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163 Cards in this Set
- Front
- Back
What does a lot block system use to develop a property's legal description? |
Plat references |
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How large is a section in the rectangular government system? |
640 Acres |
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What is a bound? |
A physical feature that defines the boundaries of the land. |
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Starting reference for metes and bounds description |
Point of Beginning |
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What is a mete |
The direction and distance of a line forming the boundary of a property |
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Which legal description uses compass headings and direction? |
Mete and Bound |
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What does the lock-and-block system use to develop a property's legal description? |
Plate Reference |
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What's a principal meridian |
A north-south line used as a reference point in the rectangular government survey system. |
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What's a Township |
A 36-mile square formed in the use of the rectangular government survey system. |
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Easement appurtenant |
The permanent right to use another's land for the benefit of a neighbor. With an easement appurtenant, the easement is on an adjoining property, and it is permanent. |
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Easement of Gross |
A right to use the land (does not necessarily involve an adjoining property) As you probably remember, a common type of easement is a utility company's right to access a property's lot to maintain it's power lines. |
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Easement of necessary |
Usually this involves access to a road: without such an easement, the owner requiring the right to passage would be landlocked. |
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Easement by Prescription |
This is an easement acquired though years of use-one person acquires the permanent right to use another person's property by doing so for a period of time. |
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Encroachment |
occurs when part of an improvement to the land (a building, fence, tree) extends over that property line into the next property. |
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Reversionary Interest |
property ownership goes back to the original owner at the end of the life estate. |
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Joint Tenancy |
Joint co-ownership without inheritance rights. Also requires time, title, interest, and possession. Equal ownership shares with undivided possession rights. |
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Termination of co-ownership by partition |
Ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively |
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Tenancy by Entirety |
Most often used by married couples and includes co-ownership with survivorship rights. |
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Tenancy in Common |
contains co-ownership with inheritance rights. Each person is entitled to possession on the whole. |
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Life Estate |
Ownership, Possession, and control for someone's lifetime. |
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Partitian |
Specific, divided portion of property that's created as part of a co-ownership termination. |
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Community Property |
Includes Unity of time, title, interest, possession, and marriage. |
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Fee Simple subject to a condition subsequent |
doesn't end automatically when the slated event or condition occurs. |
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SubChapter S Corporation |
Shareholders in a Subchapter S may deduct losses on their incomes taxes representing their share of the corporations losses |
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Partial Performance |
Only a portion of what a party has agreed to has been completed which is sometimes enough and other times will result in termination. |
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Specific Performance |
Lawsuit requiring the other party to perform under the terms of the contract (no Monies, just actions) Party must do exactly what is agreed what they agreed to do. |
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Substantial Performance |
One party has met most but not all of the terms specified in the contract and may be required to pay damages for terms not met. |
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Impossibility of Performance |
Property is destroyed or made the subject of eminent domain. |
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Operation of Law |
Manner in which an individual acquires rights or liabilities automatically due to law, and not through an agreement or act of their own. |
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Leasehold estate |
This defines the legal relationship between the parties who sign the lease. It grants possession, but not title, to the tenant, and is for a limited period of time.
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Estate for years |
This is a fixed termination type of lease that may be for a day, week, month, year, several years, or any definite period of time. When the specified date occurs, the lease terminates automatically |
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Periodic estate |
This involves possessory interest that's automatically renewed at the end of each period specified in the lease. |
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Estate at will |
In this type of leasehold, the duration of the lease is unknown at the time it's created. An example would be a month-to-month lease |
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Estate at sufferance (a.k.a. tenancy at sufferance)
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This is a type of possession in which a tenant stays after the right to possess has terminated. |
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Holdover tenant |
This is a tenant who refuses to leave after the expiration of a lease. |
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Lease |
This is a contract that transfers possession for consideration.
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Lessee |
This is the one who leases and is placed in possession (tenant).
