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What is an appraisal?
An estimate or opinion of market value supported by an analysis of relevant property data
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At what level are appraisals regulated?
State and federal
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How long is an appraisal good for?
Only the day of inspection
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What is the standard form for Appraisals?
Uniform Residential Appraisal Report URAR
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Appraisers are expected to follow what?
USPAP, Uniform Standards for Professional Appraisal Practice
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Appraisals are required on what?
All federally related loans
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What is a CMA?
Comparative Market Analysis
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A CMA is not a?
appraisal
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What is market value?
The most probably price a property will bring
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Market value may not be the same as the ?
Listing price
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In general the listing price is somewhat ___ than the market value to allow for negotiations?
higher
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What is the market price?
The actual sales price. What someone paid
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While there may be only one highest and best use of a property, it may what?
Change over time
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In real estate, when demand goes up, price goes ?
Up
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What is the most important principle in appraisal?
Substitution
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What does substitution do?
The buyer looks at the cost of acquiring an equally desirable substitute which meets the same criteria of time, function, and utility
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What is conformity determined by?
Neighborhood analysis
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How does conformity work?
Values change with properties are different in the same area. (A big house is worth less in a neighborhood of smaller houses)
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The value of an improvement not adding to the market value the same amount that it costs to build is called?
Contribution
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Increasing returns occur when it cost less to?
Build the improvement that what you get in return. Vice versa for decreasing returns
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A reasonable amount of competition will drive values up because?
of the increase in demand
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In a sales comparison approach, you are estimating the value of the subject based on?
recently sold similar properties
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How is square footage of improvement determined?
Sales Comparison approach
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In accordance to the NCREC, a living area is as follows?
- Adequately heated
- Walls and floors must be finished
- Space is directly accessible
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In order for the sales comp to be as accurate as possible, what should you use?
The most recently and accurate properties sold as possible
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Adjustments in Sales comparison are always made to the?
Sales comparables, never the subject
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If a comparable is better than the subject, you
Subtract the value from the comparable
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What is the most appropriate method of appraisal for new construction or special construction such as church or schools?
Cost Approach
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What does the cost approach in appraisal do?
estimate the cost of replacement as if new and built today
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What are the 3 steps in cost approach?
- Estimate the cost to build improvements
- Estimate and deduct all accrued depreciation of improvements
- Determine the value of the land using the sales comparison approach
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What is the method of estimating the cost of building new?
Square foot method
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What is a depreciation?
A loss of value
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How do you find the depreciation?
Effective age minus economic life
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What are the classes of depreciation?
- Physical deterioration
- Functional obsolesence (Outdated lighting or plumbing)
- Economic obsolescence (property in flight path)
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Which of the classes of depreciation is totally uncurable?
Economic Obsolescence
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What is the formula for calculating appreciation an depreciation?
Amount = Base x Rate
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What is income or income cap approach used for?
properties that generate income. Uses IRV (income rate value) formula. Net Op Income x Cap rate = Present value of property
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The process of converting estimated future income in to present value is?
Capitalization
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NOI is?
Net Operating Income
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What is the formula for NOI?
Potential Gross Income -Collections/Vacancy Rate =Effective Gross Income- Operating Expenses=NOI
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What is potential gross income come from?
All sources
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What is used to give a quick estimate of the value of a residential property that is also used to estimate income but not vacancies or bad debts or expenses from that property?
Gross Rent Multiplier
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What is the gross rent multiplier method?
Take the comparative properties and divide the property price by the rent being charged. (100,000 price / 830 rent = 120GRM ; Therefore if the rent on the subject is $1000 you would multiply that by the GRM.
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When an appraiser reconciles the 3 approaches, sales comparison, cost, and income, what is it called when he gives the most weight to the most appropriate method of valuation?
Reconciliation
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