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43 Cards in this Set

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Define Anticipation:
the appraisal principle that holds that value can increase or decrease based on the expectation of some future benefit or detriment produced by the property
Define Appraisal:
an estimate of the quantity, quality, or value of something; the process through which conclusions of property value are obtained
Define Assemblage:
the combining of 2 or more adjoining lots into one larger tract to increase their total value
Define Capitalization rate:
the rate of return a property will produce on the owner’s investment
Define Change:
the appraisal principle that holds that no physical or economic condition remains constant
Define Competition:
the appraisal principle that states that excess profits generate competition
Define Conformity:
the appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value
Define Contribution:
the appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value
Define Cost approach:
the process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation
Define Depreciation:
in appraisal, a loss of value in the property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence
Define Economic life:
the number of years during which an improvement will add value to the land
Define Functional obsolescence:
a loss of value to a improvement to real estate arising from functional problems, often caused by age and poor design
Define Gross income multiplier:
the figure used as a multiplier of the gross monthly income of a property to produce an estimate of the properties’ value
Define Highest and best use:
the possible use of the property that would produce the greatest net income and thereby develop the highest value
Define Income approach:
the process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life
Define Index method:
the appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs
Define Market value:
the most probable price property would bring in an arm’s length transaction under normal conditions on the open market
Define Physical deterioration:
a reduction in a property’s value resulting from the decline in physical condition; can be caused by action of the elements or by ordinary wear and tear
Define plottage:
the increase in value or utility resulting from the consolidation (assemblange) of 2 or more adjacent lots into one larger lot
Define progression:
an appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property
Define quality-survey method:
the appraisal method of estimating building costs by calculating the cost of all of the physical components in the improvements, adding the cost to assemble them and then including the indirect costs associated with such construction
Define reconcilation:
the final step in the appraisal process, in which the appraiser combines the estimates of value received from the sales comparison,cost, and income approaches to arrive at a final estimate of market value for the subject property
Define regression:
an appraisal principle that states that, between dissimilar properties, the value of the better-quality is affected adversely by the presence of the lesser-quality property
Define replacement cost:
the construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function an the original
Define reproduction cost:
the construction cost at current pricesof a duplicate of the subject property
Define sales comparison approach:
the process of estimating the value of a property by examing and comparing actual sales of comparable properties
Define square-foot method:
the appraisal method of estimating building costs by multipling the cost per square foot of a recently built structure by the number of square feet (using exterior dimensions) in the subject building
Define straight-line method:
a method of calculating depreciation for tax purpoes,compted by diving the adjusted basis of a property by the estimated number of years of remaining useful life
Define substition:
an appraisal principle that states that the maximum value of a property tends to be set by the cost of purcasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution
Define unit-in-place method:
the appraisal method of estimating building costs by calculating the costs of all of the physical coponents in the structure, with the cost of each item including its proper installation, connection,etc; also called segregated cost method
Define value:
the power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities
Define gross rent multiplier (GRM):
the figure used as a multipler of the gross monthly income of a property to produce an estimate of the property's value
Define appraiser:
an independent person trained tp provide an unbiased estimate of value
What is the Federal Institutions Reform,Recovery, and Enforcement Act of 1989?
(FIRREA) the federal act that requires that most appraisalsused in connection with a federally related transaction must be performed by someone licensed or cerified by law
Define increasing returns:
money spent on improvements that produces an increase in income or value
Define law of diminishing returns:
the point where money spent on improvements do not increase income or value
Define external obsolescence:
a loss of value to a improvement to real estate caused by negative factots not on the subject property, such as zoning, environmental, social, or economic factors
Who can be an associated or certified appraiser?
only individials and not corporations
What 4 characteristics must property have to have value?
Demand
Utility
Scarity
Transferability
Name 3 approaches to estimating value:
1)sales comparison
2)cost
3)income
Name 11 economic principles that affect the value of real estate:
1)anticipation
2)change
3)competetion
4)conformity
5)contribution
6)highest & best use
7)increasing & diminishing returns
8)plottage
9)regression and progression
10)substition
11)supply & demand
For appraisal purposes, name 4 classes of depreciation:
1)physical
2)functional obsolescence
3)external osolscence
4)straight-line(economic-life method)
What is the first step in an appraisal?
state the problem