(Ch. 2) Texas Principles of Real Estate Part 2

Comparative Market Analysis

An analysis of the competition in the marketplace that a property will face upon sale attempts.

How many hours of appraisal education is required to become a general certified real estate appraiser...?

300 hours

How many hours of appraisal education is required to become an appraiser trainee...?

75 hours

Functional Obsolescence

A loss of value due to adverse factors from within the structure which affect the utility of the structure, value and marketability.

Gross rent multiplier

A number which, times the gross income of a property, produces an estimate of value of the property.

Assessed Value

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

When using sales data to compare to the subject property, appraisers should use sales that are...? Current Comparable Close All of the above

All of the above

Which of the following appraisal methods will most likely be used to determine the value of a church...?

Cost approach

After the needed data has been obtained and verified, what is the next step in the appraisal process...?

Determine the highest and best use

What is the first step an appraiser takes when valuing a property using the cost approach...?

Determine the value of the land as if it were vacant

A loss in value due to factors away from the subject property but adversely affecting the value of the subject property is known as...?

Economic obsolescence

Physical Deterioration

Impairment of condition. Loss in value brought about by wear and tear, disintegration, use and actions of the elements; termed curable and incurable.

An investor is in the process of purchasing an office building. The bank providing the mortgage for the property requires an appraisal to be done. Which of the following appraisal methods will the appraiser most likely use to determine the value of the office building...?

Income approach

The sales comparison approach is also referred to as the...?

Market data approach

The price paid regardless of pressures, motives or intelligence is referred to as the...?

Market price

The most common objective of an appraisal is to develop an opinion of...?

Market value

Appraiser

One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.

The loss in value brought about by wear and tear, disintegration, and use and actions of the elements is known as...?

Physical deterioration

Value

Present worth of future benefits arising out of ownership to typical users/investors.

The cost of replacing the subject improvement with one that is the exact replica, having the same quality of workmanship, design and layout, or cost to duplicate an asset is known as...?

Reproduction cost

This appraisal method consists of comparing similar type properties, which have recently sold, to the subject property...?

Sales comparison approach

Insured Value

The cost of replacing a structure completely destroyed by an insured hazard.

Market Price

The price paid regardless of pressures, motives or intelligence.

The relative ease with which ownership rights are transferred from one person to another is known as...?

Transferability

Which of the following is the lowest real estate appraiser classification...?

Appraiser trainee

The desire for possession or ownership backed by the financial means to satisfy that need is referred to as...?

Effective Demand

The most probable use to which a property is suited that results in its highest value or highest returns to the land is known as...?

Highest and best use

Depreciation

Loss of value of property brought about by age, physical deterioration or functional or economic obsolescence.

How much experience is needed to become a real estate appraiser trainee...?

No experience is needed

This principle holds that it is the future, not the past, which is of prime importance in estimating value...?

Principle of change

David is in the process of buying his first house. David's lender requires an appraisal to be done on the property. Which of the following appraisal methods will most likely be used to determine the value of David's house...?

Sales comparison approach

Effective Demand

The desire for possession or ownership backed by the financial means to satisfy that need.

Principle of Externalities

The influences outside of a property can have a positive or negative affect on its value.

A typical residential appraisal report is issued on a...?

Uniform Residential Appraisal Report

Principle of Contribution

A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.

Economic Obsolescence

A loss in value due to factors away from the subject property but adversely affecting the value of the subject property.

Principle of Substitution

Affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and value substitute property, assuming no costly delay is encountered in making the substitution.

Principle of Anticipation

Affirms that value is created by anticipated benefits to be derived in the future.

All appraisals must contain which of the following...? All of the above The opinion of value The date on which the appraisal value was determined The purpose for which the appraisal was done

All of the above

Appraisal

An estimate of the value of property resulting from an analysis of facts about the property.

An estimate of the value of property resulting from an analysis of facts about the property is known as a/an...?

Appraisal

This appraisal method consists of an analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land...?

Cost approach

The loss of value of a property brought about by age, physical deterioration or functional or economic obsolescence is referred to as...?

Depreciation

Principle of Change

Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely the result of cause and effect.

What is the second step in the appraisal process...?

List the data needed

The income approach determines value by applying a capitalization rate to the...?

Net operating income

Sales Comparison Approach (Market Data Approach)

One of the three methods in the appraisal process. A means of comparing similar type properties, which have recently sold, to the subject property. Commonly used in comparing residential properties.

Cost Approach

One of the three methods in the appraisal process. An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

A single value is derived from the three appraisal methods of determining value during the ............ process?

Reconciliation

This appraisal method is typically used to determine the value of residential properties...?

Sales comparison approach

The supply of property in relation to effective demand is known as...?

Scarcity

What is the first step in the appraisal process...?

State the problem

Real estate appraisers used to appraise a property cannot be selected by the real estate brokers involved in the transaction...?

T (True)

Utility

The capacity to satisfy human needs and desires.

Market Value

The highest price in terms of money which a property will bring in competitive and open market and under all conditions required for a fair sale, i.e., the buyer and seller acting prudently, knowledgeably and neither affected by undue pressures.

Market value is equal to...?

The most probable price a property will bring in the market

Highest and Best Use

The most probable use to which a property is suited that results in its highest value or highest returns to the land.

Economic Life

The period over which a property will yield a return on the investment over and above the economic or ground rent due to land.

Supply and Demand

The principle that states the value of a property will increase if the supply decreases and the demand will either increase or remains constant, and visa versa.

The present worth of future benefits arising out of ownership to typical users/investors is known as...?

Value

Principle of Competition

Holds that profits tend to breed competition and excess profits tend to breed ruinous completion.

Income Approach

One of the three methods of the appraisal process generally applied to income producing property, and involves a three-step process1) Find net annual income2) Set an appropriate capitalization rate or "present worth" factor3) Capitalize the income dividing the net income by the capitalization rate

Scarcity

The supply of property in relation to effective demand.

Which of the following externalities can have a negative effect on home values...? Proximity to a landfill Proximity to a power plant Proximity to a noisy highway All of the above

All of the above

Principle of Conformity

Holds that the maximum value is realized when a reasonable degree of homogeneity of improvements is present.

.............. depreciation cannot be fixed at an economically feasible cost?

Incurable

Replacement Cost

The cost to replace a structure with one having utility equivalent to that being appraised, but constructed with modern materials and according to current standards, design and layout.

Book Value

The current value for accounting purposes of an asset expressed as original cost plus capital additions minus accumulated depreciation.

The capacity to satisfy human needs and desires is referred to as...?

Utility

When appraising a property using the sales comparison approach, which of the following factors is used to adjust comparable properties to the subject property...? All of the above The day of the sale The terms and conditions of the sale The physical features of the house

All of the above

Reproduction Cost

The cost of replacing the subject improvement with one that is the exact replica, having the same quality of workmanship, design and layout, or cost to duplicate an asset.

Transferability

The relative ease with which ownership rights are transferred from one person to another.