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RE Appraisal Flashcards

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1
Q

Estate in Land means

A

Right of Possession

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2
Q

6 Rights in the Bundle attached to the fee simple absolute estate

A

Right of quiet enjoyment
Right to give away
Right to sell by deed
Right to will
Right to exclude
Right to control with what’s allowed by law

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3
Q

2 types of fee simple defeasible

A

Determinable
Condition Subsequent

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4
Q

Determinable vs Condition Subsequent

A

reversion of the estate back to the original grantor is not automatic in CS

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5
Q

2 types of life estate & definitions

A

conventional (anyone) and legal (husband/wife/family members)

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6
Q

Partition Suit

A

can terminate a joint tenancy or a tenancy in common

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7
Q

Lucas v. South Carolina Coastal Council

A

Supreme Court ruled that a taking is unconstitutional if it
prohibits the construction of any habitable or productive improvement on the owner’s land and eliminates all economic benefits associated with the land.

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8
Q

Kelo v. City of New London

A

government may condemn property and then sell it to a private developer, concluding that the increased tax revenue and economic development would benefit the public.

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9
Q

Plat

A

depicts the arrangement of buildings, roads, and
other services for development.

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10
Q

Floodplains

A

land areas adjacent to rivers and
streams that are subject to recurring flooding.

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11
Q

Incentive zoning

A

system by which developers receive zoning incentives on the condition that specific physical,
social, or cultural benefits are provided to the community.

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12
Q

5 economic characteristics of land

A

Area (situs)
Availability
Improvements
Permanence
Externalities

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13
Q

International Trends that Impact Investment

A

balance of trade
foreign exchange rates
commodity prices
wages
interest rates
industrial production
sales volumes
imports and exports

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14
Q

National/Regional Trends that Impact Investment

A

gross national and domestic product
national income
balance of payments
price indexes
interest rates
employment and unemployment rates
housing starts
building permits
construction expenditures

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15
Q

Local Trends that Impact Investment

A

population
household formation
economic base
employment rates and stability
wages
household income levels
land use changes
technology changes
government subsidies

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16
Q

Basic Determinants of Need for RE

A

Population size, composition, and distribution

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17
Q

According to FIRREA, a property’s market value is a particular price provided that ____

A

it is a cash price or its equivalent.

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18
Q

Assumptions for Market Value Definition

A

Cash transaction

Exposed on the open market for a reasonable period

Parties have full information about market conditions and about potential uses

No abnormal pressure on either party to complete the transaction

Parties are not related (“arm’s length” transaction)

Marketable and conveyable Title

“normal consideration,” that is, price does not include hidden influences such as special financing deals, concessions, terms, services, fees, credits, costs, or other types of consideration

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19
Q

FIRREA Definition of Market Value

A

Parties are typically motivated

Parties are well informed or well advised and acting in what they consider their own best interests

Reasonable time is allowed for exposure in the open market

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto

Price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

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20
Q

Efficient Market Assumptions

A

Items are homogeneous and easily substituted for each other

Quality is uniform, leading to relatively low and stable prices

Large number of participants competing, with no one with a large enough share to directly influence price

Few restrictions or regulations

Competition keeps supply and demand close to a condition of balance and equilibrium

Participants are knowledgeable and fully informed about the market; information is readily available

Organized mechanism brings buyers and sellers together

Sellers can enter and leave the market easily in response to changes in demand

Items are supplied quickly, transported easily, and consumed quickly

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21
Q

Open market operations

A

when the Fed sells or buys government securities (bonds) as a means of controlling the supply of, and demand for, money.

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22
Q

2 Levels of Market Analysis

A
  1. General View of Entire Market (w/o any specific property)
  2. Focused View of the Specific Competitive Market
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23
Q

