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BUSI 330 - Foundations of Real Estate Appraisal > Xtra - FLASH AID > Flashcards

Xtra - FLASH AID Flashcards

1
Q

Value Principles:

A

Value Principles: Problem Identification, Property Content, Legal Considerations, Highest/Best Use,
Economic Analysis “key consideration for highest best use”

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2
Q

Demand:

A

Demand: measures quantity of property market would like to purchase at given price

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3
Q

Property Content:

A

Property Content: physical, legal, financial, locational

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4
Q

Problem Identification:

A

Problem Identification: purpose, intended use, value

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5
Q

Competition:

A

Competition: 2 or more buyers to purchase/lease

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6
Q

Legal Considerations:

A

Legal Considerations: property rights, land use regulations, legislation

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7
Q

Substitution:

A

Substitution: when many similar goods are avail, low price= greatest demand

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8
Q

Elements of Value:

A

Elements of Value: certain point in time, price which would be expected, willing seller/buyer, normal consideration

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9
Q

Factors of Value:

A

Factors of Value: Supply Utility- product to satisfy need/want/desire Scarcity- undersupply of an item relative to demand for it
Demand Desire- purchasers wish to satisfy need/want Effective purchasing power- individual/group to participate in market, acquire good/services

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10
Q

Approaches to Value:

A

Approaches to Value: direct comparison, cost approach, income approach

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11
Q

Assessment Ratio:

A

Assessment Ratio: ratio assessed value to market value

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12
Q

Forces:

A

Forces: Physical, Economic, Government

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13
Q

Social Change:

A

Social Change: forces + environment influence real property value

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14
Q

Cost Index:

A

Cost Index: Current cost index / cost index (date of) = (x) construct. Cost

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15
Q

Real Property:

A

Real Property: immobility, durability of improved land, indivisibility of services, divisibility of ownership

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16
Q

Public Limit on Bundle of Rights:

A

Public Limit on Bundle of Rights: Zoning

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17
Q

Fixture:

A

Fixture: part of the real estate

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18
Q

Chattel:

A

Chattel: personal property, not affixed

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19
Q

Supply:

A

Supply: quantity of property supplied at given price (fixed location/X > / < rapid)

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20
Q

Market Value:

A

Market Value: expected or forecasted sale price $ property should sell on open market (via direct comparison=well informed buyers

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21
Q

Trade Fixtures=

A

Trade Fixtures= Personal property placed in, or affixed to, the premises leased by a tenant that is used in connection with the tenant’s business operations at the leased premises. Typically, trade fixtures remain the tenant’s property even if they are affixed to the leased premises.

ie. ovens

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22
Q

Real Property:

A

Real Property: Use/Market Value (leases/easements) * durability of improved land

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23
Q

Real Estate:

A

Real Estate: physical entity that is tangible/immobile

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24
Q

Use Value=

A

Use Value= Limited market properties ** intended use of appraisal determines type of value to be developed

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25
Q

FORMULA - Overall Cap Rate=

A

Overall Cap Rate= NOI / Selling Price

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26
Q

CUSPAP:

A

Canadian Uniform Standards of Professional Appraisal Practice

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27
Q

Surplus Productivity=

A

Surplus Productivity= labour, capital, land

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28
Q

FORMULA - NOI=

A

NOI= Selling Price x OCR

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29
Q

Investment Value:

A

Investment Value: value to individual not value in marketplace

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30
Q

Conformity=

A

Conformity= characteristics of property conform to demand of its market

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31
Q

FORMULA - Selling Price =

A

Selling Price = NOI / OCR

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32
Q

“Going Concern Value”:

A

“Going Concern Value”: value of a proven property operation

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33
Q

Externalities=

A

Externalities= affected by changes taking place beyond borders

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34
Q

FORMULA - Rate of Return=

A

Rate of Return= income / sale price

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35
Q

Public Interest Value:

A

Public Interest Value: social, political and public policy goals- based on non economic highest/best use

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36
Q

FORMULA - Market Value= **directcap

A

Market Value= NOI / Cap Rate **directcap

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37
Q

Actual Cash Value=

A

Actual Cash Value= Insurance Concept

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38
Q

Macro Economics:

A

Macro Economics: inflation, unemployment, interest rates, govern. policies (national/intern)

