Unit 16 - 8 State - Appraisal

Question 1

Unit 16
Appraiser Qualifications Board (AQB)

Answer 1

minimum criteria for state-certified appraisers

Question 2

Unit 16
Appraisal Standards Board (ASB)

Answer 2

develops, interprets, and demands Uniform Standards of Professional Appraisal Practice (USPAP)

Question 3

Unit 16
residential appraiser vs general appraiser

Answer 3

res = appraise 4 or fewer units 
general = any type of real property

Question 4

Unit 16
Rules for Sales Assoc to give Appraisal

Answer 4

1. abide by USPAP
2. not federally related transactions
3. must not represent as certified appraiser

Question 5

Unit 16
Types of Value Appraiser may be hired to estimate

Answer 5

1. Assessed Value (for taxes)
2. Insurance Value (amount required to replace)
3. Investment Value (price investor may pay)
4. Liquidation Value (value associated with rapid sale)
5. Going-conern Value (income-property known by history)
6. Salvage Value (amount improvements could be sold at structure’s end of life)

Question 6

Unit 16
Market Value

Answer 6

most probable price property should bring in competitive and open market

Question 7

Unit 16
Characteristics of Value

Answer 7

DUST
Demand
Utility
Scarcity
Transferability

Question 8

Unit 16
principle of substitution

Answer 8

max value set by cost to substitute property or construct it

Question 9

Unit 16
Highest and Best Use

Answer 9

most profitable single use of property. Needs to be:
*ok with zoning
*physically possible
*financially possible

Question 10

Unit 16
assemblage and plottage

Answer 10

assemblage = put lots together 
plottage = added value

Question 11

Unit 16
progression vs regression

Answer 11

progression = small around big homes, increases value 
regression = large home around small, decreases value

Question 12

Unit 16
3 approaches to appraisals

Answer 12

1. sale comparison (pay no more than others similar)
2. cost approach (pay no more than cost to build)
3. income approach (projected flow of $)

Question 13

Unit 16
Reconciliation

Answer 13

weight comps to calculate price of property

Question 14

Unit 16
reproduction vs replacement cost

Answer 14

reproduction = build exact replica (ex: exact detail, historic features brought back to life) 
replacement = build similar but with modern materials but serves same functionality

Question 15

Unit 16
curable vs incurable

Answer 15

curable = get money back 
incurable = unable to get money back

Question 16

Unit 16
Depreciation attributed to (3)

Answer 16

1. physical deterioration
2. functional obsolescence (poor design)
3. external obsolescence (i-95 noise, off property problems)

Question 17

Unit 16
effective age vs economic life

Answer 17

effective age = might be 5 years old but took good care of it so only 2 years old

economic life = years structure expected to be useful

Question 18

Unit 16
PGI vs EGI vs NOI

Answer 18

PGI = Potential Gross Income = total annual income if fully rented and no collection losses 
EGI = Effective Gross Income = deduct vacancy and collection losses (commonly use 10%) 
NOI = Net Operating Income = subtract all expenses

Question 19

Unit 16
NOI Operating Expenses Categories (3)

Answer 19

1. Fixed expenses = do not fluctuate (ex: property taxes and hazard insurance)
2. Variable expenses = fluctuate (utilities, supplies, etc)
3. Reserve for replacements

Question 20

Unit 16
Examples that are NOT NOI

Answer 20

Do not contribute to actual operation:
mortgage expenses
depreciation
income taxes
business-related expenses (payroll, advertising, etc)

Question 21

Unit 16
OAR

Answer 21

Overal Capitalization Rate = NOI / Value
aka: market cap rate

Question 22

Unit 16
How to calculate NOI

Answer 22

NOI = OAR x Value

Question 23

Unit 16
GRM

Answer 23

Gross Rent Multiplier = sale price / gross monthly rent

Question 24

Unit 16
Estimate Market Value

Answer 24

Estimated Market Value = rental income x market GRM