Section 16: Property Valuation and Appraisal Flashcards
Property Valuation and Appraisal:
Appraisals Defined:
Value. This defines Real Estate. But __________o finds “Value”
Wh
Property Valuation and Appraisal:
Appraisals Defined:
* __________:
Act or process of developing an opinion of value.
Appraisal
Property Valuation and Appraisal:
Appraisals Defined:
* Appraisal:
* Real Estate Appraisals are used to either determine the value of __________ or to establish an appropriate sales price of real property.
Real Property
Property Valuation and Appraisal:
Appraisals Defined:
* Appraisal:
o Appraisals are only ‘__________’ and are not a ‘fact’.
Informed Opinion
Property Valuation and Appraisal:
Appraisals Defined:
* Appraisal:
o Opinions are derived from those who are trained to give accurate knowledge about a __________ of property, it’s location and all factors that determine value.
Parcel
Property Valuation and Appraisal:
Appraisal Facts:
* Appraisals can be ordered by __________ on any property.
Anyone
Property Valuation and Appraisal:
Appraisal Facts:
* Banks, Lenders, __________, Owners, and Speculators are examples of who can order an appraisal.
Government
Property Valuation and Appraisal:
Appraisal Facts:
* Banks, Lenders, Government, Owners, and __________ are examples of who can order an appraisal.
Speculators
Property Valuation and Appraisal:
Appraisal Facts:
* A licensed agent would have a __________ which is their commission if the property closes so their opinion is biased.
Financial Interest
Property Valuation and Appraisal:
Appraisal Facts:
* NOTE: Lenders most often __________ an appraisal before issuing a loan to ensure that the money the seller is asking meets the value of a non-interested licensed 3rd party.
Require
Property Valuation and Appraisal:
Appraisal Facts:
Typically, the __________ of a property will pay for an appraisal that was ordered by a bank/lender.
Buyer
Property Valuation and Appraisal:
Appraisal Facts:
* If paid for by the Purchaser. That appraisal is now ‘__________’ of the “Buyer”.
Personal Property
Property Valuation and Appraisal:
Appraisal Facts:
* The __________ does NOT own the appraisal.
Bank
Property Valuation and Appraisal:
Appraisal Facts:
* The __________ don’t own the appraisal and are NOT entitled to see a copy.
Sellers
Property Valuation and Appraisal:
Appraisal Facts:
* The appraisal is shared IF and WHEN a property does NOT __________ or __________ expected appraised value.
Meet or Exceed
Property Valuation and Appraisal:
Appraisal Facts:
* Sellers can __________ buyers for a copy but legally NOT entitled to it.
Ask
Property Valuation and Appraisal:
Appraisal Facts:
* If the property meets or exceeds the value listed in the sales contract, the bank or lender will lend AGAINST the property knowing that their ‘__________’ is covered by its value in case of loss.
Asset
Property Valuation and Appraisal:
* __________:
In an effort to prevent collusion or fraud, lending institutions use outside companies to hire 3rd party appraiser on a random basis.
Appraisal Management Companies (AMC)
Property Valuation and Appraisal:
* Appraisal Management Companies (AMC):
* The appraiser would have no __________ of who the lender is, who the borrower is, or where the property is in advance.
This is a preventative measure to ensure that the lender and the appraiser don’t collude to determine a fixed price. This was found to be a problem in the past and this measure acts as a stop to this practice, by making the appraiser assigned to the file, random.
Knowledge
Property Valuation and Property Valuation and Appraisal:
* Appraisal Management Companies (AMC):
* The appraiser in this case would have no knowledge of the lender, borrower or property, nor SHOULD they know the expected __________.
Sales Price
Property Valuation and Property Valuation and Appraisal:
* Appraisal Management Companies (AMC):
* The appraiser has NO __________ in the transaction and as such is forming their opinion of value ONLY.
Interest
Property Valuation and Property Valuation and Appraisal:
* Appraisal Management Companies (AMC):
* Most often, we as real estate agents will __________ appraisals when representing buyers and sellers.
