Term
| Broker/Licensee Appraisals |
|
Definition
Must conduct any appraisals in compliance with Uniform Statndards of Professional Appraisal Practice (USPAP).
May do appraisal for fee but must comply.
May do CMA but cannot refer to it as an appraisal.
May NOT prepare reports for federally related transactions unless holding valid appraisal license. |
|
|
Term
| Appraisal de minimus requirement |
|
Definition
State Certified or licensed appraiser is require unless the transaction is exempt.
de minimus requirement is $250000 or less, does not require appraisal. |
|
|
Term
|
Definition
| Value used as a basis for property taxation. |
|
|
Term
|
Definition
| Estimate of the amount of money required to replace a structure in the event of and event. |
|
|
Term
|
Definition
| Price an investor would pay, given the investors own financing requirements and tax situation. |
|
|
Term
|
Definition
| Value associated with a rapid sale. i.e Foreclosure |
|
|
Term
|
Definition
| Value of an income producing propery or business characterized by an operating history. |
|
|
Term
|
Definition
| Estimated amount for which improvements can be sold at the end of a structures useful life. |
|
|
Term
|
Definition
| The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, buyer and seller each acting prudently and knowledgeably, assuming price is not affected by undue stimulus. |
|
|
Term
|
Definition
To Create.
Expenditure to create an improvement including materials, labor and land. |
|
|
Term
|
Definition
Paid
The amount paid in a particular transaction; the contract price. |
|
|
Term
|
Definition
Worth
The worth of something between many market participants. |
|
|
Term
|
Definition
| When an owner invests more money in a structure than the owner can reasonably expect to recapture. |
|
|
Term
|
Definition
DUST
Demand - desire, need and means to obtain.
Utility - The ability to provide useful services and benefits to an owner or tenant.
Scarcity - Availability of goods in relation to demand.
Transferability - The legal ability to convey title and possession of goods. |
|
|
Term
|
Definition
The most profitable use to which a property may be put as long as it is:
Legally Permissible (zoning)
Physically possible (soil, shape, size)
Financially Feasible ( |
|
|
Term
|
Definition
| Reconcile differnt results from appraisals and correct errors based on type of property and degree assisgned to each approach. |
|
|
Term
| Principle of Substitution |
|
Definition
| A prudent buyer or investor will pay no more for a property than the cost of acquriing through purchase or construction an equally desirable alternative. |
|
|
Term
| Sales Comparison Approach |
|
Definition
Best for Neighborhood Houses and Lots.
Value of property can be estimated accurately by reviewing recent sales of properties (comps) similiar to appraised property.
CBS and CIA
Comp Better Subtract from COMP
Comp Inferior Add to Comp
Upward and downward adjustments for more or less baths, beds, Sq Ft.... |
|
|
Term
| Cost Depreciation Approach |
|
Definition
Best for Newly Constructed Homes, checking other approaches and more relvelant for special purpose properties, hospitals, schools or gov buildings.
Purchaser will pay no more than the cost of acquiring a similar site and constructing an acceptable subsitute.
Max value is costs less accrued depreciation.
1)Estimate Current reproduction/replacement costs.
2)Estimate Amount of Depreciation and deduct from rep costs. Land is NOT depreciated.
3)Estimate the Value of the Site.
4)Derive Estimate Value
Add estimated value of the site including improvements to depreciated structure value. |
|
|
Term
|
Definition
| Amount of money required to build and exact duplicate of the structure. |
|
|
Term
|
Definition
| Amount of money required to replace the structure having same use and functionality. |
|
|
Term
|
Definition
Involves detailed inventory of all labor, materials, products and indirect costs plus profit.
Items are then added up and final cost determined. |
|
|
Term
|
Definition
More practical for appraisers.
Cost of materials plus cost of labor is calculated for each component, drive, roof, foundation and floors plus profit.
Items are then added up and final cost determined. |
|
|
Term
| Comparative Sq Foot or Cubed Foot Method |
|
Definition
AKA Comparative Unit Method.
