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41 Cards in this Set
- Front
- Back
What are the three approaches to value? |
Cost approach, sales comparison or market approach, and income approach |
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This is the basis for cost approach to value. A person will pay no more for building than the cost of constructing an equally desirable alternative |
The principle of substitution |
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The cost of constructing using current construction methods and materials a substitute structure equal to the existing structure and quality and utility. This is generally used for mass appraisal purposes. |
Replacement cost |
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The cost of constructing, as closely as possible, the exact replica of the existing structure |
Reproduction cost |
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This is expenditures of labor, utilities, equipment, the materials used to construct the improvement, and the contractors profit and overhead |
Direct costs |
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These are expenditures for items other than labor and materials such as financing, Interest on a construction loan, Taxes and insurance during construction, etc. |
Indirect costs |
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This is a market-derived figure that represents the amount an entrepreneur expects to receive in compensation for his or her risk and expertise associated with the development. This is the difference between the total cost of development of the property and its market value after completion |
Entrepreneurial profit |
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Name the three methods for estimating cost |
Comparative (unit area or volume), quantity survey, unit in place |
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This method of estimating cost is the most efficient method for mass appraisal system, that uses sq ft as a base. This method assumes there are numerous similar buildings that can be grouped by design |
Comparative (unit area or volume) |
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This method of estimating cost includes a complete cost itemization of labor, materials, overhead, and profit necessary for the construction of the building. Because of the large amount of detail work and time involved appraiser seldom use this method. |
Quantity survey |
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This method of cost estimation is a modification of the quantity survey method. Cost of labor, materials, overhead and profit are combined into a unit cost for each portion of the building. This method helps the appraiser compute the cost of a building when the comparative method isn’t practical |
Unit-in-place |
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What are the four steps to the cost approach process? |
1) Value the land as if vacant 2) determine cost of on-site development 3) estimate replacement or reproduction costs 4) deduct total depreciation costs |
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What does OSD stand for? |
On site development which includes excavation, grading, backfill, gravel drive, and water and sewage disposal systems |
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What does DRC stand for? |
Depreciated replacement or reproduction cost |
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What type of accrued depreciation is considered incurable? |
External obsolescence |
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In physical deterioration what is considered curable items in need of immediate repair? |
Deferred maintenance |
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Give some examples of short-lived items |
Roofing, paint, floor covering, water heater, etc. |
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Give some example of long-lived items |
Framing, wiring, plumbing etc. |
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If the Cost to repair or replace an item is greater than the value added by the repair or replacement it is considered this. |
Incurable physical deterioration |
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This describes a component or system that exceeds market requirements and adds less value than the cost of the component. Examples include oversize heating system, excess plumbing features etc. |
Superadequacy |
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What type of accrued depreciation is considered incurable? |
External obsolescence |
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In physical deterioration what is considered curable items in need of immediate repair? |
Deferred maintenance |
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Give some examples of short-lived items |
Roofing, paint, floor covering, water heater, etc. |
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Give some example of long-lived items |
Framing, wiring, plumbing etc. |
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If the Cost to repair or replace an item is greater than the value added by the repair or replacement it is considered this. |
Incurable physical deterioration |
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This describes a component or system that exceeds market requirements and adds less value than the cost of the component. Examples include oversize heating system, excess plumbing features etc. |
Superadequacy |
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This describes a component or system that is substandard or lacking. Examples include poor design (lack of closet space, ceilings too high or too low for room arrangement) |
Deficiency or inadequacy |
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What is GRM? |
Gross rent multiplier which indicates properties typically sell for 120 times the monthly rent |
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Follow these five steps in the sales comparison process |
1) research and select sales of comparable properties 2) document and confirm sales data 3) select relevant units of comparison 4) compare sales properties to the subject and make appropriate adjustments 5) Reconcile value indications an estimate value of subject property |
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The sales comparison grid is known as a URAR and stands for what? |
The uniform residential appraisal report |
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The sales comparison grid is known as a URAR and stands for what? |
The uniform residential appraisal report |
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What is GIM? |
Gross income multiplier and is a capitalization technique |
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The sales comparison grid is known as a URAR and stands for what? |
The uniform residential appraisal report |
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What is GIM? |
Gross income multiplier and is a capitalization technique |
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What does EGI stand for? |
Effective gross income. This is the (potential gross income/rent ) minus (vacancy and collection loss) add (miscellaneous income) = EGI |
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What does NOI stand for? |
Net operating income. This is the (effective gross income) minus (operating expenses) minus (reserves for replacement) equals NOI |
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What is the difference between a net lease and a gross lease |
In a net lease the tenant pays all the taxes and operating expenses, and a gross lease the landlord pays all the taxes and operating expenses |
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What does RCN stand for? |
Replacement cost new. |
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What does IRV stand for? And what is the formula? |
Income rate value Income = rate x value (V = I / R) (R = I / V) |
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How do you figure a capitalization rate? |
It’s the net annual rent expressed as a percentage of the total property value |
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What does CPR stand for? |
Changed property ratio. The ratio determined by dividing the average maximum assessed value (AMAV) by the average real market value (ARMV) for the same area and property class of unchanged property. |