Real Estate Appraisal Principles and Procedures, Exams of Real Estate Management

Download Real Estate Appraisal Principles and Procedures and more Exams Real Estate Management in PDF only on Docsity! Real estate appraisal principles and procedures Questions And Answers REAL ESTATE - correct answer Is the physical land and improvements Real property - correct answer Is "the interest, benefits, and rights inherent to the ownership of real estate". These include the land, anything permanently attached or affixed to the land, anything incidental or appurtenant to the land, and anything immovable by law. Bundle of rights - correct answer Bundle of rights include the rights to use, enjoy, exclude others and occupy the property, to sell it or lease it, to encumber it (As by a mortgage lien, for example) and dispose of it by use of a will. Appurtenance - correct answer Is something that goes along with the ownership of land. Possessory interests - correct answer Are called estates. Non-Possessory interests - correct answer Are known as encumbrances. Real estate appraisal principles and procedures Questions And Answers Estates - correct answer estate is the degree, nature, or extent of interest or rights a person has in a real property that includes the exclusive rights to occupy and use the real estate(the right to possession). Freehold estate - correct answer An estate that includes title is a freehold estate. Leasehold estate - correct answer An estate that includes possession without title is a leasehold estate. Fee simple - correct answer Is the most complete and comprehensive form of real estate interest; it includes the entire bundle of rights. Life estate - correct answer A life estate is similar to the fee simple, except that it terminates automatically upon someone's death, either the death of the person holding the life estate( the life tenant), or the death of some other person designated as the measuring life. Estate in Reversion - correct answer The party (grantor) granting a life estate is said to hold an estate in reversion. Real estate appraisal principles and procedures Questions And Answers EASEMENT - correct answer Is a non-exclusive right to someone else's property for a particular purpose. SERVIENT (BURDENED) TENEMENT - correct answer A property that is subject to an easement is known as a SERVIENT ( BURDENED)TENEMENT. RIGHT OF WAY - correct answer A RIGHT OF WAY is a Servient tenement, it benefits a particular parcel of real estate ( DOMINANT TENEMENT). DOMINANT TENEMENT - correct answer If your neighbor has a right of way easement across your property for purpose of access, your property is the SERVIENT TENEMENT. Your neighbors benefited property would be called the dominant tenement. EASEMENT IN GROSS - correct answer In contrast to appurtenant easements, EASEMENT IN GROSS do not benefit a particular parcel of real estate; they benefit individuals or organizations. EMINENT DOMAIN - correct answer is the power of government to take private property for public use Real estate appraisal principles and procedures Questions And Answers provided that just compensation is paid to the private property owner for the taking. Ad VALOREM TAXES - correct answer AD VALOREM TAXES, Which is Latin for according to value. POLICE POWER - correct answer police power is the power of government to make and enforce regulations for the protection of public health, safety, and welfare. SPECIAL ASSESSMENTS - correct answer special assessments are taxes that are levied against particular properties in order to cover the cost of some public improvements that benefit those properties. ESCHEAT - correct answer ESCHEAT Is the power to have property revert to the state if the owner dies without heirs or a will. Value - correct answer value is the monetary worth of property, goods or services to buyers and sellers. FOUR CHARACTERISTICS OF VALUE - correct answer 1. Utility Real estate appraisal principles and procedures Questions And Answers 2. Scarcity 3. Transferability 4. Effective demand UTILITY - correct answer utility, meaning it must be able to satisfy some want or need of potential buyers. SCARCITY - correct answer Scarcity, is a key element of the theory that value is dependent on supply and demand. TRANSFERABILITY - correct answer Transferability Is the ability to will, lease, give, or sell a property EFFECTIVE DEMAND - correct answer EFFECTIVE DEMAND Refers to the combination of desire and purchasing power. Purchasing power - correct answer desire must be combined with purchasing power, the ability to pay for the item. Purchasing power is measured in terms of economic conditions such as inflation, unemployment, and wage scales, and has a tremendous impact on real estate values. Real estate appraisal principles and procedures Questions And Answers MARKET - correct answer refers to buyers and sellers interacting to exchange cash or other assets, Like property. PRINCIPLE OF SUPPLY AND DEMAND - correct answer principle of supply and demand states that the value of the property is competitive market is determined by the relative levels of supply and demand ( The number of available properties and the number of people who want to buy those properties). PRINCIPLE OF SUBSTITUTION - correct answer according to the principle of substitution, the value of a property cannot exceed the value of equivalent substitute properties that are available in the market. PRINCIPLE OF COMPETITION - correct answer The rule of supply and demand operate because of competition in the market, competition occurs when supply and demand are out of balance PRINCIPLE OF CHANGE - correct answer The principle of change recognizes that the forces of supply and demand are in constant flux. Real estate appraisal principles and procedures Questions And Answers REAL ESTATE CYCLE - correct answer The real estate property life estate cycle is a pattern in changing values. The first stage of cycle is the DEVELOPMENT STAGE ("growth"), when values increase as raw land is improved. this is followed by a stage of relative stability in value, called MATURITY("stability"), And then a stage of progressive DECLINE. Decline invites REVITALIZATION, as a physical structural