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NC Real Estate License > Unit 7: Appraisal > Flashcards

Unit 7: Appraisal Flashcards

(69 cards)

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0
Q

The cost of replacing an improvement with another of similar quality but not an exact replica

A

Replacement cost

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1
Q

The process of converting a future income stream into an expression of PRESENT VALUE

A

Capitalization

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2
Q

Loss in value due to causes EXTERNAL to the property

A

Economic obsolescence

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3
Q

Method of valuing property by comparing the subject property to similar properties that have recently sold

A

Market Data Approach /Sales Comparison

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4
Q

Demand
Utility
Scarcity
Transferability

A

Essential elements of VALUE

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5
Q

An estimate or opinion of value of a specific property

A

Appraisal

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6
Q

Income Capitalization Approach

A

NOI \ capitalization rate

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7
Q

Based on the principal of substitution

A

Sales Comparison Approach

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8
Q

Appraiser calculates accrued depreciation

A

Cost Approach

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9
Q

Functional Obsolesce

A

Curable. Physical or design features considered no longer desirable

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10
Q

Step in which the appraiser weighs all approaches to determine final value

A

Reconciliation

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11
Q

Increase in value due to rising market

A

Appreciation

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12
Q

Mathematical process never used in appraisal process

A

Averaging

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13
Q

Method that relates the sales price of a property to its expected rental income.

A

Gross Rent Multiplier (GRM)

Sales Prices/
Rental Income = GRM

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14
Q

Rental Income X GRM

A

Estimated Market Value

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15
Q

Used when a property’s income also comes from no rental sources

A

Gross Income Multiplier (GIM)

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16
Q

Appraise residential properties

A

Certified Residential Appraisers

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17
Q

Appraise commercial properties

A

Certified general appraisers

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18
Q

Established many federal agencies charged with the task of setting appraisal standards and minimum qualification requirements

A

The Financial Institutions Reform, Recovery and Enforcement Act if 1989

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19
Q

The analysis of sales similar recently sold properties in order to derive an indication of the probable sales price of a particular property by a licensed real estate broker

A

Comparative Market Analysis (CMA)

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20
Q

Relationship between an object desired and a potential purchaser

A

Value

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21
Q

The most probable price the a property will bring in a competitive and open market , allowing reasonable time to find a purchaser, who buys the property with knowledge of all the uses to which it us adapted and for which it is capable of being used.

An opinion based on analysis of potential income, expenses, replacement costs

A

Market Value

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22
Q

What a property ACTUALLY sells for.

