Unit 19

Question 1

Appraisal

Answer 1

Opinion of value based on circumstances of property and approved methods.

Based on SOLD properties to estimate market value

in IL appraisers are licensed

Question 2

3 categories of Appraisers:

Answer 2

associate real estate trainee appraiser - entry level and must be co-signed

certified residential - qualified to appraisal residential units 1-4 units

certified general - qualified to appraise all types of real property

Question 3

Paperwork

Answer 3

Must retain all contacts and reports for no less than 5 years or 2 years after judicial proceeding disposition, which is longer

Question 4

CMA

Answer 4

Based on similar properties SOLD, on the market and expireds

Question 5

Broker’s Price Opinion (BPO)

Answer 5

less expensive way to value properties (Used to Freddie Mac and Fannie Mae). Licensees perform BPOs for a fee

Question 6

Characteristics of Value

Answer 6

• Demand
• Utility - usefulness
• Scarcity - a finite supply
• transferability

Question 7

Anticipation

Answer 7

expectation that certain events will occur effecting the value. Foundation on which income approach is based

Question 8

Competition

Answer 8

interaction of supply and demand

Question 9

Valuation Techniques

Answer 9

• Sales Comparison Approach
• Cost Approach
• Income Approach

Question 10

Conformity

Answer 10

Maximum value created when property is in harmony with surroundings

Question 11

Plottage

Answer 11

The value in merging lots

Question 12

Assemblage

Answer 12

Merging lots

Question 13

Contribution

Answer 13

value of a part of the property is measured by its effect on the value of the whole

Question 14

Increasing and decreasing returns

Answer 14

Addition of improvements increases total value only to assets maximum value

Question 15

Regression and Progression

Answer 15

Regression - value of better-quality adversely affected by lesser-quality

Progression - value of lesser-quality positively affected by better-quality

Question 16

Substitution

Answer 16

Maximum value set by how much it would cost to purchase an equally desirable and valueable property

Used in Sales Comparison and Cost Approach

Question 17

Sales Comparison Approach

Answer 17

Single Family Homes
Use Market Data
Use SOLDS/Comps
Prefer properties sold within 6 months and within 1 mile

Adjustments made based on
-property rights
financing concessions
market conditions
conditions of sale
market conditions since date of sale
location
physical features and amenities

Question 18

Cost Approach

Answer 18

Newer or special purpose buildings, schools, churches- used when not a lot of comps and the properties don’t generate income

• estimate value of land (75,000)
• current construction cost (150,000)
• accrued depreciation (25,000)

Current construction cost - accrued depreciation + land value = Estimated value

150,000-25,000+75,000 = 200,000

Question 19

Reproduction Cost

Answer 19

Construction of exact duplicate at current prices

Question 20

Replacement Cost

Answer 20

Construction of similar property not exact

Question 21

Commute Cost Approach by:

Answer 21

square foot
unit in place
quantity-survey
index

Question 22

Depreciation

Answer 22

Loss in Value
Land cannot depreciate
3 Classes:

physical - curable painting
incurable - foundation crack

functional obsolescence

external obsolescence - zoning, environrental

Question 23

Straight Line Depreciation

Answer 23

improvement value / expected life (total years) = depreciation

Question 24

Income Approach

Answer 24

Apartment buildings, office buildings, shopping centers
Value based on present value of the rights to future income
Includes anticipation

CAPITALIZATION RATE is used to take income and estimate the property’s value

income / value = capitalization rate
24,000/300,000 = 8%

Question 25

Gross Rent Multiplier vs Gross Income Multiplier

Answer 25

Gross Rent 1 -4 units
sales price / gross monthly rent = GRM
rental income x GRM = estimated market value

Gross Income 5 or more units
sales price / gross annual income = GIM

Appraisers need 4 comparable properties

Question 26

Reconciliation

Answer 26

act of analyzing the findings of the 3 different approaches

Question 27

Appraisal Report

Answer 27

Report that verifies the value indicated by the market