Unit 6 --Appraisals

Question 1

An estimate or opinion of market value supported by an analysis of relevant property data.

Answer 1

Appraisal

Question 2

The Uniform Residential __________ _________ is the standard form typically used for residential appraisals.

Answer 2

Appraisal report

Question 3

Appraisers have to be _________ or certified according to state law.

Answer 3

Licensed–and they may have further designations, such as a MAI (Member of the Appraisal Institute)

Question 4

This is required for all federally related loans, such as conventional, FHA, and VA.

Answer 4

Appraisal

Question 5

Appraisals are most often seeking to estimate market value for the ___________.

Answer 5

Lender

Question 6

T or F: A competitive market analysis is the SAME as an appraisal.

Answer 6

False–CMA/BPO/BOV (Broker Opinion of Value), research on comparable properties that have recently sold, Broker may charge a fee to do one

Question 7

The most probable price (in terms of cash or its equivalent) that a property should bring

Answer 7

Market Value

Question 8

What someone has actually paid for a property is called what?

Answer 8

Market Price

Question 9

T or F: DUST helps remember the essential elements of value

Answer 9

True

Question 10

Transferability from dust in reference to elements of value…this means that title must be _________.

Answer 10

Marketable

Question 11

When there is a finite supply and only land available in specific areas this is an example of __________.

Answer 11

Scarcity

Question 12

To produce the best return on investment over time for a property it needs to have it’s ________.

Answer 12

Highest and Best Use–typically the current use, and can change over time

Question 13

An __________ would show a property’s highest and best use.

Answer 13

Appraisal

Question 14

Real Estate values are based on _____________.

Answer 14

Anticipation–future benefits determine current value

Question 15

Price usually moves __________ of supply.

Answer 15

Opposite

Question 16

The most important principal of value in appraisal is _____________.

Answer 16

Substitution–basis of the sales comparison approach and used in all 3 approaches, lowest price with highest value usually sells first

Question 17

When values tend to move toward their surroundings it is the principle of ___________.

Answer 17

Conformity–value impacted when homes have different sizes or amenities in the same area

Question 18

When the value of over-improved property declines it is called ________.

Answer 18

Regression

Question 19

When the value of under-improved property increases it is called _______________.

Answer 19

Progression

Question 20

Values are most _________ when properties are similar.

Answer 20

Stable

Question 21

________________ determines the increasing and decreasing returns on the improvements.

Answer 21

Contribution–the value of an improvement is not what it cost to build,

Question 22

Increasing returns are improvements that add more __________ than they cost.

Answer 22

Value

Question 23

_________ is determined by what the market will pay, not the price of an improvement.

Answer 23

Value

Question 24

Sales comparison approach is also called the _______ _______ approach.

Answer 24

Market Data

Question 25

The most important method for valuing residential property and vacant land is the __________ approach.

Answer 25

Sales Comparison/market data

Question 26

Comparables and SF prices are the basis for the _____________ approach.

Answer 26

Sales Comparison

Question 27

The ________ property is never adjusted in when comparing comps.

Answer 27

Subject property

Question 28

Comparables with the least adjustments generally have a __________ indication of value.

Answer 28

Stronger

Question 29

Comps used should be houses sold between _________ months.

Answer 29

Within 6-12 months

Question 30

Lot size and the _________ are 2 very important measures when comparing comps.

Answer 30

Date and Sale

Question 31

Value of adjustments may be determined by doing a __________ ______ analysis.

Answer 31

Paired Sales Analysis--appraiser finds 2 properties that are nearly identical with the exception of the item being adjusted.

Question 32

The ________ approach is the most important method for new construction and unique properties or special purpose properties.

Answer 32

Cost approach--used when comps. or income is lacking

Question 33

__________ approach estimates cost to build as if built today.

Answer 33

Cost

Question 34

In cost approach, you add in value of land because it does not __________.

Answer 34

Depreciate

Question 35

Cost to build a replica is called _________ cost.

Answer 35

Reproduction

Question 36

Cost to build an improvement with same functionality/utility is the _________ cost.

Answer 36

Replacement

Question 37

Depreciation affects improvements, not ________.

Answer 37

Land

Question 38

Physical obsolescence is ________ and ________.

Answer 38

Wear and Tear--deferred maintenance that is typically curable

Question 39

Outdated electrical and plumbing fixtures are examples of ___________ obsolescence.

Answer 39

Functional-may or may NOT be curable

Question 40

When external factors outside one's control from location or surrounds affects value it is ________ obsolescence.

Answer 40

Economic--usually NOT curable i.e. flight paths

Question 41

We use the _________ approach with properties that generate income, such as apartment buildings, shopping centers, or office buildings.

Answer 41

Income Approach--used because investors buy for the income the property produces

Question 42

Investors determine what they will pay based on the rate of return or _____________ rate.

Answer 42

Capitalization

Question 43

Capitalization is process of converting ________ income into present value.

Answer 43

Future

Question 44

Effective gross income - Operating expenses =

Answer 44

NOI--net operation income

Question 45

___________ = NOI - debt service

Answer 45

Cash Flow

Question 46

Income(NOI) = Cap Rate x _________

Answer 46

Value, I=RxV

Question 47

The ______ ________ ________ is used as a simplified alternative to capitalization that takes into account gross income but not vacancies, bad debts, or expenses--used for single family rentals.

Answer 47

Gross Rent Multiplier

Question 48

The appraiser ___________ the 3 approaches to vlue.

Answer 48

Reconciles--each approach is weighted and used to determine the subject property value--NOT AVERAGED

Question 49

Sales price and rental rates are used to determine the gross ________ ________.

Answer 49

Rent Multiplier

Question 50

First step in estimating value is to determine if the property contains all elements of ______.

Answer 50

Value--DUST, then the appropriate approach can be selected