Mckissock Basic Appraisal Principles Set II Chapters 9-12 with complete verified solutions 2024.

9| Market - mechanism for bringing together buyers and sellers - examples include the stock market, farmers market, used car market, bond market etc. 9| Supply & Demand - the amount of goods and services that are available for people to buy compared to the amount of goods and services that people want to buy. For example, if there is a shortage of something, I can probably raise my price when I'm selling. If there is a large supply, I may cut my price in order to sell it. Brainpower Read More Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:02 / 0:15 Full screen 9| Real Property Market - buyers and sellers of a particular real property and the transactions that occur among them. - participants of the real property market include buyers, sellers, landlords, tenants, real estate agents, home inspectors, contractors, and investors, underwriters, mortgage officers. 9| Active Market - a market with numerous transactions 9| Buyer's Market - a market with the buyers having the advantage, and market prices are relatively low due to oversupply of property. 9| Seller's Market - a market in which the seller's of available properties can obtain higher prices; few available properties are demanded at prevailing prices by many users and potential users. 9| A good market exhibits -homogeneous products, prices are relatively low, stable, products are easily transportable, organized market mechanism, a large # of buyers and sellers, little regulation or gov't intervention and supply and demand operate freely. - works well and efficiently if products prices are relatively low and has knowledgeable buyers and sellers 9| Homogeneous (heterogeneous) products - In real estate no parcel of land will be the same. Each parcel/property will differ in style, design, age, condition, topography, land size, and subsoil conditions etc. 9| Economic Theory - postulated that supply and demand should be free to move, and when unbalanced move toward a point of equilibrium. 9| Supply of real property in a market - existing or standing stock of a particular type of property 9| Imperfect Market - a market in which product differentation exists, there is a lack of important product or market information; some of the producers and or consumers are significant enough to affect the price and quantity of goods by their actions alone. 9| Market Area - includes a neighborhood, and district. - the geographic region from which a majority of demand comes and in which the majority of competition is located. 9| Neighborhood - a group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises. 9| District - a neighborhood characterized by homogeneous land use, apartment commercial, industrial, and agricultural 9| When It comes to market area, appraisers must... - identify the boundaries of the market area; look for observable changes in land use, demographic, or socioeconomic characteristics. 9| Real Property Market: Market Cycle - can be long term and is based on income and population levels - can also be short term based on the availability of mortgages and the prevailing interest rate 9| Real Property Market: Long Term Cycle - usually caused by national or even international changes such as opportunities for outsourcing local jobs or unemployment trends 9| Short Term Cycle Factors - the level of interest rates and the amount of credit available Real Property Market Analysis Questions What industries are in my area are experiencing growth? Which industries are stagnant and declining? If immigrants are fueling growth, is their arrival likely to continue Is a large population of my area aging? Is there a net increase or decline of population in my area? 10| Value-Homeowners - those who appreciate residential properties appreciate the value inherent in amenities - amenity : tangible or intangible benefit of real estate that enhances its attractiveness or increases the satisfaction of the users 10| Natural Amenities -waterfront location, scenic view of the surrounding area 10| Man-made Amenities - swimming pools, tennis courts, community buildings, other recreational facilities 10| Value-Investors - only focus on amenities if it is going to generate additional income for their properties Return on Investment (ROI) - is a performance measure used to evaluate the efficiency or profitability of an investment. This is also an example of an element of risk - the direct financial impact of a firm's expenditure of a resource, such as time or money 10| Return of Investment - an element of risk 10| Safety - savings account 10| Liquidity - the overall desirability of an investment - can you retrieve it in an emergency 10| Bonds and Stocks - stocks are a viable alternative investment - return on investment is not guarantedd, specifically with stocks 10| Investment Options - savings account - money market - CD - Stock -Bond - Real Estate 10| The Money Market - the interaction of buyers and sellers who trade short term money instruments 10| Capital Market - the interaction of buyers and sellers trading long or intermediate term money instruments 11| Contract Deed - two party document for buyers and sellers - a purchaser of real estate agrees to a small portion of the purchase price when the contract is signed and additional sums at intervals & in amounts specified in the contract etc. - this is offered when interest rates are higher and capital gains tax can be deterred; or when the seller is not in immediate need of money 11| Deed of Trust - three party doc, that includes the lender, borrowe, and trustee - a seller is financing the sale for the buyer. However, unlike a contact deed the seller delivers a warranty deed and legal title right away to the buyer and the sller holds the Deed of Trust on the property in the same manner. 11| Installment of Sales - seller receives payments overtime rather than cash at the original closing of the sale; - Contract deed and seller financed note along with trust deed transaction are installment sales. 11| Wrap Around Contract - variation of seller financing; the sller keeps the existing mortgage on behalf of the buyer, plus lends additional money to cover price paid above the balance of the underlying loan. - offers buyers an alternative to a new mortgage from a financial institution. - aka as an all inclusive deed of trust or all inclusive mortgage 12 | Elements of Value -for any economic value to have value it must possess desire, utility, scarcity, effective purchasing power - all of the elements of value must be present for value to occur. 12| Desire - a purchaser's wish for an item to satisfy human needs. (ex. shelter, food, clothing, and companionship) 12| Utility - the ability of a product to satisfy a human want, need, or desire 12| Functional Utility - the ability of a property or building to be useful and perform a function intended according market tastes and standards. - appraiser recognize functional utility as an element of value, and also measures loss of value as well as by the amount of diminished utility or inutility. - NO UTILITY = NO VALUE 12| Scarcity - the present or anticipated under supply of an item relative to the demand for it conditions of scarcity, contribute to value - scarcity usually triggers demand; the more scarce an item is, the more valuable it is likely to be 12| Effective Purchasing Power - the ability of an individual or group to participate in a market ie. to acquire goods and services w/ cash or its equivalent. - all elements of value must be present as well 12| Influences on Value - value is created and sustained by extreme market forces - value is not created by appraisers or a buyer/seller - as an appraiser your job is to research and analyze the property and the market, and develop and report an opinion of this value - 4 categories of external market forces include: governmental, economic, social, and environmental ALL affect real property value 12| Influences on Value: Governmental Forces - planning - zoning - building codes - environmental restrictions - taxes/utilities - transportation - education - cultural - parks and recreation - police - fire protection - public safety