Principles: Chapter 9 • Real Estate Appraisal

Front 1

The rate necessary to attract an average investor to invest in the property being appraised is the __ rate. It reflects a return on the
funds invested.

Back 1

capitalization

Front 2

Net operating income...................
----------------------------- = Estim of __
Capitalization rate.....................

Back 2

value

Front 3

The process of bringing together the three indications of value derived
through the market, cost, and income approaches is the final
step in the appraisal process. This process is called correlation
(or, __).

Back 3

reconciliation

Front 4

The cost approach is appropriate for appraising newly constructed
buildings and special-purpose properties like __.

Back 4

libraries

Front 5

The __ approach usually sets
the highest limits on value—the thought being that the most a
person will pay for real property is what it would cost to replace the
property.

Back 5

cost

Front 6

Cost Approach Cons:
-does not always measure individual __
-difficult to state depreciation in __
-people won't pay this in a declining __

Back 6

amenities
dollars
market

Front 7

Curable depreciation means that if repairs are undertaken, the expense incurred will be __ than the value added to the property.

Back 7

less

Front 8

Incurable depreciation means the cost to repair or remodel __ the value added to the property.

Back 8

exceeds

Front 9

"Economic obsolescence" is a loss in value resulting from
(a) government actions (like __);
(b) misplaced improvements, such as a home built next to an all-night service station;
(c) a drop in __ for real estate

Back 9

zoning
demand

Front 10

"Functional obsolescence" is a loss in value caused by
(a) an unpopular floor __;
(b) a lack of updated,modern
appliances and equipment;
(c) a poor architectural __.

Back 10

plan
style

Front 11

Gross monthly rent multipliers
(GMRM) = sales price / monthly income. Called GRM if __ income is used.

Back 11

annual

Front 12

To recheck the results of the market approach, the appraiser may use an appropriate GRM x estimated __ __.

Back 12

annual income

Front 13

__ mathematically computes the present value of the future income produced by real estate.

Back 13

Capitalization

Front 14

The Income Approach: a property is worth the present value of the future __ to be produced by the property.

Back 14

income

Front 15

Gross operating income = gross annual income - ( vacancy + uncollectable __ )

Back 15

rents

Front 16

Net operating income = gross operating income - __ expenses. Then, Estimated value of property = Net Operating Income / __ rate !

Back 16

operating
Capitalization

Front 17

The market approach is based on the principle of __: "a buyer should not pay more for a home than the price it takes to acquire a comparable home."

Back 17

substitution

Front 18

The market approach is also known as the __ sales approach to value.

Back 18

comparison

Front 19

Cost Method: General rule...."The higher the capitalization rate, the __ the value of the property"

Back 19

lower

Front 20

Market Approach: Comps must use '__' sales. This a sale in which a property is sold using normal financing techniques and the buyer and the seller were fully informed and knowledgeable about the real estate market.

Back 20

market

Front 21

Market Approach: If buyer or seller was under any duress or strain, such as divorce, death in the family, or financial reversals, the appraiser would discard the sale as not being a good __ sale.

Back 21

comparable

Front 22

Market Approach: 3-5 comps are used.The appraiser takes sales
prices of the __ properties and adjusts these prices to reflect
what the comparable properties would have sold for if they had the features or characteristics of the subject property.

Back 22

comparable

Front 23

Depreciation of real estate is caused by physical deterioration, functional obsolescence, and __ obsolescence.

Back 23

economic

Front 24

A run-down home in need of paint and repairs is an example of depreciation caused by __ deterioration.

Back 24

physical

Front 25

Value in use (__value) is the sentimental, emotional, subjective value a house has.

Back 25

utility

Front 26

The value sought most often is the
__ value.

Back 26

market

Front 27

For a property to have value, four elements are necessary: utility,
__ , demand, and __.

Back 27

scarcity; transferability

Front 28

If a new building has an estimated
life of 50 years, the straight-line/age-life method of __ depreciation would assume a rate of depreciation of 2 percent per year (100% / 50 year life = 2%).

Back 28

accrued

Front 29

The appraisal techniques include the cost approach, income approach, and __ approach

Back 29

market

Front 30

Don't just average the comps or methods! For any given property, one of the approaches is better and should be given more __.

Back 30

weight

Front 31

In the texbook problem, the market value EQUALS the comp which most closely __ the subject property (fewest number of adjustments); it's NOT an average of the 3 comps!

Back 31

resembles

Front 32

The Principle of Highest and __ Use: The best use of land is that which produces the greatest net return to the land.

Back 32

Best

Front 33

The most comprehensive type of appraisal report is the self contained (__) report.

Back 33

narrative

Front 34

For existing residential homes, the best appraisal approach is the __ approach.

Back 34

market

Front 35

The most comprehensive appraisal skill level is: "Certified - __".

Back 35

General

Front 36

The age assigned by the owner which reflects good or bad condition is called the __ age.

Back 36

effective

Front 37

Economic depreciation is the hardest kind to __.

Back 37

cure