Predominant costing method for appraisals.
Utilized publications for determing standard sq ft costs in different regions.
Estimates costs for main dwelling, rooms porches, carport and garages based on a per sq ft cost.
Less depreciation
Plus land value and improvements
Total Value. |
|
|
Term
|
Definition
| The loss in value caused by things such as wear and tear, poor design or surroundings. |
|
|
Term
|
Definition
| Total depreciation that has accumulated over the years. |
|
|
Term
|
Definition
| Building component that has been added or repaired and owners can receive money back in added value. |
|
|
Term
|
Definition
| Building component that has been added or repaired and the owners cannot receive money back in added value. |
|
|
Term
|
Definition
| Ordinary wear and tear caused by use, lack of maintenance and physical damage. |
|
|
Term
|
Definition
| Anything inferior due to operational inadequacies, poor deisgn or changing tastes. Poor traffic patter, not enough baths.... |
|
|
Term
|
Definition
Loss in value due to influences originating outside the boundaries of the property.
Expressway or power lines in back yard. |
|
|
Term
|
Definition
| Based on a raito of property's effective age to its economic life. |
|
|
Term
|
Definition
| Age indicated by a structure's condition and utility. |
|
|
Term
|
Definition
AKA Useful Life.
Total estimated nubmer of years that the structure is expected to contribute to the property's value. |
|
|
Term
| Income Captialization Approach |
|
Definition
Best for Income Producing Properties.
Estimates value based on present worth of future income from property. |
|
|
Term
| Potential Gross Income (PGI) |
|
Definition
| Total Annual Income property would produce if fully rented w/no collection losses. |
|
|
Term
| Effecitve Gross Income (EGI) |
|
Definition
| PGI less vacancy and collection losses. |
|
|
Term
| Vacancy and Collection Losses (VCL) |
|
Definition
| Expected income loss that will result from occasional turnover of renters and periodic vacancies as well as the likeihood that all rental income will be collected. |
|
|
Term
|
Definition
Incoming remaining after subtracting all relevant operating expenses from EGI.
The Annual Income before mortgage and tax payments.
EGI = PGI - VCL
NOI = EGI - Operating Expenses
Depreciation is not an operating or business expense. |
|
|
Term
|
Definition
Fixed Expenses - Property taxes, Hazard Insurnace.
Variable Expenses - Utilities, Maintenance, Management.
Reserve for replacements - reserve allowance that provides for the periodic replacement of building components. Roof, HVAC.... |
|
|
Term
| Net Operating Income Formula |
|
Definition
| NOI= Rate (Capitalization Rate (OAR))* Value (Sales Price) I=VR |
|
|
Term
|
Definition
| Value of property to a particular investor based on the investor's desired rate of return, risk tolerance and so forth. |
|
|
Term
| Gross Rent Multiplier (GRM) |
|
Definition
Substitute for I=RV on one to four unit rental properties.
Relates sale price to monthly rental income.
Sale Price/Gross Monthly Rent=GRM |
|
|
Term
| Gross Income Mulitplier (GIM) |
|
Definition
Used with Small Income Producting Properties.
Utilizes Annual Income versus monthly in GRM.
GIM = Sales Price/Gross Annual Income. |
|
|
Term
|
Definition
Presents information concerning three catagories:
Sold within previous 12 months
Currently on Market
Listings that expired previous 12 months |
|
|
Term
|
Definition
| Combining of two or more properties into one tract. |
|
|
Term
|
Definition
| Added Value as a result of assemblage. |
|
|
Term
|
Definition
| Principle that the value of an inferior property is enhanced by its association with superior properties |
|
|
Term
|
Definition
| Principle that the value of a superior property is adversely affected by it association with an inferior property |
|
|
Term
|
Definition
| Refers to peoples preferences, both physical and economic, for a certain area owing to factors like weather, jobs transportation. |
|
|
