Valuation And Market Analysis

Question 1

Gross Rent Multiplier

Answer 1

A number derived from comparable rental property in an area, which then is used to estimate the value of a piece of real estate. The GMRM is only used for one to four unit residential properties. COMPARE: Gross Income Multiplier, which is a variation used for commercial properties that uses annual income.

Question 2

Balance

Answer 2

A condition that exists in the real estate market when there are slightly more homes available than buyers.

Question 3

Regression

Answer 3

A principle that says the value of a home is held down by the other homes in an area. (Usually said about the “best” home in the “worst” area.)

Question 4

Supply and Demand

Answer 4

Law of economics that says for all products, goods and services when supply exceeds demand, prices will fall and when demand exceeds supply, prices will rise.

Question 5

Physical Deterioration

Answer 5

Actual wear and tear on something due to age, the elements or other forces.

Question 6

Substitution

Answer 6

A “rule” that says an informed buyer will not pay more for a home than a comparable substitute.

Question 7

Amenity

Answer 7

A tangible or intangible feature that enhances and adds value to real estate.

Question 8

Reconciliation

Answer 8

The appraisal process of analyzing the values derived from the different appraisal approaches to arrive at a final value estimate or opinion.

Question 9

Seller’s Market

Answer 9

Situation in the housing market where sellers can choose from a large number of buyers looking for houses in an area.

Question 10

Assemblage

Answer 10

The combining of two or more parcels of land into one larger parcel.

Question 11

Comparative Market Analysis

Answer 11

A method of determining the approximate market value of a home by comparing the subject property to other homes that have sold, are presently for sale, or did not sell in a given area.

Question 12

Arm’s Length Transaction

Answer 12

A transaction that occurred under typical conditions in the marketplace where each of the parties were acting in their own best interests.

Question 13

Progression

Answer 13

A principle that says the value of a home is helped up by the other homes in an area. (Usually said about the “worst” home in the “best” area.)

Question 14

Plottage

Answer 14

An increase in value by successful assemblage, usually due to a change in use.

Question 15

Buyer’s Market

Answer 15

A situation in the housing market where buyers have a large selection of properties to choose from.

Question 16

Land

Answer 16

The actual dirt or soil on the ground. From a legal standpoint, also refers to everything under the ground to the center of the earth, and everything over the land into the air (within limits to allow for air traffic).

Question 17

Scarcity

Answer 17

A physical characteristic of real property that says there is a limited supply of real estate; the perceived supply of a good or service relative to the demand for the item.

Question 18

Market Price

Answer 18

The price that a piece of real estate sold for in an actual transaction.

Question 19

Square Foot Method

Answer 19

Method for determining the cost of a building that relies on cost manuals (and is sometimes called the cost manuals method).

Question 20

Capitalization

Answer 20

A way to convert a property’s income figure into an estimated value.

Question 21

External Obsolescence

Answer 21

When something outside the control of a property makes it less desirable. Also called economic obsolescence.

Question 22

Diminishing Returns

Answer 22

Law that says beyond a certain point, the added value of an additional feature, addition, repair, etc. is less than the actual cost of the item. Also called law of decreasing returns.

Question 23

Demand

Answer 23

The need or desire for a specific good or service by others.

Question 24

Gross Income Multiplier

Answer 24

(GIM) A variation of the GMRM which is used for commercial properties, but uses annual income figures.

Question 25

Functional Obsolescence

Answer 25

When a building is less desirable because of something inherent in the design of the structure.

Question 26

Contribution

Answer 26

A “rule” that says a particular item or feature of a home is only worth what it actually contributes in value to that piece of property.

Question 27

URAR - Uniform Residential Appraisal Report

Answer 27

A standard appraisal report form used by lenders and appraisers because it has been developed and approved by secondary mortgage market players Fannie Mae and Freddie Mac.

Question 28

Comparables

Answer 28

Other similar properties that have sold in a certain area. Also called Comps.