RE Chapter 7

An opinion of the value of a specific property, on a given date, to indicate the market conditions influencing the value of the property at a particular point in time

An appraisal is valid for _____

First step of an appraisal

Final step of an appraisal, done after appraiser has collected all the data and applied different approaches

2 very important elements in determining the appraised value of a residential property

The property tax value is ______ in determining the appraised value of a home

The ultimate test of functional utility in an appraisal is _______

The date of the inspection of the property by an appraiser

The date of the final writing or delivery of the appraisal report

An appraiser is most interested in the date the "________"

3 basic styles of written appraisal reports

The least formal appraisal report, can consist of a simple letter to the client summarizing the information

Aka Summary Report or Uniform Residential Appraisal Report

An appraisal report in checklist form, with fill-in spaces, used primarily by appraisers for lending institutions

The most commonly used appraisal report

The most comprehensive appraisal report with the most complete analysis, includes all info found by the appraiser as well as the reasoning and computations for the value conclusion

Appraisal report that has headings like "Into, Site and Improvement Analysis, Supporting Data, and Opinion of Value"

Appraisal reports do not usually include information about _________

The "Statement of Purpose" in a narrative appraisal report includes the "_____"

An appraiser may appraise property for a corporation in which she owns stock if she _______

This is required to appraise non-residential property valued over $250,000

A ______ is NOT authorized to prepare an appraisal report

Principles of Valuation (5)

Principle of valuation that is used in all appraisal techniques and is the basis of the market data approach, aka comparison or substitution approach

Principle of valuation that assumes the value of a property is usually determined by the cost of acquiring an equally desirable substitute property, because no prudent person would pay more than others are willing to

The use of a parcel of land that will produce the greatest net rate of return over a given period of time

One of the first things an appraiser does, and the primary purpose, when appraising vacant land

Principle of valuation that determines the use of the land that will produce the greatest return, often used for vacant land

When appraisers use highest and best use principle on a parcel with an existing structure of little value, the appraiser subtracts ______ from the value of the land

When the highest and best use is expected to change, the current use is called the _______

Principle of valuation that holds that maximum value is found when land uses are compatible and have a reasonable degree of architectural harmony

Zoning ordinances are often used to help set _____ standards in a neighborhood

Principle of valuation that an appraiser uses when analyzing a component of income property, considering in particular the component's contribution to the net return

A remodeling and modernization program emphasizes the ________

Value, or worth, according to an appraiser is: (3)

Value based on the concept of a "willing buyer" and a "willing seller;" the most probable price the property should bring on the open market within a reasonable length of time

Market value is most nearly synonymous with _______

Value as the property is used by the owner, aka subjective value

Principle of valuation in which the value of a more expensive home is pulled down when lesser quality homes are built nearby

Building a large number of average priced homes in an area which previously had mostly high priced homes tends to _____ values

The current market value of the land and improvements combined

Market value has very little relationship to ______

When property gains value due to inflation or an increase in population

The greatest stability in value is found when there is a reasonable degree of ______ of style and design in a residential neighborhood

Changes in financing terms will effect price, but not the ______ of a property

Real estate has inherent value when it represents the _______ of available resources

Essential Elements of Value (DUST)

Essential element of value that refers to the desire in the marketplace

Essential element of value that refers to the ability of the property to satisfy a need or desire

Essential element of value that refers to the availability in the marketplace

Essential element of value that says a property must be transferrable as to use or title

NOT essential elements of value (3)

4 Great forces influencing value

An appraiser would have little concern with the economy when appraising a _______

In commercial properties, merchants like properties with the most _____, which are on the ____ and _____ sides of the street, and on the ______ corner of intersections

Less desirable sides of the street for merchants (2)

The contour of the surface of the land that influences value

Best type of topography for residential property, as far as value

Placement of a building on its lot in relation to exposure to sun, prevailing wind, traffic, and privacy from the street; influences value

Factor that influences value that refers to the past expenditures of money to acquire the property

Factor influencing value that equals the value of the improvements when they are new and represent the highest and best use of the property

Factor influencing value that refers to what the buyer actually pays for the property, may be affected by the conditions of sale

Additional factors that influence value of a home (7)

