Term
| What are the steps of the valuation process? |
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Definition
1. Define the Problem
2. Scope of Work
3. Data Collection and Property Description
4. Data Analysis
5. Land Value Opinion
6. Application of the Approaches to Value
7. Reconciliation of Value Indications and Final Opinion of Value
8. Report of Defined Value |
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Term
| Sales Comparison Approach |
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Definition
| A set of procedures in which a value indication is derived by comparing the property being appraised to similar properties and making adjustments to the sale prices of the comps based on the elements of comparison. The sales comp approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparable sales are available. |
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Term
| If buyers reject a property listed by a credible realtor at $200,000 for six months in a market where sales typically occur within three months, what can you assume about the property? |
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Definition
| It is worth less than $200,000 |
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Term
| The sales comp approach may include analyses of what listings and offers? |
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Definition
Comparable listings
Comparable sales
active listings
pending sales
expired listings
rejected offers
rejected counter-offers |
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Term
| If a property sells for more than its list price should you investigate to find out why? |
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Definition
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Term
| What is the procedure for the Sales Comp Approach? |
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Definition
1. Research the market for information on transactions, listings,and other offering of properties similar to the subject property.
2. verify information on each sale.
3. Select relevant units of comparison and develop a comparative analysis for each.
4. Compare the comps with the subj property using elements of comparison. Adjust the sale price of each comparable sale appropriately.
5. Reconcile multiple indications of value for the subject property into a single value or range values. |
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Term
| Why must the information on each sale be verified? |
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Definition
- You must factually correct information.
- Some sales may not be arm's-length transactions and should be treated with caution; if used, they may require an adjustment for conditions of sale.
- Verification often brings additional insight about the market.
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Term
| How to you verify sale information? |
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Definition
- Contacting knowledgeable source, usually one or both of the parties to the transaction or their agent(s)
- preparing as much information as possible before contacting the source.
- Using a checklist of critical items to be verified to aid in discovering the motivations of buyers and sellers.
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Term
True or False
The appraiser must research the history of the subject property and comparable sales, one the most important factors of market research, most commonly used for the appraisal of single-unit residential properties for secondary market underwriting purposes. |
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Definition
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Term
| The "subject" section of the URAR asks if the subject has been ____________. If it has, you must provide __________about the listing. |
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Definition
- for sale in the last 12 months
- relevant information
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Term
| The "contract" section asks you to _____________ associated with the property at _____________. |
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Definition
- any pending sale
- the time of appraisal
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Term
| A pending sale can be given a ______, but often the contract price may not be equal to the ________ of a property. |
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Definition
- indication of value
- market value
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Term
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Definition
| The conversion of income into value. |
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Term
| Capitalization is only applicable to ____________________. |
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Definition
| properties for which an active rental market exists. |
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Term
| What assumption is capitalization based on? |
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Definition
| The values of rented property is directly related to its ability to produce income. |
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Term
| What is the most appropriate capitalization technique for valuing one to four unit residential properties? |
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Definition
| Gross Rent Multiplier (GRM) |
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Term
| The GRM is applied to the ____________ for the subject property to develop and opinion of value. |
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Definition
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Term
| When should the gross monthly market rent be used? |
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Definition
- It is not uncommon for owners to lease one to four unit properties at less than market rent.
- If the contract rent is not within the range of market (economic) rent, the resulting GRM will not be relevant.
- If the GRM is developed with either a non-cash equivalent price or non-market rent, it will not be useful in estimating market value.
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Term
| What is the procedure for using GRM? |
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Definition
1. Derive at a GRM from Market Analysis.
2. Estimate the monthly market rent the subject property should command.
3. Multiply the estimated gross monthly market rent for the subject property by the estimated GRM to obtain a value indication for the subject. |
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Term
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Definition
| the appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based. |
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Term
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Definition
| The perception that value is created by the expectation of benefits to be derived in the future. |
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Term
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Definition
| The concept that the value of a particular component is measured in terms of its contribution to the value of the whole property, or as the amount that its absence would detract from the value of the whole. |
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Term
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Definition
| 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 context, the principle of supply and demand states that the price of real property varies directly, but not necessarily proportionately with the demand, and inversely but not necessarily proportionately, with supply. |
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Term
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Definition
| Supply is excessive and demand is stable. |
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Term
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Definition
| Demand is high and supply is low. |
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Term
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Definition
| the result of the cause and effect relationship among the forces that influence real property value. |
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Term
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Definition
| the principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. Supply and demand are equal. |
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