Appraisal Principles (Definitions) Flashcards
Professional services that come under appraisal practice include…
Appraisal, appraisal review, and other services while acting as an appraiser
What are the 8 steps of the Valuation Process?
- Identification of the Problem
- Scope of Work Determination
- Data Collection and Property Description (Market Area, Subject Property, Comparable Property Datas)
- Data Analysis (Market Analysis and Highest and Best Use Analysis)
- Land Value Opinion
- Application of the Approaches to Value (Sales Comparison Approach, Income Capitalization Approach, Cost Approach)
- Reconciliation of Value Indications and Final Opinion of Value
- Report of Defined Value
A mortgage scam used to deceive banks involving properties purchased at a low price and then resold at an inflated price…
Illegal property flipping
Fannie Mae/Freddie Mac and FHA require appraiser to have requisite knowledge and experience p____ to accepting the assignment
Prior
The state of having the requisite or adequate ability
or qualities to perform the specific assignment and produce credible
assignment results.
Competence
- “The type and extent of research and analyses in an
appraisal or appraisal review assignment.” (USPAP, DEFINITIONS) - The type of data and the extent of research and analyses. (SVP,
Definitions section)
Scope of Work
Appraisers must develop and communicate their work in a manner that is
meaningful and t___ d___ n__ m______ their services to intended users.
that does not misrepresent
An appraiser must not advocate the cause or interest of any p____ or i____.
party or issue
At what point must an appraiser be competent regarding an appraisal
assignment?
At completion of the assignment (Except for FHA, Fannie Mae/Freddie Mac must be prior)
The appraiser must be prepared to demonstrate that the type and extent of
research and analyses performed in the appraisal is sufficient to produce
c______ assignment results.
credible
An appraiser performing an assignment in an unfamiliar geographic location must
spend sufficient time to understand the n_______ of the local market.
nuances
T or F: A series of errors in an appraisal is acceptable as long as it does not significantly affect the value conclusion.
False
T or F: An appraiser must inform a client prior to accepting the
assignment if he or she lacks the requisite training,
information, and/or work experience to complete the
assignment competently.
True
T or F: A fee arrangement contingent on an appraiser’s value
conclusion will help the appraiser to maintain impartiality
and independence.
False
T or F: In an assignment that involves a dispute between two parties,
it is the appraiser’s duty to represent his client’s position.
False
T or F: The unethical practices of a few can sometimes damage
public trust for an entire profession.
True
Land is i_______, and each parcel is u______ in its location and composition.
Immobile, unique
In law, the solid surface on the earth, as distinguished from water.
Land
The right to undisturbed use and control of designated air space above a specific land area within stated elevations.
Air rights (suprasurface rights)
Rights include land, water, and anything attached to the land—either naturally
or placed by human hands.
Surface rights
These are rights pertaining to properties touching a body of water or a waterway such as a river or stream (generally interpreted as flowing waters) with an emphasis on the benefit and useful purpose to which the flowing water may be applied.
Riparian rights
These are rights pertaining to properties abutting an ocean, lake or pond (generally interpreted as non-flowing
waters) with an emphasis on the use and enjoyment of the shore (the area between high and low water levels).
Littoral rights
Riparian and littoral rights are a_________ (that is, attached) to the land and cannot be retained by the seller after the property is sold.
appurtenant
This system of allocating water rights is different from riparian and littoral rights. Water law in the western United
States generally follows the appropriation doctrine (sometimes referred to
as the Colorado Doctrine) which came about due to the scarcity of water
in that area of the country. This water right can be summed up as “first in time is first in line,” and the rights are unconnected to land ownership.
