Texas Real Estate

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Texas Real Estate
2013-12-12 12:34:46
03 Appraisal

Appraisal, Value
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  1. Market Value
    The price a willing seller will sell for and a willing buyer will pay when neither is acting under exceptional pressure - most probable price
  2. Value
    An estimate of the future benefits to be derived from a property
  3. Price
    What one must pay for a property - usually very close or equal to market value
  4. Cost
    An estimate of past expenditures
  5. D.U.S.T.
    The four basic characteristics of value - Demand, Utility, Scarcity, Transferablitity
  6. CMA
    Competitive market analysis - a range of value for a property provided by a licensee to help a seller determine a realistic price - also called comparative market analysis
  7. BOV
    Broker's opinion of value - similar to a CMA but used by a relocation firm, bank or attorney - also called BPO - broker's price opinion
  8. Appraisal
    An opinion of value
  9. Market Data Approach
    An appraisal used primarily on residential properties - it involves comparing the subject property to recent sales to determine a value - also called sales comparison approach
  10. Comparable
    A recently sold property similar to a property being valued
  11. Income Approach
    An appraisal used to determine the value of a property that produces income or rent - (net annual income = rate of return x market value) - also called capitalization method
  12. Capitalization
    The conversion of income into an indication of value
  13. Capitalization Rate
    The rate of return on an income producing property
  14. Net Annual Income
    Yearly gross rents less gross expenses
  15. GRM
    A factor based on location and rent - a price per monthly rent used to give an initial estimate of value for a residential rental property
  16. GIM
    A factor based on location and rent - a price per annual rent used to give an initial estimate of value for a commercial property
  17. Cost Approach
    An appraisal used to determine the value of unique property - one with no comparables and no income (Land + Building Reproduction Cost - Depreciation = Value) or (Land + Building Replacement Cost - Depreciation = Value)
  18. Reproduction Cost
    The cost to exactly duplicate a building
  19. Replacement Cost
    The cost to build a building of similar size and purpose using today's methods and materials
  20. Physical Deterioration
    Depreciation due to ordinary wear and tear - curable - little impact on an appraisal
  21. Functional Obsolescence
    Depreciation due to factors in the property that do not meet the expectations of buyers
  22. Economic Obsolescence
    Depreciation due to factors outside the property also called external obsolescence or environmental obsolescence
  23. Highest and Best Use
    The legal use of property giving the greatest return in money or amenities
  24. Principle of Substitution
    No person is justified in paying more for a property when a similar property can be purchase for less - sets an upper limit on price
  25. Principle of Conformity
    Maximum value is found when there is a reasonable degree of similarity or homogeneity
  26. Principle of Increasing and Decreasing Returns
    Invest in property whenever each dollar invested will return a dollar or more of increased value and stop when each dollar invested returns less than a dollar in value - do not over-improve a property
  27. Principle of Contribution
    The value of a part is determined by its contribution to the total value of the property rather than by the cost of the part
  28. Principle of Regression
    Lower valued properties in the neighborhood lead to a decline in value of a subject property
  29. Principle of Progression
    Higher valued properties in the neighborhood lead to an increase in value of a subject property
  30. Principle of Competition
    Increased competition results in decreased profits for current providers
  31. Principle of Change
    Appraisers must make adjustments for changes in market conditions and time
  32. Principle of Anticipation
    Pricing today based on the expectation of future appeal and/or benefits
  33. Assemblage
    Combining several parcels of land into one larger tract
  34. Plottage
    The increased value resulting from the combining of several parcels of land into one larger tract
  35. Reconciliation
    The final step in the appraisal process using weighted averages to determine an exact number
  36. USPAP
    Uniform Standards of Professional Appraisal Practice - appraiser's rule
  37. Chronological Age
    The actual age of a property
  38. Effective Age
    The condition of a property measured in years
  39. Deferred Maintenance
    Postponed maintenance on property that results in increased physical depreciation (wear and tear)
  40. Life Cycle
    The stages of growth and development of a community - grow, stabilize, decline and revitalize
  41. Up and Coming Neighborhood
    A neighborhood in the revitalization stage of the life cycle
  42. Square Footage
    The finished space of a structure measured by the exterior walls
  43. Gross Area
    The area of a building under the roof - includes unfinished areas
  44. Setback
    The amount of space required between the lot line and the building line
  45. Straight Line Method
    Depreciation of equal annual installment amounts
  46. Depreciated Value
    Original cost less the depreciation
  47. Module
    A unit of prefabricated housing - offsite construction
  48. Collateral
    Something of value pledged as security for a loan
  49. M.A.I.
    Member, Appraisal Institute - a designation earned by a licensed appraiser