Class 16

Question 1

A loss of value

Answer 1

depreciation

Question 2

Changing the sale price of a comparable

Answer 2

adjustment

Question 3

present worth of a future benefit

Answer 3

Value

Question 4

Period of profitability

Answer 4

economic life

Question 5

the amount a property is sold for

Answer 5

market value

Question 6

What a property sells for

Answer 6

market price

Question 7

Bringing all facts together

Answer 7

reconciliation

Question 8

An approach that combines land and improvement value

Answer 8

Cost approach

Question 9

An analysis of alternative conclusions to arrive at a value is…

Answer 9

recociliation

Question 10

An appraiser would most likely consider the principle of regression if he discovered that….

Answer 10

an expensive home was built in an area of lower priced homes

Question 11

A home that lacks sufficient wiring, has a 30 year old furnace, and an insufficient floor plan for today’s modern living is most likely suffering from

Answer 11

Functional obsolescence

Question 12

Why would the cost approach NOT be used to estimate the value of a vacant lot?

Answer 12

because the cost approach separates land and improvements. If land only, then there are no improvements

Question 13

Economic obsolescence would most likely occur when….

Answer 13

there is a downturn in market conditions

Question 14

The expectation of a future event would be applicable ot the principal of….

Answer 14

anticipation

Question 15

A separation of improvement and land value would be used if an appraiser were estimating value by using the…

Answer 15

cost approach

Question 16

An appraisal is an….

Answer 16

opinion of value

Question 17

Appraisers must be __________

Answer 17

licensed

Question 18

In Kentucky we assess based on __________

Answer 18

market value

Question 19

Standards that the appraisers must follow are the ….

Answer 19

US PAP (professional Appraisal Practice )

Question 20

By definition, ________ is the present worth of a future benefit

Answer 20

Value

Question 21

To have value, a property or good must have the characteristics of DUST:

Answer 21

Demand
Utility
Scarcity
Transferability

Question 22

NOTE: Market value has many definitions. For appraisal purposes, market value is usually defined as “ the most probably price, as of a specified date, in cash or terms equivalent to cash, for which the specified property rights should sell after reasonable exposure in a competitive market, with the buyer and seller acting prudently, knowledgeably, and for self-interest and assuming neither is under duress.

Question 23

___________ is what a property actually sold for

Answer 23

Market price

Question 24

What is book value?

Answer 24

The value of a property + improvements - depreciation

Question 25

____________ is the perception that value is created by expected future benefits

Answer 25

Anticipation

Question 26

Anticipation (expected future value) is viewed heavily in the ______ approachs

Answer 26

Income

Question 27

Competition is the interaction between _______ and ________

Answer 27

supply and demand *An appraiser needs to be aware of competition and how it affects value.

Question 28

The principal of conformity states that value is created when....

Answer 28

property conforms to the demands of its market

Question 29

The concept of ______ states that value is added or removed depending on how a component adds or detracts from the whole of a property. As an example, an in-ground pool may add or detract from the value of a property depending on how the pool is viewed by the market participants

Answer 29

Contribution

Question 30

_________ is considered to be the most important economic principal when determining value of property

Answer 30

highest and best use

Question 31

________ refers to the combining of two or more lots. When this happens, the value of the whole is normally greater than the value of the separate parts.

Answer 31

Assemblage

Question 32

The value created when land is assembled is called ____________ value

Answer 32

plottage

Question 33

The principal of ______ is a theory that higher priced property located in a lower priced neighborhood will reduce in value

Answer 33

Regression

Question 34

The principal of __________ states that lower priced property placed in an area of higher priced property will increase in value

Answer 34

Progression

Question 35

Considered to be the foundation for the approaches to appraisal, the principal of _______ states that a property with the lowest price attracts the greatest demand.

Answer 35

Substitution

Question 36

A _______ sale analysis is used to find the appropriate dollar value or percent value that will be used in the adjustment process.

Answer 36

Paired

Question 37

A minimum of ___ comparables are used to make adjustments

Answer 37

3

Question 38

Under the cost approach, the _____ and _________ are valued separately. This approach is used more often for new buildings and special purpose buildings such as churches and schools.

Answer 38

land | improvements

Question 39

To find the value using the cost approach, what formula would you use

Answer 39

Cost Approach = Reproducing/replacing improvements - accrued depreciation + Lane value

Question 40

Reproduction vs. Replacement costs

Answer 40

Reproduction cost - construct an EXACT duplicate using the same materials, design, layout, etc. Most appraisers strive for reproduction cost when using the cost approach *Notre Dam Replacement cost - construct with the same utility/use but use modern materials. Same utility but not always the same look

Question 41

______ is a loss of value from any cause . The difference between reproduction cost and the market value

Answer 41

Depreciation

Question 42

______ depreciates, the ________ does NOT depreciate

Answer 42

Improvements depreciate land does NOT depreciate

Question 43

The three forms of depreciation are below. describe each: Physical deterioration Functional deterioration External obsolescence

Answer 43

Physical deterioration - poor maintenance or wear and tear; peeling paint, weak floor joists...physical deterioration may be curable or incurable Functional deterioration - results from outdated items, poor floor plans or items of superadequacy; outdated kitchen or bath fixtures, an old furnace; may be curable or incurable External obsolescence - results from factors outside the property that cause a loss of value; high interest rates; declining property next door; incurable

Question 44

____________ is the time period over which an improvement contributes to the land value

Answer 44

economic life

Question 45

The age of a building indicated by its overall condition

Answer 45

effective age

Question 46

The process of bringing together all the facts form all approaches to estimate the value of a property

Answer 46

Reconciliation

Question 47

The date of inspection is usually the ______ on the appraisal form/report

Answer 47

date of valuation

Question 48

What factors are used when applying the income approach?

Answer 48

Annual net operating income cap rate annual gross income

Question 49

The market value of a parcel of real estate is....

Answer 49

an estimate of the most probable price it should bring

Question 50

Depreciation is the.....

Answer 50

loss of value for any reason

Question 51

Who completes a comparative market analysis

Answer 51

a real estate agent/professional

Question 52

Value is the most probable price a property will bring. What are some of the basic principles?

Answer 52

change contribution plottage substitution