Chapter Eighteen

Question 0

the appraisal principle that holds that value can increase or decrease based on the expectation of some future benefit or detriment produced by the property. 325

Answer 0

anticipation

Question 1

loss in value resulting from the property’s physical deterioration, external depreciation (decrease in price), and functional obsolescence. 328

Answer 1

accrued depreciation

Question 2

an estimate of the quantity, quality, or value of something. The process through which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value. 4

Answer 2

appraisal

Question 3

the combining of two or more adjoining lots into one larger tract to increase their total value. 326

Answer 3

asemblage

Question 4

an opinion of real estate value commissioned by a bank or attorney and provided by a broker. 316

Answer 4

broker’s price opinion (BPO)

Question 5

the rate of return a property will produce on the owner’s investment. 331

Answer 5

capitalization rate

Question 6

the appraisal principle that holds that no physical or economic condition remains constant. 325

Answer 6

change

Question 7

a comparison of the prices of recently sold homes that are similar to a listing seller’s home in terms of location, style, and amenities.. 315-316

Answer 7

competitive market analysis (CMA)

Question 8

the appraisal principle that states that excess profits generate competition. 325

Answer 8

competition

Question 9

the appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold theri value. 325

Answer 9

conformity

Question 10

the appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value. 325

Answer 10

contribution

Question 11

the process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation. 335

Answer 11

cost approach

Question 12

1) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence. 2) In real estate investment, an expense deduction for tax purposes taken over the period of ownership of income property. 329

Answer 12

depreciation

Question 13

the number of years during which an improvement will add value to the land. 331

Answer 13

economic life

Question 14

incurable depreciation caused by factors not on the subject property, such as environmental, social, or economic factors. 330

Answer 14

external obsolescence

Question 15

a loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design. 330

Answer 15

functional obsolescence

Question 16

a figure used as a multiplier of the gross annual income of a property to produce an estimate of the property’s value. 333

Answer 16

gross income multiplier (GIM)

Question 17

the figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property’s value. 333

Answer 17

gross rent multiplier (GRM)

Question 18

the possible use of a property that would produce the greatest net income and, thereby, develop the highest value. 340

Answer 18

highest and best use

Question 19

the process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life. 331-333

Answer 19

income approach

Question 20

law that applies when at the point where additional improvements do not increase income oor value. 326

Answer 20

law of diminishing returns

Question 21

law that applies as long as money being spent on improvements produces an increase to income or value. 326

Answer 21

law of increasing returns

Question 22

also known as the sales comparison approach. An estimate of value obtained by comparing property being appraised with recently sold comparable properties. 327

Answer 22

market data approach

Question 23

the most probable price property would bring in an arm’s-length transaction under normal conditions on the open market. 324

Answer 23

market value

Question 24

the income projected for an income-producing property after deducting losses for vacancy and collection and operating expenses. 331

Answer 24

net operating income (NOI)

Question 25

a reduction in a property’s value resulting from a decline in physical condition; can be caused by action of the elements or by ordinary wear and tear. 330

Answer 25

physical deterioration

Question 26

the increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot. 326

Answer 26

plottage

Question 27

an appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property. 326

Answer 27

progression

Question 28

the final step in the appraisal process, in which the appraiser combines the estimates of value received from the sales comparison, cost, and income approaches to arrive at a final estimate of market value for the subject property. 335

Answer 28

reconciliation

Question 29

an appraisal principle that states that, between dissimilar properties, the value of the better-quality property is affected adversely by the presence of the lesser-quality property. 326

Answer 29

regression

Question 30

the construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose of the function as the original. 37

Answer 30

replacement cost

Question 31

the construction cost at current prices of an exact duplicate of the subject property. 329

Answer 31

reproduction cost

Question 32

the process of estimating the value of a property by examining and comparing actual sales of comparable properties. 327

Answer 32

sales comparison approach

Question 33

the amount of money paid to a seller for a product bought. 327

Answer 33

sales price

Question 34

an appraisal principle that states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute, assuming that no costly delay in encountered in making the substitution. 326

Answer 34

substitution

Question 35

the appraisal principle that follows that interrelationship of the supply and demand for real estate. 7-8

Answer 35

supply and demand

Question 36

USPAP 315

Answer 36

Uniform Standards of Professional Appraisal Practice

Question 37

the power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities. 324

Answer 37

value