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Appraisal real estate


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CMA
Comparative Market Analysis
valuation
the process used by the appraisers to determine market value Y79
evaluation
a broad term representing other types of appraisal assignments such as land utilization studies and
market value
the most likely price that a buyer would be willing to pay and a seller willing to accept assuming
market price
the actual price paid for a property when it is sold Y79
cost
the total of past expenditures to obtain and improve the property during ownership; has nothing to do with
DUST
concepts of value
forces and factors affecting value (4)
1. social ideals and standards - family sizes, population trends, etc
anticipation
real estate buyers create value by the expectation of benefits to be obtained in the future. it can
substitution
assuming parcels of real estate have the same utility and benefit, people will normally choose the
conformity
the max value of an improved property will be realized if other properties in the immediate area
contribution
the value of any part of a property is directly dependent on the degree to which it contributes to
competition
profits attract competition and excess profits tend to encourage ruinous competition Y80
change
change occurs gradually in different areas of cities and affects the value of real estate Y81
Uniform Residential Appraisal Report
URAR, the standard form normally used for residential appraisal in NC Y81
good comparables characteristics
must be similar to the subject property with respect to age, location and
arm's length transaction
a transaction in which there is no conflict of interest and teh parties are
adjustments
never made to the subject property; always made to the comps; If the comp property is Superior,
correlation
the process of deriving a final estimate value from the indicated values of various comparable sales
cost approach
estimating the property value by the summation of the land value and the building value. building
reproduction cost
the cost of creating an exact replica of the improvement based on current prices for labor
replacement cost
the cost of creating an improvement having the same or equal utility using current standards
when to use sales comparison approach, cost approach or income capitalization approach
sales comparison - single-
quantity survey method
a method of estimating building costs for the cost approach method; a complete breakdown of
unit-in-place method
a method of estimating building costs for the cost approach method; breaks down the
square foot method
a method of estimating building costs for the cost approach method; the appraiser estimates
depreciation
a loss of utility and loss of value from any cause. the difference between new cost and present
economic life of an improvement
the period over which an improvement declines in value from100% of cost new to 0%;
effective age of a structure
the age placed on a structure by an appraiser according to its condition, design and
methods of depreciation (3)
age/life method; market abstraction method; breakdown method Y83
age/life method
a method of depreciation used in the cost approach method; based on judgement of the appraisal; the
market abstraction method
the appraiser calculates this amount of depreciation by analyzing the rate of
breakdown method
beyond scope of residential appraisal Y83
physical deterioration
caused by normal wear and tear on improvements, decay, cracks, etc. some are curable, some
functional obsolescence
caused by changes in style and taste; reflects physical design features that are no longer
economic obsolescence
loss in value due to external factors such as zoning changes, changes in traffic patterns,
income capitalization approach
the appraiser determines the value of an income producing property based on the net
NOI
net operating income = (gross rent x occupancy rate) - operating expenses Y84
capitalization rate
aka cap rate; a rate expressed as a % that enables an investor to recapture his/her capital
gross rent
the total possible income that can be earned by the property with a 100% occupancy rate Y84
operating expenses
expenses that must be paid in order to maintain the projected gross income. include: taxes,
market value using GRM approach
gross rent x gross rent multiplier (GRM) Y85
gross rent multiplier
estimate of the value of residential rental properties based on the gross income (gross
reconciliation
the final step in the appraisal process; appraiser reconciles the market data approach, cost
Accrued Depreciation
Loss in value resulting from the property's physical deterioration, external depreciation
Assemblage
The combining of two or more adjoining lots into one larger tract to increase total value.
Broker/Appraiser
A real estate broker who is licensed by the Certified Appraisers Act in Pennsylvania to
Broker Price Option (BPO)
An opinion of real estate value commissioned by a bank of an attorney and provided
Certified General Real Estate Appraiser
An individual who is certified under the state Certified Appraisers Act to
Certified Residential Real Estate Appraiser
An individual who is certified under the state Certified Appraisers
Depreciation 1
In appraisal, a loss of value in property due to any cause, including physical deterioration,
Depreciation 2
In real estate investment, an expense deduction for tax purposes taken over the period of ownership
Economic Life
The number of years during which an improvement will add value to the land.
External Depreciation
Reduction in a property's value caused by outside factors (those that are off the property).
Gross Income Multiplier (GIM)
A figure used as a multiplier of the gross annual income of a property to produce an
Gross Rent Multiplier (GRM)
The figure used as a multiplier of the gross monthly income of a property to produce
Income Approach
The process of estimating the value of an income-producing property through capitalization of the
Index Method
The appraisal method of estimating building costs by multiplying the original cost of the property
Market Data Approach
An estimate of value obtained by comparing property being appraised with recently sold
Plottage
The increase in value or utility resulting from the consolidation (assemblage) of two or more
Progression
An appraisal principle that states that, between dissimilar properties, the value of the lesser-
Regression
An appraisal principle stating that, between dissimilar properties, the value of the better-quality
Replacement Cost New
The construction cost at current prices of a property that is not necessarily an exact