12 terms

Chapter 18: Real Estate Appraisal

Appraisal principle that holds that value can increase or decrease based on the expectation that some future event may or may not occur
Combining of two or more adjoining lots into one larger tract to increase their total value
Appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value
Cost Approach
Process of estimating property value by adding to estimated land value the appraiser's estimate of the cost of the building new, less depreciation
Economic Life
Number of years during which an improvement will add value to the land
Functional Obsolescence
Loss of value to an improvement to real estate because of functional problem, often caused by changing tastes or poor design
Highest and Best Use
Possible use of a property that would produce the greatest net income and thereby develop the highest value; making an office building where a parking lot once stood
Market Value
Most probable price a property would bring in an arm's length transaction under normal market conditions on the open market; market price is what is actually paid
Progression, Regression
Value of properties near a better property see their values rise; the opposite is regression; a rundown property will negatively affect neighboring properties
Reproduction Cost
Construction cost at current prices of an exact duplicate of the subject property; i.e., using slate shingles on the roof instead of equally effective fiberglass shingle
Square-Foot Method
Appraisal method of estimating building cost; multiplying number of square feet in the improvement by cost per square foot of recently constructed similar properties
Supply and Demand
Interrelationship of availability of properties and desire for those properties; real estate is affected by marketplace just like most commodities