Factor influencing value that refers to the added increase in value when two or more lots are joined together, above and beyond the value of the individual lots

Factor influencing value that refers to the apparent age of the improvement (because of how it has been maintained or remodeled), as opposed to its actual physical age

Methods of Estimating Value (4)

Method of estimating value that studies the sales of similar properties in the area to form an opinion of value, based on the principle of substitution and commonly used to appraise residences and vacant land

The oldest, quickest, easiest to learn, and very adaptable method of estimating value

Also known as the Comparison Approach, Comparative Approach, or Substitution Method

The Market Data Approach is also used to appraise _______ properties

The entire property when appraising a single family home under the Market Data Approach

In the Market Data Approach, when a comparable property has a feature not found in the subject property, the appraiser adjusts the _____ to the characteristics of the ______

In the Market Data Approach, when an appraiser is adjusting for different features in a comparable property and the subject property, he will subtract the _____ from the _____

The most difficult step in the process of the Market Data Approach, according to appraisers

The market data approach is not very effective in a ______ market, or in times of ____ economic conditions

When a residential neighborhood is comprised of mostly owner-occupied residential properties, it tends to _______ values

Increasing the population density and home sale turnover rate tends to ____ a residential neighborhood

Method of estimating value that is used when other approaches are not appropriate, such as specific purpose buildings or new subdivision homes

Method of estimating value that is the least appropriate for appraising older buildings, because depreciation becomes difficult to calculate as the building gets older

Method of estimating value that usually sets an upper limit on value, and is also called the Replacement Approach

4 Steps of the Cost Approach

Method of estimating value that converts income into value in one step, and is not usually used because it is not as accurate as others

Also known as the Rent Multiplier or Gross Rent Multiplier Method

The Gross Multiplier Method uses a formula in which appraisers divide the _____ by their ____

A separate site analysis is _____ important when appraising with the gross multiplier method

An acre is ______ feet, _____ sq yards, and about ____ by ___ feet, if square

Discloses the location of earthquake fault lines on maps for all counties in CA

Dirt used to fill excavations or brace foundations

A wall supporting any vertical load in addition to its own weight, normally left in place during remodeling, and considered real property

_____ can be constructed at any angle to doorways

A monument used by a surveyor to establish the elevation at a particular point on land

A unit of measurement of lumber that is one foot wide, one foot long, one inch thick, and any combination of 144 cubic inches

A measurement of heat used in rating the capacity of heating systems

43,560 sq ft minus the space taken by streets, alleys, sidewalks, parkways, etc.

Compressing fill dirt to bear the weight of a building

If a building's foundation is cracked, and the doors and windows do not close properly, a report on the ______ is obtained from a registered civil engineer

A metal pipe in which electrical wiring is installed, done by an electrician in a construction project

Under the Contractor's State License Law, every person who performs the work of a contractor must be licensed by the _____

Exemptions to the Contractor's License (2)

Repairing broken equipment in an income producing property

_____ is not usually considered a dangerous gas

Plants that lose their leaves in the autumn and winter, NOT a type of soil

Drywall construction uses gypsum, fiberboard, and plywood, but not _____

Drawings which show the front and side views of homes in a subdivision as they will appear when finished

Measures the efficiency of appliances, such as A/C

The higher the Energy Efficiency Ratio, the ____ the unit

Sheet metal used to protect a building from seepage of water, like the valley of a roof

The spreading concrete base or bottom of a foundation wall, whose size and dimensions relate to the foundation of the building

Shows the location, size and dimensions of the footings, concrete piers and details of the subfloor area

Measurement of property on its street line; used for sale or valuation purposes

A roof which sloes or inclines on all four sides

Refers to the Heating, Ventilating, Air Conditioning system in a commercial lease

The "R" value rating measures insulation's _____, and must be disclosed to the buyer of a home in _____

The higher the R value, the _______

Wall insulation is adequate if the inside of an exterior wall is __________ as other interior walls

One of a series of parallel beams used to support the ceiling and floors; a parallel

Old electrical wiring does not necessarily make a home _____, as long as it was installed properly and met code requirements _____

Underground water which does not flow in a defined channel, and seeps through soil

A soil analysis that determines how quickly water will seep through soil (such as for sewage purposes), would be done before a septic tank is installed

Map that shows the location of improvements on a lot

Water which is suitable for drinking

The highest structural point in a frame house

The distance a building must be set back from the street or the side and back boundary lines, affecting the dimensions for building purposes only

The distance a building must be set back from the side line of the lot

The lowest part of a frame house that rests on the foundation

A board on which walls and partition studs rest

A single line of store buildings constructed along a major transportation route

A termite report is filed with the ______ where copies are kept for ______, and a copy must be given to _____

The Structural Pest Control Board will issue reports showing the presence of "______"

The most destructive kind of termites

Report that should be requested from the Environmental Protection Agency if a property is next to an abandoned gas station

A project that is ready for occupancy, and indicates that a tenant can move in immediately

The depth at which water is found

In the Cost Approach, it is most important to have a separate appraisal of the _____ and _____

Units of comparison for land in the Cost Approach (3)

The most common unit of comparison for appraising land

The deeper the lot, the ___ the front foot value

The distance in which a property adjoins a street or thoroughfare

4 methods appraisers use in the Cost Approach to estimate replacement costs of improvements

Method of estimating replacement costs in which appraisers use exterior dimensions and compare the cost to build a similar quality improvement

Method of estimating replacement costs used in multistory structures when the height between floors varies, like in a warehouse

Both square foot and cubic foot are ______ methods of estimating replacement cost, which is considered the easiest method

Method of estimating replacement cost in which an estimate of all labor and materials is compiled for each component of the building; the most detailed and accurate method of estimating the cost of new improvements

Method of estimating replacement cost in which the cost of individual units are added as they are installed; a time consuming and seldom used method

The cost to build a comparable structure

The cost to build an exact duplicate of a structure

The reproduction cost is usually ______ than the replacement cost

Loss in value from any cause, accrues over time

Type of depreciation that is most difficult to measure accurately

Causes of depreciation (2)

Obsolescence that is caused by external events (those occurring outside of property lines), and is the most difficult to correct

Examples of External Obsolescence (8)

Obsolescence caused by events occurring within the property lines and observable during an inspection by an appraiser

Examples of Examples of internal/functional obsolescence (3)

Cause of depreciation that is caused by events occurring within the property lines such as wear and tear and deferred maintenance

The MAJOR cause of depreciation

Depreciation that is economically and physically possible to correct

Depreciation that is either too expensive or physically impossible to correct

The period of time in which an income property generates income in excess of its expenses, and justifies the existence of the building

The _____ life of a building is usually shorter than the _____ life, hence more buildings are ______ down than _____ down

Method of estimating value that establishes the present worth of future benefits which may be obtained from an income-producing property

The Capitalization Approach determines the value of an asset by dividing the ______ by a desired _____

A mathematical process used to convert income into value

Steps to determining value under the Capitalization Approach

Three methods of calculating Cap Rate

Annual Net Income, or Net Operating Income, used to determine value in the Capitalization Approach, is determine by these formula steps: (3)

Other terms for _____ include Market Rent, Economic Rent, & Scheduled Gross Income

The rent that a property would bring in the open market at the date of an appraisal; the rent received for a comparable space in the current economy

Expenses that must be subtracted from gross income in the Capitalization Approach (TIMMUR)

3 things that are NOT considered in establishing annual net income in the Capitalization Approach

The largest fixed operating expense of an income property

Rental schedules are usually established by ______

The rate of return demanded by an investor before he will part with his money

The foundation of all cap rates is set by _______ (banks, bonds, etc.)

In determining a capitalization rate, the greater the risk, the _________ the capitalization rate demanded by investors (for example, leasing a post office has little risk of vacancy and results in a _____ capitalization rate)

Capitalization rates consider the ______ of the rent (3)

When interest rates increase, capitalization rates ______

If capitalization rates increase, the value of the property ________

If net income remains unchanged, but interest rates increase, the owner's equity ______

The capitalization rate includes a "_______" and a "________"

Cap rates do not include ______ taxes

When the annual net income of an income property decreases and the cap rate demanded by investors remains unchanged, the value of the property _________