Unit 6 --Appraisals Flashcards
An estimate or opinion of market value supported by an analysis of relevant property data.
Appraisal
The Uniform Residential __________ _________ is the standard form typically used for residential appraisals.
Appraisal report
Appraisers have to be _________ or certified according to state law.
Licensed–and they may have further designations, such as a MAI (Member of the Appraisal Institute)
This is required for all federally related loans, such as conventional, FHA, and VA.
Appraisal
Appraisals are most often seeking to estimate market value for the ___________.
Lender
T or F: A competitive market analysis is the SAME as an appraisal.
False–CMA/BPO/BOV (Broker Opinion of Value), research on comparable properties that have recently sold, Broker may charge a fee to do one
The most probable price (in terms of cash or its equivalent) that a property should bring
Market Value
What someone has actually paid for a property is called what?
Market Price
T or F: DUST helps remember the essential elements of value
True
Transferability from dust in reference to elements of value…this means that title must be _________.
Marketable
When there is a finite supply and only land available in specific areas this is an example of __________.
Scarcity
To produce the best return on investment over time for a property it needs to have it’s ________.
Highest and Best Use–typically the current use, and can change over time
An __________ would show a property’s highest and best use.
Appraisal
Real Estate values are based on _____________.
Anticipation–future benefits determine current value
Price usually moves __________ of supply.
Opposite
The most important principal of value in appraisal is _____________.
Substitution–basis of the sales comparison approach and used in all 3 approaches, lowest price with highest value usually sells first
When values tend to move toward their surroundings it is the principle of ___________.
Conformity–value impacted when homes have different sizes or amenities in the same area
When the value of over-improved property declines it is called ________.
Regression
When the value of under-improved property increases it is called _______________.
Progression
Values are most _________ when properties are similar.
Stable
________________ determines the increasing and decreasing returns on the improvements.
Contribution–the value of an improvement is not what it cost to build,
Increasing returns are improvements that add more __________ than they cost.
Value
_________ is determined by what the market will pay, not the price of an improvement.
Value
Sales comparison approach is also called the _______ _______ approach.
Market Data
The most important method for valuing residential property and vacant land is the __________ approach.
Sales Comparison/market data
Comparables and SF prices are the basis for the _____________ approach.
Sales Comparison
The ________ property is never adjusted in when comparing comps.
Subject property
Comparables with the least adjustments generally have a __________ indication of value.
Stronger
Comps used should be houses sold between _________ months.
Within 6-12 months
Lot size and the _________ are 2 very important measures when comparing comps.
Date and Sale
Value of adjustments may be determined by doing a __________ ______ analysis.
Paired Sales Analysis–appraiser finds 2 properties that are nearly identical with the exception of the item being adjusted.
The ________ approach is the most important method for new construction and unique properties or special purpose properties.
Cost approach–used when comps. or income is lacking
__________ approach estimates cost to build as if built today.
Cost
In cost approach, you add in value of land because it does not __________.
Depreciate
Cost to build a replica is called _________ cost.
Reproduction
Cost to build an improvement with same functionality/utility is the _________ cost.
Replacement
Depreciation affects improvements, not ________.
Land
Physical obsolescence is ________ and ________.
Wear and Tear–deferred maintenance that is typically curable
Outdated electrical and plumbing fixtures are examples of ___________ obsolescence.
Functional-may or may NOT be curable
When external factors outside one’s control from location or surrounds affects value it is ________ obsolescence.
Economic–usually NOT curable i.e. flight paths
We use the _________ approach with properties that generate income, such as apartment buildings, shopping centers, or office buildings.
Income Approach–used because investors buy for the income the property produces
Investors determine what they will pay based on the rate of return or _____________ rate.
Capitalization
Capitalization is process of converting ________ income into present value.
Future
Effective gross income - Operating expenses =
NOI–net operation income
___________ = NOI - debt service
Cash Flow
Income(NOI) = Cap Rate x _________
Value, I=RxV
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.
Gross Rent Multiplier
The appraiser ___________ the 3 approaches to vlue.
Reconciles–each approach is weighted and used to determine the subject property value–NOT AVERAGED
Sales price and rental rates are used to determine the gross ________ ________.
Rent Multiplier
First step in estimating value is to determine if the property contains all elements of ______.
Value–DUST, then the appropriate approach can be selected
