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Texas Real Estate: Principles of Real Estate II – Qs & As
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Texas Real Estate: Principles of Real Estate II – Qs & As
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Texas Real Estate: Principles of Real Estate II – Qs & AsAppraisal Right Ans - An appraiser's opinion of value
Information Collected By Appraisers Right Ans - The appraisal will contain
the market value and analysis of the following categories:
- Property and lender information
- Neighborhood description
- Site description
- Improvements to the site
- Analysis of market data (Sales Comparison Approach)
- Cost Approach Analysis (if required)
- Income Approach Analysis (if required)
- Reconciliation of values
- Additional support documents
- Personal property is NOT included in the analysis of a real property
appraisal
Highest and Best Use Right Ans - The legal use that gives the highest return
in money and/or amenities
Principle of Contribution Right Ans - A property's value is equal to the sum
of the contributory value of each of its component parts
Principle of Change Right Ans - Change is constant; therefore, the forces
acting on a parcel of land are always affecting the value of the land
Principle of Anticipation Right Ans - The purchase price is affected by the
expectation of future appeal and benefits
Principle of Substitution Right Ans - A commodity's value is influenced by
the cost of acquiring a substitute or comparable item
Principle of Conformity Right Ans - Value is maximized when there is a
reasonable degree of homogeneity, or sameness, in a neighborhood.
Surrounded by similar properties
,Principle of Increasing and Decreasing Returns Right Ans - It is prudent to
improve property when the value added by the improvement exceeds the cost
of the improvement
Principle of Supply and Demand Right Ans - Holds that when demand for
real estate is great, and the supply is short, prices in the marketplace go up.
Likewise, when the supply is high and demand is low, prices decline.
Principle of Regression Right Ans - The presence of lower priced properties
in the area will cause a decline in the value of the subject property
Principle of Progression Right Ans - The value of a subject property is
increased by the value of surrounding properties
Principle of Competition Right Ans - The absence of competition will cause
prices to increase in the marketplace
Principle of Balance Right Ans - Mixed land use should result in the
maximum value for all properties involved
Market Value Right Ans - The most probable price a property should bring
in a competitive and open market under all conditions requisite to a fair sale,
under guidelines published by federal lending institutions (Fannie Mae,
Freddie Mac)
Value is affected by and appraisers must be aware of: Right Ans - Social
influences, market cycles, political actions, and economic forces
Sales Comparison Approach Right Ans - Also known as the Market Data
Approach, the appraiser focuses on recent sales in determining the value of
the subject property. It is most commonly used as the best indicator of value
for existing properties. Based on verifiable market events making it
considered the most reliable approach to value.
Cost Approach Right Ans - An appraisal approach used for unique
properties for which there is little market activity, like churches and bowling
alleys
, Income Approach Right Ans - An appraisal approach used to determine the
value of income-producing properties. Used for an investor to determine the
value of a rental property.
Depreciation Right Ans - A reduction in the value of a property due to
deterioration or obsolescence
Physical Deterioration Right Ans - The loss in a property's value due to
daily wear and tear
Chronological Age Right Ans - The actual age of the property in years
Effective Age Right Ans - The appraiser's estimate of a house's age is based
upon its ongoing maintenance and upgrades
External Obsolescence Right Ans - Refers to the loss in value of a property
caused by factors outside of the property itself. Also known as economic
obsolescence and environmental obsolescence
Functional Obsolescence Right Ans - The loss in the desirability of the style,
layout, or function of an element of a property over time. Ex: an unpopular
floorplan
Loan to Value (LTV) Right Ans - The percentage of the appraised value or
sales price that the lender will lend, whichever is lower
Assessed Value Right Ans - The value of a property for tax purposes
Reconciliation Right Ans - The final step of the appraisal process in which
the appraiser considers all of the factors and available information to arrive at
a single, appraised value
Characteristics of Value: Right Ans - Demand, Utility, Scarcity,
Transferability (DUST)
Gross Rent Multiplier Right Ans - Applies to when an investor is purchasing
a residential income producing property
Contract for Deed Right Ans - - An executory contract
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