Chapter 14

Question 1

the perception that value is created by the expectation of benefits to be derived in the future.

Answer 1

principle of anticipation

Question 2

In economic theory, the principle that states that the price of a commodity, good, or service varies directly, but not necessarily proportionately, with demand, and inversely, but not necessarily proportionately, with supply.

Answer 2

Principle of supply and demand

Question 3

The result of the cause and effect relationship among the forces that influence real property value.

Answer 3

Principle of change

Question 4

The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.

Answer 4

principle of substitution

Question 5

the sales comparison approach relies most heavily on:

Answer 5

the principle of substitution

Question 6

The concept that the value of a particular component is measured in terms of its contribution to the value of the whole property, or as the amount that its absence would detract from the value of the whole.

Answer 6

Principle of contribution

Question 7

The principle that economies outside a property have a positive effect on its value while diseconomies outside a property have a negative effect on its value.

Answer 7

Principle of externalities

Question 8

The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium

Answer 8

Principle of balance

Question 9

The appraisal principle that real property value is created and sustained when the characteristics of a property conform to the demands of its market.

Answer 9

Principle of conformity

Question 10

These two principles are the result of what happens when the principle of balance is violated.

Answer 10

Progression and regression

Question 11

n appraisal, the concept that the value of an inferior property is enhanced by its association with better properties of the same type

Answer 11

Progression

Question 12

In appraisal, the concept that the value of a superior property is adversely affected by its association with an inferior property of the same type

Answer 12

Regression

Question 13

The cost of options forgone or opportunities not chosen

Answer 13

Principle of opportunity cost

Question 14

The agents of production are

Answer 14

Land, labor, capital, and entrepreneurial coordination

Question 15

The return on land

Answer 15

rent

Question 16

Return on labor

Answer 16

wages

Question 17

Return on capital

Answer 17

interest

Question 18

retun on entrepreneurship

Answer 18

profit

Question 19

The net income that remains after the costs of various agents of production have been paid

Answer 19

Principle of surplus activity

Question 20

he concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income, in dollars, benefits, or amenities, at an increasing rate until a maximum return is reached.

Answer 20

Principle of increasing and decreasing returns

Question 21

The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued

Answer 21

Highest and best use

Question 22

the use for which the property is best suited, will produce the best utility, and will bring the highest return.

Answer 22

Highest and best use

Question 23

There are four criteria used in determining the highest and best use of a property.

Answer 23

Legally permissible
Physically possible
Financially feasible
Maximally productive

Question 24

Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements

Answer 24

Highest and best use of a land or a site as though vacant

Question 25

The use that should be made of a property as it exists. An existing improvement should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.

Answer 25

highest and best use as improved

Question 26

The principle of supply and demand states that price varies _______ with demand.

Answer 26

directly

Question 27

When purchasing a home as an owner-occupant, the purchaser's anticipated benefits are

Answer 27

amenities

Question 28

Which valuation principle has its strongest application in the valuation of income-producing properties?

Answer 28

anticipation

Question 29

True or False? When developing an opinion of site value of an improved property, an appraiser needs to consider the highest and best use of the property as though vacant.

Answer 29

True

Question 30

The net income that is left over after the four agents of production are paid is returned to the

Answer 30

land

Question 31

If there is anything at all left after satisfying the four agents of production, the excess profit would be returned to the land. This is the principle of

Answer 31

surplus activity

Question 32

The concept of highest and best use applies to

Answer 32

both vacant land and improved property

Question 33

Supply and demand will tend to move towards

Answer 33

equilibrium