Real Estate Appraisal Terms Flashcards

Question

Testamentary trust

Answer 1

created according to a will; property placed in a testamentary trust doesn’t avoid probate

Answer 2

parcel of land, the improvement on that land, and a shared area of commonly owned property.

Answer 3

co-ownership with inheritance rights, undivided interest

Answer 4

co-ownership without inheritance rights.

Answer 5

time, title, interest, and possession.

Answer 6

one person owns the property.

Answer 7

conveys possession and control;

Answer 8

conveys possession, control, and title (ownership)

Answer 9

company that owns and operates income-producing real estate and offers investment opportunities to shareholders in those properties

Answer 10

receive most of their revenue from rents derived from those properties

Answer 11

receive most revenue from interest on their investments

Answer 12

Land that’s either prepared for building, or that already contains a building (but where the site and its building are being valued separately).

Answer 13

A professional on-site measurement of lot lines, dimensions, and elements of a property.

Answer 14

An abandoned or otherwise unused commercial or industrial site with suspected contaminants.

Answer 15

With this method, the appraiser applies a factor that represents the construction costs, up to the appraisal date, to the subject building’s original cost.

Answer 16

With this method, the appraiser multiplies the cost per square foot of a recently constructed comparable structure by the number of square feet in the subject building. Generally, this method is the one appraisers use to estimate construction costs.

Answer 17

With this method, the appraiser multiplies the cost per unit of each component part of the subject property’s structure (for example, the material, overhead, labor, and builder’s profit) by the number of units of that component part in the subject property. The total component cost is the cost of a new structure. Generally, component parts are provided in square feet, but some parts, like plumbing fixtures, are provided as complete units.

Answer 18

With this method, the appraiser adds the itemized costs—including direct and indirect expenses—of building or installing all of a new structure’s component parts.

Answer 19

index, square-foot, unit-in-place, and quantity survey

Answer 20

The period of time for which a structure can be used for the purpose for which it was originally intended; also known as useful life.

Answer 21

The amount of time during which the structure is expected to remain standing.

Answer 22

The age a structure appears to be. This can be "older" or "newer" than the structure’s chronological age, depending on the quality of its original construction and the care and updates it’s received since then.

Answer 23

The period of time beginning from the date of the appraisal and extending for as long as the property can remain useful for its original purpose; in terms of an appraisal, a property’s remaining economic life is the most important of these four measures of time.

Answer 24

Yield capitalization is most often used for larger properties where the investor wants a value based on long-term holdings, as well as the effect of debt repayment and potential resale of the property on the ultimate return on investment. For example, a strip mall with 10 retail storefronts would most likely be appraised using yield capitalization.

Answer 25

Direct capitalization is generally appropriate for small- to medium-size properties and those with stable forecast net income. For example, an office building with six stable tenants would likely be appraised using direct capitalization.

Answer 26

GIM is more suitable for five-unit or larger income properties.

Answer 27

GRM doesn’t recognize any operating costs. It’s a rough estimate of how income relates to value and is best used for one- to four-family units where the primary use is as a rental property.

Answer 28

The amount of rent stipulated in a lease

Answer 29

The amount of rent that is typical in the market for comparable property

Answer 30

The long-term trends of rents for comparable types of property

Answer 31

The amount of income a property is estimated to make after deducting vacancy and collection losses from potential gross income

Answer 32

Income projected after deducting losses for vacancy, collection loss, and operating expenses

Answer 33

The amount of income a property can produce if it is fully occupied and earning market rent

Answer 34

The expected vacancy rate and losses from unpaid and uncollectable rent, usually expressed as a percentage of potential gross income

Answer 35

net operating income.NOI is determined by subtracting the operating expenses from effective gross income. The potential gross income is already reflected in the effective gross income, so that value isn’t used in this equation.

Answer 36

A method of accounting that records income when earned and records expenses when incurred

Answer 37

Changes or additions to a structure that either enhance the property's overall value or increase its useful life

Answer 38

A method of accounting that records income when received and records expenses when paid

Answer 39

An amount of money identified to cover the annual cost of repairing or replacing equipment and systems

Answer 40

Expenses that vary depending on another factor, such as occupancy level

Answer 41

Expenses that don't fluctuate in response to sales or other activity, such as the number of tenants