Unit 17 - Real Property Valuation Flashcards
A method of depreciation computed by dividing the replacement cost of a property by the number of years of remaining useful life;
age-life method AKA
straight line method
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
appraisal
A transaction where the
parties are dealing from equal bargaining positions.
arm’s-length transaction
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
broker price opinion (BPO) AKA
comparative market analysis
The rate of return a property will produce on the owner’s investment.
capitalization rate
Property used in an appraisal report that is
substantially equivalent to the subject property
comparable (comp)
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
cost approach
In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence.
depreciation
The number of years during which an improvement will add value to the land.
economic life
DUST (Characteristics of Value)
Demand
Utility
Scarcity
Transferability
SEPP (Forces & Factors Influencing Property Value)
Social Forces
Economic
Political Forces
Physical
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.
straight-line method
The loss of value due to economic factors that are
outmoded or less useful
economic obsolescence AKA
locational obsolescence AKA
external obsolescence
The apparent age of a building based on observed condition rather than chronological age.
effective age
A loss of value to an
improvement to real estate arising from functional
problems, often caused by age or poor design
functional obsolescence
The figure used as a
multiplier of the gross monthly income of a property to produce an estimate of the property’s value.
gross rent multiplier (GRM)
The possible use of a property that would produce the greatest net income and thereby
develop the highest value
highest and best use
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.
income capitalization approach
The income projected for
an income-producing property after deducting losses for vacancy and collection and operating expenses.
net operating income (NOI)
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
physical deteroriation
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
quantity-survey method
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.
reconciliation
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.
replacement cost
The construction cost at current prices of an exact duplicate of the subject property.
reproduction cost