2 Types of Market Delineation

A

Market Segmentation and Product Disaggregation

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24
Q

Market Segmentation

A

differentiating most likely users of a property from everyone else

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25
Product Disaggregation
Differentiating the subject property from other properties
26
5 Things Appraiser Looks at During Market Delineation
Market Area Property Type Property Features Substitute Properties Complementary Properties
27
11 market indicators for Residential Demand
Population Employment & Income Financial Conditions Owner/Renter Mix Land Use Tax Structures Appeal Factors Service & Support Facilities Transportation Price Changes Time on Market
28
3 Approaches for Trade Area Delineation
Population and expenditure approach Drive-time approach Traffic count approach
29
Population and expenditure approach
delineates the area around the location which contains enough people and income to generate the required sales dollars for the existing or proposed retail property
30
Drive-time approach
Delineates a radius for the location based on the time consumers are willing to drive to purchase the type of good.
31
Traffic count approach
the area that has the amount of passing traffic necessary to provide sufficient demand at the location to support the store.
32
2 Step Process for Measuring Retail Demand
1. Estimate demand in dollars in the trade area 2. Convert dollar demand into square footage number
33
9 Market Indicators for Retail Demand
Population Income Sales Retention in Trade Area Required Sales Volume Vacancy Rates Sales Captured Outside Trade Area Land Use Transportation Appeal Factors
34
8 Market Indicators for Office Demand
Office-using employers Worker Space needs Vacancy and absorption Class demand changes Land use Transportation Appeal Factors Financial Conditions
35
8 Market Indicators for Industrial Demand
Industrial-space-using employers Land Use Raw Materials Labor Pool Transportation Trade Barriers Demand for Type Employment
36
5 Things Industrial Demand can be disaggregated by
Type of user Rent level Class of building Geographical submarket Size of user
37
4 Things Appraisers should examine
Current Volume of new housing Past trends to indicate if volume will decline Residential construction costs Trends in labor force
38
10 General Influences on Supply
Role of Gov't Labor force Construction costs Vacancy rates Absorption New Construction Conversions to Alternate Uses Vacant land available for development Total stock in market/Available stock Owner vs tenant occupancy
39
3 Important Factors to Putting Demand and Supply Together
Business Trends Employment & Income Financing
40
Absorption
Rate at which new supply is being occupied in the market
41
When the appraiser looks at property features or substitute properties the process is called?
Segmentation
42
Appraisal
Estimated opinion of value
43
7 Principles of Appraisal
Estimated opinion of value. "Opinion" must be properly supported with both general and specific data. Must refer to a specific date Estimated value must be properly defined. Property must be described in an accurate, adequate manner. Appraiser must have the required education and experience Appraiser must be an objective, unbiased party
44
5 Primary Attributes of Appraiser
Adequate Knowledge Appraisal Experience Objectivity Personal & Professional Integrity Unyielding Willingness to Do Work on a Mutually Agreed-Upon Fee on a Timely Basis
45
Most people feel appraisers should have _____ years of experience before conducting appraisals on their own
at least 2
46
7 Steps in the Appraisal Process
1. Define the problem and scope 2. Collect, record, and verify the required data 3. Determine the property's highest and best use 4. Estimate land value 5. Use 3 approaches to estimate value 6. Reconcile the estimated values to determine the final value estimate 7. Communicate the final value estimate
47
2 Types of Data for Appraisal
Specific data General data
48
6 Techniques in Valuing Land
Direct Sales Comparison Allocation Extraction Subdivision development analysis Land residual Ground rent capitalization
49
Direct Sales Comparison
sales of comparable vacant parcels are analyzed and adjusted to indicate a value for the subject land Most reliable method for land value estimation
50
Allocation
a typical ratio of land value to total value is derived from comparable properties and applied to the subject.
51
Extraction
land value is estimated by deducting the depreciated cost of improvements on a property from the total sale price of the property
52
Subdivision development analysis
costs and profit are deducted from estimated gross sale prices of subdivided and finished lots, and net sales proceeds are discounted to present value
53
Land residual
net operating income attributable to the land is capitalized at market rates to obtain land value
54
Ground rent capitalization
ground rent of the subject is capitalized at market rates
55
3 Approaches to Estimate Value
Cost Approach Income Approach Sales Comparison Approach
56
Sales Comparison Approach
appraiser examines the price (or price per unit area) of similar properties recently sold or currently being sold in the marketplace to come up with comparable value assessments
57
Cost Approach
estimates a property's value by adding the land value to the depreciated value of any improvements to the property
58
Income Approach
capitalizes a single year’s income or discounts a projected income stream to derive an indication of the property’s value
59
appraiser must never _____ the values reached by the three approaches to value to arrive at the final value estimate
simply average
60
3 Forms to Communicate the Appraisal
Short- or Long- Form Narrative Reports Form Reports Letter/Oral Reports
61
4 Areas of the Valuation Trade in the USPAP Ethics RUle
Conduct Management Confidentiality Record keeping
62
Goal of the USPAP Ethics Rule
“Promote and preserve the public trust inherent in appraisal practice [through] the highest standards of professional ethics.”
63
The Gramm-Leach-Bliley Act of 1999
deals with privacy laws and regulations regarding appraiser confidentiality
64
USPAP’s Standard 1
"In developing a real property appraisal, an appraiser must identify the problem to be solved and the scope of the work necessary to solve the problem, and correctly complete research and analysis necessary to produce a credible appraisal."
65
8 Steps of Defining the Problem (Identifying __)
Client and intended users Intended use Type of value sought Effective date Real property and specific property rights All assumptions Limiting conditions and hypothetical conditions Appraiser’s competence to undertake the assignment
66
8 Types of Values Sought in Appraisal
Market value Insurable value Salvage value Rental value Replacement value Investment value Value-in-use Liquidation value
67
extraordinary assumption
“an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions.”
68
hypothetical condition
“that which is contrary to what exists but is supposed for the purpose of analysis.”
69
USPAP Definition of Assumption
That is what is taken to be true
70
4 Types of Neighborhood Influence Forces
Physical/Environmental Economic Governmental Social
71
In a site appraisal the conditions of subsoil, specifically its suitability for a foundation and its bearing quality are usually defined by a(n) ____
engineering study
72
3 Primary Zones in a Residential Lot
Public, private, service
73
7 Steps in the Gross Living Area
1. Measure around the outside of the house 2. Count each floor above grade 3. Remember all above-ground habitable living area 4.If it is not above-grade, basements should not be included 5. No garages 6. Include porches only if heated and finished 7. If attic is unfinished and is <5ft tall, do not include.
74
3 Types of Foundation Walls
Slab-on-ground Basement Crawl space
75
all real property is assumed to be valued
as fee simple
76
leasehold estate for the tenant is a form of
personal property
77
Appraisers play a vital role in the real estate market because they are looked to as
value experts and financial consultants.
78
On the supply side of the market analysis, general influences of value include
the labor force.
79
Of the following forms of title evidence, which provides the best evidence of ownership?
A Torrens certificate, if available
80
four production agents of the balance principle
Land, labor, capital, and management
81
Five methods of direct capitalization
Contractor's/Cost Method, Development/Residual Method, Comparable Method, Investment/Income Method, and the Accounts /Profits Method

CA RE Principles (6 decks)

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