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Lessor |
This is the one who leases out, granting temporary possession to another (landlord). |
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Stud |
Vertical wood pieces used for wall construction. |
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Joist |
Make up floor and ceiling frame |
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Rafter |
Wood framing member used in construction of the roof |
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Platform framing |
Framing of the structure rest on a subfloor platform |
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Balloon framing |
Single system of wall studs that run from the foundation to the ceiling |
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Post-and-beam framing |
Uses larger framing members, allowing for more distance between studs |
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Insulation |
Typically made of rock wool, fiberglass, or aluminum-wrapped fiberglass |
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Masonry Veneer |
A thin thin layer of brick over wooden walls |
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Solid Masonry |
Brick walls that support the roof structure |
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Weep Holes |
Ventilate the space between the brick and sheathing |
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Sheathing |
Usually made from insulated drywall or plywood and nailed directly to wooden studs |
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Siding |
Applied over the sheathing |
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Wall |
Header, Sheathing |
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Roof |
Flashing, Pitch |
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Overhang |
Fascia, Soffit |
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Step to create a new wall: |
Installing drywall - Sheet and platerboard that cover the studs and framework of the wall Taping - Strips of adhesive used to over drywall joints Floating - Nails and drywalls joints are covered with plaster Painting - Installing - Trim - Joints between doors, walls windows, and ceilings are covered |
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Electrical System |
Amperage - Amount of electricity flowing through wire. Voltage - Electrical Pressure Service Lateral - Underground wiring connecting the structure to the power source. Service drop - Above-ground wiring connecting the structure to the power source. Fuse - Electrical component that melts when over-heated. Circuit Breaker - Electrical component that trips when capacity is exceeded. |
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Wiring Materials |
BX Cable - armored cable consisting of insulated wires in a flexible metal enclosure. Romex - Non-metallic sheath cable that's alot like BX, except it's plastic coated, moisture resistant, flame retardant, less expensive and easier to install. Conduit - is a tube made of galvanized steel, plastic, or aluminum used to enclose the wires that carry current. It’s needed if BX or Romex, which have their own protection built in. Greenfield Conductors - look like BX but have no wires until they are put inside. Greenfield is made of flexible metal, and used for connecting air conditioners, clothes dryers, and other big appliances where BX or Romexaren’t used. |
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AC Components |
Evaporator - Take heat from the air and brings it to the refrigerant. Compressor - Create a flow of refrigerant from on part of the system to the other. Condenser - Liquefies the refrigerant gas by cooling it. |
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Ventilation |
System pulls air out of the kitchen, bathrooms, and other places where smells and pollutant concentrations occur. |
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Copper |
Most common used wiring now. |
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Forced Air system |
Uses a furnace to heat cool air and transport the warm air via ducts. |
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ASPAP 8 Step Process |
1. State the problem 2. Identify date needed 3. Gather and Analyze data 4. Determine Highest and best use 5. Estimate Value of land 6. Use three approaches to estimate property value. Sales comparison, cost approach, income approach 7. Reconcile values to determine final appraisal value. 8. Report Appraisal Value |
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DUST |
Demand - Is it desirable? Will people pay for it? Utility - How can it be used? What is the highest and best use? Scarcity - How rare is the property? For instance, is it a lot with a view? Transferability - Can it easily be sold to someone else in good condition with a good title. |
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Sales comparison approach AKA Market Extraction |
Used for: Residential single family Owner occupied Vacant Land Subject property similar to the comparable properties that have sold recently. |
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Appraisers work with other economic principals: |
The principle of contribution means that a part of a property is valued according to its contribution to the value of the whole, so you get max value when the improvements on a property produce the highest net return. The principle of competition says that the more competition from similar properties, the more downward pressure there is on pricing. The principle of conformity means that you get maximum value when the improvements on a property keep it in the same ballpark as the properties surrounding it. |
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Appraiser order of elements to make adjustments |
1. Financing terms and cash equivalency 2. Conditions of sale 3. Market conditions at time of contract and closing 4. Location 5. Physical characteristics |
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Bracketing |
Compares a group of comparable sales to the subject property to determine a probable range of value |
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Correlation |
Determines how much weight to give a comparable property |
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Cost Approach |
measures value as a cost of production, including acquisition of the land and the construction costs.Its reliability depends on valid “reproduction” (the cost of rebuilding) cost estimates, and appropriate depreciation estimates. This approach is most often used in these circumstances: New construction of both residential and commercial property. Unique properties, such as highly energy-efficient houses, residential acreage with excess land, and high-dollar houses with many amenities. Special-purpose commercial uses such as hospitals, some manufacturing plants, hotels, and other single-purpose properties. |
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Three types of Value of cost approach |
Site Value - Assumes land is vacant and bases opinion on highest and best use. Reproduction cost - cost to build exact replica of the subject property with the same materials and deficiencies. Replacement cost - Reflects the cost to build a functionally equivalent improvement |
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Income approach |
The appraiser analyzes a properties ability to earn future income. The income approach also capitalizes income into a indication of present value. This approach is used for single family houses (rental property) |
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Capitalization Formula |
The formula is value = income divided by rate of capitalization or $20,000 / .10 = $200,000.
