Vocab

Question 1

Appraisal

Answer 1

An unbiased estimate of the nature, quality, value, or utility of an interest in or aspect of identified real estate and related personalty as of a certain date

Question 2

Scope of Work

Answer 2

is the appraiser’s determination of the amount and type of information to be researched and the types of analysis that will be applied.

Question 3

Cost approach to value

Answer 3

Part of appraisal where the appraiser estimates a property’s value by adding the land value to the depreciated value of any improvements to the property.

Question 4

Income (capitalization) approach

Answer 4

Appraisal approach used by appraisers who need to value commercial and investment properties using a single year’s income or discounts a projected income stream to derive an indication of the property’s value.

Question 5

Sales comparison approach

Answer 5

Appraisal approach based on principle of substitution where an appraiser examines the price (or price per unit area) of similar properties recently sold or currently being sold in the marketplace to come up with comparable value assessments.

Question 6

Valuation

Answer 6

The process of estimating the value of an identified interest in specific property as of a given date.

Question 7

Investment value

Answer 7

The amount of the return on an investment that an income-producing property will produce.

Question 8

Insured value

Answer 8

The face amount a casualty or hazard insurance policy will pay in case a property is deemed unusable.

Question 9

Mortgage value

Answer 9

The value the lender places on a property as collateral for the loan, especially in the event of a foreclosure when the lender must recover the debt through the sale of the property.

Question 10

Use value

Answer 10

The value the property holds for the owner. Also called value-in-use.

Question 11

Exchange value

Answer 11

The value that results from comparing the property

to other similar properties on the open market. This is the type of value that real estate agents are concerned with.

Question 12

Reproduction cost

Answer 12

The value based on the cost of constructing a precise duplicate of the subject property’s improvements, assuming current construction costs.

Question 13

Replacement cost

Answer 13

The value based on the cost of constructing a functional equivalent of the subject property’s improvements, assuming current construction costs.

Question 14

Salvage value

Answer 14

The nominal value of a property that has reached the end of its economic life.

Question 15

Assessed value

Answer 15

The value of a property as estimated by a taxing authority (for example, the IRS, local school or fire district) as the basis for ad valorem taxation.

Question 16

Condemned value

Answer 16

The value set by a county or municipal authority for a property that may be taken by eminent domain.

Question 17

Depreciated value

Answer 17

A value established by subtracting accumulated depreciation from the purchase price of a property. Equal to the purchase price of a property minus the accumulated depreciation.

Question 18

Rental value

Answer 18

An estimate of the rental rate a property can command for a specific period of time.

Question 19

Evaluation

Answer 19

The study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required. Evaluation of a property does not result in an estimate of value.

Question 20

Anticipation

Answer 20

The benefits a buyer expects to receive over the period of time he or she has the property influences the decision to purchase it. The value of the property can increase or decrease depending on whether the anticipated change is a benefit or a disadvantage.

Question 21

Assemblage

Answer 21

When two adjacent pieces of property are joined together, the value of the one larger parcel may be greater than the value of the two separately.

Question 22

Change

Answer 22

Both market conditions and a property’s physical condition change constantly over time. These changes affect the benefits of the property.

Question 23

Conformity

Answer 23

This principle says that a property is at its highest value when it conforms with and fits into its surroundings.

Question 24

Competition

Answer 24

This principle holds that when several businesses of a similar type are close to one another, they may make more money together than they would have individually.

Question 25

Contribution

Answer 25

This is what the market recognizes as the change in value of an improvement made to a property—not what that improvement cost.

Question 26

Diminishing return

Answer 26

This condition is a result of continuing to add improvements to a property when those improvements will have no effect on increasing the value of the property.

Question 27

Highest and Best Use

Answer 27

Principle stating every property has a single-use which produces the greatest income and return. Therefore, the property will have its highest value when it is used for that purpose. The property’s use must be legally permissible, physically possible, financially feasible, maximally productive.

Question 28

Progression and Regression

Answer 28

This principle holds that a property is affected by the surrounding properties. Progression is when lesser properties increase in value due to higher properties in the vicinity. Regression is when higher properties decrease in value due to lesser properties in the vicinity.

Question 29

Substitution

Answer 29

According to this principle, a buyer will not pay more for a home than what he or she would pay for another home that is equally attractive and available.

Question 30

Supply and Demand

Answer 30

Principle stating the value of a property depends on how many properties are available in an area; property prices; number of prospective buyers; and the price buyers are willing to pay.

Question 31

Market Value

Answer 31

The most probable price, as of a specific date, in cash for which the specified property rights should be sold after reasonable exposure in a competitive market.

Question 32

Market Price

Answer 32

The amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding the transactions—in other words, the actual sales price.

Question 33

Direct Costs

Answer 33

Costs include the cost of labor and materials. Also called hard costs.

Question 34

Indirect Costs

Answer 34

These are the costs that support a given project.

Question 35

Physical Deterioration

Answer 35

Decay or disintegration, cracks, settling, structural defects, termite damage.

Question 36

Functional Obsolescence

Answer 36

Within the property lines, outdated plumbing, electrical or heating, outmoded lighting fixtures, or architecture.

Question 37

External Obsolescence

Answer 37

Outside the property lines, population changes, neighborhood changes that decrease value, legislative changes.

Question 38

Breakdown Method

Answer 38

When appraisers break depreciation down into the three classes and give estimates for the curable and incurable factors of each class.

Question 39

Straight-line Method

Answer 39

Assumption that depreciation occurs at a steady rate over the economic life of the property useful when estimating depreciation from physical deterioration. It is also called the economic age-life method.

Question 40

Economic Life

Answer 40

The time period that a building is expected to remain useful for its originally-intended purpose.

Question 41

Capitalization Rate

Answer 41

The rate of return an investor will require on his or her investment of capital in this kind of property.

Question 42

Potential Gross Income

Answer 42

The rent scheduled to be collected on the property plus income from such other sources as vending machines, parking fees, and laundry facilities.

Question 43

Gross Rent Multiplier

Answer 43

Estimate of the value of properties such as single-family homes and duplexes that could produce income but are not primarily income-producing properties. Calculated by dividing sales price by gross rent. Also called the Gross Income Multiplier.

Question 44

Appraisal Management Company (AMC)

Answer 44

An entity authorized by TALCB to provide appraisal management services.