Unit 16- Real Estate Appraisal

Question 1

To determine the problem to be solved and the type of value to be estimated

Answer 1

Purpose of Appraisals

Question 2

The Principle that states that the value of an inferior property is enhanced by its association with superior properties of the same type

Answer 2

Progression

Question 3

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.

Answer 3

Principle of substitution

Question 4

The amount paid for something

Answer 4

Price

Question 5

The amount required to duplicate the property exactly.

Answer 5

Reproduction cost

Question 6

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.

Answer 6

Replacement cost

Question 7

The principle stating that the value of a superior property is adversely affected by its association with an inferior property of the same type.

Answer 7

Regression

Question 8

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.

Answer 8

Reconciliation

Question 9

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.

Answer 9

Vacancy and collection losses

Question 10

A set of guidelines (standards of practice) to follow when conducting appraisal services.

Answer 10

Uniform Standards of Professional Appraisal Practice (USPAP)

Question 11

The property being appraised.

Answer 11

Subject property

Question 12

A method for estimating the market value of a property by comparing similar properties to the subject property.

Answer 12

Sale comparison approach

Question 13

The most profitable, legal way that a property can be utilized.

Answer 13

Highest and best use

Question 14

The ratio between a property’s gross monthly rental income and its selling price.

Answer 14

Gross rent multiplier (GRM)

Question 15

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.

Answer 15

Gross living area (GLA)

Question 16

The ratio between a property’s gross annual income and its selling price.

Answer 16

Gross income multiplier (GIM)

Question 17

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.

Answer 17

Market value

Question 18

The worth of a property to a particular investor based on the investor’s desired rate of return and risk tolerance.

Answer 18

Investment value

Question 19

When a building component has been added or repaired but the owners are unable to get their money back in added value.

Answer 19

Incurable depreciation

Question 20

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.

Answer 20

Income approach

Question 21

The total annual income a property would produce with 100% occupancy and no collection or vacancy loses.

Answer 21

Potential Gross Income (PGI)

Question 22

The added value as a result of combining two or more properties into one large parcel.

Answer 22

Plottage

Question 23

When an owner invests more money in a structure than the owner may reasonably expect to recapture.

Answer 23

Overimprovement

Question 24

The resulting amount when all operating expenses are subtracted from effective gross income.

Answer 24

Net Operating Income (NOI)

Question 25

Data analysis compiled using a computer database of closed sales.

Answer 25

Automated valuation models (AVMs)

Question 26

The combining of two or more adjoining properties into one tract; the process of consolidating properties.

Answer 26

Assemblage

Question 27

An opinion of value based on supportable evidence and approved methods.

Answer 27

Appraisal

Question 28

A one-time mortgage insurance fee paid at closing on FHA mortgage loans.

Answer 28

Up-front mortgage insurance premium (UFMIP)

Question 29

Loss in vale caused by things such as wear and tear, poor design, or the structure’s surroundings (proximity).

Answer 29

Depreciation

Question 30

When a building component has been added or repaired and the owners are able to get their money back in added value.

Answer 30

Curable depreciation

Question 31

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.

Answer 31

Cost approach

Question 32

The amount to produce or acquire something.

Answer 32

Cost

Question 33

Any real estate-related financial transaction that a federal financial institution regulatory agency has either contracted for, or regulates, and requires the services of an appraiser.

Answer 33

Federally related transaction

Question 34

The resulting amount when vacancy and collection losses are subtracted from potential gross income.

Answer 34

Effective gross income (EGI)

Question 35

The age indicated by a structure’s condition and utility.

Answer 35

Effective age

Question 36

The total estimated time in years that an improvement will add value; useful life.

Answer 36

Economic life