Value of a Property Flashcards
Formula for determining value of a property:
Value = replacement/reproduction cost - accrued depreciation + land value
Formula for determining value via income
Value = net operating income / capitalization rate
What elements establish value? DUST
Demand
Utility
Scarcity
Transferability of the property
The expected worth of a property while owning it and possible gains when selling it.
anticipation
Bringing together adjoining parcels under the same ownership for purposes such as commercial or residential development. This could potential increase the worth of the parcels.
assemblage (plottage)
Whether physical, political, economical, social or environmental, all properties can be affected by ti and result in an increase or decrease of worth.
change
Generally speaking, properties that are similar to other properties in the neighborhood typically have higher values than those that are not.
conformity
Can results in higher or lower priced homes, depending not he number of sellers that are brought into the market. if there are a lot of sellers, that may drive the home prices down, while if there are only few sellers, this could deb a shortage of properties which could mean higher prices.
competition
The maximum use of a property that is legally allowed, which typically produces the most income.
highest and best use
When property improvements do not result in an increase in property value.
Law of decreasing returns
When property improvements do result in an increase in property value.
Law of increasing returns
The advantage to a property of being locate din a desirable area.
progression
The disadvantage to a property being located in a less desirable area.
regression
The idea that a buyer does not want to pay more for a property than he would pay for an equivalent property.
substitution
More properties and less buyers = lower prices.
Less properties and same/more buyers = higher prices.
supply and demand
