3 Real Estate Valuation Free Online FlashCards

What is a real estate appraisal?

An informed, evidence-supported opinion of a defined property interest’s value as of a specific date—not a guarantee of its eventual sale price.

What does the principle of substitution say?

A buyer generally will not pay more for a property than the cost of acquiring a comparable alternative with similar utility.

How does the principle of contribution value a property feature?

A feature adds value according to how much it contributes to the property’s value, not simply what it cost to install.

What is a property’s highest and best use?

The reasonably probable use that is legally permissible, physically possible, financially feasible, and most productive.

How does the sales comparison approach estimate value?

It estimates value by comparing the subject with similar sold properties and adjusting their sale prices for meaningful differences.

How are comparable sale prices adjusted for differences?

If the comparable is inferior to the subject in a feature buyers value, adjust the comparable’s sale price upward; if superior, adjust it downward.

What makes a property a useful comparable?

Relevant factors include location, property type, size, condition, use, sale date, financing or sale conditions, lot size, building area, and amenities.

When is the income capitalization approach most useful?

It is most useful for rental and other income-producing properties, where expected income can be converted into a value indication.

What does net operating income (NOI) represent?

NOI is property income after vacancy and collection losses and operating expenses, but before debt payments.

How do replacement cost and reproduction cost differ?

Replacement cost builds a structure with similar utility using current materials and methods; reproduction cost creates a close replica using similar materials and design.

What are the three forms of depreciation?

Physical deterioration is wear or damage; functional obsolescence is a design or utility shortcoming; external obsolescence comes from influences outside the property.

How are separate value indications reconciled?

The appraiser weighs each approach’s relevance, data quality and quantity, and result reliability. The indications are not automatically averaged.