Unit 16- Real Estate Appraisal Flashcards
To determine the problem to be solved and the type of value to be estimated
Purpose of Appraisals
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 principle that states a prudent buyer or investor will pay no more for a property than the cost of acquiring an equally desirable substitute property.
Principle of substitution
The amount paid for something
Price
The amount required to duplicate the property exactly.
Reproduction cost
The amount of money required to replace a structure having the same use and functional utility as the subject property, using modern, available, or updated materials.
Replacement cost
The principle stating that the value of a superior property is adversely affected by its association with an inferior property of the same type.
Regression
The process of weighting the estimates of value derived from the sales comparison, cost, and income approaches to arrive at a final estimate of market value; also the process of weighted averaging used in the sales comparison approach to bring the adjusted values of several comparable properties into a single estimate of value.
Reconciliation
The expected income loss that will result from occasional turnover of tenants and periodic vacancies as well as the likelihood that not all rental income will be collected.
Vacancy and collection losses
A set of guidelines (standards of practice) to follow when conducting appraisal services.
Uniform Standards of Professional Appraisal Practice (USPAP)
The property being appraised.
Subject property
A method for estimating the market value of a property by comparing similar properties to the subject property.
Sale comparison approach
The most profitable, legal way that a property can be utilized.
Highest and best use
The ratio between a property’s gross monthly rental income and its selling price.
Gross rent multiplier (GRM)
The square footage calculated by taking the exterior dimensions of a house and then subtracting the garage square footage and any other square footage that is not heated.
Gross living area (GLA)
The ratio between a property’s gross annual income and its selling price.
Gross income multiplier (GIM)
The most probable price a property will bring in a competitive and open market with the buyer and the seller each acting prudently and knowledgeably, assuming he price is not affected by undue stimulus.
Market value
The worth of a property to a particular investor based on the investor’s desired rate of return and risk tolerance.
Investment value
When a building component has been added or repaired but the owners are unable to get their money back in added value.
Incurable depreciation
A method for estimating the market value of a property based on the present worth of future income that the property can be expected to generate.
Income approach
The total annual income a property would produce with 100% occupancy and no collection or vacancy loses.
Potential Gross Income (PGI)
The added value as a result of combining two or more properties into one large parcel.
Plottage
When an owner invests more money in a structure than the owner may reasonably expect to recapture.
Overimprovement
The resulting amount when all operating expenses are subtracted from effective gross income.
Net Operating Income (NOI)
