Valuation principles Flashcards
An opinion or estimate the value of real estate as of a certain date, as supported by objective evidence and data
Appraisal
An increase in the value of property due to a positive improvement in the area where the elimination of negative factors
Appreciation
The dollars needed to develop, produce, or build something
Cost
The decrease in value to real property improvements caused by deterioration or obsolescence
Depreciation
Depreciation based on the progressive decline of a property’s condition
Deterioration
An increase in value due to some effort of the owner such as remodeling or other property improvements
Earned increment
A loss of value due to a change an external events or factors affecting a piece of real property; cannot be cured by the owner
Economic obsolescence, also called external obsolescence
Land that is not needed to support the highest and best use of a property
Excess land
A loss in value due to a property’s design characteristic that does not meet current market expectations
Functional obsolescence
The most profitable, legally permitted, feasible, and physically possible use of a piece of property
Highest and best use
The contract price for which a property actually sold
Market price
The most probable price a property should bring in an open and competitive market, when sold to a ready, willing, and able buyer through an arm’s length transaction
Market value
The placement of a building on a lot; the relationship of a building to its surroundings
Orientation
The combining of two or more parcels of land into one larger parcel, resulting in an increase in value over the combined value of individual parcels
Plottage – also called plottage increment or assemblage
The principle that factors outside of a property can have a positive or negative affect on its value
Principle of externalities
A principle that says the value of a smaller and less expensive home is positively affected when it is surrounded by larger and more expensive homes. Usually said about the “worst” home in the “best” area
Progression
A principle that says the value of a larger, more expensive home is negatively affected when it is surrounded by smaller, less expensive homes. Usually said about the “best” home in the “worst” area
Regression
An economic theory that says an informed buyer will not pay more for a property, or a feature in a property, then a comparable property
Substitution
An economic principle that says that for all products, goods, And services Winn supply exceeds demand, prices will fall and when demand exceeds supply, prices will rise
Supply and demand
An increase in the value of real property through no efforts of the property owner. For example rezoning or a population shift in the area
Unearned increment
The regard that something is held to deserve; the importance, worth, or usefulness of some thing. There are several measures of this, depending on the purpose
Value
