Real Estate Principles, Chapter 13

The important step at the beginning of the appraisal process is

Identify the scope of work

What is the cost approach?

Based upon the idea of cost to rebuild or replace the structure.

Economic Obsolescence

Depreciation from changes in the economic or social makeup of the neighborhood, zoning changes, etc.

What is depreciation and appreciation?

Depreciation is the loss of value. Appreciation is the increase in value.

What is the sales comparison approach?

Determine value through similar properties sold called comps.

What is an arms length transaction?

Neither buyer nor seller is acting under duress and both act with full knowledge of the property's assets and defects.

What is an appraisal?

Process of determining value and a written report of value.

The principle by which a nonconforming building will be enhanced if surrounding buildins are of a higher value

Progression

An exact replica of a structure being appraised determines what?

Reproduction cost

The basis of most residential real estate appraisals is

Substitution

What is fair market value?

The price a property would bring if freely offered on the open market, with both a willing buyer and a willing seller.

What is market value?

The most probable price a property would being in an arms length transaction under normal conditions in the open market.

What is the income approach?

Value based upon the income generated by a property.