BUS-R 305 EXAM 1 VERIFIED STUDY GUIDE
Classifications of income property - Answers - 1. Residential: single family or multifamily
2. Non-residential: commercial, office, retail, industrial, hotel, special purpose
Self-assessment - Answers - Are you an analytical or a people-orientated person?
Brokerage and leasing - Answers - Brings buyers/tenants and sellers/landlords together
Residential agent - Answers - Acts on behalf of the broker in buying and selling of
residential properties
Appraiser - Answers - Provides an opinion of value
Underwriter - Answers - Analyzes and assesses investment risk
Investment and development - Answers - Developer creates value through project
development
Property management - Answers - Oversees and manages various commercial and
residential real estate properties
Corporate real estate - Answers - Property that a company owns or holds for the
purposes of housing its operations
Market value - Answers - Most probable selling price, assuming "normal" sale
conditions. The concept of market value rests upon the presence of willing buyers and
sellers freely bidding in competition with one another.
Market price - Answers - Price an asset is sold for
Cost - Answers - How much an asset would cost (cost of land/building)
Investment value - Answers - Value of the property to a particular investor, based on his
specific requirements, discount rate, expectations, and so on
Value in use - Answers - Value of a property assuming a specific use
Assessed value - Answers - Dollar value assigned to a home or other piece of real
estate for property tax purposes
Insurable value - Answers - Value of a property that an insurer is willing to provide
insurance for
, Going concern value - Answers - Total value of the real estate plus the business
operation
Salvage value - Answers - Amount that an asset is estimated to be worth at the end of
its useful life
Book value - Answers - Purchase price less accrued depreciation
Liquidation value - Answers - Expected value of an asset once it has been sold
Mortgage value - Answers - Value of the mortgage on the home
Market (or Sales Comparison) approach - Answers - Value derived by comparing similar
properties that have sold recently to the subject property
Cost approach - Answers - Value derived by adding the contributing value of any
improvements after deduction for accrued depreciation to the value of the land as if
vacant based on its highest and best use
Income approach - Answers - Value derived by converting expected income into a
present value
Highest and best use - Answers - Use of a property found to be (1) legally permissible,
(2) physically possible, (3) financially feasible, and (4) maximally productive
Interim use - Answers - A temporary highest and best use
Existing use of a building continues UNTIL - Answers - value of land as if vacant (new
use) - demolition costs > value of property as improved (current use)
Cost approach formula - Answers - Market value = Estimated cost to construct structure
today - Estimated accrued depreciation + Estimated land value + Absorption costs
Physical depreciation - Answers - Measures wear and tear on a physical building over
time
Functional depreciation - Answers - Occurs when design features are outdated, not
useful, or not aligned with market tastes and standards
External depreciation - Answers - A loss in value caused by negative influences outside
of a property's site, such as economic factors or environmental changes
Curable depreciation - Answers - A loss of value that can be corrected at a cost less
than the increase in property value that would result if it were corrected
Classifications of income property - Answers - 1. Residential: single family or multifamily
2. Non-residential: commercial, office, retail, industrial, hotel, special purpose
Self-assessment - Answers - Are you an analytical or a people-orientated person?
Brokerage and leasing - Answers - Brings buyers/tenants and sellers/landlords together
Residential agent - Answers - Acts on behalf of the broker in buying and selling of
residential properties
Appraiser - Answers - Provides an opinion of value
Underwriter - Answers - Analyzes and assesses investment risk
Investment and development - Answers - Developer creates value through project
development
Property management - Answers - Oversees and manages various commercial and
residential real estate properties
Corporate real estate - Answers - Property that a company owns or holds for the
purposes of housing its operations
Market value - Answers - Most probable selling price, assuming "normal" sale
conditions. The concept of market value rests upon the presence of willing buyers and
sellers freely bidding in competition with one another.
Market price - Answers - Price an asset is sold for
Cost - Answers - How much an asset would cost (cost of land/building)
Investment value - Answers - Value of the property to a particular investor, based on his
specific requirements, discount rate, expectations, and so on
Value in use - Answers - Value of a property assuming a specific use
Assessed value - Answers - Dollar value assigned to a home or other piece of real
estate for property tax purposes
Insurable value - Answers - Value of a property that an insurer is willing to provide
insurance for
, Going concern value - Answers - Total value of the real estate plus the business
operation
Salvage value - Answers - Amount that an asset is estimated to be worth at the end of
its useful life
Book value - Answers - Purchase price less accrued depreciation
Liquidation value - Answers - Expected value of an asset once it has been sold
Mortgage value - Answers - Value of the mortgage on the home
Market (or Sales Comparison) approach - Answers - Value derived by comparing similar
properties that have sold recently to the subject property
Cost approach - Answers - Value derived by adding the contributing value of any
improvements after deduction for accrued depreciation to the value of the land as if
vacant based on its highest and best use
Income approach - Answers - Value derived by converting expected income into a
present value
Highest and best use - Answers - Use of a property found to be (1) legally permissible,
(2) physically possible, (3) financially feasible, and (4) maximally productive
Interim use - Answers - A temporary highest and best use
Existing use of a building continues UNTIL - Answers - value of land as if vacant (new
use) - demolition costs > value of property as improved (current use)
Cost approach formula - Answers - Market value = Estimated cost to construct structure
today - Estimated accrued depreciation + Estimated land value + Absorption costs
Physical depreciation - Answers - Measures wear and tear on a physical building over
time
Functional depreciation - Answers - Occurs when design features are outdated, not
useful, or not aligned with market tastes and standards
External depreciation - Answers - A loss in value caused by negative influences outside
of a property's site, such as economic factors or environmental changes
Curable depreciation - Answers - A loss of value that can be corrected at a cost less
than the increase in property value that would result if it were corrected
