Ch. 16 Appraisal Flashcards Preview

Real Estate Financing > Ch. 16 Appraisal > Flashcards

Flashcards in Ch. 16 Appraisal Deck (27):
1

accrued depreciation

loss in value, resulting from the property's physical deterioration, external depreciation, and functional obsolescence

2

anticipation

value is created by the expectation that certain events will occur

3

appraisal

an opinion of value based on supportable evidence and approved methods

4

assemblage

the process of merging two separately owned lots under one owner

5

Broker's price opinion (BPO)

less-expensive alternative of evaluating property that is often used by lenders working with home equity lines, refinancing, portfolio management, loss mitigation, and collections.

6

capitalization rate

"cap" rate-determined by comparing the relationship of net operating income with the sales price of similar properties that have sold in the current market

7

conformity

maximum value is created when a property is in harmony with its surroundings

8

cost approach

the process of estimating the value of a property by adding to the estimated land value of the appraiser's estimate of the reproduction or replacement cost of the bldg, less depreciation

9

depreciation

in a real estate appraisal, depreciation is loss in value for any reason considered curable or incurable, depending on whether it can be corrected economically

10

external obsolescence

If depreciation is caused by negative factors no the subject property such as environmental, social, or economic forces its always incurable.The loss in value cannot be reversed by spending money on the property, ex close proximity to a polluting factory

11

functional obsolescence

obsolescence means a loss in value from the market's response to the item/outmoded or unacceptable physical or design features that are no longer considered desirable by purchases are considered curable if they can be replaced and redesigned, A four-bedroom home w/only one bathroom is likely to suffer from incurable functional obsolescence

12

income approach

value is based on the present value of the right to future income, assumes that the income generated by a property will determine the property's value

13

market data approach

aka sales comparison approach, estimate of value obtained by comparing property being appraised w/recently sold comparable properties

14

market value

considered the most probably price that a property should bring in a competitive and open market under all conditions requisite to a fair sale/an opinion of value based on an analysis of data

15

net operating income (NOI)

Deduct the Annual operating expenses from the effective gross income to get the annual NOI

16

physical deterioration

a CURABLE item in one in need of repair such as painting, an item INCURABLE is caused by physical wear and tear and its correction would not be economically feasible such as an extensive crack in the foundation

17

plottage

The individual value of two adjacent properties may be greater if they are combined in an assemblage than if each is sold separately

18

progression

An appraisal principle that the value of a lesser-quality property is favorably affected by the presence of a better-quality property

19

reconciliation

act of analyzing and effectively weighting the findings from the three approaches, an appraiser explains not only the appropriateness of each approach but also the relative reliability of the data within each approach in line with the type of value sought

20

regression

the worth of a better-quality property is adversely affected by the presence of a lesser-quality property

21

sales comparison approach

also known as the market data approach, value is obtained by comparing the property being appraised

22

substitution

the maximum value of a property tends to be set by how much it would cost to purchase an equally desirable and valuable substitute property

23

supply and demand

when the supply of similar properties increases, their value decreases and when demand for such properties increases, their value increases

24

value

DUST- Demand, Utility, Scarcity, Transferability value in the real estate market is monetary worth based on desirability

25

Uniform Standards of Professional Appraisal Practice (USPAP)

Licensed or certified appraisers performing federally related real estate transactions (a value of greater than $250,000) must comply w/the Uniform Standards of Professional Appraisal Practice (USPAP)

26

Market Price

a property's asking, offer, or sales price

27

economic life

the easiest but least precise way to determine depreciation is the straight-line method called the economic age-life method, the period during which it is expected to remain useful for its original intended purpose