Real 1820 midterm 2 week 5

Question 1

Real Estate Appraisal:

Answer 1

Is the practice of estimating
the market value of a property
- performed by a licensed or
certified appraiser
- must have your Accredited Appraiser
Canadian Institute (AACI) designation.

Question 2

when is the most common time you will need to get a house appraisal

Answer 2

when buying a home with a mortgage

Question 3

Three Methods of Appraisal: Cost Approach

Answer 3

used for more Unique Properties (industrial) as there may be no comparable or income streams to determine a value
- only approach that takes into consideration depreciation

Question 4

Cost approach Formula (Land Cost + (cost of new structure - depreciation)

Answer 4

Land cost (Land acquisition + site prep) + structure cost ( structure sf x similar structure costs) - depreciation( cost of new structure x effective age/economic life)

Question 5

effective age

Answer 5

An appraisers estimate of the physical and functional conditions of a building in years

Question 6

Economic Life:

Answer 6

How long a property is expected to remain in service from its construction to being replaced. Economic life is usually less than physical life because most of the time the property is replaced due to functional inefficiency or economic reasons.

Question 7

Three Methods of Appraisal: Sales Comparison

Answer 7

• suitable for fully or semi detached, condo units
  An approach to estimating the market value of a subject property by studying the recent sale price of comparable property which are similar to the subject property in the same or similar real estate market

Question 8

Steps For Sales Comparison Approach

Answer 8

1.) select comparable properties (location, physical characteristics, time)
2.) Adjust comps towards the subject property
3.) Develop a conclusion of value

Question 9

Requirements for Comps

Answer 9

1.) must be arms length (buyer and seller are not related in any way)
2.) must be physically similar to subject property
3.) must be sold at time reasonably close to. the appraisal date of the subject properties (within one year)

Question 10

Sales Comparison Adjustments

Answer 10

sale time, size, age, features, quality, location

Question 11

The market value of the
subject property =

Answer 11

weighted average of the
adjusted prices for the
comps.

Question 12

Three Methods of Appraisal: Income Approach

Answer 12

• Suitable for income for producing income such as offices
  The Income Approach is used to estimate the market value of a property based on the income that the property generates

Question 13

How much you pay for the property is simply equal to the amount of income
you expect to receive from the property

Answer 13

Market Value = Discounted value of future income.

Question 14

The Value of Money Income Approach

Answer 14

present value (PV) = Future Value (FV)/ (1+ R) r= intrest rate ^n. n=# of yeatrs

Question 15

capitalization rate:

Answer 15

the expected rate of return on a real estate investment property.
Cap rate= Net operating Income/ Property Asset Value

Question 16

Annuity

Answer 16

a stream of equal payments at regular intervals over a period of time