Valuation & Market Analysis

Question 1

comparative market analysis

Answer 1

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 2

external obsolescence

Answer 2

when something outside the control of the property makes it less desirable.
aka. ECONOMIC OBSOLESCENCE

Question 3

functional obsolescence

Answer 3

when a building is less desirable because of something permanent in the design of the structure

Question 4

gross income multiplier (GIM)

Answer 4

used for commercial properties, but uses annual income figures

Question 5

gross rent multiplier (GRM)

Answer 5

a number from comparable rental property in an area, then used to estimate the value. 1-4 unit residential properties only.

Question 6

market price

Answer 6

price the property actually sold for

Question 7

physical deterioration

Answer 7

“wear and tear” due to age, the elements, or other forces

Question 8

plottage

Answer 8

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

Question 9

progression

Answer 9

principle that says the value of a home is helped up by the other homes in an area

Question 10

reconciliation

Answer 10

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

Question 11

regression

Answer 11

principle that says the value of a home is held down by the other homes in an area

Question 12

scarcity

Answer 12

physical characteristic of real property that says there is a limited supply of real estate

Question 13

square foot method

Answer 13

method for determining the cost of a building that relies on cost manuals

Question 14

substitution

Answer 14

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

Question 15

supply & demand

Answer 15

when supply exceeds demand, prices will fall and

when demand exceeds supply, prices will rise

Question 16

amenity

Answer 16

tangible or intangible feature that enhances & adds value to real estate

Question 17

assemblage

Answer 17

combining of 2 or more parcels of land into 1 larger parcel

Question 18

four characteristics of value

Answer 18

DUST

1. demand
2. utility
3. scarcity
4. transferability

Question 19

seller’s market

Answer 19

when the market favor’s the seller.
large demand for properties in a given area and few properties on the market.
(increases market value)

Question 20

buyer’s market

Answer 20

when the market favors the buyer.
supply of properties is much greater than the demand for those properties.
(prices will go down)

Question 21

capitalization rate

Answer 21

a factor, which if applied to an income, will convert that income into an indication of value.
higher the cap rate, lower the sales price

Question 22

highest & best use

Answer 22

use which gives the greatest return in money and/or amentities.

Question 23

appraisal

Answer 23

estimate of value

Question 24

essentials to an appraisal report

Answer 24

date
purpose
opinion of value
legal description
signature of appraiser