RP UNIT16 Flashcards
What is appraisal?
An opinion of value based on supportable evidence and approved methods
Appraisal reports provide detailed market information.
Who provides an unbiased opinion of value in real estate?
Appraiser
An appraiser is an independent professional who performs appraisal services for a fee.
What are the Appraiser Independence Requirements (AIR)?
Created by Fannie Mae to ensure appraiser independence.
What does FIRREA stand for?
Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
What is a federally related transaction?
Any real estate-related financial transaction involving a federal financial institution or regulatory agency.
Are appraisals required for residential properties valued at $400,000 or less?
No, they need not be performed by licensed or certified appraisers.
What type of appraiser is required for nonresidential properties valued above $500,000?
Certified appraiser.
Who sets state licensing and certification criteria for appraisers?
Appraisal Qualifications Board (AQB) of the Appraisal Foundation.
What does USPAP stand for?
Uniform Standards of Professional Appraisal Practice.
What is the purpose of a Comparative Market Analysis (CMA)?
To assist a seller in setting the listing price for a property based on recently sold properties, current listings, and expired listings.
What is a Broker’s Price Opinion?
A less-expensive alternative for evaluating property, often used by lenders.
What is the first step in the appraisal process?
Define the problem. What type of value is being sought?
What does DUST stand for in characteristics of value?
- Demand
- Utility
- Scarcity
- Transferability
Define market value.
The most probable price a property will bring in a fair sale.
What is the difference between market value and market price?
Market value is an estimate based on analysis; market price is the actual sales price.
What principle states that the maximum value of a property is set by the cost of purchasing an equally desirable replacement?
Substitution.
What is the highest and best use of a property?
The most profitable single use to which a property can be adapted.
What is the law of diminishing returns?
Additional improvements do not increase income or value.
What is the cost approach to value?
Estimates property value based on the cost of land and construction minus depreciation.
What is external obsolescence?
Loss in value caused by external factors beyond the property owner’s control.
What is the primary focus of the income approach?
Present value of the rights to future income.
What is the formula for capitalization rate?
Annual net operating income divided by sales price.
What are gross rent multipliers used for?
To estimate value based on gross monthly rent of recently sold similar properties.
What is the purpose of reconciliation in the appraisal process?
To obtain the final opinion of value by analyzing findings from the three approaches.