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Substitution |
This is called the economic principle of substitution, which states that the lower-priced option of two properties of equal quality will likely sell first.
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External obsolescence |
Outside influences on value can lead to external obsolescence, which is incurable.
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Data Need for appraisal report to estimate the market value. |
General Data - Geographic and economic features of the nation, region, city, and neighborhood. Specific Data - Subject site and improvements including physical description. Sales comparison - Sales data on comparable properties. Cost approach - Cost data on contraction of a like property accrued depreciation data on the subject property. Income approach - Income and expense data from properties similar to the subject |
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Data Appraisers need to gather and analyze |
Climate and natural causes - Area Maps Population Trends - Area planning commissions, US census Bureau data, Local chamber of commerce, government councils Neighborhood Boundaries - Personal observation broker, city hall or courthouse, plat maps. Zoning - City hall or courthouse, county or city engineering commission, area planning commission Price range of market - Broker, title reports, property managers or owners, federal housing administration, local board of Realtors |
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General Data that better describes the geographic and economic market |
Traffic patterns - city hall or courthouse, city or county engineering commission, area planning commission, or highway and road commissions Employment Level - Financial institutions, local chamber of commerce government councils, labor organizations Tax structure and rates - City hall or county courthouse assessors office. Utilities available - City hall or county courthouse, public utility companies. Hazards and nuisances - Personal observation, neighborhoods
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Brownfield |
An abandoned or otherwise unused commercial or industrial site |
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Reversionary Interest |
With reversionary interest, the estates reverts to the original owner at the end of the life estate if another person isnt name as a remainderman. |
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Percolating |
the right to draw water from underground resources, such as wells, for the landowner’s use. |
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How are adjustments made in the analysis used in the sales comparison approach? |
By adding or subtracting a dollar value or percentage from the sales price of the comparable property.Whether an adjustment is made for a “good” or a “bad” feature, it’s made to the comparable, not to the subject. |
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When looking at a rectangular government survey system map, where would Section 36 be located? |
The numbers on the grid start with Section 1 in the northeastern corner of the township, and then follow a zigzag pattern, with Section 36 in the southeastern most corner. |
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Disposition |
The right of disposition provides the right to determine how, when, and whether the property is to be sold and transferred. |
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Forced air
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This is how forced-air heating (usually gas) works. This type of heating can be an issue for people with allergies because dust can be stirred up inside the heat ducts throughout the house.
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Physical |
Physical amenities and their quality can cause the value of properties in the neighborhood to go up or down |
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Cheryl wants new carpeting for her rectangular dining room. Her dining room is a 5 yards by 10 yards. How much carpeting does she need to buy to cover her entire dining room? |
50 yards squared
You need to find the area for this problem. Use this formula: area = 5 yards × 10 yards = 50 square yards. |
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Foundation walls are often constructed out of which of the following?