Prior appropriation water rights
Schaefer owns land with a grove of trees that are prized for their wood. The trees
would be classified as…
real estate
Schaefer cuts down several of the trees and stacks the wood on his land.
personal property
Schaefer sends the wood to a
woodworker to be made into cabinets. The finished cabinets are delivered and placed in Schaefer’s house.
personal property
Schaefer secures the cabinets to a wall in the family room of the house.
real estate
Years later Schaefer remodels the home and removes the cabinets and places them in the attached garage.
personal property
Schaefer’s marriage falls apart, and a judge orders that Schaefer’s spouse receive one-half the wholesale timber
value of the tree grove. The interest in the tree grove represents…
real property
- Rights to the use and profits of the underground portion of a designated property.
- Right to extract coal, minerals, oil, gas, and water.
- Right to construct and maintain tunnels, subways, sewers, and basements.
Subsurface rights
Something added or appended to a property that then becomes an inherent part of the property; … usually passes with the
property when title is transferred.
Appurtenant
R___ e_____ is land (physical raw land) and all things that are a natural part of the land such as trees and minerals.
2. Includes appurtenances.
All r___ e_____ improvements were once personal property; when attached to
the land, they become r___ e______.
Real estate x3
“Any tangible or intangible article that is subject to ownership and not classified as real property, including identifiable tangible or intangible objects that are considered by the general public as being ‘personal,’ such as furnishings, artwork, antiques, gems and
jewelry, collectibles, machinery and equipment; and intangible property that is created and stored electronically such as plans for installation art, choreography, emails, or designs for digital tokens.”
Personal property
Tangible, moveable items of property not permanently affixed to, or part of,
the real estate. Personal property is also known as c_____ and p________.
chattel, personalty
Annual crops and plantings such as corn, wheat, and vegetables are known as e__________ and are p______ p_______.
emblements, personal property
A f_____ is an appurtenance (that is, treated as real estate) when permanently
attached to a property. However, some f_____s can be easily removed without
damaging the property and are treated as personal property. These differences
can cause disputes about whether a f_____ is real estate or personal property.
fixture
An article that was once personal property but has since been installed or attached to the land or building in a rather permanent manner so that it is regarded in law as part of the real estate.
Fixture
T____ f______ are articles placed in or attached to rented buildings by a
tenant to help carry out the trade or business of the tenant.
These fixtures are personal property regardless of how they are affixed.
Trade fixtures
“The interests, benefits, and rights inherent in the ownership
of real estate.” (USPAP, DEFINITIONS)
Real property
A right or interest in real estate is also referred to as a__ e_____.
an estate
Total range of ownership interests in real property. An
owner that possesses all the interests in the bundle of rights has the
most complete form of ownership.
Bundle of rights
Divided or undivided rights in real estate that represent less
than the whole, i.e., a fractional interest.
Partial interest
Estates are distinguished by
their duration and fall into two legal categories—f_______ and l______ estates.
Freehold, leasehold
Characteristics of a f______ e_____
- Present or future possession
- Indeterminate duration
- Ownership
Freehold estate
Freehold estates have two categories of estates: f___ s_____ estates (inheritable) and l___ estates (noninheritable)
fee simple, life
Types of fee simple estates:
a. F__ s_____ a______ is the most complete form of ownership with
unlimited duration and subject only to governmental powers.
b. F__ s_____ d________ is subject to the occurrence or non-occurrence of a specific event. The two types are an estate 1) qualified by a special
limitation and 2) subject to a condition subsequent (see the Appendix for expanded definitions of these two types of estates).
c. L______ f__ i______ is an ownership interest held by a landlord with the
rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease.
Fee simple absolute, fee simple defeasible, leased fee interest
Rights of use, occupancy, and control, limited to the lifetime
of a designated party, sometimes referred to as the life tenant.
Life estate
One who owns an estate in real property for his or her own lifetime, the lifetime of another person, or an indefinite period limited by
a lifetime.
Life tenant
A future possessory interest in property that is
given to a third party and matures upon the termination of a limited or
determinable fee.
