3 SCARCITY is the perceived principle of SUPPLY AND DEMAND : the more supply
of goods or service relative to the demand the lower the value.If there is an
unlimited supply of something,it is perceived have little value.
4 IMMOBILITY real estate itself cannot move from one place to another.
4.1 INDESTRUCTIBILITY real estate cannot be destroyed.
5.1 is the opinion of the value of property,as of a specified date,supported by
objective data.The opinion is supported in writing with collected data and
reasoning.An appraiser uses data from 3 approaches value and applies them:
SALES COMPARISON,COST and INCOME
5.1.1 INCOME APPROACH is not generally used in a single family
220.127.116.11 SALES COMPARISON APPROACH is the most useful and credible of the three
appraisal methods in market value appraisal assignments,especially for
non-income-producing residential properties,because it is deeply rooted in
actual market activity.A minimum of three comparables is required by most
secondary market lenders to ensure an accurate appraisal from sufficient data.
18.104.22.168.1 AN APPRAISAL IS JUST AN OPINION OF VALUE.ONLY THE MARKETPLACE CAN
ESTABLISH THE TRUE VALUE OF PROPERTY.
22.214.171.124.2 COST APPROACH The process of estimating the value of a property by adding to the
estimated land value the appraiser's estimate of the reproduction or replacement cost of the
building, less depreciation. The cost approach bases the value of a property on the cost of
replacing it, not on the value of other homes in the area or on its ability to generate income.
126.96.36.199.2.1 6 STEPS - 1.DEFINES THE BASIS FOR THE COST 2.CHOOSES A COSTING METHOD 3.ESTIMATES
DEPRICIATION,FUNCTIONAL OBSOLESCENCE AND EXTERNAL OBSOLESCENCE*age
life*breakdown*market extraction 4.ADDS "AS IS" CONTRIBUTORY 5.ADDS VACANT LAND VALUE
6.CONCLUDES ON AN OPINION OF VALUE.
188.8.131.52.2.1.1 INCOME APPROACH The process of estimating the value of an income-producing property through
capitalization of the annual net income expected to be produced by the property during its
remaining useful life.
184.108.40.206.220.127.116.11 CAPITALIZATION RATE The discount rate used to determine the present value of a stream of future
earnings. Equals normalized earnings after taxes divided by present value, expressed as a percentage.
18.104.22.168.22.214.171.124.1 CAPITALIZATION RATE A number used in gauging a property's value. One multiplies the property's
monthly gross income by this figure.
126.96.36.199.188.8.131.52.1.1 NET OPERATING INCOME( NOI) Income after deducting for operating expenses but before
deducting for income taxes and interest.
6 DEPRECIATION is the loss in value to property for any reason.
7 PHYSICAL DETERIORATION is actual wear and tear due
to age,the elements,or other forces.
7.1 FUNCTIONAL OBSOLESCENCE mean a building is less
desirable because of something inherent in the structure
itself. (outdated style,outdated fixtures,faulty design)
7.1.1 EXTERNAL OBSOLESCENCE occurs when something outside the
control of the property makes it less desirable.(air pollution
heavier traffic) Incurable
8 REPLACEMENT is building the functional equivalent of the original
building using modern materials,design,and functional layout.
8.1 REPRODUCTION is building in exact replia of the original
building,dublicating the materials,design,functional layout,workmanship..
9 ASSESSED VALUE The dollar value of an asset assigned by a public tax assessor for the purposes of
10 EVALUATION is a study of nature,quality,or utility of certain property interests
in which a value estimate is not necessarily required.
11 HIGHEST AND BEST USE is the most profitable,legally
permitted,economically feasible,and physically possible use of a property.
12 MARKET VALUE is the theoretical price real estate will likely bring in a typical transaction.(ARMs
LENGTH TRANSACTION) meaning the transaction occured under typical conditions in the
marketplace,and each of the parties is a relative stranger to one another and was acting in their
own best interest.
12.1 MARKET VALUE is the EXPECTED PRICE.
12.1.1 MARKET PRICE is ACTUAL PRICE-what someone has
13 VALUE Worth- desirability or utility.
13.1 PRICE amount a ready,willing and able buyer agrees to pay for a property and seller agrees to
13.1.1 COST the total dollar expenditure for the land,materials,legal services,architectural design,financing,taxes
paid during construction,interest,profit,..defines property cost.
14 SUBSTITUTION An
appraisal principle that
states that the maximum
value of a property tends
to be set by the cost of
purchasing an equally
desirable and valuable
assuming that no costly
delay is encountered in
making the substitution.
15 CONFORMITY The
appraisal principle that
holds that the greater
the similarity among
properties in an area,
the better they will hold
their value. In general,
that a neighborhood
that is reasonably
similar in social and
economic activity will
result in properties that
reach their maximum
means a particular
item or feature of a
home is worth what
contributes in value
to that property.
17 RESIDENTIAL MARKET ANALYSIS is an in-depth study of your listing as it stands on its own,as well as in
light of current market conditions.
18 MARKET POSITION compared to your listing how many similar properties
are for sale in the same neighborhood and for a similar price?now where
does listing fit in among these properties?once you have determined your
listings market position ,you can effectively market.