IAAO Course 101 Workbook: Chapter 1 Questions with correct Answers

Assessor - Answer- The government official responsible for administrating the property tax system and for Establishing value for ad valorem tax purposes Requirements of the assessor - Answer- Discovery , listing and valuation Discovery - Answer- Location of all taxable property Listing - Answer- Creating an inventory of the quantity, quality and important characteristics of all taxable property Valuation - Answer- An estimate of the actual or market value of all taxable property Property tax - Answer- Primary source of revenue for local governments Ad valorem - Answer- According to value Forms of expressing tax rates - Answer- Dollars per thousand, dollars per hundred and mills Formula for developing a tax rate - Answer- Tax rate = Budget / AV Formula for developing an effective tax rate - Answer- EAT Triangle Property - Answer- Right of any person to possess, use, enjoy and dispose of a thing Real property - Answer- Consists of the interest, benefits and rights inherent in the ownership of land and anything permanently affixed to it or legally defined as immovable Real estate - Answer- Land and improvements permanently affixed thereto Property classes - Answer- Residential, commercial, industrial and agricultural Residential property subclasses - Answer- Single-family, townhouse and condominium Commercial property subclasses - Answer- Multi family, retail, office and mixed use Industrial property subclasses - Answer- Manufacturing, storage and parts distribution Agricultural property subclasses - Answer- Grain farm, livestock, timber and pasture Personal property - Answer- Consists of items not permanently affixed to, or part of, the real estate Intangible personal property - Answer- Includes the rights over tangible and real and personal property Six basic rights associated with ownership of property (bundle of rights) - Answer- SLUGER Governmental restrictions on property ownership - Answer- PETE Police power - Answer- The right to regulate the use of property for the public welfare in the areas of safety, health, morals, zoning, building codes, traffic and sanitary regulations Eminent domain - Answer- The right to take property for public use provided just compensation is paid Taxation - Answer- The right to tax property for the support of government Escheat - Answer- The right of government to have property revert to the state for nonpayment of taxes or when there are no legal heirs of decedent who dies intestate (without a will) Private encumbrances on the ownership - Answer- Rights of co-owners, condominium in subdivision restrictions, covenants, conditions and restrictions found in the chain of title, mortgages, easements and rights-of-way, liens and judgments and leases Types of estates in property - Answer- Fee simple interest (fee simple absolute), lease hold interest, leased fee interest, possessory interest and life estate Lease hold interest - Answer- The tenant or leasees interest Leased fee interest - Answer- The landlord or leesors interest Possessory interest - Answer- The right to possess and use a property Fee simple (absolute) interest - Answer- The highest form of ownership Value - Answer- The present worth of future benefits arising from the ownership of real estate In order for property to have value, it must have: - Answer- Utility, scarcity, desirability and effective purchasing power Value in use - Answer- The value of the property for a specific use Value in exchange - Answer- The amount and informed buyer would offer in exchange for a property under given market conditions Cost - Answer- The sacrifice me to acquire property Price - Answer- The amount asked, offered, or paid for the property Conditions requisite to a fair sale - Answer- Buyer and seller typically motivated, both parties formed acting in your best interest, reasonable time as a lead for exposure in the open market, cash or financial arrangements comparable thereto and the price represents normal consideration for the property sold unaffected by creative financing and/or concessions Appraisal - Answer- Unipen you were estimate of value, usually in writing, they described property, as of a given date Valuation - Answer- The process of estimating the value - market, investment, insured etc... - of a specific property as of a given date Evaluation - Answer- The study of the nature, quality or utility of a parcel of real estate or interest in, or aspects of, real property , in which a value estimate is not necessarily required The basic principles of value - Answer- Principle of anticipation, change, balance, competition, conformity, consistent use, contribution, increasing/decreasing returns, progression/regression, substitution, surplus productivity and supply and demand Principle of anticipation - Answer- Present worth of future benefits Principal of change - Answer- Market value is never consistent because physical (environmental), economic, governmental and social forces are at work to change property and its environment Principal of balance - Answer- When applied to an individual property, maximum market value is reached when the four agents of production attain a state of equilibrium The four agents of production - Answer- Land, labor, capital and management Principle of competition - Answer- Created by the potential for profit, availability must be in harmony with demand if one or the other is in excess, prices rise or fall Principle of conformity - Answer- Maximum value is achieved when there is reasonable similarity I'm among improvements in the neighborhood, to