Discuss
Property Valuation and Property Valuation and Appraisal:
* Appraisal Management Companies (AMC):
* If the property meets or exceeds the value listed in the sales contract, the bank or lender will lend __________ the property knowing that ‘their asset’ is covered in case of loss
Against
Property Valuation and Appraisal:
Appraisers:
* An appraiser is an individual who is __________ by the state authority.
Licensed
Property Valuation and Appraisal:
Appraisers:
o Board of Appraisers falls under the jurisdiction of the __________.
Arizona Department of Financial Institutions [AZDFI]
Property Valuation and Appraisal:
Appraisers Duties:
* In the state of AZ there are different __________ of appraisers, and they must pass a state exam.
Levels
Property Valuation and Appraisal:
Appraisers Duties:
o Trainee Appraiser must work for __________ Years as an Apprentice to a licensed appraiser.
Subject to direct supervision by a supervising appraiser who is certified in good standing.
3 Years
Property Valuation and Appraisal:
Appraisers Duties:
o Trainee Appraisers must work under direct supervision by a supervising appraiser for the required hours:
o __________:
2,000 Hours in no fewer than 12 months.
Licensed Residential
Property Valuation and Appraisal:
Appraisers Duties:
o Trainee Appraisers must work under direct supervision by a supervising appraiser for the required hours:
o __________:
2,500 hours in no fewer than 24 months.
Certified Residential
Property Valuation and Appraisal:
Appraisers Duties:
o Trainee Appraisers must work under direct supervision by a supervising appraiser for the required hours:
o __________:
3,000 hours in no fewer than 30 months.
Certified General
Property Valuation and Appraisal:
Appraisers Duties:
* Every 2 years, appraisers must complete __________ Hours of Continuing Education.
28 Hours
Property Valuation and Appraisal:
Appraisers Duties:
* Every __________ Years, appraisers must complete 28 Hours of Continuing Education.
2 Years
Property Valuation and Appraisal:
Appraisers Duties:
* Appraisers are paid by the Lending Institution, Owner or a __________.
3rd Party
Property Valuation and Appraisal:
Appraisers Duties:
o Must be __________ to the transaction so as to not influence value.
Neutral
Property Valuation and Appraisal:
Appraisers Duties:
o Appraisers are NOT paid on the __________ of the appraisal.
o ONLY paid for their time and the amount of work involved.
Results
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
* We as real estate agents are NOT licensed to do formal appraisals but can provide __________ to clients with a Comparative Market Analysis (CMA).
Sales Data
Property Valuation and Appraisal:
* C.M.A. means __________.
Comparative Market Analysis
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
* A study of the prices of similar properties using both real time and historical data that gives an idea of __________ and __________ market value for a subject property.
Current and Future
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
* Agents perform a comparative market analysis for their clients to help them determine a price to __________ their home at when selling a home.
List
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
* Agents perform a comparative market analysis for their clients to help them determine a price to __________ when buying a home.
Offer
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
* Comparative Market Analysis (CMA) is an examination of the prices at which __________ properties in the same area recently sold or are under contract, how many days on market and other factors.
Similar
Property Valuation and Appraisal:
Agents Comparative Market Analysis (CMA):
This is much more focused on comparable properties and estimating a value based on properties that have __________ recently.
Sold
Property Valuation and Appraisal:
Agents Broker Price Opinion (BPO):
* This is the process used by an Agent to place an estimated __________ or ___________ on a piece of property.
Value or Potential Selling Price
Property Valuation and Appraisal:
o B.P.O. means __________.
Broker Price Opinion
Property Valuation and Appraisal:
Agents Broker Price Opinion (BPO):
* A Broker Price Opinion (BPO) is commonly used when a financial institution chooses to forego the expense and delay of a professional __________ and it is quicker and not as in-depth.
Appraisal
Property Valuation and Appraisal:
Agents Broker Price Opinion (BPO):
* Agents can be sub-contracted and __________ to do a Broker Price Opinion (BPO) on behalf of a bank or other lending institution.
Paid
Property Valuation and Appraisal:
Comparative Market Analysis (CMA) vs Appraisal:
* The __________ is performed by a real estate agent. This determines the current market value for the purpose of selecting the Highest possible list price.
