Real Estate U Unit 2 pt. 2

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.

Principle of Substitution

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

Principle of Conformity

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

6 steps of appraisal process

State the problem. Gather, record and verify the necessary data. Analyze and Interpret. Estimate Land Value. Estimate the value of the property. Reconcile estimated values for the final value estimates.

Utility

The capacity to satisfy human needs and desires.

Insured Value

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

Book Value

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

Effective Demand

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

Highest and Best Use

The most profitable use of the property; the one that provides the greatest net return over time.

Market Price

The price paid regardless of pressures, motives or intelligence.

Transferability

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

Scarcity

The supply of property in relation to effective demand.

Assessed Value

The valuation placed on property by a public tax assessor for purposes of taxation.

Market Value

the price at which property would sell. highest price.

Principle of Externalities

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

assessed value

a percentage of the property's true value. The most common objective of an appraisal to develop on opinion.