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39
Q

Micro Economics:

A

Micro Economics: individ/small firm

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40
Q

FORMULA ( MV= EGI X GIM **gim)

A

MV= EGI X GIM **gim

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41
Q

Replacement Cost:

A

Replacement Cost: Normal Depreciation

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42
Q

Easement=

A

Easement= privilege acquired by owner to benefit his land over another

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43
Q

FORMULA - Gross Inc. Multi (GIM) =

A

Gross Inc. Multi (GIM) = Selling Price / Eff. Gross Inc (EGI)

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44
Q

Anticipation price:

A

Anticipation price: we pay for goods/services is present worth of anticipated future benefits

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45
Q

Restrictive Covalent =

A

Restrictive Cov= restriction on use of one persons land

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46
Q

Balance:

A

Balance: combination of land and improvements is optimal, no additional marginal benefit

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47
Q

Contribution=

A

Contribution= how items contribute to overall value

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48
Q

Ownership=

A

Ownership=“legal rights of ownership”

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49
Q

Bundle of Rights=

A

Bundle of Rights= rights of ownership attributable to property (mortgage/lease/sell etc)

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50
Q

Leasehold Estate=

A

Leasehold Estate= life tenant has exclusive possession for limited time

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51
Q

Life Estates=

A

Life Estates= life tenant lives until title reverts to designated party

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52
Q

Fee Timesharing=

A

Fee Timesharing= interval ownership

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53
Q

Permitted Use=

A

Permitted Use= relevant by laws informs of use and development

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54
Q

Legal Non Conforming=

A

Legal Non Conforming= use of land/structure legally est. according to applicable zoning at the time, but doesn’t meet current standards

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55
Q

Trends:

A

Trends: vacancy rates, capitalization rates, changes in supply/home prices

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56
Q

Depreciation:

A

Depreciation: physical, functional, external obsolescence

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57
Q

Foundation:

A

Foundation: Footings, Piers, Piles

58
Q

Plottage:

A

Plottage: increment of value resulting in 2/more sites assembled to produce 1 of greater utility

59
Q

Social Influence:

A

Social Influence: # of people unemployed

60
Q

Market Study

A

Market Study: ”market analysis” (inferred/fundamental)

61
Q

Marketability Study:

A

Marketability Study: market for specific property (utility, scarcity, desire, effective purchase power)

62
Q

Short Term Capture:

A

Short Term Capture: Absorption

63
Q

Long Term Capture:

A

Long Term Capture: Share of Market

64
Q

Entrepreneurial Profit=

A

Entrepreneurial Profit= difference between total cost of development and market value

65
Q

Quality/Condition Survey:

A

Quality/Condition Survey: short lived, long lived, immediate repair

66
Q

Not Economically Feasible:

A

Not Economically Feasible: cost approach produces value higher than direct comp/income approach

67
Q

Green Building Practices:

A

Green Building Practices: development density, use of renewable materials, innovative design

68
Q

Metes:

A

Metes: “measurements”

69
Q

Bounds:

A

Bounds: terrain described in conjunction w/ compass bearings/distance

70
Q

Cost Approach:

A

Cost Approach: vacant/avail for development of its highest and best use. Most app

71
Q

Assessed Value:

A

Assessed Value: market value of property, as date specified in assessment legislation

72
Q

Comprehensive Method:

A

Comprehensive Method: quantitative survey and comparative unit

73
Q

FORMULA :: Property Taxes:

A

Property Taxes: multiply assessed value of property x tax rate (mill rate)

74
Q

Financially Feasible Uses:

A

Financially Feasible Uses: Marketability & Financial Analysis

75
Q

Plottage:

A

Plottage: ‘value increment” lots are subdivided

76
Q

Assemblage:

A

Assemblage: joining of lots

77
Q

Surplus Land:

A

Surplus Land: land over and above norm for the area

78
Q

Excess Land:

A

Excess Land: extra land can be used as additional lots

79
Q

Topography:

A

Topography: site analysis (slopes/deep hollows etc)

80
Q

Paired Sales Method:

A

Paired Sales Method: no major adjustments required, finding 2 identical/similar sales one with average and one with better landscaping

81
Q

6 Parts -Market Analysis:

A

Market Analysis:

