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60 Cards in this Set
- Front
- Back
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IRV
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Income, Cap Rate, Value
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Sales price / Gross Income =
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Gross Income Multiplier (GIM)
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Sales price / Gross Rent =
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Gross Rent Multiplier (GRM)
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Impartial 3rd person who prepares appraisal
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Appraiser (No agency relationship)
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Cost at current prices to construct improvements similar but not necessarily an exact duplicate
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Replacement Cost
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Estimate of value obtained by comparing subject property with recently sold comparable properties
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Sales Comparison Approach
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Who certifies appraisers?
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State Board of Certified Real Estate Appraisers
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Better quality property is adversly affected by the presence of a lesser quality property
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Pricipal of Regression - ONE OF THE BASIC PRINCIPLES OF VALUE
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Rules and Regulations for appraisers
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Uniform Standards of Professional Appraisal Practice.
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Money spent on improvements produces an increase in value or income
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Law of increasing returns - ONE OF THE BASIC PRINCIPLES OF VALUE
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Three classes of certifiction for appraisers
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1. Certified General Real Estate Appraiser
2. Ceritfied Residential Real Estate Appraiser 3. Broker/Appraiser |
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Art of analyzing and effectively utilizing findings from the 3 appraisal appraoches
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Reconciliation
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Deduction for vacancy and rent loss from gross income
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EFFECTIVE gross income
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Can appraise any residential, non-residential property or federally-related transactions for commercial property values over $1M
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Certified GENERAL Real Esate Appraiser
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Permitted to appraise only properties valued UNDER $250,000 that are not involved in federally-related transaction.
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Broker/Appraiser
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County Assessors who pass exam can value property (for ad valoreum) tax purposes. They recieve this certification
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Certified Pennsylvania Evaluator (CPE)
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Conditions essential to "market value"
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Probable price (not avg. or highest); parties are unrelated and acting w/o undue pressure; parties are well informed about use & potential; property is exposed to market; payment made in cash or equivalent; price represents normal consideration
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When does licensing law permit a licensee to prepare a CMA
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ONLY in conjunction with a listing or sales transaction
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Ways to determine reproduction or replacement costs in appraisals
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1. Square Foot Method
2. Unit in Place Method 3. Quantity Survey Method 4. Index Method |
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The Four characteristics of value
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Demand
Utility Scarcity Transferibility (DUST) |
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Need or desire for possession and financial means to satisfy need
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Demand
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Used as substitute for a more elaborate income capitaliztion
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Gross Rent Multiplier (GRM) and gross income multiplier (GIM)
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Capacity to satisfy human needs and desires
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Utility
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Easiest but least precise ways to determine depreciation
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STRAIGHT LINE method (economic life method) assumed at an even rate over economic life
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A finite supply
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Scarcity
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Ownership rights are easily transferred
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Transferability
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Most probable price that a property should bring in a fair sale
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Market Value
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Appraisal approach based on present value of rights to future Income
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Income approach
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Loss in value that adversly affects value
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Depreciation
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Three kinds of (Curable & Incurable) depreciation -
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1. Physical Deterioration
2. Functional Obselescense 3. External Depreciation (usually incurable) |
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Actual selling price
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Market Price
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Value
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Present worth of future benefits
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2 Basic classes of data used by appraisers
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General data - Specific data
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May not equal either market value or market price
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Cost
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Construction cost at current prices for exact duplicate of subject
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Reproduction costs (usually done for historic bldgs)
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Value created by the expectations that certain benfits will be realized in the future
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Anticipation - A Basic Principal of Value
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The cause and effect of social and economic forces constantly causes property values to be in transition
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Competition - ONE OF THE BASIC PRINCIPLES OF VALUE
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The interaction of supply and demand
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Competition - ONE OF THE BASIC PRINCIPLES OF VALUE
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Rental Income X GRM =
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Estimated Market Value
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Cap Rate =
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Income / Value
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Value is created when components of a property are in harmony with its surroundings
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Conformity - ONE OF THE BASIC PRINCIPLES OF VALUE
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Value of any component is increased by the amount it contributes to the value of the whole
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Contribution - ONE OF THE BASIC PRINCIPLES OF VALUE
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The most profitable single use to which the property may be adapted
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Highest and Best Use - ONE OF THE BASIC PRINCIPLES OF VALUE
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FOUR characteristics of highest and best use
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Legally permitted; financially feasible; physically possible; maximally productive
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Additional improvements do not produce proportionate increase in income or value
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Law of Diminishing returns - ONE OF THE BASIC PRINCIPLES OF VALUE
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"Act" of merging two or more lots under one owner
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Assemblage
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Body established uniform certification procedures for appraiser of "federally-related" transactions (any involving a bank or mortgage)
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Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989
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Merging adjacent lots into single larger one produces a greater total land value in the principal of:
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Plottage - ONE OF THE BASIC PRINCIPLES OF VALUE
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All appraisal activities are governed by whom?
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Board of Certified Real Estate Appraisers & the Real Estate Certification Act
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Value X Rate =
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Income
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Appraises only residential property, 1-4 units. For federally-related transactions, may appraise properties valued over $250,000
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Certified RESIDENTIAL real estate appraiser.
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Modest lesser quality home valued higher if located among better properties
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Pricipal of Progression - ONE OF THE BASIC PRINCIPLES OF VALUE
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Maximum value of a property tends to be set by the cost to purchase an equally desireable substitute property
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Substitution - ONE OF THE BASIC PRINCIPLES OF VALUE
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Value of property depends on the number of properties available in marketplace
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Supply and Demand - ONE OF THE BASIC PRINCIPLES OF VALUE
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3 Types of Appraisals
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1. Sales Comparison Approach
2. Cost approach 3. Income Capitaliztion Approach |
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Examples of adjustments made due to dissimilarities in Sales Comparisons
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Property rights; financing concessions; conditions of sale; date of sale; location, physical features & ammenities
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Appraisal approach based on the principal of substitution
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Cost Approach
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NOI / Cap Rate =
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Value
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Effective gross income LESS expenses is -
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Annual NET Operating Income (NOI)
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The period during which a property is expected to remain useful for its original intended purpose
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Economic Life
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