Ch 18-21

Question 1

Property Taxes

Answer 1

Local governments apply property taxes on real estate. The property owner must pay those taxes or, if he or she fails to do so, the government can levy fines, liens, or even force the sale of the property to recoup the losses. Based on value of property.

Question 2

Assessed Value

Answer 2

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property

Question 3

ad valorem tax

Answer 3

a Latin word for “according to value.” More specifically, it means the amount of tax paid is directly related to the value of the property. The higher the value, the more taxes apply to that property.

Question 4

Assessing Unit

Answer 4

– A city, county, town or village with the authority to value real property for purposes of taxation.

Question 5

Assessments

Answer 5

A charge against real estate made by a unit of government to cover a proportionate cost of an improvement such as a street or sewer.

Question 6

Tax Assessor

Answer 6

An elected or appointed official of a county, city, town or village whose function is to value real property for the purposes of taxation. The assessor must consider things like the overall availability of land, the size, and features of the property, and how much the value of homes within the community as a whole has increased.

Question 7

Special Assessment

Answer 7

a type of extra tax. An assessment made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefited. They are designed to meet a specific funding goal.

Question 8

Special Assessment Districts

Answer 8

A geographic area in which the market value of real estate is enhanced due to the influence of a public improvement and in which a tax is apportioned to recover the costs of the public improvement.

Question 9

Tax Lien

Answer 9

A lien imposed by law upon a property to secure the payment of taxes.

Question 10

Sales Comparison Approach

Answer 10

A valuation method which compares a subject property’s characteristics with those of comparable properties which have recently sold in similar transactions.

Question 11

Cost Approach

Answer 11

An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

Question 12

Appraisal

Answer 12

An estimate of the value of property resulting from an analysis of facts about the property. An opinion of value.

Question 13

Appraiser

Answer 13

One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal process.

Question 14

Value

Answer 14

Present worth of future benefits arising out of ownership to typical users/investors.

Question 15

Assessed Value

Answer 15

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

Question 16

Cost

Answer 16

The total dollar expenditure for labor, materials, legal services, architectural design, financing, taxes during construction, interest, contractor’s overhead and profit, and entrepreneurial overhead and profit (may or may not equal value).

Question 17

Insured Value

Answer 17

The value of an asset or asset group that is covered by an insurance policy; can be estimated by deducting cost of non-insurable items (e.g. land value) from market value.

Question 18

Investment Value

Answer 18

The specific value of an investment to a particular investor or class of investors based on individual investment requirements; distinguished from market value, which is impersonal and detached.

Question 19

Market Value

Answer 19

The highest price in terms of money which a property will bring in a competitive and open market and under all conditions required for a fair sale, i.e., the buyer and seller acting prudently, knowledgeably, and neither affected by undue pressures. Market value is based on numerous factors including the condition a property is in at the time it is listed for sale.

Question 20

Price

Answer 20

The amount a purchaser agrees to pay and a seller agrees to accept in an arms length transaction.

Question 21

Demand

Answer 21

The supply of willing and able buyers in the marketplace or lack thereof.

Question 22

Utility

Answer 22

The ability to give satisfaction and/or excite desire for possession.

Question 23

Scarcity

Answer 23

A lack of supply

Question 24

Transferability

Answer 24

The ability to transfer ownership of property from one person to another.

Question 25

Principle of Anticipation

Answer 25

– Affirms that value is created by anticipated benefits to be derived in the future.

Question 26

Principle of Change

Answer 26

Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely the result of cause and effect.

Question 27

Principle of Conformity

Answer 27

Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvements is present.

Question 28

Principle of Contribution

Answer 28

– A component part of a property is valued in proportion to its contribution to the value of the whole.

Question 29

Principle of Progression

Answer 29

The worth of a lesser valued residence tends to be enhanced by association with higher valued residences in the same area. developer specializes in high-end luxury homes and the properties which are built are three-bedroom, two-bath luxury homes with high end features.

Question 30

Principle of Substitution

Answer 30

– Affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution.

Question 31

Reconciliation

Answer 31

The final stage in the appraisal process where the appraiser reviews the data and estimates the subject property’s value.

Question 32

pro-forma

Answer 32

an income and expense statement for a property. It is produced by an investor and typically shows the current income and expenses for a property along with future projections, based on the investor’s knowledge of the real estate market.

Question 33

Leverage

Answer 33

The use of borrowed capital (mortgage) to increase the potential return of an investment. In other words, an investor is using another person’s or company’s money (OPM) to make an investment.

Question 34

Time Value of Money

Answer 34

– The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity

Question 35

Net operating income, also known as NOI

Answer 35

refers to the income a property produces before debt service and any capital expenditures. It equals the effective gross income (which is the actual income generated from the property) minus any expenses.

Question 36

Capitalization rates, also known as CAP rates

Answer 36

refers to the rate of return on a real estate investment based on the net operating income of a property. CAP rates are used to determine the value of a property. CAP Rate = Net Operating Income / Purchase Price (or current market value)

Question 37

Ethics

Answer 37

Moral principles that govern a person’s or group’s behavior. Ethics often hold an individual to a higher standard than the law.

Question 38

Law

Answer 38

The system of rules that a particular country or community recognize as regulating the actions of its members and may be enforced by the imposition of penalties.

Question 39

Sherman Anti-Trust Act

Answer 39

Federal legislation including imposition of civil and punitive damages for anti-trust activities. Seeks to prevent all contracts from forming trusts or conspiracies that could hinder trade or commerce, in all financial dealings. Its purpose is to not allow a restraint on trade and to encourage a marketplace that allows for more competition.

Question 40

Group Boycott

Answer 40

– An agreement between members of a trade to exclude other members from fair participation in the trade.

Question 41

Price Fixing

Answer 41

Conspiring to establish fixed fees or prices for services or products.

Question 42

Market Allocation

Answer 42

An agreement between members of a trade to refrain from competition in specific market areas.

Question 43

Tie-in Arrangement

Answer 43

A contract where on transaction depends upon another. The offer to sell a desirable property depends on the purchase of a much less desirable property.

Question 44

Business Statutes

Answer 44

Legal restrictions that apply to any business professional also apply to the real estate professional in Georgia

Question 45

The Fair Business Practices Act (FBPA)

Answer 45

gives the Governor the power to prohibit business transactions that would result in substantial actual damage to the citizens of Georgia. The Act regulates advertising and restricts activities that encourage consumer transactions.

Question 46

Uniform Deceptive Trade Practices Act (UDTPA

Answer 46

a mechanism to provide penalties for individuals who fraudulently misrepresent aspects of the service they provide to their clients.