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Real Estate > Unit 8: Valuation + Market Analysis > Flashcards

Unit 8: Valuation + Market Analysis Flashcards

1
Q

Evaluation:

A

A study of a property, possibly for land use or marketability.

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2
Q

Valuation:

A

The process of forming an opinion of a property’s value.

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3
Q

Appraisal:

A

Determines property value based on the appraisal “problem,” which varies depending on the property type, client, and intended purpose of the appraisal.

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4
Q

What do appraisers help with?

A

determine property worth, mortgage value, investment value, or insured value.

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5
Q

What are real estate licensees responsible for?

A

preparing a comparative market analysis for what buyers in a given market will pay for the property

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6
Q

Price:

A

Amount the buyer paid for a property and what the seller has accepted

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7
Q

Value:

A

A property’s worth that may not equal price or cost

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8
Q

Cost:

A

Amount to recreate that property if it disappeared off the face of the earth today

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9
Q

What are the 4 factors of value?

A

Demand, Utility, Scarcity, and Transferability

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10
Q

The principle of conformity:

A

A property’s value is determined in part by how well it conforms to its surrounding area.

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11
Q

The principle of competition:

A

A property’s value is determined in part based on what else is available.

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12
Q

The principle of substitution:

A

A reasonable person will not pay more for a property if a comparable one can be had for less.

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13
Q

The principle of contribution:

A

The value of any given change to the property is dependent on the value of the property as a whole.

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14
Q

Highest and best:

A

The most profitable (and legal and possible) use of a property

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15
Q

Plottage:

A

The joining of two adjacent parcels to increase the overall property value beyond what each would be worth if sold separately

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16
Q

Regression:

A

A decline in value due to the decline in value of neighboring properties

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17
Q

Progression:

A

The increase in property value from increased surrounding property values

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18
Q

Sales Comparison Approach to Value:

A

based on the value of similar properties in the market - appraiser look at both qualitative (elemental) and quantitative (unit-based) assets of a property

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19
Q

What are the elements of property used in the sales comparison approach?

A

financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics

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20
Q

Cost Approach to Value:

A

based on the cost to rebuild the property - weighed heavily when property is unique/newly constructed

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21
Q

External depreciation:

A

caused by factors outside the property (e.g., an airport is built nearby, causing noise)

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22
Q

Functional obsolescence:

A

occurs with outdated structure or systems, or when a property is overbuilt for the area.

23
Q

Physical deterioration :

A

occurs with wear and tear, damage, and improper maintenance.

24
Q

replacement cost approach:

A

bases value on cost to build a functionally equivalent property.

25
Q

reproduction cost approach:

A

determines cost to build an exact replica of the property with the same materials and deficiencies.

26
Q

site value approach:

A

assumes the land is vacant and bases opinion on highest and best use.

27
Q

Income approach:

A

determines potential property income if leased or rented, or by other means.

28
Q

Gross income multiplier:

A

Sales price divided by gross annual income.

29
Q

Gross rent multiplier:

A

Sales price divided by the gross monthly rent.

30
Q

Capitalization rate or cap rate:

A

An annual rate of return from an income-producing property. Often used by investors to determine value or to compare one investment to another

31
Q

Determine cap rate:

A

Divide annual income by value (or sales price) (I ÷ V = R).

32
Q

Determine value using the cap rate formula:

A

Divide annual income by cap rate (I ÷ R = V).

33
Q

Determine income using the cap rate formula:

A

Multiply cap rate by value (R x V = I).

34
Q

Determine value of home with income approach:

A

If you know GRM of comparable, multiply monthly annual income by GRM

35
Q

Process of Reconciliation:

A

Analyzing the findings from the approaches used, and then weighing the findings that each provided.

36
Q

Higher unemployment in market = ….

A

reduce buyers, downward pressure on housing prices

37
Q

Higher taxes in market = …

A

Decrease buying power

38
Q

Lower taxes in market =…

A

Increase buying power

39
Q

Higher interest rate in market =

A

fewer buyers, decrease in price

40
Q

Lower interest rate =

A

more buyers, increase in price

41
Q

CMAs:

A

not appraisals and are usually prepared at no cost, prepared by real estate licensees.

42
Q

BPOs

A

prepared by real estate licensees, for a minimum fee, and appraisals generally cost $400 and up – sometimes ordered by lender in foreclosure situation to determine market price

43
Q

making CMA Adjustments -

A

adjustments are made to the comparables, not to the subject property.

44
Q

Selecting CMA comparable -

A

recent sales carry more weight than older sales

45
Q

To find a home’s estimated value (based on price per square foot):

A

multiply the number of square feet by the price per square foot.

46
Q

Price per square foot is calculated by :

A

dividing a home’s price by its square footage.

47
Q

Appraisal:

A

An estimate of value that’s for a specific purpose, party, and property as of a specific date.

48
Q

Broker’s price opinion (BPO):

A

The process used by a hired sales agent to determine the potential selling price or estimated value of a real estate property.

49
Q

Comparative market analysis (CMA):

A

An opinion of a property’s market price range.

50
Q

Market value:

A

The price the buyer and seller agree upon.

51
Q

Demand:

A

How popular or desirable a property is

52
Q

Utility:

A

The function of the property

53
Q

Scarcity:

A

Relates to market supply.

54
Q

Transferability:

A

The ease with which another person can purchase the property

Real Estate (7 decks)

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