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23 Cards in this Set
- Front
- Back
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What is appraisal?
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an opinion or estimate of value: an estimate of the vaule of specified rights or interests in real estate
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Who utilizes the services of real estate appraisers?
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Lenders, Investors, Owner/occupants, Buyers, Subdividers, Developers, Insurance companies, Lawyers, Local government
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What are the professional organizations?
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1. Appraisal Institute
2. American Society of Farm Managers and Rural Appraisers 3. International Associaton of Assessing Officers 4. American Society of Appraisers 5. Other organizations |
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What attributes cause an item to have value in a transaction?
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1. Utility- ability to satisfy human needs or desires
2. Scarcity 3. Effective Demand 4. Transferability- ability to transfer the attendant rights to another party |
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What types of value that appraisers might be asked to estimate?
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1.Market Value
2. Investment value 3. Insurable Value |
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What is market value? **
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the highest price that a property would sell for on the SPECIFIED DATE if the buyer and seller were well-informed and acting in their own best interests and without duress
**also known as the "most probable selling price" |
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What is an Investment value?
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Present value of the future benefits to a particular investor
**might be known as the "Steven Spielburg" value and it would not be less than a given property's market value |
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What is an Insurable value?
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the amount for which an insurance company should insure a property, based on replacement or reproduction cost
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What is the appraisal process?
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1. Define the problem
2. Select data and complete preliminary study 3.Research and analyze the market, including Highest and Best Use analysis 4. Apply the 3 approaches to valuation-- Cost approach, Sales Comparison Approach, Income Approach 5. Finalize the Process |
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What is the Macro Market?
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information on the national, regional, and state economy; conditions in the local area and the neighborhood where the property being appraised is located
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What is the Micro Market?
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Property itself; information on the site (lot) and improvements
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What is the Highes and Best Use (HBU)?
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the use, from among those that are physically and legally possible, that maximizes the property's value
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What is the Cost approach?
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the adjusted price of substituting newly-built improvements for a property that is the "subject" of an appraisal
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What is the Sales comparison Approach?
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"Market Data" Approach: the price of substituting an available existing property for the subject
**look at what similar properties have sold for recently |
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What is the Income Approach?
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you should pay no more for an income-producing property than the price of buying a substitute income stream with equal magnitude and risk
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What is physical deterioration in the Cost Approach?
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wear and tear, action o fth elements, poor maintenance, poor construction; curable if it can be repaired at a price less than or equal to the accompanying increase in value; otherwise it's incurable
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What is functional obsolescence in the Cost Approach?
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features that make the improvements undesirable relative to current market standards; curable if it can be reparied at a price less than or equal to the increase in value; otherwise it's incurable
EX: poor floor plan, too few bathrooms, outdated/insufficient mechanical systems |
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What is Locational obsolescence in the cost approach?
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features that reduce the property's value because of its location; typically considered to be incruable
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What is Gross Income Multiplier of Direct Capitalization?
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used particularly for single-family houses of a type for which an active rental market exists and it can be used in appraising othe rincome property types
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What is the formula for the Indicated GIM?
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Selling Price / Gross Montly Rent
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What is the Net Income Multipler (NIM) or Overall Capitalization Rate (OAR) of the Direct Capitalization?
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preferred method if expense information is available for recently sold income-producing properties
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What is the formula for the Indicated OAR?
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Annual Net Income / Selling Price
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How can we estimate appropriate expense levels?
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Property managers experience
Discussions with insurance agents and tax assessors and maintenance contractors Published figure from the Building Owners and Managers Association (BOMA) or Institute for Real Estate Managment (IREA) |