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Poured concrete, bricks, or concrete blocks Common materials for foundation walls include poured concrete, concrete blocks, and brick.
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Fee simple determinable |
A fee simple determinable has limitations as to what can or can’t be done with a property
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Abstraction method
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The ________________ method of land valuation is sometimes used when there’s little comparable sales data available and large parcels of land are involved.
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Encapsulation
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Encapsulation with specialized paints is a way to keep lead-based paint from potentially deteriorating and releasing toxic amounts of lead into the home.
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Utility |
The U in DUST is for utility, which looks at the property’s use or function.
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Cost approach |
Reproduction/replacement cost –accrued depreciation + site value = property value of improvements
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Four Methods to Finding the Reproduction Cost of a Structure |
Indexmethod: With this method, the appraiser applies a factor that represents the construction costs,up to the appraisal date,to the subject building’s original cost. Square-footmethod: With this method, the appraiser multiplies the cost per square foot of a recently constructed comparable structure by the number of square feet in the subject building.Generally, this method is theone appraisers use to estimate construction costs. Unit-in-placemethod: With this method, the appraiser multiplies the cost per unit of measure of each component part of the subject property’s structure (for example, the material, overhead, labor, and builder’s profit) by the number of units of that component part in the subject. The totalcomponentcost is the cost of a new structure. (Generally, component parts are provided in square feet, but someparts, like plumbing fixtures, are provided as completeunits.)Copyright © The CE Shop. All rights reserved.66 Quantity surveymethod: With this method, the appraiser adds the itemized costs—including direct and indirect expenses—of building or installing all of a new structure’s component parts. |
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Index method formula
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Present index ÷ Index at time of construction x Original cost = Present cost
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Square - foot method formula AKA Comparative Unit Method
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cost per square foot of a recently constructed comparable structure by the number of square feet in the subject building.
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Gross living area formula |
(Gross living area x Cost per square foot)+ Cost of the non-living areas + Cost of improvements = Reproduction cost new
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Unit - in - place method formula
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multiplies the cost per unit of measure of each component part of the subject property’s structure
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quantity survey method formula
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Direct costs + Indirect costs + Entrepreneurial profit = Total reproduction cost new
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Economic Life |
Period of time for which a structure can be used for the purpose for which it was originally intended. |
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Physical Life |
Amount of time during which the structure is expected to remain standing |
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Effective Age |
Age a structure appears to be measure of time, with regard to depreciation, is the age a structure appears to be? |
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Remaining Economic Life - Most important of the four measures of time |
Period of time beginning from the date of the appraisal and extending for as long as the property can remain useful for it's original purpose |
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Four Measures of Appreciation |
Market Extraction - also known as straight-line method or economic age-life method Observed Condition - also known as the breakdown method Capitalized Value - also known as rent loss method Age-Life - Method, also known as the market comparison or sales comparison method |
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Age-Life AKA Straight Line Method Effective age /Total Economic Life - Accrued depreciation |
Compare the structure's effective age at the time it's appraised with the structure's total economic life. |
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Observed Condition |
Estimates the property's loss in value for both curable and incurable items of depreciation. |
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Capitalized Value |
Applies a capitalization rate to an income comparison of similar properties. loss in income—due to depreciation—by comparing the income that similar properties produce. |
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Market Extraction |
Uses comparable properties' sales prices to figure out the value a depreciated item |
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Functional obsolescence |
form of depreciation or loss in value caused by defects in design, or design features that are no longer desirable. |
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Capitalization |
Describes the process of using income to calculate value. Technique of expressing potential income as current value |
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Capitalization Rate |
is the expected rate of return on an investment. In appraisals, the capitalization rate can be determined in several ways: direct capitalization, market extraction or brand of investment. Expressed as a ration of: New Operating Income / Value = Rate (NOI/V=R) |
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Capitalization recapture |
Return of original investment |
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Yield Capitalization Method
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Investors usually want to get a minimum rate of return on their investment. Using the yield capitalization method,future income estimatesare calculated, and then a discount rateis applied. The discount rate converts the future income to a present value,or,what it’sworth to an investor today.