Decay and loss of market appeal causes lower and lower prices, thus attracting investors to invest in the area and restart the lifecycle process again. GENTRIFICATION - correct answer GENTRIFICATION occurs when properties in lower class neighborhoods are purchased and renovated or rehabilitated by more affluent ( middle and upper-class) buyers, increasing the value and desirability. REAL PROPERTY LIFE CYCLE ( AGE CYCLE) - correct answer 1. Development ( values increase) 2. Maturity. (values stable) 3. Decline ( values decrease) 4. Revitalization ( Life cycle begins again) Real estate appraisal principles and procedures Questions And Answers HIGHEST AND BEST USE PRINCIPLE - correct answer The Highest and Best Use principle states that the value of property is determined by the most profitable use to which the property may reasonably (and legally) be put. CONSISTENT USE PRINCIPLE - correct answer Consistent Use requires both the land and the improvements to be valued for the same use, even if they are being valued separately. PRINCIPLE OF CONFORMITY - correct answer Principle of Comformity property values are enhance when the use of surrounding properties conform to the use of the subject property. REGRESSION - correct answer when a property that is much more luxurious than surrounding properties suffers a decline in value, it is called regression PROGRESSION - correct answer A modest home in an area of more expensive houses would see a relative increase in value called progression AGENTS OF PRODUCTION PRINCIPLE - correct answer 1. CAPITAL (Financial resources) Real estate appraisal principles and procedures Questions And Answers WHY intended use intended users HOW Scope of the appraisal Assumptions limiting conditions 1. WHAT is to be appraised? 2. WHEN is it to be appraised? 3. WHY is it to be appraised? 4. HOW is it to be appraised? LEGAL DESCRIPTION - correct answer 1. Metes and bounds system 2. Rectangular or Government Survey system 3. Lot , Block, and Tract System ASSUMPTIONS (chapter 3) - correct answer ASSUMPTIONS are facts that the appraiser assumes are true, but does not independently verify. Real estate appraisal principles and procedures Questions And Answers LIMITING CONDITIONS - correct answer A Limiting condition is a statement or explanation that limits the application or assumptions of the conclusions contained in the report. HIGHEST AND BEST USE ANALYSIS (CHAPTER 3) - correct answer highest and best use analysis indicates whether an existing improvements are contributing to the value of the land, or should be removed to permit some more profitable use. It's important when land and improvements must be valued separately (as in the cost approach to value). COST APPROACH - correct answer The COST APPROACH assumes that the value of improved property is indicated by the value of the site, plus the cost (new) to construct the improvements, less any depreciation that the improvements have suffered. INCOME APPROACH - correct answer The INCOME APPROACH assumes that the value of property is indicated by the amount of income of the property can generate: The greater the income, the greater the value. Real estate appraisal principles and procedures Questions And Answers DEPRECIATION - correct answer Depreciation is the difference in value between the cost (new) of the improvements and their current value, regardless of the reason for the difference. VALUING THE SITE - correct answer A SITE VALUATION is an estimate of value of a property, excluding the value of any existing or proposed improvements "OFF" THE SITE ( OFF-SITE) - correct answer contrast these to site improvements, such as buildings and landscaping, that are called improvements. "ON" THE SITE - correct answer "ON" THE SITE ( ON-SITE) and are valued separately from the land. TIER LINES - correct answer The east-west lines(running parallel to the base line) are called TIER LINES. RANGE LINES - correct answer The north-south lines (parallel to the principal meridian) are referred to as RANGE LINES. Real estate appraisal principles and procedures Questions And Answers TOWNSHIP - correct answer One TOWNSHIP (Standard) is 6 mi.² (36 mi.²) COMMERCIAL ACRE - correct answer One COMMERCIAL ACRE Is an acre minus any required public dedications DISTANCE - correct answer DISTANCE is a measurement of one dimension only, such as the width of a lot or the height of a building. AREA - correct answer AREA is the size of something in two dimensions. VOLUME - correct answer Like Area, VOLUME is the size of something in more than one dimension. In the case of volume the thing to be measured has three dimensions. RECTANGLE - correct answer A RECTANGLE is any four- sided figure whose sides all meet at right angles (90 degrees) A=L x W Real estate appraisal principles and procedures Questions And Answers AREA = LENGTH x WIDTH AREA= 100 FEET x 50 FEET A= 100 x 50 A = 5,000 SQUARE FEET * AREA OF RECTANGLE = LENGTH x WIDTH TRIANGLE - correct answer A TRIANGLE Is any three sided figure who sides are straight lines. RECIPROCALS - correct answer The RECIPROCALS OF A NUMBER is equal to one divided by the number. CASE/ EXAMPLE: 0.5 is the reciprocal of 2. So 2 is also the reciprocal of 0.5. INTEREST - correct answer INTEREST = PRINCIPLE x RATE x TIME Real estate appraisal principles and procedures Questions And Answers COMPOUND INTEREST - correct answer Compounding interest Is the interest that is earned on both the principal and accrued (paid) interest. WIDTH & DEPTH - correct answer WIDTH is the dimensions of the site measured parallel to the street on which the site address is located. DEPTH Is the opposite dimension perpendicular to the street. FRONTAGE - correct answer FRONTAGE ( or front footage) is the length of a property's boundary where it adjoins a street or body of water. SITE DATA - correct answer SITE DATA is specific day that regarding this subject property site. PLOTTAGE - correct answer PLOTTAGE refers to the increase in value that results from combining two or more lots to allow for more profitable highest and best use. if two lots were worth more when combine then they were separately, the added value is called the plottage value or plottage increment.