02 Flashcards
(25 cards)
the reduction in value of a property over time.
depreciation
loss of value caused by physical wear and tear over time.
deterioration
a loss in value caused by negative forces outside the property which are beyond the control of the owner (unfavorable changes in the environment or market).
economic obsolescence
an estimated age that is influenced by the updates and quality of maintenance of the property.
effective age
loss of value because of a property’s function or appearance has gone out of style or has been replaced by a more appealing or effective version.
functional obsolescence
with respect to an appraisal; information about the area surrounding the property.
general data
the use of a property that is legal, physically possible, financially viable, and produces the greatest yield.
highest & best use
a determination of value arrived at by considering how much income the property could generate when used as a rental property.
income approach
a simpler, abbreviated version of a regular appraisal made by checking out the exterior of the property only.
limited appraisal
the amount of money being loaned compared to the value of the property.
loan-to-value ration
the price for which a property will theoretically sell under typical conditions.
market value
states that the present value of a property is affected by the anticipated income or utility that property will give its property owner.
principle of anticipation
states that the condition of a property, the desirability of its location, and the market in which it exists can always change.
principle of change
states that values are highest when the houses in a neighborhood look roughly the same.
principle of conformity
states that the value of each component contributes to the total value.
principle of contribution
states that the value of a subject property can increase when surrounded by properties with a higher value.
principle of progression
states that lower-value properties surrounding a subject property can drag down the value of the subject property.
principle of regression
the idea that the value of something is affected by the cost of getting a similar (substitute) item elsewhere.
principle of substitution
the basic economic concept that when supply is low and demand is high, princes increase; while when supply is plentiful and demand is low, prices drop.
principle of supply & demand
an appraiser’s use of a combination of more than one approach to value.
reconciliation
approach to determining value by comparing the subject property to similar properties (“comps”) that have sold recently.
sales comparison approach
with respect to an appraisal; the information regarding the property itself.
specific data
a report from a licensed appraiser that sums up a property’s market value based on collected data.
appraisal report
an evaluation or audit of a property appraisal; usually initiated by a lending underwriter.
appraisal review
