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Real Estate Broker Course > Real Estate Appraisal Terms > Flashcards

Real Estate Appraisal Terms Flashcards

1
Q

Appraisal

A

estimate of value for a specific purpose, party, and property as of a specific date

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2
Q

Real estate

A

land, plus all things permanently attached to it naturally or artificially

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3
Q

Real property

A

real estate, plus the interests, benefits, and rights included with ownership.

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4
Q

Real property ownership rights

A

enjoyment, disposition, possession, control, exclusion

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5
Q

Personal property

A

everything that’s not real property

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6
Q

Improvements

A

artificial attachments to land (e.g., fencing, buildings, and walkways)

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7
Q

Fixtures

A

part of real property; included with a sale of real property unless the parties negotiate differently

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8
Q

Five tests to determine if an item is a fixture: MARIA

A

Method of annexation, Adaptability for use, Relationship of the parties, Intention in placing, and Agreement of the parties

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9
Q

“M”ARIA

A

Method of annexation

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10
Q

M”A”RIA

A

Adaptability for use

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11
Q

MA”R”IA

A

Relationship of the parties,

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12
Q

MAR”I”A

A

Intention in placing

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13
Q

MARI”A”

A

Agreement of the parties

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14
Q

Three primary forms of legal descriptions

A

lot and block, metes and bounds, and rectangular survey

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15
Q

Rectangular survey system

A

divides land into townships and further into sections and fractions of sections

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16
Q

Section

A

640 acres (one square mile).

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17
Q

Township

A

36 sections

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18
Q

Deed restriction

A

may be placed on a deed anytime during ownership; may be permanent or for a specified period

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19
Q

Encroachments

A

structures or objects illegally built on another’s land

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20
Q

Fee simple

A

conveys all rights of ownership

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21
Q

Fee simple defeasible

A

the property holder owns the property subject to a condition

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22
Q

Land trust

A

formed to hold real estate; real property is the only asset within the trust

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23
Q

Three parties to a trust

A

the trust maker (trustor), person in charge of carrying out the terms of the trust (the trustee), and the beneficiary

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24
Q

Living trust

A

created during a person’s lifetime and is established to provide a means to convey property

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25
Q

Testamentary trust

A

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

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26
Q

Ownership in a PUD

A

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

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27
Q

Tenancy in common

A

co-ownership with inheritance rights, undivided interest

28
Q

Joint tenancy

A

co-ownership without inheritance rights.

29
Q

Joint tenancy four unities

A

time, title, interest, and possession.

30
Q

Estate in severalty

A

one person owns the property.

31
Q

Leasehold estate

A

conveys possession and control;

32
Q

Freehold estate

A

conveys possession, control, and title (ownership)

33
Q

Real estate investment trust (REITs)

A

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

34
Q

Equity REITs

A

receive most of their revenue from rents derived from those properties

35
Q

Mortgage REITs

A

receive most revenue from interest on their investments

36
Q

Site

A

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

37
Q

Survey

A

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

38
Q

Brownfield

A

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

39
Q

Index method

A

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.

40
Q

Square-foot method

A

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.

41
Q

Unit-in-place method

A

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.

42
Q

Quantity survey method

A

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.

43
Q

Four basic methods to find the reproduction cost of a structure

A

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

44
Q

Economic life

A

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.

45
Q

Physical life

A

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

46
Q

Effective age

A

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.

47
Q

Remaining economic life

A

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.

48
Q

Yield Capitalization

A

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.

49
Q

Direct Capitalization

A

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.

50
Q

Gross Income Multiplier

A

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

51
Q

Gross Rent Multiplier

A

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.

52
Q

Contract rent (aka scheduled rent)

A

The amount of rent stipulated in a lease

53
Q

Economic rent (aka market rent)

A

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

54
Q

Historical rent

A

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

55
Q

Effective gross income

A

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

56
Q

Net operating income

A

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

57
Q

Potential gross income

A

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

58
Q

Vacancy and collection losses

A

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

59
Q

NOI

A

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.

60
Q

Accrual basis accounting

A

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

61
Q

Capital improvements

A

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

62
Q

Cash basis accounting

A

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

63
Q

Reserves for replacement

A

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

64
Q

Variable expenses

A

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

65
Q

Fixed expenses

A

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

Real Estate Broker Course (1 decks)

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