Chapter 10 - Valuation Process and Pricing Properties Flashcards Preview

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Flashcards in Chapter 10 - Valuation Process and Pricing Properties Deck (22)
1

Appraisal

Opinion of value of property as of specified date, supported by objective data. Only done by licensed appraisers.

2

Assessed value

Taxation purposes, not necessarily market value.

3

Comparative Market Analysis (CMA)

Prepared for seller as their home goes on market. Includes:
1) recently closed sales, within last 90 days
2) those currently on market (competition)
3) recently expired listings
"Days on Market" (DOM) - how was the pricing?

4

Cost

How much it costs to build

5

Cost Approach

Appraisal method. Works best with new construction or one-of-a-kind properties. Factors in the costs of building the home - hard costs like materials, labor, and land, as well as soft costs like architecture, legal, and permits and subtracts depreciation.

6

Depreciation

The loss in value to property for any reason

7

Direct Cost

Land
Materials
Labor
Equipment
Permits
Utilities
Contractor's profit
Construction Site Security

8

Evaluation

Study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required.

9

External Obsolescence

Type of depreciation - something outside the property makes it less desirable. EX: rise in neighborhood crime rate, building of a large retail center across the street, etc.

10

Functional Obsolescence

Type of depreciation - building becomes less desirable because of something inherent in design or structure itself. EX: outdated design, home that has been over-improved for its neighborhood.

11

Income Approach

Appraisal method. Used with income properties - rental, commercial, investment. Analyses net operating income (gross income minus operating expenses) compared to similar properties nearby.

12

Indirect Cost

Real estate taxes
Fees - engineering, architecture, appraising, accounting, legal
Insurance during construction
Marketing
Interest and expenses on loans

13

Insured Value

The amount a property can be insured for - typically structure only.

14

Investment Value

Highest price that investors would pay for a property.

15

Location/Situs

Greatest effect on property value - where is it? Is there scarcity in that neighborhood? Is that area accessible?

16

Property Value

1) Demand - desirability
2) Improvements - structure vs. cosmetic
3) Scarcity - supply and demand
4) Location

17

Mortgage Value

The amount of money a lender is willing to let a property owner borrow to finance the property.

18

Plottage

Putting two parcels of land together so that land value increase because newer parcel allows for a larger building

19

Price

What someone actually pays for a property

20

Residential Market Analysis (RMA)

More indepth analysis of market. Includes
- recently sold properties
- comps currently on market
- recently expired listings
- assets and drawbacks
- area market conditions
- recommended terms of listing
- curb appeal
- market value range
- market value position - where do you stand?

21

Sales Comparison Approach

Appraisal method. Residential, single family properties. Compares minimum of 3 comparable properties (comps) that are similar in style/type in the same market area sold within the last 90 days.

22

Physical deterioration

Type of depreciation. Actual wear and tear.