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Texas National Exam Test Prep > Property Value & Appraisals > Flashcards

Property Value & Appraisals Flashcards

1
Q

What is defined as the most probable price?

A

The Market Value

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1
Q

What is Market Value?

A

Price a seller will sell for and the price a willing buyer will pay

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2
Q

True or False: Appraised value is market value

A

True

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3
Q

What are the four Characteristics of Value:

A
  1. Demand
  2. Utility
  3. Scarcity
  4. Transferability
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4
Q

What is an opinion and estimate of Value?

A

An Appraisal

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5
Q

What does the accuracy of the appraisal depend on?

A

the integrity and competency of the appraiser and the availability of the needed information

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6
Q

What do appraisers use to help them arrive at their final opinion?

A

Principles of Value

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7
Q

What is the Highest and best use?

A

Use that gives the greatest return in money and is considered the most important detail by an appraiser.

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8
Q

What principle governs when the Maximum value of a property is set by the cost of similar surrounding substitute properties and is used to demonstrate the need to price correctly?

A

Principle of Substitution

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9
Q

What principle states that maximum value is found when properties are the same or have a degree of similarity?

A

Principle of Conformity

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10
Q

Increasing & Decreasing Returns are also known as

A

Law of Diminishing Returns

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11
Q

When each dollar invested will return a dollar or more of increased value and STOP when each dollar invested returns less than a dollar in value what principle is this ?

A

Law of Diminishing Returns

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12
Q

When value is determined by its contribution to the total value of the property vs the cost is?

A

Principle of Cotribution

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13
Q

Which principle states the presence of lower-valued or declining valued properties in the neighborhood leads to a decline in value of your property and vice versa if higher valued properties ?

A

Priciple of regression

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14
Q

True or False: Competition Lowers Price

A

True

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15
Q

Which principle states an increase of competition will result in decreased profits?

A

Principle of Competition

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16
Q

How long is an appraisal considered good for ?

A

6 months

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17
Q

Which principle states that change is Constant and is reflected in values?

A

Principle of change

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18
Q

Which principle states the purchase price is affected by the expectation of future appeal and benefits?

A

Principle of Anticipation

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19
Q

Which Principle states mixed land use should result in maximum value for ALL properties involved?

A

Principle of balance

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20
Q

If there is an increase in property value as a result of fixing a problem, then what concept has been applied?

A

Cost/value added

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21
Q

THE STEPS IN THE APPRAISAL PROCESS ARE:

A

1.State the purpose of the appraisal
2.Collect and verify information about the property.
3. Estimate value using three approaches
4. Reconciliation

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22
Q

FIRREA stands for

A

Financial Institutions Reform, Recovery, and Enforcement Act

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23
Q

Why was the Financial Institutions Reform, Recovery, and Enforcement Act passed ?

A

to regulate the appraisal industry nationwide and REQUIRES the use of a state-licensed or state-certified appraiser to perform any appraisal used in connection with a federally related transaction of property

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24
Q

What are the rules all Appraisers must adhere to ?

A

Uniform Standards of Professional Appraisal Practice (USPAP)

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25
Q

What are the three basic approaches to appraisal?

A

Market Data Approach, Cost and Income

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26
Q

where is the Market Data Approach used primarily?

A

esidential appraisals.

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27
Q

The appraiser should have _________ Arms Length Transactions (the Comparables) no more than ____________.

A

3-5 , 6 months old

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28
Q

Which approach is used for unique properties, such as churches or government buildings?

A

Costa Approcach

29
Q

When there are no comparables for a particular property which approach is used?

A

Cost Approach

30
Q

What would be the cost to exactly duplicate a building?

A

Reproduction Cost

31
Q

What is the cost to build a building of similar size and usefulness using today’s methods and materials?

A

Replacement Cost

32
Q

Which approach is used for income-producing properties ( if a property has rent)?

A

Income Approach

33
Q

What are the 3 types of depreciation in the cost approach?

A

physical deterioration, functional obsolescence, and externalobsolescence

34
Q

What is ordinary wear and tear and has the least impact on an appraisal because all buildings have it?

A

Physical Deterioration

35
Q

When a property appraisal is reduced due to factors such as an unpopular floor plan or lack of modern updates, this is known as what type of depreciation?

A

Functional Obsolescence

36
Q

When a loss of Value due to outside factors such as (zoning, air pollution, noise and traffic) this is what type of depreciation?

A

External Obsolescence

37
Q

What is the Formula for Cost Approach?

