Coastal Council

A

Supreme Court ruled that a taking is unconstitutional if it
prohibits the construction of any habitable or productive improvement on the owner’s land and eliminates all economic benefits associated with the land.

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8
Q

Kelo v. City of New London

A

government may condemn property and then sell it to a private developer, concluding that the increased tax revenue and economic development would benefit the public.

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9
Q

Plat

A

depicts the arrangement of buildings, roads, and
other services for development.

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10
Q

Floodplains

A

land areas adjacent to rivers and
streams that are subject to recurring flooding.

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11
Q

Incentive zoning

A

system by which developers receive zoning incentives on the condition that specific physical,
social, or cultural benefits are provided to the community.

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12
Q

5 economic characteristics of land

A

Area (situs)
Availability
Improvements
Permanence
Externalities

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13
Q

International Trends that Impact Investment

A

balance of trade
foreign exchange rates
commodity prices
wages
interest rates
industrial production
sales volumes
imports and exports

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14
Q

National/Regional Trends that Impact Investment

A

gross national and domestic product
national income
balance of payments
price indexes
interest rates
employment and unemployment rates
housing starts
building permits
construction expenditures

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15
Q

Local Trends that Impact Investment

A

population
household formation
economic base
employment rates and stability
wages
household income levels
land use changes
technology changes
government subsidies

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16
Q

Basic Determinants of Need for RE

A

Population size, composition, and distribution

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17
Q

According to FIRREA, a property’s market value is a particular price provided that ____

A

it is a cash price or its equivalent.

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18
Q

Assumptions for Market Value Definition

A

Cash transaction

Exposed on the open market for a reasonable period

Parties have full information about market conditions and about potential uses

No abnormal pressure on either party to complete the transaction

Parties are not related (“arm’s length” transaction)

Marketable and conveyable Title

“normal consideration,” that is, price does not include hidden influences such as special financing deals, concessions, terms, services, fees, credits, costs, or other types of consideration

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19
Q

FIRREA Definition of Market Value

A

Parties are typically motivated

Parties are well informed or well advised and acting in what they consider their own best interests

Reasonable time is allowed for exposure in the open market

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto

Price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

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20
Q

Efficient Market Assumptions

A

Items are homogeneous and easily substituted for each other

Quality is uniform, leading to relatively low and stable prices

Large number of participants competing, with no one with a large enough share to directly influence price

Few restrictions or regulations

Competition keeps supply and demand close to a condition of balance and equilibrium

Participants are knowledgeable and fully informed about the market; information is readily available

Organized mechanism brings buyers and sellers together

Sellers can enter and leave the market easily in response to changes in demand

Items are supplied quickly, transported easily, and consumed quickly

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21
Q

Open market operations

A

when the Fed sells or buys government securities (bonds) as a means of controlling the supply of, and demand for, money.

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22
Q

2 Levels of Market Analysis

A
  1. General View of Entire Market (w/o any specific property)
  2. Focused View of the Specific Competitive Market
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23
Q

2 Types of Market Delineation

A

Market Segmentation and Product Disaggregation

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24
Q

Market Segmentation

A

differentiating most likely users of a property from everyone else

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25
Q

Product Disaggregation

A

Differentiating the subject property from other properties

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26
Q

5 Things Appraiser Looks at During Market Delineation

A

Market Area
Property Type
Property Features
Substitute Properties
Complementary Properties

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27
Q

11 market indicators for Residential Demand

A

Population
Employment & Income
Financial Conditions
Owner/Renter Mix
Land Use
Tax Structures
Appeal Factors
Service & Support Facilities
Transportation
Price Changes
Time on Market

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28
Q

3 Approaches for Trade Area Delineation

A

Population and expenditure approach
Drive-time approach
Traffic count approach

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29
Q

Population and expenditure approach

A

delineates the area around the location which contains enough people and income to generate the required sales dollars for the existing or proposed retail property

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30
Q

Drive-time approach

A

Delineates a radius for the location based on the time consumers are willing to drive to purchase the type of good.

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31
Q

Traffic count approach

A

the area that has the amount of passing traffic necessary to provide sufficient demand at the location to support the store.

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32
Q

2 Step Process for Measuring Retail Demand

A
  1. Estimate demand in dollars in the trade area
  2. Convert dollar demand into square footage number
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33
Q

9 Market Indicators for Retail Demand

A

Population
Income
Sales Retention in Trade Area
Required Sales Volume
Vacancy Rates
Sales Captured Outside Trade Area
Land Use
Transportation
Appeal Factors

34
Q

8 Market Indicators for Office Demand

A

Office-using employers
Worker Space needs
Vacancy and absorption
Class demand changes
Land use
Transportation
Appeal Factors
Financial Conditions

35
Q

8 Market Indicators for Industrial Demand

A

Industrial-space-using employers
Land Use
Raw Materials
Labor Pool
Transportation
Trade Barriers
Demand for Type
Employment

36
Q

5 Things Industrial Demand can be disaggregated by

A

Type of user
Rent level
Class of building
Geographical submarket
Size of user

37
Q

4 Things Appraisers should examine

A

Current Volume of new housing
Past trends to indicate if volume will decline
Residential construction costs
Trends in labor force

38
Q

10 General Influences on Supply

A

Role of Gov’t
Labor force
Construction costs
Vacancy rates
Absorption
New Construction
Conversions to Alternate Uses
Vacant land available for development
Total stock in market/Available stock
Owner vs tenant occupancy

39
Q

3 Important Factors to Putting Demand and Supply Together

A

Business Trends
Employment & Income
Financing

40
Q

Absorption

A

Rate at which new supply is being occupied in the market

41
Q

When the appraiser looks at property features or substitute properties the process is called?

A

Segmentation

42
Q

Appraisal

A

Estimated opinion of value

43
Q

7 Principles of Appraisal

A

Estimated opinion of value.
“Opinion” must be properly supported with both general and specific data.
Must refer to a specific date
Estimated value must be properly defined.
Property must be described in an accurate, adequate manner.
Appraiser must have the required education and experience
Appraiser must be an objective, unbiased party

44
Q

5 Primary Attributes of Appraiser

A

Adequate Knowledge
Appraisal Experience
Objectivity
Personal & Professional Integrity
Unyielding Willingness to Do Work on a Mutually Agreed-Upon Fee on a Timely Basis

45
Q

Most people feel appraisers should have _____ years of experience before conducting appraisals on their own

A

at least 2

46
Q

7 Steps in the Appraisal Process

A
  1. Define the problem and scope
  2. Collect, record, and verify the required data
  3. Determine the property’s highest and best use
  4. Estimate land value
  5. Use 3 approaches to estimate value
  6. Reconcile the estimated values to determine the final value estimate
  7. Communicate the final value estimate
47
Q

2 Types of Data for Appraisal

A

Specific data
General data

48
Q

6 Techniques in Valuing Land

A

Direct Sales Comparison
Allocation
Extraction
Subdivision development analysis
Land residual
Ground rent capitalization

49
Q

Direct Sales Comparison

A

sales of comparable vacant parcels are analyzed and adjusted to indicate a value for the subject land

Most reliable method for land value estimation

50
Q

Allocation

A

a typical ratio of land value to total value is derived from comparable properties and applied to the subject.

51
Q

Extraction

A

land value is estimated by deducting the depreciated cost of improvements on a property from the total sale price of the property

52
Q

Subdivision development analysis

A

costs and profit are deducted from estimated gross sale prices of subdivided and finished lots, and net sales proceeds are discounted to present value

53
Q

Land residual

A

net operating income attributable to the land is capitalized at market rates to obtain land value

54
Q

Ground rent capitalization

A

ground rent of the subject is capitalized at market rates

55
Q

3 Approaches to Estimate Value

A

Cost Approach
Income Approach
Sales Comparison Approach

56
Q

Sales Comparison Approach

A

appraiser examines the price (or price per unit area) of similar properties recently sold or currently being sold in the marketplace to come up with comparable value assessments

57
Q

Cost Approach

A

estimates a property’s value by adding the land value to the depreciated value of any improvements to the property

58
Q

Income Approach

A

capitalizes a single year’s income or discounts a projected income stream to derive an indication of the property’s value

59
Q

appraiser must never _____ the values reached by the three approaches to value to arrive at the final value estimate

A

simply average

60
Q

3 Forms to Communicate the Appraisal

A

Short- or Long- Form Narrative Reports
Form Reports
Letter/Oral Reports

61
Q

4 Areas of the Valuation Trade in the USPAP Ethics RUle

A

Conduct
Management
Confidentiality
Record keeping

62
Q

Goal of the USPAP Ethics Rule

A

“Promote and preserve the public trust inherent in appraisal practice [through] the highest standards of professional ethics.”

63
Q

The Gramm-Leach-Bliley Act of 1999

A

deals with privacy laws and regulations regarding appraiser confidentiality

64
Q

USPAP’s Standard 1

A

“In developing a real property appraisal, an appraiser must identify the problem to be solved and the scope of the work necessary to solve the problem, and correctly complete research and analysis necessary to produce a credible appraisal.”

65
Q

8 Steps of Defining the Problem (Identifying __)

A

Client and intended users

Intended use

Type of value sought

Effective date

Real property and specific property rights

All assumptions

Limiting conditions and hypothetical conditions

Appraiser’s competence to undertake the assignment

66
Q

8 Types of Values Sought in Appraisal

A

Market value
Insurable value
Salvage value
Rental value
Replacement value
Investment value
Value-in-use
Liquidation value

67
Q

extraordinary assumption

A

“an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions.”

68
Q

hypothetical condition

A

“that which is contrary to what exists but is supposed for the purpose of analysis.”

69
Q

USPAP Definition of Assumption

A

That is what is taken to be true

70
Q

4 Types of Neighborhood Influence Forces

A

Physical/Environmental
Economic
Governmental
Social

71
Q

In a site appraisal the conditions of subsoil, specifically its suitability for a foundation and its bearing quality are usually defined by a(n) ____

A

engineering study

72
Q

3 Primary Zones in a Residential Lot

A

Public, private, service

73
Q

7 Steps in the Gross Living Area

A
  1. Measure around the outside of the house
  2. Count each floor above grade
  3. Remember all above-ground habitable living area
    4.If it is not above-grade, basements should not be included
  4. No garages
  5. Include porches only if heated and finished
  6. If attic is unfinished and is <5ft tall, do not include.
74
Q

3 Types of Foundation Walls

A

Slab-on-ground
Basement
Crawl space

75
Q

all real property is assumed to be valued

A

as fee simple

76
Q

leasehold estate for the tenant is a form of

A

personal property

77
Q

Appraisers play a vital role in the real estate market because they are looked to as

A

value experts and financial consultants.

78
Q

On the supply side of the market analysis, general influences of value include

A

the labor force.

79
Q

Of the following forms of title evidence, which provides the best evidence of ownership?

A

A Torrens certificate, if available

80
Q

four production agents of the balance principle

A

Land, labor, capital, and management

81
Q

Five methods of direct capitalization

A

Contractor’s/Cost Method, Development/Residual Method, Comparable Method,
Investment/Income Method,
and the Accounts /Profits Method

CA RE Principles (6 decks)

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