  1. Property Productivity Analysis
  2. Market Delineation
  3. Fore Demand
  4. Fore Competitive Supply
  5. Residual Analysis
  6. Fore. Subject Capture
82
Q

Market Delineation:

A

Market Delineation: Characteristics of likely buyers, income and age are analyzed

83
Q

NOI:

A

NOI: remains after deducting all operating expenses but before mortgage deb services

84
Q

Definition- Highest Best Use:

A

Highest Best Use: what would land be worth if it were vacant and awaiting redevelopment, what is site worth as presently developed with improvements

85
Q

4 Parts- Highest Best Use:

A

4 Parts- Highest Best Use:

  1. Physically Possible
  2. Legally Permissible
  3. Financial Feasible
  4. Maximally Productive
86
Q

Income:

A

Income: allowance for vacancy / collection loss estimated as %

87
Q

Highest Best Use ”funnel process” narrows range of possible uses Contract Rent=rental income specified in lease Market Rent= rent income that command in open market
1.Problem Definition 2.Analyze Legally Permissible Uses 3.Apply Principle of Change 4.Demand Analysis 5. List Probable Uses (Financial)

A

Highest Best Use ”funnel process” narrows range of possible uses Contract Rent=rental income specified in lease Market Rent= rent income that command in open market
1.Problem Definition 2.Analyze Legally Permissible Uses 3.Apply Principle of Change 4.Demand Analysis 5. List Probable Uses (Financial)

88
Q

Highest Best Use Vacant:

A

Highest Best Use Vacant: any existing improvement can be demolished

89
Q

Capital Cost Allowance:

A

Capital Cost Allowance: depreciation of assesses, claimed for tax income purpose

90
Q

Special Considerations:

A

Special Considerations: Conforming/Non,General Use/Specific, Separate Use/Combined, Public Use/Private, Special Purpose, Excess Land, H/B as improved

91
Q

Highest/Best as Improved:

A

Highest/Best as Improved: Continuation of existing use, modification of existing use, demolition of existing use/redevelopment

92
Q

Reporting:

A

Reporting: Uses, Timing for uses, market participants (users, most probable buyers)

93
Q

NOI excludes:

A

NOI excludes: depreciation, capital cost allowance, income tax, debt repayment

94
Q

Present/Future Use: (for land)

A

Present/Future Use: current trends/demands of market to asses best use for land

95
Q

Effective Gross Income:

A

Effective Gross Income: income from all operations of real property

96
Q

Definitive Use/ Speculative Use:

A

Definitive Use/ Speculative Use: ‘r-urban’ underdeveloped land on fringe of urban development

97
Q

Interim Use:

A

Interim Use: ‘holding use’ until market changes and demand for particular development is ready

98
Q

Absorption Period:

A

Absorption Period: measure of time to sell lots in subdivision

99
Q

5 Steps: Direct Comparison Approach:

A
  1. research the data
  2. verify
  3. select units of comparison
  4. analyze/adjust comparable
  5. reconcile value indications Anticipation, Change, Supply/Demand, Substitution*** (value of given property, should be no more than cost of buying another substitute), Balance, Externalities
100
Q

Physical Characteristic=

A

Physical Characteristic= property adjustment

101
Q

Breakdown method:

A

application of age life ratio, incurable physical deterioration

102
Q

Quantitative Technique:

A

Quantitative Technique: Market Observation Analysis (science) isolating/separating valuing each element of comparison

103
Q

Qualitative Technique:

A

Qualitative Technique: Appraisers judgment on experience (art) larger view comparing each comparable sale on an overall basis w/ subject property

104
Q

Real Property Analysis:

A

Real Property Analysis: science/art. Reconciliation: (final step) indicating value estimate for subject property

105
Q

Grouped Data Analysis:

A

Grouped Data Analysis: paired sales

106
Q

IASS:

A

IASS: feature of comparable property inferior-Add to sale price of comparable, feature of comparable property Superior-Subtract from sale price of comparable

107
Q

Special Use properties:

A

Special Use properties: do not lend themselves to direct comparison approach.

