Unit 17 - Real Property Valuation

Question 1

A method of depreciation computed by dividing the replacement cost of a property by the number of years of remaining useful life;

Answer 1

age-life method AKA

straight line method

Question 2

An estimate of the quantity, quality, or value of something. The process through which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value

Answer 2

appraisal

Question 3

A transaction where the

parties are dealing from equal bargaining positions.

Answer 3

arm’s-length transaction

Question 4

A comparison of the prices of recently sold homes that are similar to a listing seller’s home in terms of location, style, and amenities; an estimate of market value

Answer 4

broker price opinion (BPO) AKA

comparative market analysis

Question 5

The rate of return a property will produce on the owner’s investment.

Answer 5

capitalization rate

Question 6

Property used in an appraisal report that is

substantially equivalent to the subject property

Answer 6

comparable (comp)

Question 7

The process of estimating the value of a property by adding the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation to the estimated land value

Answer 7

cost approach

Question 8

In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence.

Answer 8

depreciation

Question 9

The number of years during which an improvement will add value to the land.

Answer 9

economic life

Question 10

DUST (Characteristics of Value)

Answer 10

Demand
Utility
Scarcity
Transferability

Question 11

SEPP (Forces & Factors Influencing Property Value)

Answer 11

Social Forces
Economic
Political Forces
Physical

Question 12

A method of calculating
depreciation for tax purposes, computed by dividing the adjusted basis of a property by the estimated number of years of remaining useful life.

Answer 12

straight-line method

Question 13

The loss of value due to economic factors that are

outmoded or less useful

Answer 13

economic obsolescence AKA
locational obsolescence AKA
external obsolescence

Question 14

The apparent age of a building based on observed condition rather than chronological age.

Answer 14

effective age

Question 15

A loss of value to an
improvement to real estate arising from functional
problems, often caused by age or poor design

Answer 15

functional obsolescence

Question 16

The figure used as a

multiplier of the gross monthly income of a property to produce an estimate of the property’s value.

Answer 16

gross rent multiplier (GRM)

Question 17

The possible use of a property that would produce the greatest net income and thereby
develop the highest value

Answer 17

highest and best use

Question 18

The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful
life.

Answer 18

income capitalization approach

Question 19

The income projected for

an income-producing property after deducting losses for vacancy and collection and operating expenses.

Answer 19

net operating income (NOI)

Question 20

A reduction in a property’s
value resulting from a decline in physical condition; can be caused by action of the elements or by ordinary wear and
tear

Answer 20

physical deteroriation

Question 21

The appraisal method of
estimating building costs by calculating the cost of all of
the physical components in the improvements, adding the cost to assemble them, and then including the indirect costs associated with such construction

Answer 21

quantity-survey method

Question 22

The final step in the appraisal process, in which the appraiser combines the estimates of value received from the sales comparison, cost, and income capitalization approaches to arrive at a final estimate of market value for the subject property.

Answer 22

reconciliation

Question 23

The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or
function as the original.

Answer 23

replacement cost

Question 24

The construction cost at current prices of an exact duplicate of the subject property.

Answer 24

reproduction cost

Question 25

The process of estimating

the value of a property by examining and comparing actual sales of comparable properties.

Answer 25

sales comparison approach

Question 26

The appraisal method of
estimating building costs by multiplying the number
of square feet in the improvements being appraised by the cost per square foot for recently constructed similar
improvements.

Answer 26

square-foot method

Question 27

An appraisal principle that states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in
making the substitution.

Answer 27

substitution

Question 28

The appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure, with the cost of each item including its proper installation, connection, et cetera

Answer 28

unit-in-place method AKA

segregated cost method

Question 29

The power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities.

Answer 29

value