Remainder interest
Characteristics of l______ e____
- Possessory
- Defined period of time or specified conditions
- Reversion of possessory rights (that is, reverts back to the owner)
leasehold estates
A leasehold estate begins with an agreement called a l____. There are two primary participants to a lease.
L____ (the landlord). The property owner holding a fee simple estate with a leased fee interest (this is a future interest).
L_____ (the tenant). The party with a leasehold interest.
lease, lessor, lessee
Leasehold estates are also referred to as t_____.
Tenancies
E_____ (tenancy) for y____: Tenancy is for a d_____ or f____ p____ of t___, not necessarily in years.
Estate for years, definite, fixed period of time
E_____ (tenancy) f___ p____ to p____: Tenancy is for an i_____ p____ of t___ with no specific expiration date. Notice must be given to terminate the lease.
Estate from period to period, indefinite period of time
E____ (tenancy) a__ w___: Tenancy is for an u______ p_____ of t___ and similar to a tenancy from period to period except that it never originated with any specific term.
Estate at will, unspecified period of time
E_____ (tenancy) a__ s________: The estate is created when a tenant lawfully takes possession but stays after the lease expires without consent of the property owner.
Estate at sufferance
Any claim or liability that affects or limits the title to property. An
e___________ can affect the title such as a mortgage or other lien, or it can affect
the physical condition of the property such as an easement. An e____________
cannot prevent the transfer of possession, but it does remain after the transfer.
encumbrance x2
The right to use another’s land for a stated purpose.
Easement
All l___ are e_________; not all e_________ are l___.
Liens, encumbrances, encumbrances, liens
An easement that is attached to, benefits, and passes with the transfer of the dominant estate; runs with the land for the benefit of the dominant estate and continues to burden the servient estate.
Easement appurtenant
An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and
not a particular tract of land; an easement having a servient estate but no dominant estate.
Easement in gross
Trespassing on the domain of another.
Encroachment
Longstanding encroachments can mature into an e______ by p________ or possibly a title issue via adverse possession.
Easement by prescription
A provision written into a deed that limits the use of land. D____ r_______s usually remain in effect when title passes to subsequent owners.
Deed restriction
_____ is a term used to represent conditions, covenants, and restrictions.
CC&R
A clause found in legal instruments and conveyances that creates a new right or interest on behalf of the grantor. While title passes to
the grantee, some use or income is reserved for the grantor. R__________s
may include mineral rights, rental income, or easements.
Reservation
L______ are NOT encumbrances.
Licenses
Which of the following items are considered to be personal property? A. a tree orchard B. built-in cabinetry C. furniture D. interior light fixtures
C Furniture
Mayes owns a property but has leased it to Jacobs. Which term describes Jacobs’ right in the property? A. fee simple interest B. leased fee interest C. leasehold interest D. lessor interest
C Leasehold interest
Real estate is best described as
A. everything resting on the surface of the land.
B. fixtures and building improvements.
C. land and everything permanently attached to the land.
D. the complete bundle of rights attached to land.
C Land and everything attached to the land
Mineral rights are an example of A. air rights. B. riparian rights. C. subsurface rights. D. suprasurface rights.
C
An appraiser’s familiarity with a specific type of property applies to what concept? A. competency B. impartiality C. intended use D. sufficient diligence
A Competency
Sanchez is appraising a property for a client with the intended use of fi ling a tax
appeal. In this type of assignment, Sanchez should
A. find out what value the client’s lawyer recommends.
B. not advocate the cause or interest of any party or issue.
C. represent the client’s cause in the appeal.
D. try to keep the value as low as possible.
B
Before an appraiser begins an assignment, the problem to be solved must be
identified. What is the next step the appraiser must take to ensure credible
assignment results?
A. a preliminary opinion for the client
B. a pro forma for the assignment
C. a project timeline
D. determination of the scope of work
D
Chattel and personalty are terms used to describe A. emblements. B. fixtures. C. personal property. D. real property.