Comparative Market Analysis (CMA)
Property Valuation and Appraisal:
Comparative Market Analysis (CMA) vs Appraisal:
* The __________ is performed by a licensed appraiser who has no vested interest in the valuation of the property.
Appraisal
Property Valuation and Appraisal:
Comparative Market Analysis (CMA) vs Appraisal:
* The appraiser isn’t earning a commission from the sale, so they are a __________ third-party.
Neutral
Property Valuation and Appraisal:
Comparative Market Analysis (CMA) vs Appraisal:
* The real estate agent while preparing a Comparative Market Analysis (CMA) is earning a commission from the sale, so they are a __________ party because they have a financial interest.
Biased
Property Valuation and Appraisal:
Comparative Market Analysis (CMA) vs Appraisal:
* Remember an appraiser is only being paid for their time and work. Their Job is to provide a licensed ‘__________’ not to create facts.
Opinion of Value
Property Valuation and Appraisal:
Appraisal:
Quiz:
In an appraisal, which of the following would be accurate statements?
The appraiser is neutral
The value of the property influences the cost of the appraisal
The agents assign properties to appraisers
The determined value is an opinion form the appraiser
The appraisal is owned by whoever orders and pays for it
The appraiser is neutral
The determined value is an opinion form the appraiser
The appraisal is owned by whoever orders and pays for it
Property Valuation and Appraisal:
Appraisal Regulations:
* After the Savings and Loan Crisis in the 190’s the federal government created the laws of the ________ Act.
o Passed in 1989 established regulations on appraisals of property
assessments that involved federally-related cases.
FDIC, Fannie Mae, Ginnie Mae, Freddie Mac, are all government insured loans.
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
Property Valuation and Appraisal:
Appraisal Regulations:
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA):
* Title XI:
This targeted the ________ not appraisers themselves.
Appraisal Standards
Property Valuation and Appraisal:
Appraisal Regulations:
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA):
* Title XI:
This stated that individual states follow the ________.
Uniform Standards of Professional Appraisal Practice (USPAP)
Property Valuation and Appraisal:
_________:
This is the nation’s foremost authority on the valuation profession. Our boards are responsible for setting congressionally authorized standards and qualifications for real estate appraisers and provide voluntary guidance for all valuation professionals.
The Appraisal Foundation
Property Valuation and Appraisal:
* ________:
* Adopted standardized competency training using regulations.
o Still known today as being the authority on creating quality control standards used in developing appraisals for the real estate industry.
The Uniform Standards of Professional Appraisal Practice (USPAP)
Property Valuation and Appraisal:
* The Uniform Standards of Professional Appraisal Practice (USPAP):
* Nearly every state has its own licensing authority.
* In ARIZONA it is the ________ that licenses appraisers.
Department of Financial Institutions (ADFI)
Property Valuation and Appraisal:
True or False: Appraisals are only an informed opinion and are not a fact.
True
False
True
Property Valuation and Appraisal:
Quiz:
Choose the correct statements about appraisers…
Every two years; must complete 28 hours of continuing education
Paid on the results at the end of each appraisal
Must be neutral to the transactions as to not influence value
Job is to provide facts and not an informed ‘opinion of value’
Every two years; must complete 28 hours of continuing education
Must be neutral to the transactions as to not influence value
Property Valuation and Appraisal:
Case Study:
From a lender’s perspective, what is the purpose of an appraisal?
Lenders most often require an appraisal before issuing a loan to ensure that the money the seller is asking meets the value of a non-interested licensed 3rd party.
Property Valuation and Appraisal:
Case Study:
You are representing a buyer; the home they are trying to purchase has appraised for a price much lower than anticipated. The seller is furious at the low-priced appraisal, and their agent demands a copy of the assessment. Are you allowed to send them a copy?
No, the Sellers don’t own the appraisal and are NOT entitled to see a copy. However, the sellers can ask buyers for a copy but are legally not entitled to it.
Property Valuation and Appraisal:
Case Study:
Who can order an appraisal?
