Valuation principles

Question 1

An opinion or estimate the value of real estate as of a certain date, as supported by objective evidence and data

Answer 1

Appraisal

Question 2

An increase in the value of property due to a positive improvement in the area where the elimination of negative factors

Answer 2

Appreciation

Question 3

The dollars needed to develop, produce, or build something

Answer 3

Cost

Question 4

The decrease in value to real property improvements caused by deterioration or obsolescence

Answer 4

Depreciation

Question 5

Depreciation based on the progressive decline of a property’s condition

Answer 5

Deterioration

Question 6

An increase in value due to some effort of the owner such as remodeling or other property improvements

Answer 6

Earned increment

Question 7

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

Answer 7

Economic obsolescence, also called external obsolescence

Question 8

Land that is not needed to support the highest and best use of a property

Answer 8

Excess land

Question 9

A loss in value due to a property’s design characteristic that does not meet current market expectations

Answer 9

Functional obsolescence

Question 10

The most profitable, legally permitted, feasible, and physically possible use of a piece of property

Answer 10

Highest and best use

Question 11

The contract price for which a property actually sold

Answer 11

Market price

Question 12

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

Answer 12

Market value

Question 13

The placement of a building on a lot; the relationship of a building to its surroundings

Answer 13

Orientation

Question 14

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

Answer 14

Plottage – also called plottage increment or assemblage

Question 15

The principle that factors outside of a property can have a positive or negative affect on its value

Answer 15

Principle of externalities

Question 16

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

Answer 16

Progression

Question 17

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

Answer 17

Regression

Question 18

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

Answer 18

Substitution

Question 19

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

Answer 19

Supply and demand

Question 20

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

Answer 20

Unearned increment

Question 21

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

Answer 21

Value