C
Hooper gave permission to a nearby business neighbor to place a sign on his
corner property to advertise the neighbor’s liquidation sale. What has Hooper
given his neighbor?
A. a license
B. a partial interest in his property
C. a personal easement in gross
D. an estate
A License
What is a tenancy (that is, estate) in which a lessee remains in possession of the property without the lessor’s consent? A. tenancy at sufferance B. tenancy at will C. tenancy for years D. tenancy from period to period
A
Sq ft in 1 acre
43,560
A system for the legal description of land that refers
to the parcel’s boundaries, which are formed by the point of beginning (POB) and
all intermediate points (bounds) and the courses or angular direction of each
point (metes).
Mete and bounds system
M___ are measures that include direction and distance. B_____ are the
terminal points that in some cases are landmarks or monuments.
Begins and ends at a designated ____ (point of beginning).
Metes, bounds, POB
A land survey system used in Florida, Alabama,
Mississippi, and all states north of the Ohio River or west of the Mississippi River
except Texas; divides land into townships and ranges approximately six miles
square, each normally containing 36 one-square-mile sections of 640 acres,
except when adjusted for the curvature of the earth. Also called the government
survey system.
Rectangular survey system
- System is based on two sets
of intersecting lines.
a. P________ m_______ run north and south.
b. B_______ run east and west.
Principal meridians, baselines
There are ___ principal meridians in the USA.
35
Survey lines that run east and west at six-mile intervals
north and south of a baseline and form the north and south boundaries of
townships.
Township lines
One of a series of government survey lines that extend due
north and south at six-mile intervals and are numbered east or west from the principal meridian. R_____ l____ form the east and west boundaries of
townships.
Range lines
This is the area between two township lines and two range lines; normally contains 36 sections of approximately 640 acres each.
Township
A township is 640 ac x 36, which is _____.
23,040
Vertical columns of townships.
Range
Horizontal row of townships.
Tier
One of the 36 designated areas of land, each approximately one mile square, into which each township is divided.
Section
Land areas that are not divided into quarters of a quarter due to location or size; usually lie along the northern and western borders of
a township and along the edges of rivers or lakes, and extend from the border
or waterline to the first quarter of a quarter.
Government lots
A system for the legal description of land that refers to parcels’ lot and block numbers, which appear on recorded maps and plats of
subdivided land; may also be used for assessment maps.
Lot and block system, also known as recorded plat
The method of legal description most frequently used west of the Mississippi River is r________ s_____ s_____.
Rectangular survey system
Ownership forms divide into three groups; o_______ in s_______, c__-o_______
(also known as c_______ ownership), and t____.
ownership in severalty, co-ownership, concurrent, trusts
O_______ in s_______ is really sole ownership by an individual or single entity.
Ownership in severalty
A corporation or trust that
combines the capital of many investors to acquire or provide financing for all forms of real property.
Real estate investment trust (REIT)
A private or public partnership that pools funds for the
acquisition and development of real estate projects or other business ventures.
Syndication
Co-ownership or concurrent ownership property is held by two or more individuals and is categorized into 4 types: T_____ in c______, j___ t______, t_____ by the e_____, and c________ p______
Tenancy in common, joint tenancy, tenancy by the entirety, community property
T______ in c_____: Property is not physically divided. Ownership interest is divided. Equally divided among owners. Each co-owner can sell, mortgage, or transfer this interest. No co-owner can transfer the entire property. Upon the death of a co-owner, the interest passes according to the will of that owner. Business partnerships.
Tenancy in common
J____ t_____: Right of survivorship. Interest is passed to living tenants not heirs. Must be specifically written into the deed.
Joint tenancy
T_____ by the e_____: Co-ownership for married couples in which each spouse has an equal, undivided interest in the property. Husband and wife have rights of survivorship.
Tenancy by the entirety
C_______ p______ r____: 9 states use this for married couples. Each spouse has one half interest in property. When spouse dies, that half is distributed by a will unless there is no will, then it goes to the spouse. Two classifications of property: S______ p______- Property owned solely by either spouse before marriage. C_____ p_____ - Property acquired by either spouse during marriage.
