Property Valuation/financial Analysis

Front 1

Value

Back 1

The worth of something to someone at a given time fair ma

Front 2

Fair market value

Back 2

The most commonly saw Zaw you conclusion for a reasonable, unpressured buyers price but the seller would agree to for a property in the open market, both having reasonable knowledge relevant facts

Front 3

What are some common variations of the principle of value?

Back 3

Investment value, insurance value, and value in use

Front 4

Elements of value

Back 4

DUST

D - demand (number of buyers for property)

U - Utility (property’s possible uses)

S - Scarcity (availability of similar properties)

T - Transferability (sellers ability to transfer a good title to a buyer clear of all encumbrances itemized in the title insurance policy)

Front 5

Clouded title

Back 5

If a property can not be transferred with a clean title

Front 6

Influences on value

Back 6

PEGS

Physical (location)

Economic (rents in area etc)

Government (property taxes etc)

social

Front 7

Principles of appraisal valuation

Back 7

Principle of supply and demand, principle of change, principle of conformity, principle of regression, principle of progression, principle of contribution, principle of substitution

Front 8

Principle of supply and demand

Back 8

The amount of homes available versus how many want to buy

Front 9

Principle of change

Back 9

Holds that the property is constantly in a state of change through its lifecycle

Front 10

What are the four stages of the lifecycle of a property?

Back 10

Development, stability, decline, renewal

Front 11

Principle of conformity

Back 11

That the price is maintained in the neighborhood and the maximum value of the property can protect homeowners by the narrowing of uses

Front 12

Principle of regression

Back 12

The best property in the neighborhood will have a lesser value

Front 13

Principle of progression

Back 13

The worst property in the neighborhood will have a higher value

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Principle of contribution

Back 14

The value of one component/improvement is measured in terms of its contribution to the value of the whole property rather than the cost

Front 15

Principle of substitution

Back 15

A buyer will not pay more for a property if it will cost less to buy a similar property of equal desirability

Front 16

Appraisal

Back 16

An individual’s opinion or estimate of a properties value on a specific date reduced to writing in an appraisal report

Front 17

What are the four steps of the appraisal process?

Back 17

Identifying to finding the appraisal effort to be undertaken by the appraiser, data collection, applying the data, and determining the value of the property

Front 18

What are the three approaches to estimate value in a real estate appraisal?

Back 18

Market comparison, cost approach, and income approach

Front 19

Market comparison

Back 19

Most appropriate for single-family residences, and the basis of comparative market analysis it is used by real estate sales people

Front 20

Cost approach

Back 20

Used for especially used properties of churches, schools, and public buildings

Front 21

Income approach

Back 21

Valid for properties that generate rental income

Front 22

“Comps”

Back 22

Gathering data on comparable properties in order to define appraisal

Front 23

If using the income pros for an appraisal, what are the two methods to arrive at a determination of value?

Back 23

The gross rent multiplier (uses the potential or gross rent multiplied by gross rent multiplier to determine the value) or capitalization method (Determines the properties value based on the properties future income and operating expenses using the net operating income dividing it by the number by a capitalization rate to determine the value)

Front 24

What kinds of properties are appraised using the income approach?

Back 24

Apartments, offices, industrial buildings, commercial units, and other income producing property

Front 25

What is the first step to establish value using the capitalization approach?

Back 25

Establish the effective gross income

Front 26

What is the second step to establish values in the capitalization approach?

Back 26

Deduct operating expenses from the effective gross income to determine the net operating income

Front 27

Variable costs

Back 27

Operating expenses such as utilities or repairs

Front 28

Fixed costs

Back 28

Operating costs that remain constant

Front 29

What are the methods to calculate a cap rate?

Back 29

The band of investment, the summation method, market comparison

Front 30

What is the third step to establish value in the capitalization approach?

Back 30

Mathematically divide the properties NOI by appropriate cap rate

Front 31

Cap rate

Back 31

Comprised of the prudent investors expected annual rate of return on the monies invested in this type of property and a rate of recovery of their invested monies allocated to the improvements, also called appreciation

Front 32

What’s The last step to establish values in the capitalization approach?

Back 32

Divide the NOI by the cap rate

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Appraisal report

Back 33

Documentation of the appraisers findings

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Appraisal report

Back 34

Documentation of the appraisers findings

Front 35

What are the three types of appraisal report?

Back 35

Short form (I filled in for using checks and exclamations), letter form (a brief written report), narrative report (an extensive report)

Front 36

How do you analyze a rental properties income and expense history under the income approach?

Back 36

Depression begins with an annual property operating data sheetAPOD

Front 37

absorption rate

Back 37

The estimated time required to sell or lease a property within a designated area and it’s fair market value

Front 38

Ad Valorem

Back 38

Real estate taxes imposed on property based on its assessed value

Front 39

Vacancy rate

Back 39

The percentage of a building space that is not rented over a givenperiod