BASIC APPRAISAL PROCEDURES FINAL EXAM QUESTIONS
WITH COMPLETE SOLUTION
Potential Gross Income (PGI)
the income that could be produced by a property in an ideal situation, with no vacancy
or collection losses
EX: all the income produced from a property
Effective Gross Income (EGI)
potential gross income, less vacancy and collection losses
Operating Expenses
day-to-day costs of running a building, such as repairs and maintenance, but not
including debt service or depreciation
Net operating Income (NOI)
income after expenses
Lot Dimensions
the first number in a lot size is its frontage
Gross Rent Multiplier (GRM)
a number derived from comparable rental property in an area, which is then used in an
income method for indicating a value conclusion.
Is determined by dividing the sold price of the comparable by the gross market rent
Restricted Appraisal Report
a type of appraisal report that is for the use of the client only, with no other intended
users
Reproduction
building an exact duplicate of the original building, giving the new structure the exact
look and feel of the original, including the original functional obsolescence (if any)
Replacement
building the functional equivalent (substitute) of the original building, using modern
materials, usually with one that is the same size, layout, quality, and utility as the
original, usually with the original functional obsolescence
Extraordinary Assumption
an assignment-specific assumption as of the effective date regarding uncertain
information used in an analysis which, if found to be false, could alter the appraiser's
opinions or conclusions.
Hypothetical Condition
a condition, directly related to a specific assignment, which is contrary to what is known
by the appraiser to exists on the effective date of the assignment results, but is used for
the purpose of analysis.
Exposure Time
the estimated period of time the property would have been offered on the market before
a hypothetical sale at market value on the effective date of the appraisal.
Marketing Time
the estimated period of time required to market the property after the effective date in
order to consummate a sale at market value
, Quantity Survey Method
the most detailed method of the cost approaches. the appraiser counts the number of
each type of part and material used to construct the subject building
Economic Life
the time during which a building can be used for its intended purpose and generate
more income than is paid out for operating expenses
Remaining Economic Life
the period of usefulness that a building has remaining as of the effective date of the
appraisal
Effective age
the age of a dwelling estimated by an appraiser and based on all forces of physical
deterioration and functional and external obsolescence and may be greater or less than
the Actual Age
Actual Age
the total number of years since the completion of a structure.
aka Chronological age
Depreciation
a loss in value to property for any reason - physical deterioration, functional
obsolescence, external obsolescence
Age Life Method
estimates depreciation as a ratio of the effective age of the improvements to the total
economic life.
Adjustment application
adjustments are only made to the comparable sale price and are made in sequence
Sequence of Adjustments #1
Property rights conveyed
Sequence of Adjustments #2
Financing terms
Sequence of Adjustments #3
Conditions of sale
Sequence of Adjustments #4
Market conditions
Sequence of Adjustments #5
Location
Sequence of Adjustments #6
Physical characteristics
Formula for Depreciation Percentage
Effective age / total economic life
Site Value
the best indicator is the sales comparison approach.
Extraction
takes the total property value less depreciated cost of improvements
Allocation
takes the typical ration of site value to total property value in an area and applies that
ratio to the subject property
Land Residual method
WITH COMPLETE SOLUTION
Potential Gross Income (PGI)
the income that could be produced by a property in an ideal situation, with no vacancy
or collection losses
EX: all the income produced from a property
Effective Gross Income (EGI)
potential gross income, less vacancy and collection losses
Operating Expenses
day-to-day costs of running a building, such as repairs and maintenance, but not
including debt service or depreciation
Net operating Income (NOI)
income after expenses
Lot Dimensions
the first number in a lot size is its frontage
Gross Rent Multiplier (GRM)
a number derived from comparable rental property in an area, which is then used in an
income method for indicating a value conclusion.
Is determined by dividing the sold price of the comparable by the gross market rent
Restricted Appraisal Report
a type of appraisal report that is for the use of the client only, with no other intended
users
Reproduction
building an exact duplicate of the original building, giving the new structure the exact
look and feel of the original, including the original functional obsolescence (if any)
Replacement
building the functional equivalent (substitute) of the original building, using modern
materials, usually with one that is the same size, layout, quality, and utility as the
original, usually with the original functional obsolescence
Extraordinary Assumption
an assignment-specific assumption as of the effective date regarding uncertain
information used in an analysis which, if found to be false, could alter the appraiser's
opinions or conclusions.
Hypothetical Condition
a condition, directly related to a specific assignment, which is contrary to what is known
by the appraiser to exists on the effective date of the assignment results, but is used for
the purpose of analysis.
Exposure Time
the estimated period of time the property would have been offered on the market before
a hypothetical sale at market value on the effective date of the appraisal.
Marketing Time
the estimated period of time required to market the property after the effective date in
order to consummate a sale at market value
, Quantity Survey Method
the most detailed method of the cost approaches. the appraiser counts the number of
each type of part and material used to construct the subject building
Economic Life
the time during which a building can be used for its intended purpose and generate
more income than is paid out for operating expenses
Remaining Economic Life
the period of usefulness that a building has remaining as of the effective date of the
appraisal
Effective age
the age of a dwelling estimated by an appraiser and based on all forces of physical
deterioration and functional and external obsolescence and may be greater or less than
the Actual Age
Actual Age
the total number of years since the completion of a structure.
aka Chronological age
Depreciation
a loss in value to property for any reason - physical deterioration, functional
obsolescence, external obsolescence
Age Life Method
estimates depreciation as a ratio of the effective age of the improvements to the total
economic life.
Adjustment application
adjustments are only made to the comparable sale price and are made in sequence
Sequence of Adjustments #1
Property rights conveyed
Sequence of Adjustments #2
Financing terms
Sequence of Adjustments #3
Conditions of sale
Sequence of Adjustments #4
Market conditions
Sequence of Adjustments #5
Location
Sequence of Adjustments #6
Physical characteristics
Formula for Depreciation Percentage
Effective age / total economic life
Site Value
the best indicator is the sales comparison approach.
Extraction
takes the total property value less depreciated cost of improvements
Allocation
takes the typical ration of site value to total property value in an area and applies that
ratio to the subject property
Land Residual method