Il Real Estate Ch#19

Front 1

Define Anticipation:

Back 1

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

Front 2

Define Appraisal:

Back 2

an estimate of the quantity, quality, or value of something; the process through which conclusions of property value are obtained

Front 3

Define Assemblage:

Back 3

the combining of 2 or more adjoining lots into one larger tract to increase their total value

Front 4

Define Capitalization rate:

Back 4

the rate of return a property will produce on the owner’s investment

Front 5

Define Change:

Back 5

the appraisal principle that holds that no physical or economic condition remains constant

Front 6

Define Competition:

Back 6

the appraisal principle that states that excess profits generate competition

Front 7

Define Conformity:

Back 7

the appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value

Front 8

Define Contribution:

Back 8

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

Front 9

Define Cost approach:

Back 9

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

Front 10

Define Depreciation:

Back 10

in appraisal, a loss of value in the property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence

Front 11

Define Economic life:

Back 11

the number of years during which an improvement will add value to the land

Front 12

Define Functional obsolescence:

Back 12

a loss of value to a improvement to real estate arising from functional problems, often caused by age and poor design

Front 13

Define Gross income multiplier:

Back 13

the figure used as a multiplier of the gross monthly income of a property to produce an estimate of the properties’ value

Front 14

Define Highest and best use:

Back 14

the possible use of the property that would produce the greatest net income and thereby develop the highest value

Front 15

Define Income approach:

Back 15

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

Front 16

Define Index method:

Back 16

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

Front 17

Define Market value:

Back 17

the most probable price property would bring in an arm’s length transaction under normal conditions on the open market

Front 18

Define Physical deterioration:

Back 18

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

Front 19

Define plottage:

Back 19

the increase in value or utility resulting from the consolidation (assemblange) of 2 or more adjacent lots into one larger lot

Front 20

Define progression:

Back 20

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

Front 21

Define quality-survey method:

Back 21

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

Front 22

Define reconcilation:

Back 22

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

Front 23

Define regression:

Back 23

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

Front 24

Define replacement cost:

Back 24

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

Front 25

Define reproduction cost:

Back 25

the construction cost at current pricesof a duplicate of the subject property

Front 26

Define sales comparison approach:

Back 26

the process of estimating the value of a property by examing and comparing actual sales of comparable properties

Front 27

Define square-foot method:

Back 27

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

Front 28

Define straight-line method:

Back 28

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

Front 29

Define substition:

Back 29

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

Front 30

Define unit-in-place method:

Back 30

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

Front 31

Define value:

Back 31

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

Front 32

Define gross rent multiplier (GRM):

Back 32

the figure used as a multipler of the gross monthly income of a property to produce an estimate of the property's value

Front 33

Define appraiser:

Back 33

an independent person trained tp provide an unbiased estimate of value

Front 34

What is the Federal Institutions Reform,Recovery, and Enforcement Act of 1989?

Back 34

(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

Front 35

Define increasing returns:

Back 35

money spent on improvements that produces an increase in income or value

Front 36

Define law of diminishing returns:

Back 36

the point where money spent on improvements do not increase income or value

Front 37

Define external obsolescence:

Back 37

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

Front 38

Who can be an associated or certified appraiser?

Back 38

only individials and not corporations

Front 39

What 4 characteristics must property have to have value?

Back 39

Demand
Utility
Scarity
Transferability

Front 40

Name 3 approaches to estimating value:

Back 40

1)sales comparison
2)cost
3)income

Front 41

Name 11 economic principles that affect the value of real estate:

Back 41

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

Front 42

For appraisal purposes, name 4 classes of depreciation:

Back 42

1)physical
2)functional obsolescence
3)external osolscence
4)straight-line(economic-life method)

Front 43

What is the first step in an appraisal?

Back 43

state the problem