some extent the value of property depends on how it relates to its surroundings Principle of consistent use - Answer- A property must be valued with a single use for the entire property Principle of contribution - Answer- The value of a component of property depends on its contribution to the whole Principle of increasing and decreasing returns - Answer- At a certain point, the additional successive increments of one agent of production decreases future incomes or amenities Principle of substitution - Answer- Market value of property tends to be set by the cost of aquiring an equally desireable and valuable property Principle of surplus productivity - Answer- The net income remaining after the costs of labor, management and capital have been satisfied Principle of supply and demand - Answer- Supply-The amount of goods the producers are willing to sell at a given price during a specific period, Demand- The amount of a commodity that consumers buy in at a given price during a specific period Elements of demand - Answer- Consumer taste and preferences, consumer income, price of related commodities, consumer expectations and the price of the commodity Demand = - Answer- Consumer Supply= - Answer- Producer The four major elements of 'The cost of Production' - Answer- Cost of raw materials, labor, technology and financing costs (interest rates) Highest and Best Use - Answer- The use that generates the highest net return to the property over a reasonable time period Criteria for highest and best use - Answer- Legally permissible, physically possible, financially feasible and maximally productive Interim use - Answer- The current highest and best use that is likely to change in a short to moderate time period The appraisal process - Answer- Definition of the problem, scope of work, preliminary survey and analysis, data collection and analysis, highest and best use, application of data and correlation/reconciliation Definition of the problem - Answer- Where, what, why, when and how Where what where why and how - Answer- Property to be appraised, property rights to be appraised, purpose and intended use of appraisal, date appraisal and definition of value Scope of work - Answer- The type and extent of research and analysis in an assignment Preliminary survey and planning - Answer- Generate a tentative highest and best use, develop an inventory of data required, consider the three approaches to value and allocate time and resources to accomplish the assignment Data collection and analysis - Answer- Gather general data, specific data and comparative data General data - Answer- Neighborhood characteristics, trends and factors (PEGS) Specific data - Answer- Site, offsite and improvement Comparative data - Answer- Cost, sales and income/expense Application of data and the approaches to value - Answer- Cost approach, sales comparison approach and income approach Correlation/reconciliation of indicated values - Answer- Reconciliation of the value indicators from the three approaches to value and resolution of differences and determination of the final estimate of value Steps in the cost approach - Answer- Estimate land as vacant, estimate cost new of improvements, estimate total depreciation, subtract depreciation from cost new of primary improvements, estimate the total cost new for accessory and site improvements, then estimate and deduct depreciation from the cost of those improvements, it's like value to the depreciated cost improvements to arrive at an indication of value Sales comparison approach - Answer- Data collection verification, analysis of market data and development of units of comparison, development of reasonable adjustments, application of adjustments to comparable sales and analysis of the justice sale prices to estimate the value of the subject The income approach - Answer- Estimate PGI from the market, estimate vacancy and collection loss and subtract from PGI and add miscellaneous income to arrive at EGI, analyze and estimate operating expenses, subtract operating expenses from EGI to arrive NOI, select an appropriate capitalization method, technique and rate, compute value by capitalizing NOI Trends affecting property value - Answer- Economy, price levels and building costs, business cycles, population, purchasing power, financing and property taxes For forces or factors of value - Answer- (PEGS) physical, economic, governmental and social Physical factors - Answer- Location (the most important), site attributes, Street patterns, proximity to support facilities, topography, climate, utilities, soil condition, drainage and hazards Economic factors - Answer- Jobs, family income, Price in rent levels, turnover in vacancy, land-use patterns, property taxes, foreclosure rate, Milton vacant land and fire insurance rates Government factors - Answer- Local laws, regulations, taxes and restrictions, municipal services, planning, zoning in the building codes, development regulations and special assessments Social factors - Answer- Population characteristics and shifts(age, lifestyle, etc...), crime and neighborhood cohesiveness Neighborhood - Answer- A neighborhood comprises complementary land uses in which all properties are similarly influenced by the four forces affecting property value and is a Subarea of an economic area Economic (market) area - Answer- A geographic area, typically encompassing a group of sub areas that are influenced to a great extent by the same economic factors Types of boundaries used to delineate neighborhoods - Answer- Natural, political and man-made Typical lifecycle of a neighborhood - Answer- Gro