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Annuity |
is a fixed annual return on an investment.
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Annuity capitalization |
is a method of converting the income from an annuity to a present value. It’s often used to determine how much of an investment is required now in order to yield a specific rate of return in the future.
simplifies the discounting process through the use of published financial tables. |
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recapture rate |
is a periodic allowance to recover the investment capital from the investment property’s income stream. |
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Annuity Factor Table |
provides a factor that’s multiplied by the investor’s desired level of annual income to learn The present value of the investment.
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building residual technique |
calculates how muchresidual income must be earned by the building, while also providinga value estimatefor the building.
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Cost of Capital |
the minimum rate of return an investor requires |
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Reversion |
The value of an income property at resale or at the end of a lease period |
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Cash Flow |
The income over and above expenses received from an investment. |
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Gross Income |
Income before expenses are deducted |
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Net Income
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Income after expenses have been deducted |
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Yield |
The amount of money returned from an investment |
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Net Operating Income |
Income projected after deducting loses for vacancy, collection loses, and operating expenses |
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Potential Gross Income |
The amount of income a property can produce if it is fully occupied and earning market rent |
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Effective Gross Income |
The amount of income a property is estimated to make after deducting vacancy and collections losses from potential gross income $900,000 - (900,000 x .20)The calculation for effective gross income must find the proper amount to be deducted by multiplying the percentage of loss with the potential gross income. |
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Accrual Basis Accounting |
A method of accounting that records income when earned and records expenses when incurred. |
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Capitol Improvements |
Changes or additions to a structure that either enhance the property's overall value or increase its useful life |
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Cash basis accouting |
A method of accounting that records income when received and records expenses when paid. |
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Reserves for Replacement |
An amount of money identified to cover the annual cost or repairing or replacing equipment and systems. |
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Operating Expenses Ratio |
Operating expenses / Effective gross income |
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Net Income Ratio |
Net Operating Income / Effective Gross Income |
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Break even Ratio |
(Operating Expenses / debt service) / effective gross income |
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Planned unit development (PUD)
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Appraising a home in a PUD isn’t much different than appraising any single-family residence. The homeowner owns the parcel of land and the structure built on it, and has the right to use thedevelopment’s common areas, which are usually owned by the PUD association. The important part for the appraiser (and the real estate agent)to ascertainisthat the subject unit is part of a PUD butis not a condominium. That distinction is extremely important to lenders, who’ll have different underwriting requirements for a condominium.The association’s Declaration of Covenants, Conditions, and Restrictions(CC&Rs)will tell the appraiser what the specific ownership and owners’rights are.
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Condominiums |
Since condominiums have both private and common areas, anappraiser needsto evaluate both. Forexample, Micky is appraisinga one-bedroom unit in a 25-unit complex. The complex has a pool, underground parking with assigned spaces, and a storage locker for each unit. Micky includes notes in his appraisal about: Whichareas of the complexare public and which are private The location of the subject unit within the complex Special facilities included in the common areas (such as the pool) The quality of upkeep for both common and private areas The association or management company responsible for maintenance of common areasFees charged by the association |
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Timeshare Projects |
Timeshares aren’t commonly appraised for loans. Most time shares don’t require major financing, for one thing,and in most cases,the appraisal will cost far too muchin relation to the purchase to warrant it. However, time shares may be appraised for value aspart of a legal proceeding or estate plan.Rememberthat purchasingtimeshare use doesn’t involve owningreal estate, while a time share estate doesgive the buyer a percentageof property ownership. This is one factor that complicates an appraiser’s job. Another is the wide variety of purchase prices, making it difficult to establish a reliablemarket value.