Appraisals can be ordered by anyone on any property. Banks, Lenders, Government, Owners, and Speculators are examples of who can order an appraisal.
Property Valuation and Appraisal:
Case Study:
Can you, as a real estate agent, perform an appraisal for your client selling their home? If not, what kind of pricing expectations/guidance can you offer?
Agents perform a comparative market analysis for their clients to help them determine a price to list when selling a home or a price to offer when buying a home.
Property Valuation and Appraisal:
Quiz:
An appraisal that was ordered by the institutional lender, who is providing the buyer with an FHA loan is owned by the:
Seller
Bank
Buyer
Broker
Buyer
Property Valuation and Appraisal:
Quiz:
Which appraisal is the ONLY method allowed to determine the value in LAND?
Factual Data Approach
Market Data
Cost Approach
Comparison Value Approach
Market Data
Property Valuation and Appraisal:
Quiz:
The only person allowed to write an appraisal report is a(an):
Broker
Lending institution
Appraiser
B and C
Appraiser
Property Valuation and Appraisal:
Quiz:
Freddie Mac, Ginne Mae and FDIC loans usually require a certified appraisal. What are these loan types?
Appraisal Based Loans
Government Insured Loans
Conventional Loans
Secondary Market Loans
Government Insured Loans
Property Valuation and Appraisal:
Quiz:
Most appraisers follow the standards set forth by the:
United States Appraisal Association (USAA)
Uniform Standards of Professional Appraisal Practice (USPAP)
Board of Authorized Appraisers (BAA)
Appraisal Standards Institute (ASI)
Uniform Standards of Professional Appraisal Practice (USPAP)
Property Valuation and Appraisal:
Quiz:
A study of the prices of similar properties using both real time and historical data to give an idea of current and future market value for a subject property is referred to as:
Comparative market analysis
Superlative statistics
Brokers Price Option
Appraisal
Comparative market analysis
Property Valuation and Appraisal:
Quiz:
An appraiser in training in Arizona must work for how many years as an apprentice to an appraiser?
5 years
0 years
1 year
3 years
3 years
Property Valuation and Appraisal:
Land and Value:
All land, no matter where it is located has a value to someone. In this case, you will find that land has inherent value and can never depreciate to a value of _________.
Zero
Property Valuation and Appraisal:
Land and Value:
* Inherent Value:
It will always hold some value to someone.
* Land carries with it an inherent value in all areas of the world.
* Land typically does NOT _________, nor will it ever be of ZERO value.
Depreciate
Property Valuation and Appraisal:
Land and Value:
* Four Components of Value:
[Remember: DUST]
1.
2.
3.
4.
- Demand
- Utility
- Scarcity
- Transferability
Property Valuation and Appraisal:
Land and Value:
* One of Four Components of Value:
* _________:
Several factors can determine this including population, cost of living, local job market, and more – or lack of this.
Demand
Property Valuation and Appraisal:
Land and Value:
* One of Four Components of Value:
* _________:
Factors to consider in the usage of property include the highest and best use, zoning, and rental or residential property.
Utility
Property Valuation and Appraisal:
Land and Value:
* One of Four Components of Value:
* _________:
Land is not being created any longer and as such it is not easily available for sale. They don’t make any more land and as such, it has a perceived value.
Scarcity
Property Valuation and Appraisal:
Land and Value:
* One of Four Components of Value:
* _________:
The capability of the title of real property to be transferred from one owner to another; it’s an asset, which is desirable to have and hold.
Transferability
Property Valuation and Appraisal:
Highest and Best Use:
* Appraisers must be able to determine if the property is being used to its fullest _________.
Extent
Property Valuation and Appraisal:
Highest and Best Use:
* A condo complex sitting on 4 acres surrounded by warehouses is not best use.
* A multi-unit condo complex overlooking the _________ is that lands best use.
Ocean
Property Valuation and Appraisal:
Highest and Best Use:
Optimal use of a property determines its _________ value.
Highest
Property Valuation and Appraisal:
Highest and Best Use:
_________:
The positioning of a home on a lot. This can affect the market value of that home.
