appraisal
the act or process of developing an opinion of value
real estate
an identified parcel or tract of land, including improvements, if any
real property
the interests, benefits, and rights inherent in the ownership of real estate; items that have been installed or attached to the land or building in a permanent manner. all real estate improvements were once personal property, when attached to the land, th
bundle of rights
the total range of private ownership interests in real property
fee simple interest
absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat
taxation
the right of government to raise revenue through assessments on valuable goods, products, and rights
eminent domain
the right of the government to take private property for public use upon the payment of just compensation. the 5th amendment of the US Constitution, also known as the takings clause, guarantees payment of just compensation upon appropriation of private pr
police power
the inherent power of government to regulate property in order to protect public health, safety, and general welfare
escheat
the right of government that gives the state titular ownership of a property when its owner dies without a will or any ascertainable heirs
personal property
movable items of property that are not permanently affixed to, or part of, the real estate. personal property is not endowed with the rights of real property ownership; examples: furniture and furnishings not built into the structure such as refrigerators
intangible assets
those assets that are not tangible real property, tangible personal property, or financial assets. an intangible is something that is not material, not corporeal, not substantially real; examples: franchises and licenses, goodwill, skilled workforce
Appraisal is
the act or process of developing an opinion of value
real estate is
the physical land and opportunities affixed to the land
real property includes
all interests, benefits, and rights inherent in the ownership of real estate
the manner in which a client employs the information contained in the appraisal report is called
the intended use
real property consists of
rights in realty
appraisals are always used
to solve problems that involve real estate valuation
an appraiser is appraising a small residential property and observes that it has a clothes washer and dryer. should these items be included in the appraisal?
the appraiser should include these items, but they should be identified as such and their contributory value should be estimated
items that are built to be permanent and intended to be included with real property are
real estate
an appraiser
measures and develops an opinion of value
easements are another division of property rights. they usually give a party the right
to access the property to perform a specific service
the fifth amendment to the US Constitution
requires the government to pay just compensation for land taken for the common good
suppose that you have owned a 40-acre parcel of land for the last 25 years. you paid the taxes on the real estate for the first 20 years but have not paid them for the last five. which of the following statements is true?
the state has the right to sell the real estate to pay the back taxes
suppose that you own a house and five acres just outside the town of Monticello. this home is adjacent to Route 23, which has been a small two-lane highway for many years. last year, the state decided to widen this road to six lanes to accommodate all the
pay you fair and equitable amount based on the estimated property value before the taking and another valuation after the taking
a fee simple interest in real property is limited only by
taxation, eminent domain, police power, and escheat
a deed should be recorded because
recording gives public notice of the transaction and sets the priority
zoning and environmental protection regulations are examples of
police power
land
is investigated and analyzed in a variety of disciplines - government, the law, economics, geography, environmental studies, engineering, and land planning
geography
the utility of land and the highest and best use to which land can be put are significantly affected by the physical and locational characteristics of the land and other related considerations
value theory
the economic concept of land reflects a long history of thought on the sources and bases of value
land is unique because
no two parcels can occupy the same space on the face of the earth
the supply of land is
finite
the concepts of land are
legal, geographic and environmental, economic, and social
an example of a governmental force that affects real estate value would be
changes in local building codes
zoning and environmental protection regulations are examples of
police power
which of the following is not a way to hold title or deed to real estate?
tenancy at will
Joint tenancy, tenancy in common, and tenancy by the entirety are
a parcel of land was owned by Ms. Long, who offered it for sale or lease. Short Development Co., a retail developer, obtained control of the real estate and then improved it with a retail building. the listing agent said the Long and Short split the real
this is most likely a situation in which the owner leased the property to the developer, who improved the property. the terms of the lease must be researched
entrepreneurial coordination
the ability of an entrepreneur to combine land, labor, and capital in the development of real property; a component of real estate value that represents the investment of time and expertise in the development of a property
cost
represents the dollar amount required to reproduce, build, or assemble an improvement
price
is the amount of money agreed upon by buyers and sellers for the transfer of real estate
value
describes worth
anticipation
the perception that value is created by the expectation of benefits to be derived in the future
change
the result of the cause and effect relationship among the forces that influence real property value
supply and demand
in economic theory, the principle that states that the price of a commodity, good, or service varies directly, but not necessarily proportionately, with demand, and inversely, but not necessarily proportionately, with supply. in a real estate appraisal co
competition (among properties)
the level of productivity and amenities or benefits characteristic of each property considering the advantageous or disadvantageous position of the property relative to the competitors
law of decreasing returns/diminishing returns
the premise that additional expenditures beyond a certain point (the point of decreasing returns) will not yield a return commensurate with the additional investment
law of increasing returns
the premise that larger amounts of the agents of production produce greater net income up to a certain point (the point of decreasing returns)
when real property is sold by one person to another, the amount of money used to compensate the seller is called
the price of real property
a cash-equivalent price
reflects what a seller would accept as if he or she received cash at the closing
a good's capacity to satisfy human desires or needs is known as
utility
the city planning department has indicated that a vacant residential lot located in a flood zone cannot be given a building permit. this site
has lost nearly all utility
demand for real estate may be affected by
increasing population and employment, the availability of mortgage financing, and increases in purchasing power
the four agents of production are
land, labor, capital, and entrepreneurship
real property has value because it
provides future benefits
the supply of one-unit residential properties is most affected by
an increase in the number of homes built
two homes in the same addition have the same size, location, amenities, and features. one is priced at $100,000, and the other is priced at $110,000. which of the following statements is the most accurate?
