Appraisal - Economic Principle Flashcards Preview

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Flashcards in Appraisal - Economic Principle Deck (30):
1

Change

The only constant variable in real estate
Basis of Market Condition Analyst

2

Land - Highest & Best Use

the four CELL in Harmony

3

Production - 4 agents

C - Capital
E - Entrepreneurship
L - Land
L - Labor

4

Principle of Substitution

When markets are in BALANCE, market rent is established by what a typical and prudent tenant would pay for an equally desirable substitute

5

Principle of change

closely related to broad forces of value (P-E-G-S)

6

Progression

- “worst" house of the "best area"
- Value of home helped up by other home in the area
- An increasing return result

7

Regression

"Best"house in a "worst" area

8

Principles - Balance

supply & demand
the 4 agents of production are in optimal balance

9

Principles - Change

constant physical & economic change that influence value

10

Principles -Conformity

property is in harmony with surrounding properties
(progress and regression)

11

Principles -Contribution

an item is only worth what is contributes in value to the whole

12

Principles - Substitution

Knowledge buyer will pay no more for one item than for a comparatively equivalent substitute

13

Principles - Plottage

Increased value by combining smaller lots in to one large lot for greater money

14

Principles - Assemblage

Combining smaller lots in to one large lot for greater money

15

Loan -Acceleration Clause

if borrower defaults, then entire amount due

16

Loan - Alienation Clause

full mortgage balance due upon the transfer of title (prevent buyer from assuming loan)

17

Loan - Assignment

Changes who owes the debt of mortgage, without changing loan terms

18

Mortgage - ARM

IR is periodically adjusted

19

Mortgage - Graduated PMT

PMT starts low and rises over time

20

Mortgage - Open-End

Mortgagor can re-borrow against principal that has been paid so far

21

Mortgage - Package

includes home, furniture & other personal property

22

Mortgage - Purchase Money

seller/owner financing

23

Mortgage - Reverse Annuity

owner borrows against equity in home & receives monthly tax-free pmt from the lender

24

Principle of Contribution - Decreasing Return

cost > return = forego the conversion or improvement

25

Principle of Competition

Comparing the properties against each other by observing the principle of competition.

26

Mortgage - Blanket

covers more than 1 property, with partial releases issued for the individual parcels as they are sold or paid-off

27

Surplus productivity

Net Income to the land that remains after cost of AGENTS OF PRODUCTION have been satisfied

28

Surplus Productivity
Analysis

Used for highest & best use determies an alternative land use for the highest return

29

Demographic

Income
Age
Owner vs Tenant
Size of household

30

Market Segmentation Analysis

breaking the market down to sub market
i.e. Condo users into 2 apt and 3 apt units