Real Estate Definations Chapter 18

Front 1

Anticipation

Back 1

The appraisil principal that holds that value can increase or decrease based on the expectation of some future benefit or detriment produced by the property

Front 2

Appraisal

Back 2

An estimate of the quality or value of something. The process through which conclusions of property value are obtained also the report that sets forth the process of estimation

Front 3

Appraisal report

Back 3

An opinion of market value on a property given to a lender or client with detailed accurate information

Front 4

Appraiser

Back 4

An independent person trained to provide an unbiased estimate of value.

Front 5

Assemblage

Back 5

The combining of two or more adjoining lots into one larger tract to increase their total value.

Front 6

Broker's price opinion BPO

Back 6

An oppinion of real estate value comissioned by a bank or attorney and provided by a broker.

Front 7

Capitalization rate

Back 7

The rate of return a property will produce on the owner's investment.

Front 8

Change

Back 8

The appraisal principal that holds that no physical or economic condition remains constant

Front 9

Competitive Market Analysis (CMA)

Back 9

A comparison of the prices of recently sold homes that are simular to a listing seller's home in terms of location, style and amenities

Front 10

Competition

Back 10

The appraisal principal that states that excess profits generate competition

Front 11

Conformity

Back 11

The appraisal principal that holds that the greater the similarity among properties in an area the better they will hold their value.

Front 12

Contribution

Back 12

The appraisal principal that states that the value of any component of a property is what it gives to the vlue of the whole or what it's absence etracts from that value

Front 13

Cost Approach

Back 13

The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building less depreciation.

Front 14

Depreciation

Back 14

In appraisal; a loss of value in property due to any cause including physical eteriatioian, functional obsolescence, and external obsolescence. (2) In investment, an expense deduction for tax purposes taken over the period of ownership of income property.

Front 15

Economic Life

Back 15

The number of years in which an improvement will add value to the land.

Front 16

External Obsolescence

Back 16

Incurable epreciation caused by factors not on subject property, such as environmental, social or economic factors.

Front 17

Functional Obsolescence

Back 17

A loss of value to an improvement to real estate arising from functional problems often caused by age or poor design.

Front 18

Gross income multiplier (GIM)

Back 18

A figure used as a multiplier of the gross annual income of a property to prouce an estimate of the property's value.

Front 19

Gross rent multiplier (GRM)

Back 19

The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property's value

Front 20

Highest and best use (HABU)

Back 20

the possible use of a property that would produce the greatest net income and thereby develop the highest value.

Front 21

Income Approach

Back 21

The process of estimating the value of an income producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life.

Front 22

Index Method

Back 22

The appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for the current construction costs.

Front 23

Law of diminishing returns

Back 23

Law that applies when at the point where aditional improvements do not increase income or value.

Front 24

Law of increasing returns

Back 24

Law that applies as long as money being spent on improvements produces an increase in income or value.

Front 25

Market Data Approach

Back 25

(AKA Sales comparison approach) An estimate of value obtained by comparing property being appraised with recently sold comparable properties.

Front 26

Market Value

Back 26

the most profitable price property would bring in an arms-length transaction under normal conditions on the open market.

Front 27

Physical Deterioration

Back 27

A reduction in a properties value resulting from a decline in physical condition. Can be caused by action of the elements or by ordinary wear and tear

Front 28

Plottage

Back 28

The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot.

Front 29

Progression

Back 29

An appraisal principal that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better quality property.

Front 30

Quantity-survey method

Back 30

the appraisal method of estimating building costs by calculating the cost of all of the physical components in the improvements, adding the cost to assemble them, and then incluing the indirect costs associated with such construction.

Front 31

Reconcillation

Back 31

The final step in the appraisal process, in which the appraiser combines the estimates of value received from the sales comparioson cost, and income approaches to arrive at a final estimate of market value for the subject property

Front 32

Regression

Back 32

An appraisal principal that states that, between dissimilar properties, the value of the better quality property is affected adversly by the presence of the leser-quality property

Front 33

Replacement cost new

Back 33

The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original

Front 34

Reproduction costs

Back 34

The construction cost at current prices of an exact duplicate of the subject property.

Front 35

) comparison approach

Back 35

The process of estimating the value of a property by examining and comparing actual sales of comparable properties

Front 36

Sales Price

Back 36

Price a property sells for

Front 37

Square-foot method

Back 37

The appraisal method of estimating building costs by multiplying the number of square feet in the imporvements being appraised by the cost per square foot for recently constructed similar improvements

Front 38

Straight line method

Back 38

A method of calculating depreciation for tax purposes, computed by dividing the adjusted basis of a property by the estemated number of years of remaining life.

Front 39

Substitution

Back 39

An appraisal principal that states the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution.

Front 40

Supply and Demand

Back 40

The appraisal principal that follows the interrelationship of the supply of and demand for real estate (recognizes that real property is subject to the influences of the marketplace)

Front 41

Uniform Standards of Professional Appraisal Practice (USPAP)

Back 41

Appraisers are expected to follow the (USPAP) Established by the founder's appraisal standards board

Front 42

Unit-in-place Method

Back 42

Appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure, with the cost of each item including its proper installation connection etc. Also called segregated cost method.

Front 43

Value

Back 43

the power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities.