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Unit #18
Real Estate Appraisal
| Term | Definition |
|---|---|
| Accrued Depreciation | Loss in value resulting from the property's physical deterioration, external depreciation (decrease in price), and functional obsolescence. |
| 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 |
| Assemblage | The combining of two or more adjoining lots into one larger tract to increase their total value. |
| Appraisal | An estimate of the quantity, quality, or 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 |
| Broker's Price Opinion (BPO) | An opinion of real estate value commissioned by a bank or an attorney and provided by a broker. |
| Capitalization Rate | The rate of return a property will produce on the owner's investment. |
| Change | The appraisal principle that holds that no physical or economic condition remains constant |
| 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. |
| Competition | The appraisal principle that states that excess profits generate competition |
| Conformity | The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value. |
| 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. |
| Cost Approach | The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation |
| Depreciation | In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence |
| Economic Life | The number of years during which an improvement will add value to the land. |
| External obsolescence | Incurable depreciation caused by factors not on the subject property, such as environmental, social, or economic factors |
| Functional obsolescence | A loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design. |
| 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 |
| 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. |
| Highest And Best Use | The possible use of a property that would produce the greatest net income and, thereby, develop the highest value. |
| 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. |
| Law Of Increasing Returns | Law that applies as long as money being spent on improvements produces an increase in income or value |
| Law Of Diminishing Returns | Law that applies at the point where additional improvements do not increase income or value. |
| Market Value | The most probable price that a property would bring in an arm's-length transaction under normal conditions on the open market. |
| Net Operating Income (NOI) | The income projected for an income-producing property after deducting losses for vacancy and collection and operating expenses |
| 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. |
| Plottage | The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot. |
| 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. |
| 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. |
| 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. |
| Replacement Cost New | The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original. |
| Reproduction cost | The construction cost at current prices of an exact duplicate of the subject property. |
| Sales Comparison Approach | The process of estimating the value of a property by examining and comparing actual sales of comparable properties |
| Sales Prices | The amount of money paid to a seller for a product bought |
| State-certified Residential Real Property Appraiser | May perform any appraisal that is not to be used in a federally related financial transaction and may perform appraisals for use in a federally related financial transaction without regard to transaction value. |
| State-certified General Real Property Appraiser | May appraise any type of property for any purpose in Georgia. |
| State-licensed Real Property Appraiser | May perform any appraisal that is not to be used in a federally related financial transaction and may perform appraisals for use in a federally related financial transaction in which the value of the transaction does not exceed $1 million. |
| Substitution | An appraisal principle that states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution. |
| Supply And Demand | The appraisal principle. Because appraising is based on economic concepts, this principle recognizes that real property, like any other commodity, is subject to the influences of the marketplace. |
| Uniform Standards of Professional Appraisal Practice (USPAP) | A set of standards that details information required in an appraisal of residential property. This report is required by many government agencies. |
| 3 Types of Depreciation | Physical, Functional and External obsolescence |
| Depreciation is most often determined by | The Straight Line Method |
| The Straight Line Method | Properties Cost / # of years of expected economic life |
| Capitialization Rate | Net Income / Salesprice |
| Determining Value | Income / Rate |
| Determining Rate | Income / Value |
| Determining Income | Value x Rate |
| Gross Rent Multiplyer | Salesprice / Monthly Income |
| Gross Income Multiplyer | Salesprice / Annual Income |
| Three basic Valuation Techniques | Sales Comparison, Cost and Income Approach |
| Two types of Appraisal Data | General, Specific Data |
Created by:
jozie723
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