Community property rights, separate property, community property
In a trust, real estate can be transferred to another person, called a f_____ (trustee) to hold or manage for the benefit of a third party.
Fiduciary
A l_____ t____ is created by an agreement while the property owner is alive. A t_________ t____ is established by the will of the property owner after his or her death.
Living trust, testamentary trust
Real estate is the only asset in a l___ t____. Trustor is the beneficiary.
Land trust
Condominium owners hold a f__ s_____ t____ to an individual condo unit. Owners hold an undivided interest in the remaining condominium real estate known as c_____ e_____ (pool, tennis courts, parking spaces, elevator, gym)
fee simple title, common elements
C________ o______, a corporation owns the real estate. Offers shares of stock to prospective tenants. Tenant obtains a p_______ l____ to the apartment for the life of the corporation. Stock is personal property.
Cooperative ownership, proprietary lease
T_______ o_______, typically involve a resort property that allows each owner the right to use the facilities for a specific period of time. F__ s____ i_____ in condominium ownership with accompanying rights.
Timeshare ownership, fee simple interest
A type of building development designed as a
grouping of complementary land uses, such as housing, schools, recreation, retail,
office, and industrial parks, contained within a single master development.
Planned unit development (PUD)
“Development that seeks to meet the needs
of the present without compromising the ability of future generations to
meet their needs.”
Sustainable development
Residential and commercial properties located in P___s are typically appraised
in f___ s_____ ownership with j____ ownership of open areas. The appraiser,
however, must analyze the common amenities and benefits shared by all
property owners within the P___.
PUDs, fee simple, joint, PUD
A d__ m_____ p___ is one in which the common elements owned by the
association have little or no effect on the individual property’s value. This term is
commonly used by the lending industry.
de minimis PUD
The party that gives a mortgage is called the m________.
mortgagor
Williams owns property with Campbell by tenancy in common. When Williams dies,
her interest in the property will go to h__ h____ or a______ to her w___.
her heirs, according to her will
Purchasing a cooperative unit means you are buying s____ of s____.
Shares of stock
Joint tenancy has a right of survivorship feature shared with what other form of
ownership?
Tenancy by the entirety
Concurrent ownership is also known as c_______.
Co-ownership
Trusts that allow 100 or more investors to pool their resources into large real
estate investments are called R___
REITs
Estates in real property are subject to f____ p____ of g_______: T____, E_____ D____, P____ p____, E____
Four powers of government, taxation, eminent domain, police power, escheat
The right of government to raise revenue through assessments on
valuable goods, products, and rights.
Taxation
A__ v_____ t___ is used in property taxation because it is levied in
proportion to the value of the property to which the tax applies.
Ad valorem tax
Property taxes have their origin in the fiscal budget for each level of government. Revenue (other than taxation) is estimated and paired
against anticipated expenses. The difference is assessed in a t___ l____ against the properties within the taxing district.
tax levy
Taxable property in the district is valued by an a______ who
determines the a______ v____ of each real estate parcel.
assessor, assessed value
Owners who disagree with the assessor’s value can file a t___ a________ a_____. Appraisers can be retained in these types of disputes over value.
tax assessment appeal
An assessment against real property levied by a
public authority to pay for public improvements, e.g., sidewalks, street
improvements, sewers; also called betterment tax.
Special assessment
If a property sells between the time a special assessment
becomes of record and the time it is actually levied, it is referred to as a p______ s_____ a________.
pending special assessment
The right of government to take private property for public use upon the payment of just compensation. The Fifth Amendment of the
US Constitution, also known as the takings clause, guarantees payment of just compensation upon appropriation of private property.
Eminent domain
The acquisition process for eminent domain is called c________.
Condemnation
The inherent power of government to regulate property in order
to protect public health, safety, and general welfare.
