Term
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Definition
Prevent Discrimination
Fair Lending (Laws/Regs)
· Equal access to credit based only on financial characteristics; ALL credit transactions |
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Term
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Definition
| – Relating to good or bad; having to do with moral duty and obligation |
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Term
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Definition
| – Relating to the principle of Right & Wrong |
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Term
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Definition
| – Preference or inclination that precludes and appraisers impartiality, independence, or objectivity in an assignment |
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Term
(UAD) Uniform Appraisal Dataset |
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Definition
– Program that provides for standardized formats and responses for many fields on most popular Residential
Appraisal Report Forms (1004, 2055, 1073, 1075)
· Only for mortgage loan for Freddie, Fannie, FHA, or VA
· C1 = Best
· C6 = Worst |
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Term
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Definition
| – Act or process of developing an opinion of value; opinion of value |
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Term
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Definition
| – Agreement between appraiser and client to provide valuation services; The valuation service that is provided as a consequence of such agreement |
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Term
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Definition
| – Party/parties who engage appraiser (by employment or contract) in a specific assignment |
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Term
| (AMC) – Appraiser Management Company |
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Definition
| – May engage appraiser as an agent for client |
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Term
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Definition
| – Parcel or tract of land, including improvements, Land (physical, tangible) and anything permanently attached to it. |
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Term
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Definition
| – Earths surface (land/water) anything attached to it whether by human hands or nature (all natural resources in natural state); In law, sound surface on the earth, distinguished from water; One of the four agents of production in economic theory |
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Term
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Definition
| – That can be bought and sold in the market place |
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Term
LAND – IMPORTANT CHARACTERISTICS
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Definition
· Unique Location
· Immobility
· Durability (Long lasting asset)
· Finite Supply (Increases price) |
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Term
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Definition
| – Right to the use/profits of the underground portion of a designated pro perm, usually refers to the right to extract coal, minerals, oil, gas, other hydro-carbons as designated in the grant; may include right-of-way over designated portions of surface; Right to construct/maintain tunnels, subways, sub-cellars, pipelines, sewers, etc |
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Term
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Definition
| – Right to undisturbed use/control of designated air space above a specific land area with in stated elevations. Rights may be acquired to construct a building above the land or building of another, or to protect the light and air of an existing/proposed structure on adjoining lot. |
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Term
(TDR) TRANSFERABLE DEVELOPMENT RIGHTS |
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Definition
| – May/may not exist. Development right that cannot be used by land owner or land owner chooses not to use, but can be sold to landowners in another location; Generally used to preserve agricultural land; May also be used to preserve historic sites or buildings and open space or to protect scenic features. Transferred from landowner in sending district to landowner in receiving district |
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Term
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Definition
– Article that was personal property but has since been installed/attached to the land or building in a rather permanent manner so that it is regarded as part of real estate; Usually man-made (fence, shed, etc)
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Term
Most common test to determine if fixture:
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Definition
· Method of attachment (screws, nails, set in place)
· Can it be removed with out doing permanent damage?
· The intent when it was attached (Permanent/Temporary)
(Ex) Area Rug – Not fixture
Wall to Wall carpet – Fixture |
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Term
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Definition
| – Identifiable, tangible objects that are considered by general public as being personal (Ex) Furnishings, artwork, antiques, gems, jewelry, collectibles, machinery, equipment…all tangible property NOT classified as Real Estate; Consists of every kind of property that is NOT Real Property; movable with out damage to itself or real estate; subdivided into tangible/intangible. Also called IAAO |
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Term
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Definition
| – Placed in or attached to rented buildings to help carry out trade or business of tenant. (Ex) shelves used to display merchandise = Personal Property. Also known as CHATTEL FIXTURES. Only in rented commercial space. (pizza ovens, bars, display case, restaurant equipment |
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Term
REAL ESTATE
REAL PROPERTY
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Definition
– Physical being
– Right & Benefits in owning Real Estate |
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Term
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Definition
each stick representing a distinct/separate right of property ownership
§ Use real estate
§ Sell it
§ Lease it
§ give it away
§ or choose to exercise ALL or NONE
REAL PROPERTY IS WHAT IS APPRAISED – NOT REAL ESTATE |
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Term
PUBLIC RESTRICTIONS – On Private Property Rights
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Definition
· Taxation
· Eminent Domain
· Police Power
· Escheat
