# REAL ESTATE CHAPTER 16 TERMS

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1. Appraisal
an expert estimate of the value of something.
2. Assemblage
• -The combination of two or more adjoining plots of real estate into a single plot.
• -can increase the value of the real estate such that the new plot is worth more than the sum of its parts.
3. Automated valuation model (AVM)
is the name given to a service that can provide real estate property valuations using mathematical modelling combined with a database. Most AVMs calculate a property's value at a specific point in time by analyzing values of comparable properties.
4. Comparative market analysis (CMA)
___ ___ ___ is an examination of the prices at which similar properties in the same area recently sold. Real estate agents perform a ___ ___ ___ for their clients to help them determine a price to list when selling a home or a price to offer when buying a home.
5. Cost
an amount that has to be paid or spent to buy or obtain something.
6. Cost-depreciation approach
The fundamental premise of the cost approach is that a potential user of real estate won't, or shouldn't, pay more for a property than it would cost to build an equivalent. The cost of construction minus depreciation, plus land, therefore is a limit, or at least a metric, of market value.
7. Curable
___ depreciation means the physical depreciation or deterioration of a property that can be repaired or replaced by a property owner. ___ depreciation in a rental property might include worn carpet, faded paint and non working appliances
8. Depreciation
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
9. Economic life
is the expected period of time during which an asset is useful to the average owner. The ___ ___ of an asset could be different than its actual physical life.
10. Federally related transaction
11. Gross income multiplier (GIM)
is a rough measure of the value of an investment property that is obtained by dividing the property's sale price by its gross annual rental income.
12. Gross rent multiplier (GRM)
Gross Rent Multiplier is the ratio of the price of a real estate investment to its annual rental income before accounting for expenses such as property taxes,

Market Value / Annual Gross Income = Gross Rent Multiplier (GRM)
13. Highest and best use
The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value.
14. Income approach
is a real estate appraisal method that allows investors to estimate the value of a property by taking the net operating income of the rent collected and dividing it by the capitalization rate.
15. Incurable
___ depreciation" Occurs when the cost of repairing a component of a building structure exceeds the value of the structure and is therefore uneconomical to perform. For example, because of extensive settling, the foundation of an old home crumbled and had to be replaced.
16. Market value
___ ___is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.
17. Over-improvement
• An improvement which is not the most profitable for the site on which it is placed because of its excessive size or cost, and consequent inability to develop the maximum possible land value. May be temporary or permanent.
• An overimprovement typically reflects environmental obsolescence, although a substantial market may exist for such property among a group which takes personal pride in owning the most expensive home in the block and is willing to pay a price commensurate with cost.
18. Plottage value
A real estate term referring to the process of combining adjacent parcels of land to form one larger parcel. Typically the value of the whole parcel will be greater than the sum of the individual smaller parcels.
19. Price
___ determined by supply and demand, for consumer goods such as automobiles or electronics. 2. The initial asking ___ for area estate property, such as a home, as determined by similar properties that have recently sold in the area.
20. Principle of progression
___ ___ ___states that the value of less expensive properties will increase when more expensive properties come into the area. Thus, if your home is worth \$500,000 and it is surrounded by \$1,000,000 homes, the value of your property will go up.
21. Principle of regression
___ ___ ___ states that the value of a more expensive property will decrease when less expensive properties come into the area. Thus, if your home is worth \$500,00 and it is surrounded by \$100,000 homes, the value of your property will go down.
22. Principle of substitution
___ ___ ___  is the basis for the market data approach to appraisal. This principle says that the maximum value of a property usually is established by the cost of acquiring an equivalent substitute property that has the same use, design, and income.
23. Reconciliation
___ is an accounting process that uses two sets of records to ensure figures are accurate and in agreement. ___ is the key process used to determine whether the money leaving an account matches the amount spent, ensuring the two values are balanced at the end of the recording period.
24. Replacement cost
___ ___ is the estimated cost to construct, at current prices, a building with equal utility to the building being appraised.

___ ___ is the cost to construct a structure with the same usefulness (utility) as a comparable structure using today's materials and standards.
25. Reproduction cost
___ ___  is the cost to construct an exact duplicate of the subject structure at today's costs.
26. Sales comparison approach
The ___ ___ ___ compares recently-sold local similar properties to the subject property. Price adjustments are made for differences in the comparable and subject property. The ___ ___ ___ is the foundation for the real estate professional's CMA, Comparative Market Analysis.
27. Special-purpose properties
___ ___ ___ refers to property that is appropriate for one type of use or limited use. This type of property has unique design or layout, uses special construction materials, or other features that limit the property's utility for purposes other than the one for which it was built....church, auditorium
28. Subject property
A ___ ___ is the home you’re seeking to finance or refinance with a mortgage.
29. Uniform Standards of Professional Appraisal Practice (USPAP)
___ ___ __ ___ ___ ___ (USPAP) can be considered the quality control standards applicable for real property, personal property, intangible assets, and business valuation appraisal analysis and reports in the United States and its territories.
30. Value
1 : the monetary worth of something : market price. 2 : a fair return or equivalent in goods, services, or money for something exchanged.
31. Valuation
___ an estimation of something's worth, especially one carried out by a professional appraiser.
 Author: mccullochhelen ID: 332051 Card Set: REAL ESTATE CHAPTER 16 TERMS Updated: 2017-06-17 14:11:19 Tags: terminology Folders: Description: CHAPTER 16 TERMS Show Answers: