Chapter 16: Appraising and Estimating Market Value Flashcards Preview

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Flashcards in Chapter 16: Appraising and Estimating Market Value Deck (21)
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1
Q

As a component of real estate value, the principle of substitution suggests that…

A

If two similar properties are for sale, a buyer will purchase the cheaper of the two

2
Q

The highest and best use of a property is that use which…

A

Is physically and financially feasible, legal and the most productive

3
Q

The concept of market value is best described as…

A

The price that a willing, informed, and unpressured seller and briar agree upon for a property assuming a cash price and the properties reasonable exposure to the market

4
Q

A significant difference between an appraisal and a broker’s opinion of value is…

A

The broker may not be a disinterested party

5
Q

A notable weakness of the sales comparison approach to value is that…

A

There may be no recent sale price data in the market

6
Q

The steps in the market data approach are…

A

Select comparable properties, adjust the comparables, estimate the value

7
Q

In the sales comparison approach, an adjustment is warranted if…

A

The seller offers below market seller financing

8
Q

To complete the sales comparison approach, the appraiser…

A

Weights the comparables

9
Q

One weakness of the cost approach for appraising market value is that…

A

Market value is not always the same as what the property cost

10
Q

The cost of constructing a functional equivalent of a subject property is known as…

A

Replacement cost

11
Q

An office building lacks sufficient cooling capability to accommodate modern computer equipment. This is an example of…

A

Functional obsolescence

12
Q

A home is located in the neighborhood where homeowners on the block have failed to maintain their properties. This is an example of…

A

Incurable economic obsolescence

13
Q

In appraisal, loss of value in a property from any cars is referred to as…

A

Depreciation

14
Q

First two steps in the cost approach to estimate the value of the land and the cost of the improvements. The remaining steps are…

A

Estimate depreciation, subtract depreciation from cost, and add back the land value

15
Q

The roof of a property cost $10,000. The economic life of the roof is 20 years. Assuming the straight-line method of depreciation, what is the depreciated value of the roof after three years?

A

$8500

16
Q

The income capitalization approach to appraising value is most applicable for which of the following property types?

A

Apartment buildings

17
Q

The steps in the income capitalization approach are…

A

Estimate net income, and apply a capitalization rate to

18
Q

Net operating income is equal to…

A

Potential gross income minus vacancy and credit loss minus expenses

19
Q

If the net income on a property is $20,000 and the Rate is 5%, the value of the property using the income capitalization method is…

A

$400,000

20
Q

The principal shortcoming of the gross rent multiplier approach to estimating value is that…

A

Numerous expenses are not taken into account

21
Q

If the monthly rent of a property is $3000 and the gross rent multiplier or GRM is 80, what is the value of the property?

A

$240,000