Chapter 16 keywords

Question 1

Appraisal

Answer 1

An appraisal is an active process of developing an opinion of value
An appraisal is numerically expressed as a specific amount, a range values, Or as a relationship to a previous value, opinion, or benchmark example value is greater than the previous appraised value

Question 2

Assemblage

Answer 2

Plottage value is increased in value, resulting from an assemblage, or combining, or two or more adjacent parcels of land, and one owner. Typically, the value of the whole parcel would be greater than the sum of the individual smaller parcels.

Question 3

Automated valuation model

Answer 3

Automated valuation, models AVM’s are electronic services that can provide an estimate of a properties valuation very quickly. These models typically use electronic databases to compare the subject property to other properties in the area. Although AVMs may be faster and easier than appraisals or BPO, they do not take into account, property condition, neighborhood characteristics, and recent transactional data. As a result, AVMs are tool that may be used, but are often followed up with a site visit or an actual appraisal. 

Question 4

Comparative market analysis

Answer 4

A comparative market analysis, Cma is developed by using the same basic steps as an appraiser uses with the sales comparison approach, but employees less stringent methods. This type of analysis is useful when dealing with sellers system, and establishing a listing price, and with buyers who are considering an offering price

Question 5

Cost

Answer 5

Cost is actual or estimated amount required to create, produce, or obtain a property. It includes labor, materials, finance and expense, land, management, overhead, and the contractor is profit necessary to bring the finished product to the market. Cost may be more than orless than the market value of the property

Question 6

Cost depreciation approach

Answer 6

The cost creation approach, or cost approach, is used to estimate the current cost of reproducing, or replacing the building, minus an estimate for depreciation, plus the value of the land. The support is also based on the principal substitution. No one would pay more for an existing property that the cost of precious land, and have comparable improvements constructed on that land, assuming no unusual time delay. The value of the subject property could be estimated by using either replacement, cost or reproduction cost.

Question 7

Curable

Answer 7

Physical deterioration can be either curable or incurable. Whether something is curable, or incurable is based on economic feasibility. If repair an item adds as much or more value than the cost of the repair, it is curable otherwise, it is incurable.

Question 8

Cost depreciation approach

Answer 8

The cost depreciation approach, or cost approach, is used to estimate the current cost of reproducing, or replacing a building, minus an estimate for depreciation, plus the value of the land.

Question 9

Physical deterioration

Answer 9

Physical deterioration is any loss and valued due to normal, wear and tear from use, negligence, or Aging of the building

Question 10

The economic age life

Answer 10

There are several methods used by appraisers to estimate the amount of the accrued depreciation. The simplest is called the economic age life method. The appraiser estimates the total economic life of a building, which is the number of years it will contribute value above the value of the land, this is 100% of its useful life.

Question 11

GRM

Answer 11

Gross rent multiplier is used for monthly rental properties and it is derived from comparable properties which are rented at the time of sale by using the formula:
Comparable sales price / gross monthly rent = gross rent multiplier GRM

Question 12

GIM

Answer 12

Gross income multiplier is similar to the GRM, and is calculated in exactly the same manner but uses annual gross rental income rather than gross monthly rent. But using an annual gross rental income, distortion is prevented in the estimate due to seasonal fluctuation and income during the year. Here is the formula:
Comparable sales price / annual gross rental income= gross income multiplier GIM

Question 13

The principle of highest and best use

Answer 13

The principle of highest and best use states that the best use for the property, known as its highest, best, and most profitable use, is that which will most likely produce the greatest net return to the land over given period of time. This not return is realized in terms of money or other amenities.

Question 14

Income approach

Answer 14

The income approach is used to estimate the value that a prop is not earning power will support. The support is used to estimate the value of income produce and property and the valuation of business.
The income approach is based on the assumption that the value of a property is related to the amount of income that it can produce in the future

Question 15

Incurable

Answer 15

External obsolescence, or economic obsolescence, is a loss of value caused by factors beyond the boundaries of the subject property. External obsolescence is considered to be incurable on the part of the owner since the problem is beyond the property is boundaries.

Question 16

Market value

Answer 16

Market value is a valued, a typical buyer, and a typical seller. This is the most common type of value that is estimated by appraisers. The market value of a property is the most probable price at which specified property right should sell.

Question 17

Over improvement

Answer 17

Function and obsolescence can be caused by either a deficiency or an over improvement. The structural deficiency or access effects, consumer preferences, which in turn affect value.

Question 18

Plottage value

Answer 18

Plottage value is increased in value, resulting from an assemblage, or combining, or two or more adjacent parcels of land, and they’re one owner. Typically the value of the whole parcel will be greater than the sum of the individual smaller parcels.

Question 19

Price

Answer 19

Price is the amount that is actually paid in a real estate transaction. It is not necessarily the asking amount or amount offered, and may not represent the actual market value of the property.

Question 20

Principle of progression

Answer 20

The principle of progression applies when a-lower priced property is built or an existing property is inadequate(under improved) and an area that consist of property that is more expensive.

Question 21

Principal of regression

Answer 21

The principle of regression applies when a higher price property is constructive or an existing property is over improved an area that consist of lower price properties

Question 22

Principle of substitution

Answer 22

The principle of substitution recognizes that no one would pay more for property than the amount necessary to acquire an acceptable substitute. This principle is the basis for all mathematical methods that are used by appraisers to estimate value. This is the most used in residential appraisals.

Question 23

Replacement cost

Answer 23

Replacement cost is the estimated cost at current prices to construct a comparable building with equal utility to the subject building by using modern materials, design, and features.

Question 24

Reconciliation

Answer 24

Reconcile the adjusted sales price. Experience and judgment are used to weigh the adjusted sales price of each comparable property to infer an estimate of value for the subject property. They just sell prices of the comparable properties cannot be simply added, and then averaged. Awaited average technique is used to determine the estimate of value.

Question 25

Replacement cost

Answer 25

The replacement cost is the estimated cost at current prices to construct a comparable building with equal utility to the subject building by using modern materials, design, and features. Replacement building is not necessarily constructed with materials as a subject property. Some construction methods and materials may no longer be available, therefore substitution may be necessary.

Question 26

Reproduction cost

Answer 26

The reproduction cost is the estimated cost to construct a current prices and exact duplicate or replica of the building that is being appraised by using the same materials, design, and layout as a subject property. Production causes preferred in appraisals for historic properties.

Question 27

Sales comparison approach

Answer 27

Sales comparison approach is most suitable for estimate in the value of a single family property

Question 28

Income approach

Answer 28

Income approach would be given greater weight when appraising an apartment complex

Question 29

Subject property

Answer 29

Is a specific property being finance or purchased

Question 30

Uniform standards of professional appraisal, practice USPAP

Answer 30

All appraisers must adhere to the uniform standards of professional appraisal practice USPAP

Question 31

Value

Answer 31

Value is an opinion of the worth of a property at a given time in accordance with a specific definition of value. It is the monetary relationship between properties, and those who buy, sell, or use those properties.

Question 32

Valuations

Answer 32

The value most often estimated in real estate valuation is market value