Chapter 16 Real Estate Appraisal
Comparative 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.
Automated Valuation Model (AVM)
A data analysis compiled from a computer database of closed sales used by lenders when an appraisal is not warranted.
Cost-depreciation approach
A method for estimating the market value of a property based on the cost to buy the site and to construct a new building on the site, less depreciation.
Sales Comparison Approach
A method for estimating the market value of a property by comparing similar properties to the subject property.
Gross Income Multiplier (GIM)
A method of appraising income-producing property based on a multiple of the annual gross income; also called a gross rent multiplier.
Gross Rent Multiplier (GRM)
A method of appraising single family or duplexes based on the monthly gross income.
Income Approach
A method of computing GDP that measures the income-wages, rents, interest, and profits-received by all factors of production in producing final goods and services.
federally related transaction
A sales transaction that ultimately involves a federal agency in either the primary or secondary mortgage market. Under FIRREA, state certified or state license appraiser must be used for certain loans in federally related transactions.
apprasial
An estimate of the current value of the property.
Over Improvement
An improvement that is not the highest and best use for the site on which it is placed by reason of excess size or cost. Super adequate.
value
Property value refers to the worth of a piece of real estate based on the price that a buyer and seller agree upon. ... In other words, the value of a property at any given time is determined by what the market will bear.
Principle of Regression
The Value of more expensive home placed in a neighborhood of less expensive homes will drop in value
price
The amount of money exchanged for a good or service
Market Value
The amount you could realistically sell an asset for today
Reproduction Cost
The cost of exactly duplicating a structure using the same material and design.
Replacement Cost
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Principle of Substitution
The maximum value of a property tends to be set by the cost of purchasing an equally desirable substitute property.
Subject Property
The property that is being appraised.
Economic Life
The time period over which an improvement to land earns more income than the cost incurred in generating the income. Profitability.
Highest and Best Use
The use that will give the owners the greatest actual return on their investment
Assemblage
When two parcels (or more) of land are combined to be sold as one parcel together, this is assemblage in real estate
Special purpose properties
a facility that is not easily converted to other uses, and where the business operation is integrally tied to the real property value and to the physical location.
curable
able to be cured
Plottage Value
increase in the value of land by assemblage of smaller lots into one ownership; known as plottage increment.
incurable
not able to be cured
cost
the amount of money a buyer will pay for a property
Depreciation
the decline in value of an asset over time
Uniform Standards of Professional Appraisal Practice (USPAP)
the generally recognized ethical and performance standards for the appraisal profession in the United States.
Principle of Progression
the idea that the value of a house increases when more valuable houses are built in the area.
Valuation
the process of developing an opinion of value for real property
Reconciliation
the process through which appraisers take values derived through different techniques and/or different people, reviews the different figures to arrive at a final estimate of value
