Chapter 8 Flashcards
Appraisal
An estimate of a property’s value by an appraiser who is usually presumed to be expert in his work.
Valuation
The process of estimating market value, investment value, insurable value, or other properly defined value of an identified interest or interests in a specific parcel or parcels of real property as of a given date.
Assessed Value
A valuation placed upon property by a public officer or a board, as a basis for taxation.
Insured Value
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.
Value-in-Use
The net present value (NPV) of a cash flow or other benefits that an asset (real property) generates for a specific owner under a specific use.
Investment Value
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.
Evaluation
A study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required, e.g. highest and best use, feasibility, market supply and demand, etc.
Market Value
The most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
Price
The amount a purchaser agrees to pay and a seller agrees to accept in an arms length transaction.
Cost
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).
Sales Comparison Approach
Valuation method which compares a subject property’s characteristics with those of comparable properties which have recently sold in similar transactions.
Cost Approach
A method of estimating the value of real property by calculating a current construction cost, subtracting accrued depreciation and adding a land value obtained from the market. This method works best when the improvements are relatively new and estimates of depreciation are thus more likely to be accurate.
Depreciation
A loss of utility and thus value caused by physical deterioration, functional obsolescence or economic obsolescence or any combination thereof.
Comparative Market Analysis
A property evaluation that determines property value by comparing similar properties sold within the last year.
Cost Approach
A method of estimating the value of real property by calculating a current construction cost, subtracting accrued depreciation and adding a land value obtained from the market. This method works best when the improvements are relatively new and estimates of depreciation are thus more likely to be accurate.
