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AP13B Inc Cap Apprai
AP13B RE Appraisal Income Capitalization Approach
| Question | Answer |
|---|---|
| The person to whom property is leased by another; also called a tenant. [L] | lessee |
| In the _____ __________ Approach, adjustments are always made to the comparable properties, never to the subject. Because Comparable A is inferior to the subject, its sales price must be adjusted upward. [SC] | sales comparison |
| Under _________ _________ (such as USPAP), transaction adjustments like financing terms, property rights conveyed, and conditions of sale must be applied first before physical adjustments like condition or size are addressed. [AS] | appraisal standards |
| ___-______ financing artificially inflates sales prices. To reflect a standard cash-equivalent market transaction, the value of the concession must be subtracted from the comparable's sales price. [N-M] | non-market |
| ______________ involves evaluating the quality and quantity of adjustments. The comparable with the fewest, lowest, and least complex adjustments is considered most similar and is heavily weighted. [R] | reconciliation |
| An ____-______ transaction requires that neither party is under undue duress or forced to act. A foreclosure sale is a forced transaction, which typically occurs below market value. [A-L] | arm's-length |
| The _________ __ ____________ states that a buyer will not pay more for a property than the cost of acquiring an equally desirable substitute, which is not the primary driver of this cost-to-value gap. [PoS] | Principle of Substitution |
| The _________ __ ____________ states that the value of an individual feature or component of a property is equal to what it adds to the overall market value, rather than its cost of installation. [PoC] | Principle of Contribution |
| Principle that states properties achieve their maximum market value when their size, age, style, and condition match the surrounding neighborhood. [PoC] | Principle of Conformity |
| Principle where excess profits in a market naturally attract new buyers, sellers, and developers. As competition increases, supply shifts to meet demand, which stabilizes market prices and drives profit margins toward a normal equilibrium. [PoC] | Principle of Competition |
| _____ adjustments reflect the absolute sum of all adjustments without matching positive and negative signs. A low gross adjustment percentage means the comparable required very little physical alteration to match the subject. [G] | gross |
| Standard underwriting guidelines (like Fannie Mae and Freddie Mac) prefer __________ sales to be located within one mile of the subject and to have sold within the last 12 months (ideally 6 months). [C] | comparable |
| The ____ __ __________ method is a real estate appraisal technique used to calculate an overall capitalization rate by taking a weighted average of expected returns on debt and equity. [BoI] | band of investment |
| Band of Investment Formula | The overall capitalization rate RO = (MR x MC) + (ER x ED) MR = Mortgage Ratio MC = Mortgage Constant ER = Equity Ratio ED = Equity Dividend Rate |
| _____ capitalization (such as Discounted Cash Flow analysis) is designed to value properties with irregular or changing cash flows over a projected holding period such as a multi-tenant commercial center. [Y] | yield |
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