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Cooperatives |
Since the owner of a cooperative doesn’t own real estate, this appraisal assignment is different from other common ownership situations, such as a condo or aPUD. The appraiser has to find the market value of the specific shares and interest represented by the subject property. Like a condominium, the entire developmentrequires some description and evaluation, as doesthespecificsubject unit and the portion of ownershipit represents. Since a co-op can deny membership to a buyer, the appraiser has to consider how that may affect marketability and value.Appraisal of a unit in a cooperative housing project will often use the sales comparison approach, and when performed for a bank loan, the appraiser will report findings andvalue on Fannie Mae’s Individual Cooperative Interest Appraisal Report (Form 2090). |
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Gross lease: |
The amount of rent is fixed for the duration of the lease. The landlord is responsible for paying all expenses of ownership. This is the most commonly used type of lease for both residential and commercial property
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Net lease |
The tenant pays a fixed amount of rent, like withthe gross lease, but also pays specifiedexpenses, such as taxes, insurance, or maintenance |
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Triple net lease |
The tenant pays a fixed rent and also all operating and other expenses that would otherwise be the responsibility of the owner. This type of lease is also known as a net, net, net lease; absolute net lease; triple net lease; or 3N lease. |
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Percentage lease |
The tenant pays a base rent anda percentage of the gross sales received. The amount over the base rent is called overage rent.
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Reconciliation |
is the step in the appraisal process where appraisers consider the values from the applicable approaches and decide on a final value estimate
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Where can the Universal Appraisal Data set and the Uniform Collateral Data Portal be found?
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On the Fannie Mae websiteThe UAD and the UCDP are tools developed and required by Fannie Mae and can be found on their website.
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Gross rent multiplier |
Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.
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encroachment |
occurs when someone illegally places a structure or object on another person’s property, like Michael’s basketball hoop.
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Fee simple defeasible |
the property holder owns the property subject to a condition. If the condition is breached, then the property will go back to the original owner.
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Statute of frauds |
The statute of frauds requires that contracts transferring ownership of real property be in writing to be enforceable.
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The subdivision development method |
a large tract of land is purchased and prepared for development, and then split into parcels, |
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The principals to the transaction
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The appraiser may find this information published, but must verify all sales data with the principals to the transaction.
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To determine the estimated reproduction cost of a subject building using the index method |
The formula for the index method is: Present index ÷ Index at time of construction x Original cost = Present cost.
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Quitclaim deed |
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Observed Condition |
The observed condition method is also known as the breakdown method. This is because the appraiser analyzes each component of the structure in terms of the three categories of depreciation.
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The Appraisal Foundation
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The umbrella organization that’s authorized by Congress to develop and oversee the standards and requirements real estate appraisers must follow
a nonprofit corporation that bears responsibility for the standards used by real estate appraisers. |
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According to the EPA, at what level does radon become a health concern requiring mitigation? |
Although there is no safe level of radon, once the level reaches above 4.0 picocuries per liter of air, the EPA recommends radon mitigation. |
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Community property
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It’s similar to joint tenancy in that it has the right of survivorship and includes unity of time, title, interest, and possession, but with marriage added.
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What's the best definition of land?
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The earth's surface, extending downward to the center of the earth and upward to infinity, including permanently attached natural objects |
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Yield capitalization |
Both discounted cash flow analysis and annuity capitalization are forms of yield capitalization, which is a technique used to determine future income value.
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Metes and bounds
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Metes and bounds uses compass headings and directions.
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economic influencers of property value |
Interest rates and employment trends
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Regression analysis
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Regression analysis is a complicated computation that can determine a mathematical relationship between two or more factors, but it requires a large amount of data to draw valid conclusions. |
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What is a base line, as used in the rectangular government survey system? |
An east-west line used as a reference pointBase lines run east-west, and principal meridians run north-south. Both are used in the rectangular survey system
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Which real property ownership right grants the ability to determine who may enter your property? |
ExclusionThe right of exclusion provides the right to refuse other interests in your property. |
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Appraisal Independence Requirements are protections that were instituted by
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Fannie Mae instituted the AIR to help prevent appraisers from being pressured into determining a specific property value.
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What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach?
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Elements and units
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