108
Q

Relative Comparison Analysis:

A

Relative Comparison Analysis: ranking sales

109
Q

Elements of Comparison: Not as common=

A

Elements of Comparison: Not as common= rights conveyed, financing terms, conditions of sale, expenditures made immediate after purchase

110
Q

Elements of Comparison: Require Adjustment=

A

Elements of Comparison: Require Adjustment= market conditions (time), location, physical/economic characteristics, use, non realty items

111
Q

Rights Conveyed:

A

Rights Conveyed: fee simple/freehold, life estates, leasehold, mineral rights

112
Q

Observed Condition Method:

A

Observed Condition Method: allocates depreciation among individual Build. Components

113
Q

Financing Conditions:

A

Financing Conditions: low interest mortgage assumptions, conditional sale contracts, purchase mortgages, seller paid concessions, atypical financing

114
Q

Conditions of Sale:

A

Conditions of Sale: motivated sellers, motivated buyers, related parties, sales of adjacent properties, sales w/ one buyer

115
Q

Expenditures Made Immediately:

A

Expenditures Made Immediately: immediate repairs, demolitions, zoning/redevelopment, remediation

116
Q

Physical Short lived deterioration:

A

Physical Short lived deterioration: not curable Physical /eco short term replacement.

117
Q

Market Conditions:

A

Market Conditions: time adjustment, Adjustments for Physical Attributes: size of land, condition, age of improvements, amenities, functional utility

118
Q

Gross Adjustments “absolute adjustments” :

A

Gross Adjustments “absolute adjustments” total adjustments made ignoring negative signs

119
Q

Physical Curable Deterioration:

A

Physical Curable Deterioration: cost to fix problem is less than loss in value

120
Q

Net Adjustments:

A

Net Adjustments: difference between properties sale price and adjusted sale price

121
Q

Cost to cure:

A

Cost to cure: cost to restore an item of a deferred maintenance/new condition

122
Q

Principle of Substitution:

A

Principle of Substitution: holds value of a property tends to equal the cost of acquiring an equally desirable substitute property

123
Q

Adjustments:

A

Adjustments: financing, market conditions, basement

124
Q

Incurable Super adequacy:

A

Incurable Super adequacy: unwanted extra costs not adding to value

125
Q

Ground Rate Cap:

A

Ground Rate Cap: (portion of total rent allocated to underlaying land) V= I / R

126
Q

Curable Deficiency:

A

Curable Deficiency: property lacking a major component that market demands, fix the deficiency

127
Q

Land Value=

A

Land Value= income / land capitalization rate

128
Q

Functional Obsolescence:

A

Functional Obsolescence: functionally inadequate items whose cost cure is more than upgrading it

129
Q

FORMULA: Value=

A

Value= ground rent (net income) / land capitalization rate

130
Q

Cost Eliminating Methods:

A

Cost Eliminating Methods: direct and indirect costs must be calculated and included

131
Q

Extraction Method:

A

Extraction Method: land value = sale price - depreciated building value (uses data from comparable sales to estimate depreciation)

132
Q

Cost of Development method:

A

Cost of Development method:
(yield capitalization, subdivision analysis) land value based on redevelopment potential Projected sale price of lots: Lots#(x)price (*subtract)

133
Q

New improvements:

A

New improvements: Market Value
Site development costs (*subtract) - Land Value
Total overhead costs (%) of projected sale total (subtract) +Depreciation
= NOI - Entrep. Profit
Holding costs and profit (%) of NOI (subtract from above total)

134
Q

Super adequacy:

A

Super adequacy: component building exceeds standard normally in marketplace
=indicated value of undeveloped land

135
Q

Depreciation:

A

Depreciation: accumulated loss in market value, wear and tear

136
Q

Value Penalty:

A

Value Penalty: improvements that make no contribution to property value and constitute equivalent cost of their demolition

137
Q

Short Lived:

A

Short Lived: furnaces, hot water tanks, carpets, cupboards

138
Q

Effective Age:

A

Effective Age: property condition/overall maintenance

139
Q

Physical Life:

A

Physical Life: building period of time to remain standing

140
Q

Economic Life:

A

Economic Life: period of time improvements contribute to overall value

141
Q

Economic Age-Life Method: % depreciation =

A

Economic Age-Life Method: % depreciation = effective age / economic life Functional Depreciation: (functional obsolescence) loss in value outdated design

BUSI 330 - Foundations of Real Estate Appraisal (6 decks)

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