Missouri Real Estate Exam: Appraisal
Terms in this set (50)
the development of an opinion of a defined type of value for particular property
economic characteristics of value
the desire for a good backed by the ability to pay for the good
the total satisfaction received from consuming a good or service. must meet a useful need
the lack of sufficient supply
the ability to transfer ownership. If ownership cannot be transferred, than value does not exist
1. physical and environmental forces
2. economic forces
3. governmental forces
4. social forces
economic principals of value
influence the market and cause adjustment and or correction in the marketplace
property may increase or decrease due to some future benefit or detriment coming to the neighborhood
combining of two or more adjacent parcels of land
as a result of assembling, the larger parcel generates a greater value
an appraisal principal that states that property value is created and maintained when contrasting, opposing or interacting elements are in state of equilibrium.
4 agents of production
capital, management, land and labor
an appraisal principal that recognizes the fact that a property and its environment are always in transition and are impacted economic and social forces that are constantly at work
4. revitalization (renewal)
a value concept that states that value is affected by the interaction of supply and demand in the market
an appraisal principle that states that the more a property is in harmony with its surroundings, the greater the contributory value. often maximizes value.
an item is worth what it has to offer in real estate
law of increasing returns
the added value of the additional feature or repair will contribute more to the value of the property than its original cost
law of decreasing returns
a point when added value of another feature, or additional repair, will be less than the cost to accomplish that feature or repair.
an appraisal concept that states that economies or diseconomies outside a property's boundaries may have a positive or negative effect on its value
an appraisal concept that states that a buyer will pay no more for a property than the cost of obtaining an equally desirable substitute. when an investor looks at cost of a new structure before buying one. The maximum value of property is limited.
supply and demand
an appraisal principle that states the value of a property depends on the quantity and price of the property type available in the market, and on the number of market participants and price that they are willing to pay
the most probably price in terms of cash that a property would bring in the open market within a reasonable time.standard value sought by appraisers and real estate professionals.
when the total property value is equal to the sum of the site value, plus contribution of improvements. it assumes a hypothetical buyer considers producing a substitute residence that has the same utility as the subject property. typically for new structures or "no-market properties"
CA: estimate site value
determine the value of the land
CA: estimate cost of new improvements
rebuilding a house. measuring a build along its exterior foundation to determine gross square footage
estimated cost to construct, at current prices, an exact duplicate, or replica of the building being appraised, using same material construction standards, design, layout, and quality.
estimated cost to construct, at current prices, a building with utility equivalent to building being appraised, using modern material and current standard designs and layout. (used most of the time for cost estimation)
loss in value as a result of the passage of time or wasting away caused by the elements. deferred maintenance- can be curable or incurable. (physical depreciation)
an item of physical deterioration where the cost to cure is equal to or less than the value added by curing.
an item of physical deterioration where the cost to cure is greater than the value added by the curing problem
a loss in value as a result of the subject not performing the function for which is was intended. curable or incurable (functional depreciation)
a loss in value as a result of external conditions
locational: subject's proximity to a factory can cause loss of utility
economic: high unemployment or high interest rates
sales comparison approach
an orderly process for analyzing the sales of similar properties in order to estimate the value of the subject property. appraiser uses data from actual market transactions
market theory of value
states that the value is determined by the actions of buyers and sellers in the marketplace in response to the influences of supply and demand.
comparing data on properties to derive specific numbers that can be applied to other properties in the same market (dollar adjustments, percentage adjustments)
comparing data on properties to derive relative comparisons between properties in the same market. derives value by determining which properties are superior and inferior to the subject.
the primary method used to estimate the present value of properties the produce income. measures value through the eyes of the investor
determined by using a gross rent multiplier method
commercial property value
evaluated by a direct capitalization technique
gross rent multiplier
a number that expresses the relationship between the sales price of a residential property and its gross monthly unfurnished rental.
the conversion of income expectancy into a capital sum or property value
direct capitalization technique
a technique that reaches an opinion of value for property by taking the property's income and applying a rate.
expenses that must be paid that are not related to occupancy. (taxes, insurance)
expenses that must be paid that are related to occupancy (maintenance, management)
reserves for replacements
expenses that relate to items that must be replaced more than once during a lifetime of a building. (heating and cooling units)
when more than once approach is used to determine the value of the subject property then the agent must decide which method provided the most reliable indicator of value
a plot of land plus improvements that make it ready for use
net operating income
make as a net profit (the company made $1 million dollars last year)
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THIS SET IS OFTEN IN FOLDERS WITH...
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