A

Market Price

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23
Q

Forces and factors influencing property value

A

Social
Economic
Political
Physical

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24
Trends in marriage, divorce rates, family size, longevity, desirability of social activities
Social forces
25
Income, employment levels, rate of property taxation, current interest rates, general economic growth
Economic forces
26
Government activities such as zoning, building codes, growth management, environmental legislation, tax structures
Political forces
27
Topography, location, climate, size, shape, proximity to major a retrials, jobs, public transportation
Physical forces
28
Most profitable single use to which a property is adapted and for which it is needed, or the use that is likely to be in demand in the reasonably near future. Can only be one use at any given time.
Highest and best use
29
Several items with essentially the same amenities and utilities are available, the item with the lower price will attract the most demand
Substitution
30
States that the value of the property will change if supply decreases and demand increase and vice versa.
Supply and demand
31
Maximum value is realized if the use of the land confirms to existing neighborhood standards
Conformity
32
Value can increase or decrease in anticipation of some future benefit or detriment
Anticipation
33
Affirms that the value of any component of a property is defined by what it's addition contributes to the value of the whole or what it's absence detracts from that value
Contribution
34
Principle that states that profit tends to attract competition
Competition Principal
35
No physical or economic condition remains constant
Change Principal
36
4 phases of cycle of change
Growth, stability, decline, renewal = Neighborhood Life Cycle
37
Comparative data relating to costs, sales, and income & expenses of properties similar to and competitive with subject property
Specific Data
38
Covers the nation, region, city, and neighborhood
General data
39
Steps of an appraisal
``` State the problem List the data needed and the sources Gather, record and verify the necessary data Determine the highest and best use Estimate the land value Estimate the value by each of the three approaches Reconcile the estimated values Report final estimate ```
40
Estimate of value us obtained by comparing the subject property with recently sold comparable properties *used most for single family homes
Sales Comparison Approach (Market Data Approach)
41
4 categories of Sales Comparison Approach
Date of Sale Location Physical Features Terms and Conditions of Sale
42
Property did not sell for an unusually high or low price bc of a special relationship between buyer and seller
Arm's Length Transaction
43
Value of feature present in comparable property but not in subject property
SUBTRACTED from comparable property's total sales price
44
Based on substitution which states that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute. Most helpful in the appraisal of special-purpose buildings such as schools, churches, public buildings.
The Cost Approach
45
5 steps of cost approach
1) estimate the value of the land as if it was vacant (sales comparison approach) 2) separate the land from improvements, estimate the current cost of constructing the buildings and site improvements based on cost data and experience 3) estimate accrued depreciation resulting from physical deterioration, functional or economical obsolescence 4) deduct accrued depreciation from the estimated construction cost and the contributory depreciated value of site improvements 5) add estimated value of the land to the depreciated cost of the building and site improvements to determine total property value
46
Dollar amount required to construct an exact duplicate of the subject building at CURRENT prices
Reproduction Cost
47
Cost per square foot of a recently built comp x sq feet in subject building. Most common method of cost estimation
Square foot method
48
Replacement cost of a structure estimated based on construction cost per unit of measure of individual building components including material, labor, overhead and profit. Most components are measured in sq feet
Unit-in-place method
49
Estimate made of the quantities of raw materials needed to replace the subject structure as well as current price of materials plus installation. These factors are added to indirect costs (survey,payroll taxes, building permit) to arrive at total replacement cost
Quantity-survey method
50
Loss in value for any reason. Adversely affects the value of an improvement to real property
Depreciation
51
Curable. Repairs that are physically possible and economically feasible and will result in an increased appraisal value equal to or exceeding their cost
Physical deterioration : curable
52
Repairs to major structural components if a building which deteriorate at different rates may not be economically feasible
Physical deterioration : in curable
53
Physical or design features that are no longer desirable but can be replaced
Functional obsolescence :curable
54
Undesirable design features that can NOT be remedied easily. (Older multistory industrial building )
Functional obsolescence : Incurable
55
Effective age of a building and it's economic (useful) life
Age life method
56
Cost of an asset is depreciated evenly over its useful life
Straight line method of depreciation
57
A building's economic life x amount of depreciation the building has suffered
Effective Age
58
Based on the present worth of the future rights to income. Assumes that the income derived from a property will control the value of the property. Used on apartment buildings, office buildings, shopping centers
The Income Capitalization Approach
59
Annual potential gross income- appropriate allowance for vacancy and rent losses
Effective Gross Income
60
Effective gross income - annual operating expenses (taxes,insurance, maintenance,repairs, mgmt costs)
Net operating income (NOI)
61
Rate if return an investor would will demand for investment in building. Compares NOI to sales prices of similar properties sold in current market
Capitalization Rate
62
Net operating income / | Capitalization rate = Value
Income capitalization rate
63
Income/rate = Value Income/value = Rate Value x rate = Income
Variations in estimating value of income producing property
64
Used to appraise single and two family homes used as income properties
Gross Rent Multipliers or Gross Income Multipliers
65
Sales Price / | Rental income
Gross rent multiplier (GRM)
66
Rental income x GRM
Estimated market value
67
Federally related appraisals must follow guidelines stated in
Uniform Standards of Professiinsl Appraisal Practice (USPAP)
68
Economic principals of value
``` Highest and best use Substitution Supply and demand Conformity Anticipation Contribution Competition Change ```

NC Real Estate License (12 decks)

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