1
Q
it is a formal opinion of value that a real estate have, based on supportable evidence, for a specific purpose, party, and property, as of a specific date
A
An appraisal
2
Q
it is the process of forming an opinion of a property’s value.
A
Valuation (formal appraisal)
3
Q
Appraisers follow the Uniform Standards of Professional Appraisal Practice (USPAP) and use these steps:
A
State the problem
Identify data needed
Gather and analyze data
Determine highest and best use
Estimate the land value
Use one or more of the three approaches to valuation
Reconcile values to determine the final appraised value
4
Q
Residential properties valued at ___________ or less are exempt from federal appraisal requirements.
A
$400,000
5
Q
Does FHA loans should be appraised?
A
Yes, by a state licensed appraiser
6
Q
Does VA loans should be appraised?
A
Yes, by a VA licensed appraiser
7
Q
What AIR stands for?
A
Appraiser Independence Requirements of 2010
8
Q
What are the 3 requirements of AIR appraisers?
A
- State Certified
- Local Market knowledge
- Qualify to appraise
9
Q
it is the most probable price a property will sell for in an open market if neither the buyer nor the seller is under duress.
A
Market value
10
Q
it is a property’s objective worth and may not equal price or cost.
A
Value
11
Q
it is the amount to recreate that property if it disappeared off the face of the earth today
A
Cost
12
Q
it is the amount a buyer paid for a property and the seller accepted.
A
Market price
13
Q
it refers to a property’s legal and feasible use that would be the most profitable.
A
The principle of highest and best use
14
Q
How popular or desirable a property is.
A
Demand
15
A
Utility
16
Q
Relates to market supply
A
Scarcity
17
Q
The ease with which another person can purchase the property; a property with a title defect may suffer a loss of value because of the difficulty of being able to transfer title to another.
A
Transferability
18
Q
What a property is worth to the person using it.
A
Value in use
19
Q
What the local taxing authority thinks a property is worth
A
Assessed value
20
Q
Price at which the property can be loaned on or sold for at a foreclosure sale
A
Mortgage value
21
Q
Cost to replace or rebuild a property
A
Insurance value
22
Q
The return on investment a property may provide
A
Investment Value:
23
Q
A property’s value is determined in part by how well it conforms to its surrounding area (how similar it is to other properties in the neighborhood).
A
The principle of conformity
24
Q
A property’s value is determined in part based on what else is available.
A
The principle of competition
25
Q
A reasonable person will not pay more for a property if a comparable one can be had for less.
A
The principle of substitution
26
Q
The value of any given change to the property is dependent on the value of the property as a whole. Because of this, the same improvement to different houses may result in an increase in value in one, while the other sees no appreciable change.
A
The principle of contribution
27
Q
An increase in value that occurs by combining adjacent parcels of land into a single parcel
A
The principle of plottage
28
Q
The process of combing the parcels
A
The principle of assemblage
29
Q
A decline in value due to the decline in value of neighboring properties
A
The principle of regression
30
Q
The increase in property value from increased surrounding property values
A
The principle of progression
31
Q
Changes in value may be caused by the expectation of events. A suburban residential property that is located near the site of a proposed public transportation facility may see an increase in value before the actual benefit is realized.
A
The principle of anticipation:
32
Q
is based on the principle of substitution and uses the prices for which similar properties have sold recently to estimate the subject property’s market value. The similar properties are referred to as “comps” or “comparables.” The property being appraised is called “subject property.”
A
The sales comparison appraisal approach
33
Q
it is a process in which an appraiser uses both superior and inferior units of comparison such as age, transaction price, etc., to determine a probable range of values for a property.
A
Bracketing
34
Q
Appraisers will make adjustments for a number of factors, applying the elements of comparison in this specific order, including:
A
Financing terms and cash equivalencyConditions of saleMarket conditions LocationPhysical characteristics
35
Q
it is based on the concept that the entire property is worth the sum of the value of the land and the value of the improvements on that land.
A
The cost approach
36
Q
Appraisers use and rely on this approach when the property is unique and is not being used to generate rental income. A movie theater, hospital, church, or school fall into this category. It is also used in newly constructed or unique high-value homes.
A
The cost approach
37
Q
it is caused by factors outside the property (e.g., an airport is nearby, causing noise).
A
External depreciation, also known as economic obsolescence
38
Q
it is a form of depreciation or loss in value caused by defects in design and can occur with outdated structures or systems or when a property is overbuilt for the area.
A
Functional obsolescence
39
Q
it occurs with wear and tear, damage, and improper maintenance
A
Physical deterioration
40
Q
it refers to an item of physical deterioration or functional obsolescence where the cost to cure the item is less than or the same as the anticipated increase in the property’s value after the item is cured.
A
Curable depreciation
41
Q
it includes items not practical to correct
A
Incurable depreciation
42
Q
it bases value on the cost to build a functionally equivalent property.
A
The replacement cost approach
43
Q
it determines the cost to build an exact replica of the property with the same materials and deficiencies
A
The reproduction cost approach
44
Q
it assumes the land is vacant and bases the opinion of value on highest and best use.
A
The cost approach
45
Q
This approach bases the current property value on potential income that the property can generate for residential investment rental properties, such as single-family homes or residential buildings that comprise two- to four-family units.