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Term
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Definition
| – All real property is subject to taxation and occurs at the local level; Tax obligation creates liens against property |
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Term
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Definition
| – (condemnation) right of federal government to take private property for public use upon the payment of “JUST COMPENSATION”. 5th Amendment…”Takings Clause” guarantees payment and can be at the federal, state or local level. Just Compensation = appraisal |
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Term
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Definition
– (All levels of government) Right of government, through which property is regulated, to protect public safety, health, morals, and general welfare by:
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Term
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Definition
| – (Intestate – No Will) Right of government that gives state titular ownership of a property when its owner dies without a will or ascertainable heirs |
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Term
PRIVATE RESTRICTIONS – On private property rights
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Definition
· Mortgage
· Mechanics lien
· Deed restrictions (CC&R) – Conditions, Covenants and Restrictions |
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Term
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Definition
– Pledge of described property interest as collateral or security for repayment of loan under certain terms and conditions
– Document/clause in a document in which borrower accepts responsibility for repayment of loan |
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Term
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Definition
– Legal claim placed on real estate by someone who is owed money for labor, services, supplies to the property of improving it
· General Contractor
· Sub Contractor
· Suppliers of building materials |
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Term
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Definition
| – Provision in deed that limits the use of land, usually remains in effect when title passes |
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Term
CC&R – Conditions, Covenants and restrictions (Private) |
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Definition
– A list of expressed assurances/limitations on land use; often found in contracts between a land subdivider and a lot purchaser. Govern HOA. ( Similar to Deed restrictions but apply to more than 1 property)
· Building size/cost
· RV storage
· For sale signs/political signs
· Storage sheds/out buildings
· Landscaping/outdoor lighting |
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Term
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Definition
| – (Must be Unique) Description of land that identifies the real estate according to a system established or approved by law; An exact description that enables the real estate to be located & identified |
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Term
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Definition
| – (Most recent) Legal description that revers to parcel’s lot & block numbers; which appear on recorded maps and plats of subdivided land; may be used for assessment maps. (THIS CONTAINS NO PROPERTY DESCRIPTION…ONLY LOCATION…MUST HAVE CORRECT MAP) |
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Term
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Definition
| – (Earliest) Legal description that refers to parcel’s boundaries, which are formed by the (POB) – Point of Beginning and intermediate points (BOUNDS) and the courses or angular direction of each point (METES) |
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Term
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Definition
Refers to “Bearing” or direction relative to N or S
§ FULL CIRCLE = 360 DEGREES
§ 1 DEGREE = 60’ (MINUTES)
§ 1’ = 60” (SECONDS)
§ 1 DEGREE = 3,600” (60 X 60) |
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Term
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Definition
– Distance that a boundary runs at the prescribed angle (usually in feet and decimals)
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Term
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Definition
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Term
· RECTANGULAR SURVEY SYSTEM |
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Definition
| – same as (GOVERNMENT SURVEY SYSTEM) Based on standardized measurements and consistent squares. Divides land into Townships 6 miles square, each containing 36, 1 square mile sections of 640 acres…except where adjusted for curvature of the earth |
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Term
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Definition
§ MILE = 8 FURLONGS (5,280 FEET OR 660 X 8)
§ FURLONG = 660 FEET, OR 10 CHAINS
§ CHAIN = 66 FEET OR 4 RODS
§ ROD = 16.5 FEET OR 25 LINKS
§ LINK = 7.92 INCHES OR .67 FEET |
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Term
| RECTANGULAR SURVEY MEASUREMENTS |
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Definition
TOWNSHIP = 36 SQ MILES (6 X 6 MILES)
SECTION = 1 SQ MILE (5280’ X 5280’)
1 SQ MILE = 640 ACRES
¼ SECTION = 160 ACRES
QUARTER-QUARTER SECTION = 40 ACRES |
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Term
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Definition
| – Right/interest in property, defines an owners degree, quantity, nature, and extent of interest in real property. |
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Term
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Definition
| – (Leased Fee Interest) Where the possessory interest has been granted to another party by creation of a contractual landlord – Tenant relationship |
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Term
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Definition
– (Most Complete) Absolute ownership Unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, escheat
§ Inheritable
§ Transferable
§ Perpetual |
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Term
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Definition
| –(Missing rights) Divided/Undivided rights in real estate that represent less that the whole (fractional interest) |
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Term
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Definition
| – (Remainder Man) Rights of use, occupancy, and control, limited to the lifetime of a designated party, sometimes referred to as LIFE TENANT (Discounted value based on mortality tables) |
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Term
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Definition
| – (Non-Freehold Estate) Tenants possessory interest created by a lease |
