Unit 6 Review

Card Set Information

Unit 6 Review
2013-06-22 12:11:14
NC Real Estate Unit

Unit 6 Review
Show Answers:

  1. What is an appraisal?
    An estimate or opinion of market value supported by an analysis of relevant property data
  2. At what level are appraisals regulated?
    State and federal
  3. How long is an appraisal good for?
    Only the day of inspection
  4. What is the standard form for Appraisals?
    Uniform Residential Appraisal Report URAR
  5. Appraisers are expected to follow what?
    USPAP, Uniform Standards for Professional Appraisal Practice
  6. Appraisals are required on what?
    All federally related loans
  7. What is a CMA?
    Comparative Market Analysis
  8. A CMA is not a?
  9. What is market value?
    The most probably price a property will bring
  10. Market value may not be the same as the ?
    Listing price
  11. In general the listing price is somewhat ___ than the market value to allow for negotiations?
  12. What is the market price?
    The actual sales price. What someone paid
  13. While there may be only one highest and best use of a property, it may what?
    Change over time
  14. In real estate, when demand goes up, price goes ?
  15. What is the most important principle in appraisal?
  16. What does substitution do?
    The buyer looks at the cost of acquiring an equally desirable substitute which meets the same criteria of time, function, and utility
  17. What is conformity determined by?
    Neighborhood analysis
  18. How does conformity work?
    Values change with properties are different in the same area. (A big house is worth less in a neighborhood of smaller houses)
  19. The value of an improvement not adding to the market value the same amount that it costs to build is called?
  20. Increasing returns occur when it cost less to?
    Build the improvement that what you get in return. Vice versa for decreasing returns
  21. A reasonable amount of competition will drive values up because?
    of the increase in demand
  22. In a sales comparison approach, you are estimating the value of the subject based on?
    recently sold similar properties
  23. How is square footage of improvement determined?
    Sales Comparison approach
  24. In accordance to the NCREC, a living area is as follows?
    • Adequately heated
    • Walls and floors must be finished
    • Space is directly accessible
  25. In order for the sales comp to be as accurate as possible, what should you use?
    The most recently and accurate properties sold as possible
  26. Adjustments in Sales comparison are always made to the?
    Sales comparables, never the subject
  27. If a comparable is better than the subject, you
    Subtract the value from the comparable
  28. What is the most appropriate method of appraisal for new construction or special construction such as church or schools?
    Cost Approach
  29. What does the cost approach in appraisal do?
    estimate the cost of replacement as if new and built today
  30. What are the 3 steps in cost approach?
    • Estimate the cost to build improvements
    • Estimate and deduct all accrued depreciation of improvements
    • Determine the value of the land using the sales comparison approach
  31. What is the method of estimating the cost of building new?
    Square foot method
  32. What is a depreciation?
    A loss of value
  33. How do you find the depreciation?
    Effective age minus economic life
  34. What are the classes of depreciation?
    • Physical deterioration
    • Functional obsolesence (Outdated lighting or plumbing)
    • Economic obsolescence (property in flight path)
  35. Which of the classes of depreciation is totally uncurable?
    Economic Obsolescence
  36. What is the formula for calculating appreciation an depreciation?
    Amount = Base x Rate
  37. What is income or income cap approach used for?
    properties that generate income. Uses IRV (income rate value) formula. Net Op Income x Cap rate = Present value of property
  38. The process of converting estimated future income in to present value is?
  39. NOI is?
    Net Operating Income
  40. What is the formula for NOI?
    Potential Gross Income -Collections/Vacancy Rate =Effective Gross Income- Operating Expenses=NOI
  41. What is potential gross income come from?
    All sources
  42. What is used to give a quick estimate of the value of a residential property that is also used to estimate income but not vacancies or bad debts or expenses from that property?
    Gross Rent Multiplier
  43. What is the gross rent multiplier method?
    Take the comparative properties and divide the property price by the rent being charged. (100,000 price / 830 rent = 120GRM ; Therefore if the rent on the subject is $1000 you would multiply that by the GRM.
  44. When an appraiser reconciles the 3 approaches, sales comparison, cost, and income, what is it called when he gives the most weight to the most appropriate method of valuation?