Appraisal Questions and Answers 100% Pass

Appraisal Questions and Answers 100% Pass What is an "Appraisal"? The process of estimating, fixing or setting the market value of real property. An appraisal may take the form of a lengthy report, a completed form, a simple letter or even an oral report. What is an "Appreciation:"? An increase in the worth or value of property due to economic or related causes, which may prove to be either temporary or permanent What is an "Assessed valuation"? The value of real property as established by the state government for purposes of computing real property taxes. What is "Building residual technique"? A method of determining the value of an improvement, normally used in appraising income property. What is "Capitalization"? A mathematical process for converting net income into an indication of value, commonly used in the income approach to appraisal. What is "Cap rate (capitalization rate)"? The percentage selected for use in the income approach to valuation of improved property. The cap rate is designed to reflect the recapture of the original investment over the economic life of the improvement to give the investor an acceptable rate of return(yield) on the original investment and to provide for the return on borrowed capital. Define "Comparables"? Recently sold properties that are similar to a particular property being evaluated and that are used to indicate a reasonable fair market value for the subject property. Define "Depreciation"? As related to appraisal, loss in value due to any cause; any condition that adversely affects the value of an improvement What is "Fair Market Value"? The highest monetary price that a property would bring, if offered for sale for a reasonable period of time in a competitive market to a seller, willing but not compelled to sell, from a buyer, willing but not compelled to buy, both parties being fully informed of all the purposes to which the property is best adapted and for which it is capable of being used. What is "Functional obsolescence"? A loss in value of an improvement due to functional inadequacies, often caused by age or poor design. What is "Gross income Multiplier"? A useful rule of thumb to estimate market value of income-producing residential property. The multiplier is derived by using comparable sales divided by the actual or estimated monthly rentals and then arriving at an acceptable average. Define "Highest and best use"? That use which, at the time of appraising the property, is most likely to produce the greatest net return to the land and/or the building over a given period of time. Define "Income Approach"? An approach to the valuation or appraisal of real property as determined by the amount of net income the property will produce over its remaining economic life. What is an "Obsolescence"? A type of depreciation of property. What is "Plottage"? The increased value and improved usability that results from the merging or consolidating of adjacent lots into one larger lot. Reproduction cost—The cost on the basis of current prices, of reproducing an exact replica of property