Chap. 17

Question 0

Economic principals of value

Answer 0

1. Highest and best use
2. Substitution
3. Supply and demand
4. Conformity
5. Anticipation
6. Contribution
7. Competition
8. Change

Question 1

An estimate or opinion of value of a specific property as of a specific date

Answer 1

Appraisal

Question 2

The most profitable single use to which a property is adapted and for which it is needed or the use that is likely to be in demand in the near future
“The best return”

Answer 2

Highest and best use

Question 3

When several items with essentially the same amenities and utilities are available the item with the lowest price will attract the most demand

Answer 3

Substitution

Question 4

The value of a property will change if the supply decreases and the demand either increases the remains constant and vice versa
Buyers market vs sellers market

Answer 4

Supply and demand

Question 5

Means that maximum value is realized if the use of land coliforms to existing neighborhood standards
“Restrictive covenant”

Answer 5

Conformity

Question 6

This principle holds that value can increase or decrease in this of some future benefit or detriment affecting the property

Answer 6

Anticipation

Question 7

Any component of property is defined by what is addition to the value of the whole or what is absent detracts from the value

Answer 7

Contribution

Question 8

This principle states that the profit tend to attract competition

Answer 8

Competition

Question 9

No physical or economic constant

Answer 9

Change

Question 10

3 approaches to value

Answer 10

1. Sales comparison approach (single family homes and land)
2. The cost approach
3. The income cap. Approach (apt. buildings,office,shopping centers)

Question 11

Based on substitution
5 steps
1. Estimate the value of the land as if vacant
2. Separate the land from the improvements
3. Estimate the amount of accrued depreciation
4. Deduct the accrued depreciation from the estimated construction cost
5. Add the estimated value of the land to the depreciated cost of the building

Answer 11

Cost approach

Question 12

Comps

Answer 12

The more similar the comparable is the more recently sold and the fewer adjustments that are required the more reliable the estimate of value will be

Question 13

Breakdown method of depreciation includes?

Answer 13

Age life method- uses the effective age of a building and it’s economic life
Straight line method- when the cost of an asset is depreciated evenly over its useful life
Economic life- the period during which it is expected to remain useful for its original intended purpose

Question 14

Income approach formula

Answer 14

Gross income - vacancy - expenses= NOI 
NOI / cap rate = value 
*income/ rate = value 
*income/value =rate
Value x rate = income