A
Income analysis approach
46
Q
This is the most reliable approach to value when the property being appraised is primarily used to generate rental income, which includes shopping centers, apartment buildings, and office buildings.
A
Income analysis approach
47
Q
Your client is purchasing a single-family home with a conventional loan. The listing price is $150,000. Does this situation require a licensed or certified appraiser?
A
No, since the sales price is less than $400,000
48
Q
What is an appraisal?
A
An opinion or estimate of a property’s value as of a specific date
49
Q
There are three different methods for estimating value within the income approach:
A
- Gross Rent multiplier = GSM = Sale/Gross Monthly Rent
- Gross income multiplier. GIM=Sale price ÷ gross annual income
- CAP RATE. Divide net operating income by value (or sales price)
50
Q
they’re an informal estimate of market value.
A
comparative market analyses (CMAs)
51
Q
What are arm’s length transactions?
A
Transactions that are not sold to relatives or under duress
52
Q
How many comparable a licensee should do?
A
at least three comparables. More may be necessary if good comparables are difficult to find.
53
Q
If a comparable is inferior to the subject property (e.g., next to a busy street), adjust upward. If it’s superior (e.g., in a secluded, quiet neighborhood), adjust downward.
A
Check point
54
Q
When appraisers look past how a property is being used to determine a more optimal function, what are they determining?
A
Highest and best use looks past the current use (if there is one) to determine if there is another use that provides a higher value.
55
Q
What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach?
A
Elements and units
56
Q
What’s the estimated value by cost approach for a property if the site value is $25,000, the new cost of improvements is $100,000, and the total depreciation estimate is $15,000?
A
To estimate value using the cost approach, an appraiser adds the site value to the cost to replace improvements, then subtracts the amount of depreciation. Here, that gives us $100,000 + $25,000 - $15,000.
Well, diving into the world of real estate appraisal, it's evident that the process is a meticulous one, grounded in expertise and a thorough understanding of various principles. Let's break down the key concepts discussed in the provided article.
Appraisal (1Q): An appraisal is a formal opinion of the value that a real estate property holds, supported by evidence. This opinion is tailored for a specific purpose, party, and property, and it's determined as of a specific date.
Valuation (2Q): Valuation is the broader process of forming an opinion on a property's value. Formal appraisals fall under this umbrella.
Uniform Standards of Professional Appraisal Practice (3Q): Appraisers adhere to the Uniform Standards of Professional Appraisal Practice (USPAP) and follow specific steps in their process. These include stating the problem, identifying necessary data, gathering and analyzing data, determining the highest and best use, estimating land value, using valuation approaches, and reconciling values to arrive at the final appraised value.
Federal Appraisal Requirements (4Q): Residential properties valued at $400,000 or less are exempt from federal appraisal requirements.
FHA and VA Loans (5Q, 6Q): Both FHA and VA loans require appraisal, conducted by state-licensed appraisers for FHA and VA-licensed appraisers for VA loans.
Appraiser Independence Requirements (AIR) (7Q, 8Q): AIR stands for Appraiser Independence Requirements of 2010, and appraisers need to meet three requirements: state certification, local market knowledge, and qualification to appraise.
Market Value (9Q): Market value is the most probable price a property will sell for in an open market if neither the buyer nor the seller is under duress.
Value Concepts (10Q to 22Q): These concepts include value, cost, market price, highest and best use, demand, utility, scarcity, transferability, value in use, assessed value, mortgage value, insurance value, investment value, conformity, competition, substitution, contribution, plottage, assemblage, regression, progression, anticipation, and conformity.
Sales Comparison Appraisal Approach (32Q to 35Q): This approach relies on recent sales prices of similar properties ("comps") to estimate the subject property's market value.
Cost Approach (36Q to 45Q): This approach is used when a property is unique or not used to generate rental income. It involves determining the sum of the value of land and improvements.
Depreciation (38Q to 42Q): Various forms of depreciation include external, functional, physical, curable, and incurable. These impact a property's value.
Income Analysis Approach (46Q, 47Q): This approach is reliable for properties primarily used to generate rental income, such as shopping centers, apartment buildings, and office buildings.
Appraisal Requirements for Loans (48Q): For a single-family home purchase with a conventional loan under $400,000, a licensed or certified appraiser is not required.
Methods Within Income Approach (49Q): Three methods within the income approach are Gross Rent Multiplier (GSM), Gross Income Multiplier (GIM), and Capitalization Rate (Cap Rate).
Comparative Market Analyses (CMAs) (50Q): CMAs are informal estimates of market value.
Arm's Length Transactions (51Q): These are transactions not involving relatives or under duress.
Comparable Evaluation (52Q to 54Q): Appraisers should use at least three comparables, adjusting for differences.
Highest and Best Use (54Q): Determining the optimal function of a property beyond its current use for maximum value.
Market Comparison Approach (55Q, 56Q): Elements and units are two categories used when evaluating comparables in this approach.
Cost Approach Calculation (56Q): The estimated value using the cost approach involves adding site value to the cost of improvements and subtracting depreciation.
If you have more specific questions or want to delve deeper into any of these concepts, feel free to ask!
