Real Estate Appraisal 1

Question 1

In what 2 ways is appraisal referred to?

Answer 1

1) The process by which an appraiser reaches certain conclusions
2) The written report that the conclusions are stated on

Question 2

Define appraisal

Answer 2

An unbiased, knowledgeable, supported estimate or opinion of value

Question 3

Why does the estimate of a value have to be documented?

Answer 3

If you tell someone a value that changes they can sue you

Question 4

Typical assignments for appraisers

Answer 4

Refinance of loans
Equity loans/secondary mortgage
Real estate sales
New construction
Estate tax
Gifts/donations
Condemnation proceedings
Divorce cases
Tax assessment
Property insurance

Question 5

Four elements that create value

Answer 5

Demand
Utility- usable
Scarcity
Transferability- market

Question 6

Physical/environmental influences

Answer 6

Tornado, hurricane

Transportation network

Question 7

Economic influences

Answer 7

Unemployment
Interest rate changes
Stock market crashes
*More borrowing when lower interest rates

Question 8

Government and legal influences

Answer 8

Zoning
Military bases
Tax incentives for industry

Question 9

Social influences

Answer 9

Population growth
Baby boom
Living standards

Question 10

Market value

Answer 10

Most probably sales price

Question 11

Arms length

Answer 11

Values are between independent parties (not related)

Question 12

How are values considered arms length?

Answer 12

Buyer and seller typically motivated
Both parties well informed and acting in best interests
Reasonable exposure time
Payment in cash or comparable
No affect on price by creative financing or sales concessions

Question 13

Investment value

Answer 13

The value to you, not the value to the average buyer or seller (market value)

Question 14

Assessed value

Answer 14

The value used for property taxes

Question 15

Liquidation value

Answer 15

Quick-sale value for foreclosure

Question 16

Book value

Answer 16

Used for estate tax

= cost - depreciation

Question 17

Business value

Answer 17

Includes other than just real estate

-When would business value be market value? apartments-rent

Question 18

Valuation of a site

Answer 18

Examining the use of the site and deciding which is best to find the max market value
(highest and best use)

Question 19

What 2 ways is a property examined for highest and best use?

Answer 19

As improved

As if vacant

Question 20

4 tests for highest and best use

Answer 20

Physically possible (fit)
Legally permissible (zoning)
Financially feasible (return)
Maximally productive (use)

Question 21

Property life cycle

Answer 21

Growth
Equilibrium
Decline
Revitalization

-Helps to get the final value