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61 Cards in this Set

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As the value of property increases, typically the value of the dollar

Decreases -in other words, if the prices go up, your dollar buys less

If an appraiser finds indications of soil problems he would normally recommend

Soil inspection as a condition of the appraisal and appraisal is only valid for the date the appraiser sites in the report

Economic obsolescence involves depreciation based on what factors

Outside the property (i.e. the city widens a street decreasing the size of the property)

What is the most detailed and complete report and appraisal would issue

Narrative form

The best method for estimating the value of a house to be built on vacant land

Cost approach

An appraiser calculates the accured depreciation of improvements, land is not depreciated

Cost approach

Determine the cost of new construction is the most difficult but most accurate method. It details all raw materials and installation cost

Quantity survey method

Method determining the replacement cost is the easiest at least accurate method, if the original cost of the construction is known. The appraiser multiplies the original cost of the subject property by a factor that represents the percentage change in construction cost between the time the construction was built and the present

Index method

If the original cost of the structure is not known what method is easiest but least accurate method

Square-foot method

Capitalization of net income technique used to estimate the value of land, not the building value
Land residual technique

Another appraisal method where the appraisal estimates the land value of improved property by deducting the value of any site improvements

Abstraction

The present highest and best use when a change in highest and best use is in the foreseeable future. (Example - a Goldmine where the gold is running out
Interim use
An unbiased estimate or opinion of the property value given date
Appraisal
What is created to identify the range of values for particular property of identifying current listed properties (the competition) recently sold and closed properties and expired listings
(CMA) comparative market analysis
Present worth of rights to future benefits that come from property ownership

Value

The price a property would bring it freely offered on the open market, with both a willing buyer and a willing seller
Fairmarket value
Multiple offers in a short market time indicates a
Sellers market
To have an oversupply of inventory is a
Buyers market
The price at which the property changes hands between a willing buyer and seller
Market price
Market value is sometimes called the
Objective value, since it may be determined by actual data
Is the usefulness of the property to its owner
Utility value
Is a likely price that a property would bring in a forced sale (forclosure or tax sale)
Liquidation value
What are the four elements to create value
Demand, utility, scarcity, and transferability (DUST)
Also called external characteristics, these characteristics include quality of conveyances such as availability of schools, shopping, public transportation, churches, and similarity of land-use
Physical characteristics
What may be the most important factor influencing value, as far as highest and best use
Location
Includes building codes, zoning laws, public health measures, fire regulations, rent controls, and pending legislation
Political forces
Increasing supply or decreasing demand will reduce the price in the market
Principle of supply and demand
Is how much of a product is desired by buyers
Demand
Is how much of the product the market can offer
Supply
Values set by the cost of getting an equally desirable substitute
Principle of substitution
Probable future benefits to be derived from a property will increase the value
Principle of anticipation
An appraiser must be aware of trends that affect the value of real estate
Principle of change
When land uses are compatible and homes are similar in design size, the maximum value is realized

Principle of conformity

A lesser value property will be worth more because of the presence of greater value properties nearby
Principle of progression
A greater value property will be worth less because of the presence of lower value properties nearby
Principle of regression
One that is not the highest and best use for the site on which is placed by reason of excess size or cost
Overimprovement
The worth of an improvement and what it adds to the entire property's market value, regardless of actual cost of improvement
Principles of contribution
When contrasting, opposing, or interacting elements are in balance in a neighborhood or area, value is created
Principle of balance
Summary appraisal report
Uniform residential appraisal report most commonly used
What is the most comprehensive and detailed appraisal
Self-contained appraisal report
The use of report is limited to the client
Restricted use appraisal report
What approach uses the principle of substitution to compare recent sales and listings of similar properties in the area
Sales comparison or market data approach
What approach is used primarily for residential properties
Sales comparison
Properties similar to the subject property that have sold within the previous six months
Comparables
What approach is land and improvements valued separately
Cost approach
What approach takes that reproduction or replacement cost of the improvements my secure depreciation plus the land value
Cost approach
What approach used primarily for new buildings, special-purpose buildings, or properties with few or no comparables

Cost approach

What are the three appraisal approaches
Sales comparison approach, cost approach, and income approach
Difference between the cost to replace the property and the properties current appraised value
Accrued depreciation
What method is the most common method used to calculate accured depreciation
Straight-line (age-life)
Estimates the present worth of future benefits by capitalizing the income stream of the property
Income approach
When actually paid by tenant for use on the premises and may or may not be the same as economic rent
Contract rent
When the property with command in an open market
Economic rent
All of income a property should produce
Scheduled gross income
Ordinary and necessary costs to the operating income producing property, does not include mortgage interest or IRS depreciation
Operating expenses
Income available after paying operating expenses, but before paying debt
Net operating income
Is the conversion of income stream into an indication of value
Capitalization
Annual rate of return produced by income producing property or the desired rate of return by an investor
Capitalization rate (CAP)
Is a number that, when multiplied by the income, is an indicator of value
Multiplier (the values based on income without expenses being deducted)
When multiplied by the monthly gross rental income, will give an indication of the properties market value
Gross rent multiplier (GRM)
When multiplied by the annual gross income from all sources, given indication of the properties market value. The gross income could include parking, laundry, or fees for other services offered
Gross income multiplier (GIM)