Unit 4 Ch 3 Section 2 Real Estate Valuation and Appraisal Flashcards
used to determine value for a variety of purposes including the transfer of property ownership, financing and credit, taxation, insurance, and condemnation.
Appraisals
the worth of a property is determined by an (Blank)
Appraisal
the act or process of developing an opinion of value of the property on a given date.
appraisal
at the core of the appraisal process is the
determination of value, which is the relationship between the thing desired and the purchaser.
two basic types of value are
market value and value in use
the four elements which must be present for a property to have market value are
demand, utility, scarcity, and transferability
value can be influenced by
physical factors, economic influences, political factors, and social trends.
the appraisal process can be divided into how many steps?
six distinct steps
the appraiser must indicate the purpose of the appraisal and identify and describe the property in question. What step in the appraisal process is this?
This is the first step in the appraisal process
the appraiser must determine the problem to be solved, evaluate the assignment, and make the scope of work decisions. What step is this?
the second step in the process
the appraiser must obtain and verify data which will help determine the property’s value. Once the required and appropriate data has been gathered, the appraiser will then be able to decide on the proper appraisal approach to be used. What step is this in the appraisal process?
this is the third and fourth step in the process
the appraiser will make a final value estimate by reconciling and correlating all of the relevant data. What step is this in the appraisal process?
this is the fifth step in the appraisal process
the appraiser will present his or her findings in the appraisal report, which step is this in the appraisal process?
the final step, number six.
What are the three main approaches to value that an appraiser will use throughout the process?
the sales comparison approach, the cost approach, and the income approach.
a valuation method used that compares one property to similar ones that recently sold in the area.
the sales comparison approach
a valuation method that estimates the price a buyer should pay for a piece of property, works on the assumption that it does not make sense to pay more for a property than it will cost to build an equivalent property.
the cost approach
a valuation method that uses the income the property generates to estimate fair value; its used by taking the net operating income (NOI) of the rent and dividing it by the capitalization rate.
the income approach
calculated by dividing a property’s net operating income by the current market value.
capitalization rate
Several professional associations have developed, and national standards and laws have been created to regulate the industry, The Appraisal Foundation (TAF) includes
the Appraiser Qualifications Board, the Appraisal Standards Board, and the Appraisal Practices Board.
As of 1991, the Texas Appraiser Licensing and Certification Board (TALCB) has been responsible for
certifying real estate appraisers
Land owned completely, without any limitations or conditions
fee simple absolute estate
refers to its above-grade, finished living space- what’s also commonly referred to as square footage.
the gross living area (GLA)
a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area.
Comparative Market Analysis
a real estate professionals’ opinion of a property’s value
Broker Price Opinion (BPO)
the worth of a firm when the assets of the firm are sold, in other words, the estimated amount of money received when its assets are sold, and debts paid.
Liquidation Value
a property’s determined valuation to calculate the appropriate tax rates. Considers sales of similar homes, square footage, current market conditions and home inspection findings in its final determinations.
Assessed Value
blank is the value of a property that must be sold immediately
I dont know, guessed Liquidation but could be wrong, double check and edit. I was correct
What helps decide which appraisal report is appropriate for communicating the results of the appraisal process?
My guess is the intended use, double check and edit. I was correct.
Members of the Appraisal Institute hold which of the following designations?
- member appraisal institute 2. senior residential appraiser 3. senior real estate analyst 4. all choices apply ; I have no idea, for fun purposes my stab at it will be all choices apply, I was correct.
In the sales comparison approach, any aspect of a real estate transaction or any characteristic of the property that may affect the property’s sale price is a(n):
- principle of competition 2. element of comparison 3. element of correlation 4. principle of progression Not 100% certain here but I think the correct answer is the element of comparison, I was correct.
a categorization of property characteristics that cause real estate prices to vary
Elements of Comparison
the idea that the value of a house increases when more valuable houses are built in the area
the principle of progression
An appraiser valuating a property looks at the blank, rather than the contract rent, in order to discover the fair income of the property.
- appraised rent 2. economic rent 3. express agreement 4. Vacancy factor Taking a fun guess, I think its appraised rent, I was wrong here, its actually economic rent. An appraiser valuating a property looks at the economic rent, rather than the contract rent, in order to discover the fair income of the property.
Market value of improved real property is least affected by:
- an open market 2. its exchange value 3. its objective value 4. the original cost of materials Taking a fun guess here, I think I need to go back and read more, Open market. I was incorrect, its actually #4, Market value has very little to do with original cost. Neither cost nor appreciation is considered an essential element of value.
In the capitalization approach to appraisal, the most difficult step to determine is:
- gross income 2. effective net income 3. net income 4. the capitalization rate
Fun guess here, I think its effective net income or the NOI ( Net operating income) which wasnt listed; I was incorrect, its actually the capitalization rate, choosing a capitalization rate is the hardest part for appraisers using the income approach.
Effective July 1, 1991, the authority to certify real estate appraisers was transferred from the TREC (Texas Real Estate Comission) to the:
TALCB or the Texas Appraiser Licensing and Certification Board
the value of high-end real estate may be diminished by having lower-end properties in the same vicinity. What term is used here?
regression
In determining the value of an unimproved parcel of land, the first thing to establish is:
- listing price 2. purchase price 3. highest and best use 4. the original cost of the land
Completely guessing here, I’ll go with the #3, I was correcto mundo!
to calculate a gross rent multiplier accurately, what does the appraiser need from comparable properties?
- net income and selling price 2. Original cost and the debt service 3. Annual rent and the selling price 4. Operating expenses and the capitalization rate Fun guess here, I think its #4, I was incorrect, its actually #3 the annual rent and the selling price. Gross rent is income (calculated annually or monthly) received before any expenses are deducted. Calculate a gross rent multiplier to compare properties to see if they are priced right or are above or below market value. If you know that most rental properties are selling for around eight times the gross annual multiplier (eight times gross), simply divide the listed price by the gross income to arrive at the multiplier.
a post-contract attachment that modifies, alters, or totally changes some of the terms of a previously established contract.
contract addendum
all of the following are sources of property data for an appraiser, except
- the internet 2. a visitor’s observation 3. government publications 4. newspapers and magazines
a visitors observation, I was correct here.
When analyzing comparables, what will an appraiser do to “equalize” each comparable sale to the subject property?
apply adjustments; After analyzing and verifying the comps, appraisers narrow down the number of sales, listings, and pending sales to those most similar to the subject. The next step is to apply adjustments to the comps. Appraisers apply adjustments to the sales prices of comparable properties in an effort to equalize the comparable sale to the subject property.
