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93 Cards in this Set

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This is what will command in exchange for goods, services or money
value
what an able and informed buyer will pay and an able and informed seller will accept if property is offered on the market for a reasonable time and neither buyer nor seller is under any undue pressure to buy or sell
Market Value
What is another name for "Market Value"?
Arms Length Transaction
a personal view of value by the buyer or seller
subjective value
a percentage of value used to calculate ad valorem taxes (prop taxes)
Asessed Value
a percentage of the sales price or appraised value, whichever is less, that the lender will loan
Loan Value
What does LTV Ratio stand for?
Loan to Value Ratio
the adj cost basis from which a capital gain or loss is calculated when the prop is sold.
Book Value
On prop used in a trade or buisness, it is the cost plus capital improvements less deprectiation. For a person's home, it is the cost plus capital improvements

TRADE OR BUSINESS

Cost + Cap Improv - Depreciation

Residental
Cost + Cap Improvements
Book Value
the cost of replacing an improvement destroyed by flood, fire, storm, etc Does not include depreciation or the value of the land.
Insured Value
Name 4 characteristics of Value
D emand
U tility
S carcity
T ransferablity
the desire and ability of a buyer to buy a property
demand
the ability of the prop to meet the needs of the buyer
utility
the supply or availability of real estate for sale in the market place
scarcity
a clear, marketable title without encumbrances
transferability
when there are 2 or more prop for sale and one is priced lower than the others, the lower priced prop will sell first as long as it is equally desirable.
substitution
T or F the sales price of an equally desirable prop sets the upper limits of value for all similar prop
True
the legal use which provides the owner with the greatest net income or amenities
Highest and Best Use
Btw dissimlar prop, the worth of the better prop is adversley affected by the presence of a lesser-quality prop.
regression
give an example of regression
Building a $100,000 home in a $80,000 neighborhood
Btw dissimilar prop, the worth of the lesser prop is favorable affected by the presence of a better-quality prop.
progression
give an example of progression.
Building a $80,000 home in a $100,000 neighborhood.
profit breeds _________; if the purchasing power of the public is suficient, more businesses will be successful and values will increase.
competition
stable values result when there is a _________ btw real estate usage and the needs of the community
balance
when real estate needs, location preferences and uses are subj to What?
Change
Maximum value is realized when there is social, economic and physical homogeneity
conformitiy
the anticipation of a future benefit or detriment affects value
anticipation
what an improvement adds to the value of the prop, or its absence detracts from the value
contribution
adding improvements to land will increase the value of the land up to a point where the value will no longer increase
increasing & diminishing returns
the process of merging adjoining lots together
assemblage
What is the equation to calculate Book Value on a residental property when sold?
Cost + Capital Improv
What is the equation to calculate Book Value on a business or trade prop when sold?
Cost + Capital Improv - Depreciation
It is used to take advantage of the principal of value known as pottage
assemblage
action of the sun and prevailing winds
elements
attractive or desirable features that make it enjoyable to own property
amenitites
value is affected by style, construction and design
architectural design
value is affected by both govt and private restrictions
zoning & bldg restrictions
corner lots often have more value than other lots; especially commercial lots
corner influence
prop in the path of growth will have more value than other prop.
growth pattern
________ preference affects value and is the first consideration of buyers
location
business trends, wage levels, interest rates, the availablity of credit, etc affect the value of real estate
economic factors
placement of improvements on land affects value
orientation
an _______ shaped tract of land will not have as much value as a well ________ tract of land with the same number of square feet.
irregularly
proportioned
values and neighborhood boundaries are defined by the ________ characteristics of the occupants of the area...this is called what?
social

social atmosphere
what does this describe? hillside land is costly to develop; flat land may be monotonous; gently rolling terrain is less costly to develop w/o being monotonous; a subdivision with a buffer has more value
topography
a strip of land separating one land use from another.
buffer or buffer zone
give an example of a buffer.
a subdivder leaving undeveloped land, a park, or line of trees btw residental and commercial usage.
Name 3 life's of property
Economic Life
Physical Life
Life cylce of prop
period over which a structure produces a profit or adds value to the land
economic life
which is shorter:
physical life or economic life
economic life
the period over which a structure will safely stand
physical life
Name the 3 parts of the life cycle of prop
Integration
equilibruim
disintegration
develompent of the land
integration
when value is at its max
equilibrium
the declining of value from its max or equilibrium states
disintegration
the actual age of the structure
chronological age
the apparent age of a structure due to its condition
effective age
an estimate or opinion of value
appraisal
(should or should not) an appraiser appraise outside his/her field of experience?
should not
(should or should not) an appraiser appraise propertyin which s/he has an interest?
should not
An appraisers fee should be based on _____ and ______; not on the estimate of value.
time
expenses
if the appraiser is also a RE licensee, s/he (should or should not) appraise prop they are listing.
should not
what is the purpose of an appraisal?
to obtain a listing price, purchase price, taxes, condemnation, insurance policy and loans
Name the 5 steps in the Appraisal process
Define the problem
Make a preliminary survey
Gather data
use the data
reconciliation
what is another name for reconciliation?
correlation
what info is gathered in the appraisal process?
economy
neighborhood
the property
to arrive at the final estimate of value
reconciliation
How many different reports can the appriaser make?
Oral report
Letter report
Form report
Narrative report
Name 3 approaches to appraising
sales comparison approach
income approach
cost approach
an appraisal best for older residential and raw land
sales comparison approach
an appraisal for income producing properties
income approach
an appraisal best for new residential and special purpose buildings
cost approach
under the sales comparison approach name the points of camparability
sales price and financing
date of sale
location
physical features
amenitites
the sales comparison approach is usually considered the most (inaccurate or accurate), providing adequate data is available.
accurate
who uses comparative market anaylsis (CMA) and why?
agents and brokers
to estimate value for listing purposes
What other approach is similar to the sales comparison approach?
(CMA) comparative market anaylsis
estimates the value of property based on its ______ _______ capabilities.
this is which appraisal approach?
income producing
income approach
Net income
income after expenses
what expenses are excluded from net income?
mortgage payments
depreciation
when doing capitalization problems, use (weekly, monthly or annual) net operating income.
annual
what is the formula for effective gross income?
+ max gross income
- vacancy rate
- collection problems
+ other income (vending laundry)
= effective gross income
what is the formula for net operating income?
+ Effective gross income
- Expenses
= net operating income
a capitalization method that seperates the land from the bldg adn has a different cap rate for each.
Building Residual Method
converts gross rent into value
gross rent multiplier
what is the formula for gross rent muliplier (GRM)?
sale price/ rent = grm
or
subj rent x grm = value
this appraisal approach is based on the assumption that the cost of reproducing the improvements is the upper limit of value
cost approach
name the 4 steps in the cost approach
Estimate the cost of reproducing the structure
Estimate the accrued depreciation
Calculate the depreicated value by subtracting the amount of depreciation from the reproduction cost
Add the value of the land to the depreciated value of the structure
Name 3 methods of determining costs.
quantity survey method
unit in place method
square/cubic foot method
what are the steps to the quantity survey method?
Estimate the cost of all physical components in the improvements
+ the cost to assemble or install them
+ the indirect costs associated witht eh construction (architect fees, bldg permits, insurance etc)
How is the cost determined using the unit-in-place method?
pricing various units of the structure on an installed basis such as walls, roof, heating & a/c, electric wiring, etc.
use (inside or outside) measurements on the area used as living quarters only.
outside
using the sq ft method what things are calculated seperately?
porches, garages, basements
using the sq ft method, volume is calculated on storage bldgs such as what?
Warehouses, barns and silos.