Unit 16 Key Terms Flashcards
appraisal
The process of developing and communicating an opinion of a property’s value based on supportable evidence and approved methods as of a certain date.
assemblage
The combining of two or more adjoining properties into one tract.
automated valuation model (AVM)
A data analysis compiled from a computer database of closed sales used by lenders when an appraisal is not warranted.
cost
The amount to produce or acquire something.
cost approach
A method for estimating the market value of a property based on the cost to buy the site and to construct a new building on the site, less depreciation.
curable
When the correction of a defect results in as much added value as the cost to correct the defect.
depreciation
A loss in value for any reason; a deduction for tax purposes.
economic life
the period of time a property may be expected to be profitable or productive; useful life.
effective age
The age indicated by a structure’s condition.
effective gross income (EGI)
The resulting amount when vacancy and collection losses are subtracted from potential gross income. See also vacancy and collection losses.
federally related transaction
Any sale transaction that ultimately involves a federal agency in either the primary or secondary mortgage market. Under FIRREA, state-certified or state-licensed appraisers must be used for certain loans in federally related transactions.
gross income multiplier (GIM)
A rule of thumb for estimating the market value of commercial and industrial properties; the ration to convert annual income into market value.
gross rent multiplier (GRM)
A rule of thumb for estimating the market value of income-producing residential property; the ration to convert rental income into market value.
highest and best use
A principle of value that focuses on the most profitable legal use to which a property can be put.
income approach
A method of estimating the market value of a property based on the present and future income the property can be expected to generate.
incurable
When the cost to correct a defect is greater than the value added by the cure.
investment value
The worth of a property to a particular investor based on the investor’s desired rate of return, risk tolerance, etc.
market value
The most probably price a property will bring from a fully informed buyer, willing but not compelled to buy, and the lowest price a fully informed seller will accept if not compelled to sell.
net operating income (NOI)
The resulting amount when all operating expenses are subtracted from effective gross income.
overimprovement
An addition or change to property not in line with its highest and best use, or a betterment that exceeds that justifies by local conditions.
plottage
The added value as a result of combining two or more properties into one large parcel.
potential gross income (PGI)
The total annual income a property would produce with 100% occupancy and no collection or vacancy losses.
price
The amount paid for something.
principle of substitution
An economic law of value: No prudent buyer will pay more for a property than the cost of an equally desirable replacement property.
progression
The principle that states that the value of an inferior property is enhanced by its association with superior properties of the same type.
reconciliation
The process of weighting the estimates of value derived from the sale comparison, cost, and income approaches to arrive at a final estimate of market value.
regression
The principle stating that the value of a superior property is adversely affected by its association with in inferior property of the same type.
replacement cost
The expenditure of constructing a building with +current materials and techniques that has the same functional utility as the structure being appraised.
reproduction cost
Amount required to duplicate the property exactly.
sales comparison approach
A method for estimating the market value of a property by comparing similar properties to the subject property.
subject property
The real property under discussion or appraisal.
Uniform Standards of Professional Appraisal Practice (USPAP)
The set of standards that must be followed when performing appraisal services.
vacancy and collection losses
A deduction from potential gross income for (1) current or expected future space not rented as a result of tenant turnover and (2) loss from uncollected rent due from delinquent tenants.
value
The worth of something
The process of developing and communicating an opinion of a property’s value based on supportable evidence and approved methods as of a certain date.
appraisal
The combining of two or more adjoining properties into one tract.
assemblage
A data analysis compiled from a computer database of closed sales used by lenders when an appraisal is not warranted.
automated valuation model (AVM)
The amount to produce or acquire something.
cost
A method for estimating the market value of a property based on the cost to buy the site and to construct a new building on the site, less depreciation.
cost approach
When the correction of a defect results in as much added value as the cost to correct the defect.
curable
A loss in value for any reason; a deduction for tax purposes.
depreciation
the period of time a property may be expected to be profitable or productive; useful life.
economic life
The age indicated by a structure’s condition.
effective age
The resulting amount when vacancy and collection losses are subtracted from potential gross income. See also vacancy and collection losses.
effective gross income (EGI)
Any sale transaction that ultimately involves a federal agency in either the primary or secondary mortgage market. Under FIRREA, state-certified or state-licensed appraisers must be used for certain loans in federally related transactions.
federally related transaction
A rule of thumb for estimating the market value of commercial and industrial properties; the ration to convert annual income into market value.
gross income multiplier (GIM)
A rule of thumb for estimating the market value of income-producing residential property; the ration to convert rental income into market value.
gross rent multiplier (GRM)
A principle of value that focuses on the most profitable legal use to which a property can be put.
highest and best use
A method of estimating the market value of a property based on the present and future income the property can be expected to generate.
income approach
When the cost to correct a defect is greater than the value added by the cure.
incurable
The worth of a property to a particular investor based on the investor’s desired rate of return, risk tolerance, etc.
investment value
The most probably price a property will bring from a fully informed buyer, willing but not compelled to buy, and the lowest price a fully informed seller will accept if not compelled to sell.
market value
The resulting amount when all operating expenses are subtracted from effective gross income.
net operating income (NOI)
An addition or change to property not in line with its highest and best use, or a betterment that exceeds that justifies by local conditions.
overimprovement
The added value as a result of combining two or more properties into one large parcel.
plottage
The total annual income a property would produce with 100% occupancy and no collection or vacancy losses.
potential gross income (PGI)
The amount paid for something.
price
An economic law of value: No prudent buyer will pay more for a property than the cost of an equally desirable replacement property.
principle of substitution
The principle that states that the value of an inferior property is enhanced by its association with superior properties of the same type.
progression
The process of weighting the estimates of value derived from the sale comparison, cost, and income approaches to arrive at a final estimate of market value.
reconciliation
The principle stating that the value of a superior property is adversely affected by its association with in inferior property of the same type.
regression
The expenditure of constructing a building with +current materials and techniques that has the same functional utility as the structure being appraised.
replacement cost
Amount required to duplicate the property exactly.
reproduction cost
A method for estimating the market value of a property by comparing similar properties to the subject property.
sales comparison approach
The real property under discussion or appraisal.
subject property
The set of standards that must be followed when performing appraisal services.
Uniform Standards of Professional Appraisal Practice (USPAP)
A deduction from potential gross income for (1) current or expected future space not rented as a result of tenant turnover and (2) loss from uncollected rent due from delinquent tenants.
vacancy and collection losses
The worth of something
value