A

Land Value + Building Reproduction Cost - Depreciation = Value
– OR –
Land Value + Building Replacement Cost - Depreciation = Value

38
Q

When is the Income Approach typically used?

A

When there is rent and you are calculating the Net income

39
Q

What is the Formula for Income Approach?

A

Net Annual Income
_________________________________________________
Cap Rate/Rate of Return | Market Value

(or you can use IRV)

Income = Rate x Value

40
Q

What are the three Steps to calculate the Net Income:

A
  1. Calculate the Potential Gross Rent, the rent received if the building is 100% occupied.
  2. Calculate the Actual Gross Rent by deducting for vacancies and uncollected rents
  3. Subtract Expenses from Actual Gross Rent to receive the Net Annual Income
41
Q

Income Approach Summary

A

Net Income = Gross Rent – Vacancy – Expenses

42
Q

Why are investment properties generally purchased?

A

to provide income to the buyer

43
Q

What helps an investor determine interest in a property?

A

Capitalization Rate

44
Q

The Gross Rent Multiplier or GRM is based on what factors?

A

location and rent

45
Q

How to determine a neighborhood GRM ?

A

Divide the average property price by the average monthly rent to get the Gross Rent Multiplier (GRM). Multiply the GRM by the monthly rent to estimate the property value. (GRM x Rent = Price)

46
Q

What is the difference between GRM and GIM ?

A

GRM = Residential and based on monthly rent
GIM = commercial and based on annual rent

47
Q

What is the GIM sometimes described as ?

A

“an appraisal tool with a yearly component in the calculation.”

48
Q

What tool does a licensee use to help sellers determine a realistic price for their property by comparing the subject property to current listings, recent sales, and even expired listings?

A

CMA (AKA a Competitive Market Analysis)

49
Q

True or False: a CMA is a range of values for a property rather than an exact price and is NOT an appraisal.

A

True

50
Q

The list price is the __________responsibility, and the offering price is the ____________ responsibility.

A

Seller’s , Buyer’s

51
Q

What is the same as an CMA but is a broker’s written opinion of value often requested by an attorney or a relocation company rather than by a principal to the transaction?

A

Broker’s Price Opinion (BPO)

52
Q

True or False: a sales licensee can prepare a BPO in the broker’s name.

A

True

53
Q

What is considered the value of your property for tax purposes?

A

Assessed Value

54
Q

Where are the list of the assessed values for all the properties in a taxing district?

A

are found in the assessment rolls or online

55
Q

what is often expressed as dollars per hundred of valuation?

A

Tax Rates

55
Q

Which Tax rate is per thousand?

A

Mill Rate

56
Q

When is Property Sales Tax paid, and by whom?

A

usually paid by the seller of real property at closing

57
Q

What type of tax is placed If the local government is providing a benefit ONLY to those property owners who benefit from the improvement?

A

Special Assessment Tax

57
Q

Property Sales Tax is based on the __________ of the property regardless of any profit or loss for the seller

A

Full Sale Price

58
Q

When there is a real estate sale with an unpaid balance on a Special assessment who usually pays the tax?

A

The seller usually pays the special assessment but could be prorated at closing

59
Q

What is a tax bill, similar to a special assessment but requires the person to pay the tax bill UNTIL the improvement is paid for or designation is removed?

A

Municipal Improvement District

60
Q

What is the difference between replacement cost and market value?

A

Depreciation

61
Q

What approach would an appraiser most likely use to value a residential rental house in a neighborhood where most of the homes are leased?

A

Income Approach

62
Q

A licensed broker is advertising that he will perform a free appraisal if you contact him for a listing appointment. He is not in violation of the law:

A

If he is a licensed appraiser

63
Q

A house was listed for $549,000 and sold for $545,000. The appraised value of the property was $542,000. What is the market value?

A

$542,000

64
Q

What are the requirements/criteria for real estate to have value?

A

Demand, Utility, Scarcity, Transferability

65
Q

What principle of value defines the most important factor for appraisal?

A

Highest and Best Use

65
Q
A
66
Q

Which of the following is NOT an example of functional obsolescence?

A

Deferred Maintenance

67
Q

A buyer is interested in purchasing a home. He has a home inspection, and the inspector notifies the buyer that the house has 60 amp service. The inspector states that 100 amp service is usual and customary for a home of this size. This inspector has identified an example of…

A

Functional Obselecence

68
Q

Which of the following is an example of economic obsolescence?

A

Air Polution

Texas National Exam Test Prep (5 decks)

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