Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
Depreciation a concept well known by appraisers, is the loss of value because of
obsolescence (becoming obsolete) or deterioration.
Depreciation is also tied closely with a property's effective age,
Effective Age an estimated age that is influenced by the updates and quality of
maintenance of the property.
An appraiser's job: a licensed real estate agent cannot perform an appraisal unless they are
also a licensed appraiser.
supply impartial and unbiased information in order to estimate the value of a property.
appraisal report a report from a licensed appraiser that sums up a property's market value
based on collected data.
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
Principle of Anticipation The idea that the present value of a property is affected by the
anticipated income or utility that property will give its property owner.
Principle of Anticipation EXAMPLE Jimmy is buying a property and plans to rent it out
for business purposes — his ability to make income off of rent is affecting the amount he is
willing to bid on the house.
Principle of Contribution The idea that a property's overall value is made up of the
combined value of each of its parts. But the contributory value of an item is not always equal to
the price of that item.
Principle of Contribution EXAMPLE Jimmy renovated his kitchen, but was disappointed
that the appraisal of his house only added part of the cost of the renovation to his house's value
— Jimmy learned that his house's overall value is made up of the value of all of the parts. (The
broken-down A/C affects his house's value as much as the new kitchen.)
Principle of Substitution States that the value of something is affected by the cost of
getting a similar (substitute) item elsewhere.
EXAMPLE:
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
Jimmy wants to put his house for sale, and his neighbor Shane, who has an almost identical
house in his neighbor, put his house up for sale — Jimmy is carefully watching Shane (and vice
versa).
Principle of Change Reminds us that the condition of a property, the desirability of its
location, and the market in which it exists can always change, which could affect the value of the
property.
EXAMPLE:
Jimmy got an appraisal for his home in 2015, but market conditions have changed so that
appraisal is no longer correct.
Principles of Supply and Demand States that when supply is low and demand is high,
prices will increase. And if supply is plentiful and demand is low? Prices will then drop.
EXAMPLE:
The local factory in Jimmy's town shut down, and suddenly 30% of the town put their house for
sale — due to this supply increase (and demand decrease), the value of Jimmy's house decreased.
Principle of Conformity: Claims that maximum value is realized when land use is in
harmony with surrounding standards.
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
EXAMPLE:
Jimmy's house has a "farmhouse look" and so do the houses that surround his — the high value
of Jimmy's house is partly a result of the fact that the houses that surround his have a similar
look.
Principles of Regression & Progression states that the presence of higher value or lower
value homes near the subject property can change its value.
EXAMPLE:
Jimmy's small home is surrounded by larger, more expensive homes. The value of Jimmy's house
is probably increased through the principle of progression.
DUST: four characteristics that make real estate valuable: Demand: If there are multiple
buyers interested in a property, the property will increase in value.
Utility: Properties need to be useful or serve some kind of purpose in order to have value to a
buyer. An empty lot, for example, may not look like it has much utility, but to a buyer who wants
to build a custom home in that area, it's quite useful!
Scarcity: If the amount of housing in an area is low in supply, it grows in value.
Transferability: Whether it's government rules or a title issue, anything that limits the
transferability of real estate makes it less valuable.
Questions And Complete Answers
Depreciation a concept well known by appraisers, is the loss of value because of
obsolescence (becoming obsolete) or deterioration.
Depreciation is also tied closely with a property's effective age,
Effective Age an estimated age that is influenced by the updates and quality of
maintenance of the property.
An appraiser's job: a licensed real estate agent cannot perform an appraisal unless they are
also a licensed appraiser.
supply impartial and unbiased information in order to estimate the value of a property.
appraisal report a report from a licensed appraiser that sums up a property's market value
based on collected data.
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
Principle of Anticipation The idea that the present value of a property is affected by the
anticipated income or utility that property will give its property owner.
Principle of Anticipation EXAMPLE Jimmy is buying a property and plans to rent it out
for business purposes — his ability to make income off of rent is affecting the amount he is
willing to bid on the house.
Principle of Contribution The idea that a property's overall value is made up of the
combined value of each of its parts. But the contributory value of an item is not always equal to
the price of that item.
Principle of Contribution EXAMPLE Jimmy renovated his kitchen, but was disappointed
that the appraisal of his house only added part of the cost of the renovation to his house's value
— Jimmy learned that his house's overall value is made up of the value of all of the parts. (The
broken-down A/C affects his house's value as much as the new kitchen.)
Principle of Substitution States that the value of something is affected by the cost of
getting a similar (substitute) item elsewhere.
EXAMPLE:
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
Jimmy wants to put his house for sale, and his neighbor Shane, who has an almost identical
house in his neighbor, put his house up for sale — Jimmy is carefully watching Shane (and vice
versa).
Principle of Change Reminds us that the condition of a property, the desirability of its
location, and the market in which it exists can always change, which could affect the value of the
property.
EXAMPLE:
Jimmy got an appraisal for his home in 2015, but market conditions have changed so that
appraisal is no longer correct.
Principles of Supply and Demand States that when supply is low and demand is high,
prices will increase. And if supply is plentiful and demand is low? Prices will then drop.
EXAMPLE:
The local factory in Jimmy's town shut down, and suddenly 30% of the town put their house for
sale — due to this supply increase (and demand decrease), the value of Jimmy's house decreased.
Principle of Conformity: Claims that maximum value is realized when land use is in
harmony with surrounding standards.
, Aceable Principles of Real Estate 2 Review
Questions And Complete Answers
EXAMPLE:
Jimmy's house has a "farmhouse look" and so do the houses that surround his — the high value
of Jimmy's house is partly a result of the fact that the houses that surround his have a similar
look.
Principles of Regression & Progression states that the presence of higher value or lower
value homes near the subject property can change its value.
EXAMPLE:
Jimmy's small home is surrounded by larger, more expensive homes. The value of Jimmy's house
is probably increased through the principle of progression.
DUST: four characteristics that make real estate valuable: Demand: If there are multiple
buyers interested in a property, the property will increase in value.
Utility: Properties need to be useful or serve some kind of purpose in order to have value to a
buyer. An empty lot, for example, may not look like it has much utility, but to a buyer who wants
to build a custom home in that area, it's quite useful!
Scarcity: If the amount of housing in an area is low in supply, it grows in value.
Transferability: Whether it's government rules or a title issue, anything that limits the
transferability of real estate makes it less valuable.
