Chapter 19 - The Value of Real Estate

Question 1

Arm’s length Transaction

Answer 1

A transaction that occurred under typical conditions in the marketplace, with each party acting in his or her own best interest

Question 1

Assemblage

Answer 1

Combining two or more parcels of land into one larger parcel.

Question 2

Conformity

Answer 2

A ‘rule’ that says a particular home achieves maximum value when it’s surrounded by homes similar in style or function.

Question 3

Contribution

Answer 3

A value theory that says a particular item or feature of a home is only worth what it actually contributes in value to a piece of property

Question 4

Demand

Answer 4

The need or desire for a specific good or service; an essential ingredient in creating value.

Question 5

Depreciation

Answer 5

1. A loss in property value for any reason. 2. For taxes, the expensing of the cost of business or investment property over a set number of years, determined by IRS to be a asset’s useful life.

Question 6

Effective Demand

Answer 6

The ability of a particular market to afford a property

Question 7

External Obsolescence

Answer 7

Any influence that falls outside the actual property site and negatively affects a property’s value

Question 8

Frontage

Answer 8

The dimension across the access side of a parcel of land. When referring to lot size, frontage is the first number. For example, if a lot size is 150’ by 100’; the frontage is 150’. also called front foot

Question 9

Functional Obsolenscence

Answer 9

Loss in property value resulting from changes in tastes, preferences, or market standards

Question 10

Highest and Best Use

Answer 10

The most profitable, legally permitted, feasible, and physically possible use of a piece of property

Question 11

Immobility

Answer 11

A physical chaaracteristic of real estate referring to the fact that it cannot move from one place to another

Question 12

Indestructibility

Answer 12

A physical characteristic of real property referring to the concept that it can’t be destroyed.

Question 13

Law of Decreasing Returns

Answer 13

Theory that says that beyond a certain point, added value of a feature, addition, repair, etc., is less than the actual cost of that item. Also called law of diminishing returns

Question 14

Law of Increasing Returns

Answer 14

Theory that says that the added value of a feature, addition, repair, etc., is more than the actual cost of the item.

Question 15

Market Value

Answer 15

The theoretical price that a piece of property would bring if placed on the open market for a reasonable period of time, with a buyer willing (but not forced) to buy, and a seller willing (but not forced) to sell, if both buyer and seller were fully informed as to the possible use of the land

Question 16

Neighborhood

Answer 16

Group of houses or properties that shares common characteristics. also called market area

Question 17

Plottage

Answer 17

An increase in vlue, over the cost of acquiring the separate parcels, by successful assemblage, usually due to a change in use

Question 18

Price

Answer 18

What one person paid for something. compare value

Question 19

Value Characteristics of Real Estate

Answer 19

DUST - Demand, Utility, Scarcity, Transferablility

Question 20

Physical Characteristics of Real Estate

Answer 20

Uniqueness, immobility, indestructability

Question 21

Broad forces that affect Real Estate Value

Answer 21

PEGS - Physical, Economic, Governmental, Social