Unit 16

Question 1

Appraisal

Answer 1

Opinion of value based on supportable evidence and appraisal methods, as defined by the Uniform Standards of Professional Appraisal Practice (USPAP) established by the Appraisal Foundation’s Appraisal Practices Board

Question 2

Uniform Residential Appraisal Report (URAR)

Answer 2

Required by Fannie Mae and Freddie Mac

Question 3

Comparative Market Analysis

Answer 3

Report but a real estate professional of market statistics, not an appraisal

Question 4

Broker’s Price Opinion (BPO)

Answer 4

May be used in transactions involving home equity lines, refinancing, portfolio management, loss mitigation, and collection

Question 5

Value is created by

Answer 5

DUST
-Demand
-Utility
-Scarcity
-Transferability

Question 6

Market Value

Answer 6

The most probable price that a property should bring in a fair sale, but not necessarily the same price as the price asked for paid or the cost to construct.

Question 7

Basic principles of value

Answer 7

Anticipation
Change
Competition
Contribution

Question 8

highest and best use

Answer 8

use that is physically possible, legally permitted, economically feasible, most profitable or maximally productive

Question 9

Law of increasing and diminishing returns

Answer 9

When additional property improvements no longer bring a comparable increase in property value

Question 10

Plottage

Answer 10

The increase in value that can result when 2 or more parcels are combined called ASSEMBLAGE

Question 11

principle of PROGRESSION

Answer 11

When a property’s value is enhanced because of more valuable properties in the vicinity; and the opposite REGRESSION

Question 12

Substitution

Answer 12

The foundation of the sales comparison approach. A buyer will not want to pay more for a property than it would cost to purchase an equally desirable and suitable property

Question 13

Sales Comparison Approach (market data approach)

Answer 13

Makes use of sales of properties comparable to the property that is the subject if the appraisal by adding or subtracting from the sales price of each comp the value of a feature present or absent in the subject property vs the comparable

Question 14

Income Approach

Answer 14

1) Estimating annual potential gross income
2) Deducting an allowance for vacancy and rent loss to find effective gross income
3) Deducting annual operating expenses to find net operating income (NOI)
4) Estimating the rate of return (cap rate) for the subject by analyzing cap rates of similar properties
5) Deriving an estimate of market value by applying the cap rate to the property’s annual NOI using (net operating income / cap rate = value)