Real Estate Valuation and Market Analysis Flashcards
capitalization approach
An appraisal method used by an appraiser to
arrive at a property’s value based on the present
worth of a property’s future net operating
income.
loan-to-value ratio
A ratio stating the outstanding mortgage
balance as a percentage of the mortgaged
property’s fair market value.
yield
The interest earned by an investor on an
investment (or by a bank on the money it has
loaned). Also, called return.
home energy audit
An audit conducted by a Home Energy Rater
evaluating the energy efficiency of the home.
capital gain
At resale of a capital item, the amount by which
the net sale proceeds exceed the adjusted
cost basis (book value). Used for income tax
computations. Gains are called short or long
term based upon length of holding period after
acquisition. Usually taxed at lower rates than
ordinary income.
opportunity cost
The cost of an action that is forgone in choosing
to take an alternative action.
comparable sales
Sales which have similar characteristics as the
subject property and are used for analysis
in the appraisal process. Commonly called
comparables, they are recent selling prices of
properties similarly situated in a similar market.
market comparison
An appraisal method used by an appraiser to
arrive at a property’s value by a comparison of
recent sales prices of similar properties, adjusted
for differences in the properties
gross rent multiplier
A number which, times the gross income of a
property, produces an estimate of value of the
property. Example The gross income from an
unfurnished apartment building is $200,000 per
annum. If an appraiser uses a gross multiplier of
7%, then it is said that based on the gross multiplier
the value of the building is $1,400,000.
replacement cost
The dollar amount required to replace an
improvement at its current value.
comparison approach
A real estate comparison method which
compares a given property with similar or
comparable surrounding properties; also called
market comparison.
appraisal
An individual’s opinion of a property’s value on
a specific date, documented in an appraisal
report.
return on investment
A measure of profits in relation to capital
invested.
fair market value
The price a reasonable, unpressured buyer would
pay for property on the open market.
broker price opinion
An agent’s opinion of a property’s fair market
value based on comparable sales.