the lower-priced home will attract more demand
when a property is put up for sale, the seller is forced to reduce the price when
the seller decides that a price reduction is needed to facilitate a sale
in a high-demand market, the cost of building a new property will increase substantially until
the supply increases because new builders get into the market
a one-unit homeowner who builds a new and unique structure will commonly find that
generally, fewer people desire unique structures
externalities are
factors outside the property that can affect the property value
when demand for housing increases, the supply
increases slowly
the overproduction of new homes
causes oversupply and lower prices
a buyer invests in a small strip mall because she believes the property will net $25,000 per year. this is an example of
anticipation
as an agent of production, capital is
the necessary equipment, buildings, and infrastructure for development
the statement "property values are created and sustained when the characteristics of a property conform to the demand of its market" refers to
conformity
valuation process
is a systematic set of procedures an appraiser follows to provide answers to a client's questions about real property value
reconciliation
the last phase of any valuation assignment in which two or more value indications derived from market data are resolved into a final value opinion, which may be either a final range of value or a single point estimate. professional standards typically req
final opinion of value
the opinion of value derived from the reconciliation of value indications and stated in the appraisal report; may be expressed as a single point, as a range, or in relation to a benchmark
the three approaches to value are
sales comparison, cost, and income capitalization
highest and best use
includes two parts when the property is improved: the highest and best use as though vacant and highest and best use as improved
land valuation techniques include
sales comparison approach, allocation, and extraction
the valuation technique in which land and building are valued separately is
the cost approach
the valuation technique in which the income a property earns is considered is
the income capitalization approach
in the valuation process, defining the value estimated is included in the
identification of the appraisal problem
one reason to estimate the highest and best use "as though vacant" and "as improved" is
to recognize when the improvements should be razed
land value can be estimated using all of the following techniques except
the cost method
there are three approaches to estimating market value because
purchasers have three alternative options available
one activity that is not part of defining appraisal problem is
identifying the fee with the client
what is the final step of the valuation process?
completion of a report with the defined value
confidence interval
in statistics, the specification of a zone within a population, based on a sample mean and its standard error, within which the true mean most probably lies
point estimate
a final value indication reported as a single dollar amount. a point estimate is typically regarded as the most probably number, not the only possible number, and is often required for revenue and compensation purposes
range of value
in final reconciliation, the range in which the final market value opinion of a property may fall; usually stated as a variable amount between a high and low value limit
rounding
expressing an amount as an approximate number - i.e., exact only to a specified decimal place. an appraisal conclusion may be rounded to reflect the level of precision associated with the appraiser's analysis
probability range
the confidence level associated with a specific value opinion or set of value opinions
the final value opinion should
be rounded to show that the number is an opinion, not a precise calculation
the process by which the appraiser evaluates, chooses, and selects a final value opinion known as
reconciliation
giving a client a range of values rather than a single value opinion
allows for a greater probability of correctness
in an appraisal of a property using the three approaches to value, each approach resulted in a different value indication. the indicated value by the cost approach was $100,000, the indicated value by the sales comparison approach was $93,500, and the ind
no, you can choose any one of the numbers or any number between and, in some cases, slightly above or below the range
if the three approaches to value provide three different value indications, the appraiser should
choose a value opinion that best represents the market for the subject based on all data available as of the date of the appraisal
how significant is the reported open market sale price of the subject property if the sale has not closed yet?
significant because the buyers have made a statement with their checkbook
a residence has been listed for sale in the MLS for the last six months at a price of $124,900, and it has not sold. in this market, the average marketing period is 45 days for this type of property.
the subject property's market value is less than the list price
if the subject is a special-purpose property and the value indication by the cost approach is much higher than the value indication by the sales comparison approach, what is the typical problem?
the cost approach needs to be adjusted (or adjusted more) for the loss in value due to functional obsolescence
oral report
an appraisal report that is transmitted orally rather than in written form. an unwritten appraisal report should include a property description as well as all facts, assumptions, conditions, and reasoning on which the value conclusion is based. the report
written appraisal report
any written communication of an appraisal, appraisal review, or consulting service that is transmitted to the client upon completion of an assignment
the type of appraisal report
has no influence on the appraisal process
a narrative appraisal report
gives the appraiser the freedom to design the report in the manner that is most efficient
residential appraisal reports always involve
various forms and report types, depending on the assignment
in an appraisal report, the appraiser must include
the effective date of the appraisal and the date of the report
a client ordered an appraisal of his property at 2134 Roberts Road in Smallburg. the local appraiser developed an opinion of value. before she could finish the job, the client cancelled the order. the appraiser never provided any of her findings to the cl
appraisal only
an attorney is reading a document prepared by an appraiser on a vacant lot. the document states and supports a value of $1,000,000 on the property. this document is called an
appraisal report