Principles of Real Estate 2 Champions School of
Real Estate Exam
appraisal - -appraisers opinion of value
principal of contribution - -the value if the property is equal to the sum if the
contributory value of each of its component parts.
loan to value ratio - -percentage of value or sales price that a lender is willing to
finance.
desk review - -goes through items as they analyze the appraisal report for
completeness and acceptable conclusions
field review - -independent 3rd party appraiser will be contracted to review the
appraisal report then verify the accuracy
limited appraisal - -exterior only/ drive by inspection (low risk loans)
subject property - -property being appraised
highest and best use - -gives greatest return in money or amenities
principle of change - -forces acting on the parcel of land are always affecting the
value of the land.
principle of anticipation - -purchase price is affected by the expectation of of future
appeal and benefits.
principle of substitution - -value of a commodity is influenced by the cost of
acquiring a substitute or a comparable item.
principle of conformity - -maximized value when homogeneity in neighborhood
principle of increasing and decreasing returns - -value added to improvement
exceeds the cost of improvement.
principle of supply and demand - -supply is short, prices go up. high supply, low
demand, prices go down
principle of regression - -presence of lower priced properties in the area will cause a
decline in the value of a subject property
principle of competition - -completion causes prices to increase
market value - -most reasonable price a property should bring in a competitive open
market.
, Principles of Real Estate 2 Champions School of
Real Estate Exam
ad valorem - -according to value
depreciation - -loss in value due to any cause
assessed value - -for tax purposes- determined by tax authority- not reliable estimate
of market value
chronological age - -physical number of years
sales comparison approach "market data approach" - -compares subject property
charectoristcs with those of comparable properties which have recently sold
functional obsolescence - -loss in value by factors outside
sales comparison - -price a wiling seller will sell for & price willing buyer will buy.
cost approach to value - -estimate of value based on current construction costs.
less depreciation, plus land value.
effective age - -age of structure based off observed physical condition determined by
the degree of maintenance and repair
uspap - -uniform standards of appraisal practice- established by appraisal
foundation
urar - -uniform residential appraisal report aka fannie mae form 1004, Freddie mac
form 70.
principle of progression - -value of subject property is increased by value of
surrounding properties
net adjustment - -absolute adjustments made to the comparable, considering those
that are +/-
gross adjustments - -sum of all adjustments.
gross rent multiplier - -grm= sales price/ monthly rent
net income - -gross income- expenses
ivr(income, return on investment, value) - -if similar properties in the market are
selling at prices that yield and investor a return of x%
potential rate of return(income, return on investment, value) - -r=I/v
certain rate of return (income, return on investment, value) - -I=v*r
Real Estate Exam
appraisal - -appraisers opinion of value
principal of contribution - -the value if the property is equal to the sum if the
contributory value of each of its component parts.
loan to value ratio - -percentage of value or sales price that a lender is willing to
finance.
desk review - -goes through items as they analyze the appraisal report for
completeness and acceptable conclusions
field review - -independent 3rd party appraiser will be contracted to review the
appraisal report then verify the accuracy
limited appraisal - -exterior only/ drive by inspection (low risk loans)
subject property - -property being appraised
highest and best use - -gives greatest return in money or amenities
principle of change - -forces acting on the parcel of land are always affecting the
value of the land.
principle of anticipation - -purchase price is affected by the expectation of of future
appeal and benefits.
principle of substitution - -value of a commodity is influenced by the cost of
acquiring a substitute or a comparable item.
principle of conformity - -maximized value when homogeneity in neighborhood
principle of increasing and decreasing returns - -value added to improvement
exceeds the cost of improvement.
principle of supply and demand - -supply is short, prices go up. high supply, low
demand, prices go down
principle of regression - -presence of lower priced properties in the area will cause a
decline in the value of a subject property
principle of competition - -completion causes prices to increase
market value - -most reasonable price a property should bring in a competitive open
market.
, Principles of Real Estate 2 Champions School of
Real Estate Exam
ad valorem - -according to value
depreciation - -loss in value due to any cause
assessed value - -for tax purposes- determined by tax authority- not reliable estimate
of market value
chronological age - -physical number of years
sales comparison approach "market data approach" - -compares subject property
charectoristcs with those of comparable properties which have recently sold
functional obsolescence - -loss in value by factors outside
sales comparison - -price a wiling seller will sell for & price willing buyer will buy.
cost approach to value - -estimate of value based on current construction costs.
less depreciation, plus land value.
effective age - -age of structure based off observed physical condition determined by
the degree of maintenance and repair
uspap - -uniform standards of appraisal practice- established by appraisal
foundation
urar - -uniform residential appraisal report aka fannie mae form 1004, Freddie mac
form 70.
principle of progression - -value of subject property is increased by value of
surrounding properties
net adjustment - -absolute adjustments made to the comparable, considering those
that are +/-
gross adjustments - -sum of all adjustments.
gross rent multiplier - -grm= sales price/ monthly rent
net income - -gross income- expenses
ivr(income, return on investment, value) - -if similar properties in the market are
selling at prices that yield and investor a return of x%
potential rate of return(income, return on investment, value) - -r=I/v
certain rate of return (income, return on investment, value) - -I=v*r
