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Session 7
Appraisal
| Question | Answer |
|---|---|
| Appraisal | an estimate or opinion of value as of a certain date that is supported by objective data |
| Appraisal Management Company | Acts as a "firewall" between a lender and an appraiser to prevent the lender from choosing the appraiser directly. |
| Appreciation | An increase in value for any reason |
| Automated Valuation Model (AVM) | A valuation based on a mathematical model (Algorithm) combined with a database |
| Broker Price Opinion (BPO) | An evaluation prepared by a broker or salesperson for a lender who is. considering a short sale, foreclosure, or home equity line of credit. may not be called an appraisal. |
| Certified General Appraiser | May appraise all types of properties- 300 hours of certification, 3000 hours of acceptable experience within 18 months, must have a bachelors degree or higher |
| Certified Residential Appraiser | May appraise all types of one to four family residential properties- 200 hours of education, 1500 hours of acceptable experience within 12 months, bachelors degree or other acceptable education |
| Comparison Approach | used to estimate the value of the subject property by comparing the subject property with similar properties |
| Competitive Market Analysis (CMA) | An Analysis of current market conditions used to help consumers determine a list price, sales price, or purchase price. |
| Cost | The amount of money required to construct a building at todays prices |
| Depreciation | A loss in value for any reason |
| Desktop Appraisal | An appraisal performed without a physical inspection of the property, it uses the data that is readily available from the tax listings and MLS |
| Deterioration | A loss in value due to physical wear and tear such as deferred maintenance, termites, weather damage etc, usually curable meaning you can repair it at a reasonable cost |
| Drive-By Appraisal | An estimate of value based on an exterior inspection of a home by a licensed appraiser. |
| Earned Increment | An increase in value due to some effort the owner such as remodeling or other property improvements |
| Economic Obsolence | A loss in value due to factors outside the property, usually incurable. Examples include loss of employment in a neighborhood, noise or air pollution, poor zoning changes or changes in business or market conditions |
| Excess Land | Land that is not needed to support the highest and best use |
| Highest and best use | The use of the property which will produce the greatest net return |
| Licensed Appraiser | May appraise non complex one to four family residential units valued at less than 1 million. -150 hours of education -1000 hours of acceptable experience within 6 months, and an exam |
| Market price | The actual amount of money paid for the property in a transaction |
| Market Value | A amount a willing buyer would pay, and a willing seller would accept in an arms length transaction with neither party acting under duress |
| Narrative Appraisal Report | An appraisal report presented in descriptive paragraphs as opposed to an appraisal presented in form, letter, or table format. lenders on commercial properties usually require this |
| Orientation | The placement of a building on its site in relation to the sun and prevailing winds, along with consideration for privacy and views. |
| Plottage (Assemblage) | An increase in value by bringing small parcels under one ownership |
| Progression | The value of a lesser property is enhanced by the presence of greater properties |
| Regression | The presence of lesser properties adversely affects the value of greater properties |
| Substitution | The maximum value of a property tends to be set by how much it costs to buy an equally desirable property. (It is used in all 3 appraisal methods) |
| Reconciliation | The final step in the appraisal process. Involves analyzing the values derived from the different appraisal approaches. Values are never simply averaged. |
| Unearned Increment | An increase in value through no effort of the owner, such as positive zoning changes, inflation, population increase, increases in demand, or reduction of supply |
| Uniform Residential Appraisal Report (URAR) | The form used in residential appraisals that allows for standard reporting and analysis of single family dwellings |
| Value Componets | DUST- Demand Utility Scarcity Transferability |
| Loan or mortgage value | The amount a lender will lend using a property as collateral |
| Insurance Value | The value of physical items that are subject to loss due to fire or hazards |
| Full cash value/ Assessed Value | The value for property tax purposes |
| Salvage or residual Value | The Value of a property at the end of its physical life |
| Principal of Anticipation | The expectation that a future benefit or event may affect the value of a particular property |
| Principal of Contribution | The Value of an item or improvement is measured by how much it contributes to the whole. |
| Principal of Conformity | A particular property achieves its maximum value and values tend to be more stable when surrounded by properties of similar style and function |
| Principal of Externalities | Factors outside of a property can have a positive or negative effect on its value |
| Functional Obsolence | A loss in value from causes inside the property limiting utility. Examples include outdated features or poor plan design |
| Capitalization Rate | The rate of return an investor wants to receive or what the property is producting. |
| Cost approach | An appraisal approach in which the cost of building the structure brand new is calculated, depreciation is subtracted, and the land value is added. |
| Economic Life | Period of time over which the property will produce income and be economically beneficial to the owner |
| Effective Gross Income | All income for all sources actually received after vacancies and credit losses |
| IRV Formula | Income= Value x Rate |
| Net operating Income (NOI) | The income remaining after operating expenses and the vacancy or collection losses are deducted from the annual effective gross income which is the total rent collected. |
| Replacement Cost | The cost to produce a reasonable functional equivalent at todays prices; often used |
| Reproduction Cost | The cost to produce an exact replica at todays prices; rarely used |
| Square Footage of living area | Determined by measuring the exterior dimensions of the building and calculating the area. does not include areas that are not heated or cooled or porches garages or car ports |
| Square footage under roof | The area of a building under roof which includes garages patios and eaves. |
| Capitalization | The process of converting net income into value |
| Potential Gross Income | All rents a property could produce at the market rate with no vacancies |
Created by:
Baayangle
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