study guide chapter 16

Question 1

Price:

Answer 1

The amount received in a transaction (Purchase Price) (pg 269)

Question 2

Going Concern:

Answer 2

The concept of value pertaining to the appraisal of a profitable business. (pg 295 also Ch 17 pg 333)

Question 3

Liquidation Value:

Answer 3

The value of a business that is NOT expected to continue. (pg
296)

Question 4

Principle of Substitution:

Answer 4

The concept that states that an informed buyer will pay no more for a property than the cost of acquiring another equally desirable property with the same or equal utility. (pg 297)

Question 5

Cost Depreciation:

Answer 5

The approach of value that would be selected for a new property or a special property with no comparable proper es available. (i.e. County Court House, School, Church etc)

Question 6

What is the Highest and Best use of a parcel in real estate?

Answer 6

The Highest and Best use of a parcel in real estate is the legal and possible use that generates the greatest return on the future use of land and improvements (pg 301)

Question 7

Functional Obsolescence:

Answer 7

A loss in building value as a result of a deficiency or excess that is inherent to the structure. (i.e. An over improvement) (Pg 304)

Question 8

External Obsolescence

Answer 8

External Obsolescence is the loss in value caused by factors beyond the boundaries of the property. (pg 304)

Question 9

Effective Age:

Answer 9

Is the age that a property appears to be due to extensive updates or excessive wear and tear due to negligent management. (pg 304)

Question 10

Actual Age:

Answer 10

The true age of a property (pg 304)
ACRONIM for Principle of Substitution.
CIA: Comparable Inferior Add.
CBS: Comparable Better Subtract.