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93 Cards in this Set
- Front
- Back
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This is what will command in exchange for goods, services or money
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value
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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
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Market Value
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What is another name for "Market Value"?
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Arms Length Transaction
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a personal view of value by the buyer or seller
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subjective value
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a percentage of value used to calculate ad valorem taxes (prop taxes)
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Asessed Value
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a percentage of the sales price or appraised value, whichever is less, that the lender will loan
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Loan Value
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What does LTV Ratio stand for?
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Loan to Value Ratio
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the adj cost basis from which a capital gain or loss is calculated when the prop is sold.
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Book Value
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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
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the cost of replacing an improvement destroyed by flood, fire, storm, etc Does not include depreciation or the value of the land.
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Insured Value
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Name 4 characteristics of Value
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D emand
U tility S carcity T ransferablity |
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the desire and ability of a buyer to buy a property
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demand
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the ability of the prop to meet the needs of the buyer
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utility
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the supply or availability of real estate for sale in the market place
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scarcity
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a clear, marketable title without encumbrances
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transferability
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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.
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substitution
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T or F the sales price of an equally desirable prop sets the upper limits of value for all similar prop
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True
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the legal use which provides the owner with the greatest net income or amenities
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Highest and Best Use
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Btw dissimlar prop, the worth of the better prop is adversley affected by the presence of a lesser-quality prop.
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regression
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give an example of regression
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Building a $100,000 home in a $80,000 neighborhood
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Btw dissimilar prop, the worth of the lesser prop is favorable affected by the presence of a better-quality prop.
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progression
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give an example of progression.
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Building a $80,000 home in a $100,000 neighborhood.
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profit breeds _________; if the purchasing power of the public is suficient, more businesses will be successful and values will increase.
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competition
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stable values result when there is a _________ btw real estate usage and the needs of the community
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balance
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when real estate needs, location preferences and uses are subj to What?
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Change
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Maximum value is realized when there is social, economic and physical homogeneity
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conformitiy
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the anticipation of a future benefit or detriment affects value
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anticipation
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what an improvement adds to the value of the prop, or its absence detracts from the value
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contribution
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adding improvements to land will increase the value of the land up to a point where the value will no longer increase
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increasing & diminishing returns
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the process of merging adjoining lots together
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assemblage
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What is the equation to calculate Book Value on a residental property when sold?
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Cost + Capital Improv
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What is the equation to calculate Book Value on a business or trade prop when sold?
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Cost + Capital Improv - Depreciation
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It is used to take advantage of the principal of value known as pottage
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assemblage
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action of the sun and prevailing winds
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elements
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attractive or desirable features that make it enjoyable to own property
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amenitites
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value is affected by style, construction and design
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architectural design
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value is affected by both govt and private restrictions
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zoning & bldg restrictions
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corner lots often have more value than other lots; especially commercial lots
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corner influence
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prop in the path of growth will have more value than other prop.
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growth pattern
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________ preference affects value and is the first consideration of buyers
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location
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business trends, wage levels, interest rates, the availablity of credit, etc affect the value of real estate
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economic factors
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placement of improvements on land affects value
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orientation
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an _______ shaped tract of land will not have as much value as a well ________ tract of land with the same number of square feet.
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irregularly
proportioned |
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values and neighborhood boundaries are defined by the ________ characteristics of the occupants of the area...this is called what?
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social
social atmosphere |
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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
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topography
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a strip of land separating one land use from another.
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buffer or buffer zone
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give an example of a buffer.
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a subdivder leaving undeveloped land, a park, or line of trees btw residental and commercial usage.
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Name 3 life's of property
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Economic Life
Physical Life Life cylce of prop |
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period over which a structure produces a profit or adds value to the land
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economic life
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which is shorter:
physical life or economic life |
economic life
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the period over which a structure will safely stand
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physical life
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Name the 3 parts of the life cycle of prop
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Integration
equilibruim disintegration |
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develompent of the land
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integration
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when value is at its max
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equilibrium
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the declining of value from its max or equilibrium states
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disintegration
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the actual age of the structure
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chronological age
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the apparent age of a structure due to its condition
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effective age
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an estimate or opinion of value
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appraisal
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(should or should not) an appraiser appraise outside his/her field of experience?
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should not
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(should or should not) an appraiser appraise propertyin which s/he has an interest?
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should not
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An appraisers fee should be based on _____ and ______; not on the estimate of value.
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time
expenses |
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if the appraiser is also a RE licensee, s/he (should or should not) appraise prop they are listing.
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should not
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what is the purpose of an appraisal?
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to obtain a listing price, purchase price, taxes, condemnation, insurance policy and loans
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Name the 5 steps in the Appraisal process
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Define the problem
Make a preliminary survey Gather data use the data reconciliation |
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what is another name for reconciliation?
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correlation
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what info is gathered in the appraisal process?
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economy
neighborhood the property |
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to arrive at the final estimate of value
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reconciliation
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How many different reports can the appriaser make?
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Oral report
Letter report Form report Narrative report |
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Name 3 approaches to appraising
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sales comparison approach
income approach cost approach |
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an appraisal best for older residential and raw land
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sales comparison approach
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an appraisal for income producing properties
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income approach
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an appraisal best for new residential and special purpose buildings
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cost approach
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under the sales comparison approach name the points of camparability
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sales price and financing
date of sale location physical features amenitites |
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the sales comparison approach is usually considered the most (inaccurate or accurate), providing adequate data is available.
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accurate
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who uses comparative market anaylsis (CMA) and why?
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agents and brokers
to estimate value for listing purposes |
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What other approach is similar to the sales comparison approach?
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(CMA) comparative market anaylsis
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estimates the value of property based on its ______ _______ capabilities.
this is which appraisal approach? |
income producing
income approach |
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Net income
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income after expenses
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what expenses are excluded from net income?
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mortgage payments
depreciation |
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when doing capitalization problems, use (weekly, monthly or annual) net operating income.
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annual
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what is the formula for effective gross income?
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+ max gross income
- vacancy rate - collection problems + other income (vending laundry) = effective gross income |
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what is the formula for net operating income?
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+ Effective gross income
- Expenses = net operating income |
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a capitalization method that seperates the land from the bldg adn has a different cap rate for each.
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Building Residual Method
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converts gross rent into value
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gross rent multiplier
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what is the formula for gross rent muliplier (GRM)?
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sale price/ rent = grm
or subj rent x grm = value |
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this appraisal approach is based on the assumption that the cost of reproducing the improvements is the upper limit of value
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cost approach
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name the 4 steps in the cost approach
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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 |
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Name 3 methods of determining costs.
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quantity survey method
unit in place method square/cubic foot method |
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what are the steps to the quantity survey method?
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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) |
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How is the cost determined using the unit-in-place method?
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pricing various units of the structure on an installed basis such as walls, roof, heating & a/c, electric wiring, etc.
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use (inside or outside) measurements on the area used as living quarters only.
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outside
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using the sq ft method what things are calculated seperately?
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porches, garages, basements
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using the sq ft method, volume is calculated on storage bldgs such as what?
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Warehouses, barns and silos.
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