Unit 16: Real Estate Appraisal

Question 1

An opinion of value based on supporting evidence and approved methods

Answer 1

Appraisal

Question 2

This Act requires that any appraisal used in connection with a federally related transaction be performed by a competent individual who is licensed or certified by the state in which the appraiser practices

Answer 2

Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989

Question 3

Real estate professionals often prepare this which focuses on properties of similar size, location, and amenities for the purpose of deriving a likely listing price

Answer 3

comparative market analysis- recently closed properties, properties currently on the market and properties that did not sell (expired)

Question 4

Appraisers are paid this and it cannot be based on the value of the property

Answer 4

Flat fee

Question 5

This is a less expensive alternative for evaluating property value such as a drive by - banks like this for certain instances

Answer 5

Brokers price opinion (BPO)

Question 6

To have value in the real estate market, the property must have the following characteristics

Answer 6

DUST
Demand (desire for ownership_
Utility (useful for its intended purpose
Scarcity- a finite supply
Transferability- relative ease to sell to another

Question 7

This is considered the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale.

Answer 7

Market value

Question 8

This is what was paid for the property

Answer 8

Cost

Question 9

What are the basic conditions that affect value

Answer 9

Anticipation- loss of big employer in the area or moving in
Change- natural phenomena- inevitable
Conformity- property should be in harmony with its surroundings similar designs, construction, size
Contribution- swimming pool, greenhouse,

Question 10

Money spent on improvements to the property produces more money

Answer 10

Law of increasing value

Question 11

Additional improvements to property do not increase income or value

Answer 11

Law of diminishing returns

Question 12

Evidence when consolidation of adjacent lots into a single larger one produces a greater total land value

Answer 12

Plottage

Question 13

The worth of a better quality property is adversely affected by the presence of a lesser quality property

Answer 13

Regression

Question 14

Value of a modest home would be higher if it were located among larger, fancier properties

Answer 14

Progression

Question 15

What are the three approaches to value

Answer 15

1. The sales comparison approach- market data approach compares the property with recently sold properties (similar)
2. The cost approach- based on principal of substitution (pricing land, construction of similar home, accrued depreciation
3. The income approach- value based on present value of the right to future income (gross income from rents,

Question 16

What are the three types of depreciation

Answer 16

Physical, functional, external

Question 17

This is the act of analyzing and weighing the findings from the three approaches to determining value

Answer 17

Reconciliation