13 Appraisal

Question 0

Three Approaches

Answer 0

Sales comparison approach - market data
Cost Approach - principle of substitution
Income approach - capitalization approach

Question 1

Appraisal

Answer 1

Opinion of value supported by evidence.

Question 2

Characteristics of Value

Answer 2

Demand - desire for possession of ownership
Utility - the properties usefulness for the intended purpose
Scarcity - a finite supply
Transferability - the ease of transferring owners rights

Question 3

Market Value

Answer 3

What a buyer offers, and what a seller accepts.

Question 4

Market Price

Answer 4

What a property actually sells for.

Question 5

Anticipation

Answer 5

The value is created by the expectation that certain events will occur.

Question 6

Change

Answer 6

The one constant you can count on is change.

Question 7

Competition

Answer 7

High levels of profit tends to increase competition from competitors which results in less profit for everyone.

Question 8

Conformity

Answer 8

The value will be maximized if the property is in harmony with existing properties in the neighborhood.

Question 9

Contribution

Answer 9

The value of any part of a property is measured by the value of the whole.

Question 10

Highest and Best Use

Answer 10

The most profitable use for a property.

Question 11

Increasing or Diminishing Returns

Answer 11

Improvements increase until a period of time where there is no longer an increase.

Question 12

Substitution

Answer 12

What would it cost to purchase a similar property.

Question 13

Supply and Demand

Answer 13

The price will increase is supply is low and demand is great.

Question 14

Plottage

Answer 14

This is assemblage of 2 properties where the value is greater than if they stood apart.

Question 15

Progression/regression

Answer 15

Value of properties will decrease if surrounded by houses of lower value, and vice versa.

Question 16

Reconciliation

Answer 16

Appraisers never average. More weight would be given to one of the approaches over another.

Question 17

Adjusted Basis

Answer 17

Refers to the original cost of the property reduced by deductions and increased by certain improvement costs.

Question 18

Appreciation

Answer 18

Increase in value.

Question 19

Basis

Answer 19

The cost of the property plus the value of capital improvements.

Question 20

Boot

Answer 20

Money or something else of value to make up the difference in an exchange of properties.

Question 21

Capital Gain

Answer 21

The taxable profit realized from the sale of a capital asset.

Question 22

Cash Flow

Answer 22

The spendable income generated from an investment after deducting expenses.

Question 23

Depreciation

Answer 23

Loss of value.

Question 24

Exchanges

Answer 24

Used to defer capital gains on investment properties.

Question 25

Inflation

Answer 25

The rate at which the general level of prices for goods and services is rising, and subsequently purchase power is falling.

Question 26

Intrinsic Value

Answer 26

A persons individual preference for a given geographical area based on amenities the area has to offer.

Question 27

Joint Venture

Answer 27

Group of investors coming together for a specific project only.

Question 28

Leverage

Answer 28

The use of borrowed funds for an investment.

Question 29

Liquidity

Answer 29

The ability to sell an asset and turn it into cash.

Question 30

REIT

Answer 30

Real estate investment trust - a group of at least 100 investors who transfer title to real estate to a trustee, who manages the property on behalf of the investors.

Question 31

Syndicate

Answer 31

A joint venture that sticks around for more than 1 project.