Vocabulary: Chapter 11- Real Estate Appraisal Flashcards Preview

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Flashcards in Vocabulary: Chapter 11- Real Estate Appraisal Deck (37)
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1

Accrued depreciation

Loss in value resulting from the property's physical deterioration, external depreciation (decrease in price), and functional obsolescence

2

Anticipation

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

3

Appraisal

An estimate of the quantity, quality, r 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

Assemblage

The combining of tow or more adjoining lots into one larger tract to increase their total value

5

Broker's Price Opinion (BPO)

An opinion of real estate value commissioned by a bank or attorney and provided by a broker

6

Capitalization Rate

The rate of return a property will produce on the owner's investment

7

Change

The appraisal principle that holds that no physical or economic condition remains constant

8

Competitive Market Analysis (CMA)

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

9

Competition

The appraisal principle that states that excess profits generate competition

10

Conformity

The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value

11

Contribution

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

12

Cost Approach

The process of estimation the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or relacement cost of the building, less depreciation

13

Depreciation

(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

14

Economic Life

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

15

External Obsolescence

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

16

Functional Obsolescence

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

17

Gross Income Multiplier (GIM)

A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property's value

18

Gross Rent Multiplier (GRM)

The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property's value

19

Highest and best use

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

20

Income Approach

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

21

Law of diminishing returns

The law that applies when at the point where additional improvements do not increase income or value

22

Law of increasing returns

Law that applies as long as money being spent on improvements produces an increase in income or value

23

Market data approach

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

24

Market value

The most probable price property would bring in an arm's length transaction under normal conditions on the open market

25

Net operation income (NOI)

The income projected for an income producing property after deducting losses for vacancy and collection and operating expenses

26

Physical deterioration

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

27

Plottage

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

28

Progression

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

29

reconciliation

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

30

regression

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