Orientation
Property Valuation and Appraisal:
Highest and Best Use:
Orientation:
_________ facing homes are MORE desirable in Arizona due to the sun’s heat.
North/South
Property Valuation and Appraisal:
Highest and Best Use:
* _________:
Land that is not needed to serve or support the existing improvement. Can be sold separately.
Excess Land
Property Valuation and Appraisal:
Highest and Best Use:
* There are four criteria to determine the subjects highest and best use:
Remember:
- Let’s Find More Profit L.F.M.P.
1.
2.
3.
4.
- Legal Permissibility
- Financial Feasibility
- Maximum Productivity
- Physical Possibility
Property Valuation and Appraisal:
Highest and Best Use:
Identify the property that does not meet it’s highest and best use:
A high rise apartment building in a dense city
A golf course built on an existing land fill
A manufacturing plant in a college town
A manufacturing plant in a college town
Property Valuation and Appraisal:
Highest and Best Use:
* There are four criteria to determine the subjects highest and best use:
* Legal Permissibility: Determined by reasonable and legal _________ of a vacant land or an improved property.
* Financial Feasibility:
Land is considered feasible by its ability to justify its use from an _________ point of view, for instance to make a profit over time.
* Physical Possibility:
The appraisal report describes _________ aspects of the property, surrounding properties and complementary attributes such as proximity to traffic avenues, visibility, and other things that would determine the best use of the subject property.
* Maximum Productivity:
Use of the land that would produce the maximum _________ return based on the other Highest and Best Use (HBU) factors.
Usability
Economic
Physical
Profitable
Property Valuation and Appraisal:
Best Use:
* There are four criteria to determine the subjects highest and best use:
* _________:
Determined by reasonable and legal usability of a vacant land or an improved property.
Legal Permissibility
Property Valuation and Appraisal:
Best Use:
* There are four criteria to determine the subjects highest and best use:
* _________:
Land is considered feasible by its ability to justify its use from an economic point of view, for instance to make a profit over time.
Financial Feasibility
Property Valuation and Appraisal:
Best Use:
* There are four criteria to determine the subjects highest and best use:
* _________:
The appraisal report describes physical aspects of the property, surrounding properties and complementary attributes such as proximity to traffic avenues, visibility, and other things that would determine the best use of the subject property.
Physical Possibility
Property Valuation and Appraisal:
Best Use:
* There are four criteria to determine the subjects highest and best use:
* _________:
Use of the land that would produce the maximum profitable return based on the other Highest and Best Use (HBU) factors.
Maximum Productivity
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
These are factors that exist near the subject property that affect its value. Nearby industry produces air pollution could negatively affect property values.
Physical / Environmental
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
These are factors of an area determined by its dominant population can influence property values. High Society New Yorkers don’t want to live around low-income housing.
Social Class
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
Local governments will have an effect on property values.
- Zoning varies by city and some people prefer to live in that city.
Political
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
These are conditions in a geographic area effect value. Favorable conditions could increase job opportunities or could have an adverse effect.
Economic
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
If there is a large profit margin in any given market i.e. flipping, renting, building etc. There would be an increase in competition, thus driving down prices towards a point of equilibrium.
Competition
Property Valuation and Appraisal:
* Real Estate Valuation is driven by a multitude of economic factors:
External Effects on Value:
* _________:
Social and economic variables that can alter property values. Local economy suffered a downturn, this would negatively affect the property values in its area.
Change
Property Valuation and Appraisal:
Land Value Definitions:
* _________:
Income expected in future value Tax breaks to big employers would be seen as a boom to the surrounding housing area as works would also move in.
Anticipation
Property Valuation and Appraisal:
Land Value Definitions:
* _________:
A property conforms to the other houses in a neighborhood.
Properties that don’t conform to the area bring less in value on the open market.
Conformity
Property Valuation and Appraisal:
Land Value Definitions:
Property Valuation and Appraisal:
Land Value Definitions:
* _________:
Property value will increase if more valuable property enters an area. A new Million $ development is slated, area homes prices rise.
Progression