Police power
C_____________ p____ are a form of police power used to control growth and
development.
Comprehensive plans
Public regulation of the use of private land through application of police power; accomplished by establishing districts or areas with uniform requirements relating to lot coverage, setbacks, type of improvement, permitted activities, signage, structure height, minimum lot area, density, landscaping and other aspects of land use and development.
Zoning
Z_____ o_________ are local laws that implement the comprehensive
plan and provide regulation and control of land and structures within a
specified district.
Zoning ordinances
Open spaces, landscaped areas, fences, walls, berms, or any combination thereof used to physically separate
or screen one use or property from another so as to visually shield or block noise, lights, or other nuisances; often associated with a change of land use or density.
Buffer strip
An exception to the general zoning regulations; permits specific, usually small, parcels of land to be zoned for a use that is not permitted in the surrounding area.
Spot zoning
A legally authorized modification in the
use of property at a particular location that does not conform to the regulated use set forth in the zoning ordinance for the surrounding
area; not an exception or change in the legally applicable zoning.
Zoning variance
A use that was lawfully established and maintained, but no longer conforms to the use regulations of its current zoning; also known as a grandfathered use.
Legally nonconforming
Local governments may require a b______ p_____ before any improvements
are constructed on the property owner’s land. The permit serves as
evidence that the application has complied with the various regulations.
building permit
When the improvements have been completed and are in compliance with
all regulations, the local government will issue a c________ of o________
or c_________ indicating the property can now be occupied.
certificate of occupancy or compliance
The right of government that gives the state titular ownership of a
property when its owner dies without a will or any ascertainable heirs.
Escheat
T_____: The condition of dying with a valid will.
I_______: The condition of dying without leaving a valid will.
Testate, Intestate
A charge against property in which the property is the security for payment of the debt. Financial encumbrances.
Lien
Liens fall into two categories:
a. G_____ lien is a type that binds all the assets of the individual debtor (that is, the debtor’s property) to the lien.
b. S_____ lien is a type that is levied against or attaches to a
specified piece of property.
General, specific
G________ l____ include property tax liens and special assessment liens.
They also include liens from other forms of taxation. Are considered s_____ liens.
Government liens, specific
A p_____ t___ l___ attaches to the taxed property on the first day of the year in which the tax is due. A s_____ a______ l___ attaches to each of the properties identified by the government entity as benefiting from the proposed public improvements.
property tax lien, special assessment lien
M______’ liens can arise when someone provides labor, skill, equipment, or
materials while improving, repairing, or maintaining the property. Are s_____ liens.
Mechanics, specific
M_____ l___ are voluntary and is created by a contract between the property owner and a lender. Are s_____ liens.
Mortgage liens, specific
J______ l____ typically result from a lawsuit in which a monetary judgment
is awarded. The party that won the suit and was awarded the judgment is a judgment creditor. The party who lost the lawsuit is a judgment debtor. Are g_____ liens.
Judgment liens, general
L__ p____ is a legal term signifying pending litigation that can affect the ownership title to real estate. Simply a notice of potential lien in the near future.
Lis pendens
An a_________ is a lien that allows a creditor with an interest in an
otherwise unsecured property to prevent the debtor from conveying title
while the dispute is being decided in court. Seizure of property by court order.
attachment
When a financial institution puts together a loan for a property owner, the lender is referred to as the A. grantee. B. mortgagee. C. mortgagor. D. trustor.
B mortgagee
Which of the following limitations on ownership is not an exercise of government power? A. covenants B. escheat C. special assessment lien D. zoning ordinance
A covenants
The Hawthorns bought a condominium unit in a resort area for $500,000. They
use the condo for one month out of every year, and during the remaining months,
they rent it out through an agreement with the property management. What type of
ownership do the Hawthorns have?
A. condominium
B. cooperative
C. leasehold
D. timeshare
A condominium