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Term
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Definition
–(Diminished Estate) Right to use others land for stated purpose |
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Term
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Definition
– (Rail Road or Pipeline)Benefits a legal person/entity (individual, corporation, partnership, LLC, government entity, etc) and not a particular not a particular tract of land, Has servient estate, NO dominate estate |
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Term
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Definition
| – Having both dominant and servient estates. The easement interest passes with title to the dominant estate and continues to burden the servient estate |
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Term
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Definition
| – (Dominant estate) Right to perform a specific act on a property owned by another |
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Term
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Definition
| – Preventing a property owner from certain, otherwise permitted, uses of the land (ex) agreeing to not do something such as build wall/fence blocking adjoining property view |
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Term
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Definition
| –Interest in real property restricting future land use to preservation, conservation, wildlife habitat, or combination of |
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Term
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Definition
| – (Drainage Right-of-way) Right to drain surface water from one owners land over adjacent owners |
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Term
HISTORIC PRESERVATION EASEMENT |
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Definition
| – imposed by municipalities such as towns, cities, villages |
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Term
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Definition
| – Interest in real property that has the effect of prohibiting alteration of the exterior of an existing improvement |
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Term
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Definition
| (Personal property) A person, un-assignable, and typically revocable privilege or permit to perform some activity on the land of another with out obtaining an interest in the property (Hunting/Fishing on Private Property) |
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Term
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Definition
| – trespassing on domain of another (physical) (ex) build over property line |
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Term
INDIVIDUAL OWNERSHIP
TENANCY
CONCURRENT OWNERSHIP |
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Definition
– (Tenancy in Severalty) Estate in Real estate held by one owner
– Holding of property by any form of title
– more than one owner |
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Term
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Definition
– Estate held by two or more persons, each with undivided interest
§ Ownership does not have to be equal
§ No right of survivorship |
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Term
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Definition
– Ownership by two or more persons
§ All have equal percent (Unity of Interest)
§ All must go on title at same time (Unity of Time)
§ Has right of survivorship |
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Term
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Definition
– Estate of husband/wife in which neither has a disposable interest in property during the lifetime of the other, except through joint action
§ right of survivorship |
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Term
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Definition
| – If one owner dies, his interest automatically passes to the other owners |
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Term
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Definition
| – Legal vehicle for partial ownership interest in real property in which independently owned properties are conveyed to a trustee; may be used to effect a profitable assemblage or in some cases to facilitate the assigning of property as collateral for a loan |
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Term
PARTNERSHIP
GENERAL
LIMITED |
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Definition
– (Pooling funds)Association of two or more persons who carry on as co-owners of a business for profit
– All partners share in gain/loss, each has personal, unlimited responsibility liabilities
– Consist of General & limited partners limited partners are passive and liable only to the extent of capital contribution |
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Term
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Definition
| – In law, Organization that acts as a single legal entity in performing certain activities usually business for profit; also includes charitable, educational, religious organizations |
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Term
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Definition
| – Private/public partnership that pools funds for the acquisition/development of real estate projects or other ventures |
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Term
(REIT) REAL ESTATE INVESTMENT TRUST |
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Definition
| – Mutual fund for real estate |
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Term
(PUDS) – PLANNED UNIT DEVELOPMENT |
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Definition
| – Type of residential/commercial/industrial development in which buildings are clustered or set on lots that are smaller than usual, and large, open, park like areas are included within development |
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Term
Minimum Characteristics of PUD:
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Definition
§ HOA hold title to common areas
§ Mandatory membership of all unit owners
§ Right of unit owners to vote in operation of Association
§ Lien supported assessment of the members |
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Term
Timeshares
Fee Timesharing
Non-Fee Timeshare
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Definition
– Limited ownership interest in, or right to use residential apartment/hotel room
– Deed conveys title to unit for specific part of year
– Only rights granted by developer, No legal title to property |
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Term
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Definition
– Written, legal instrument that conveys an estate or interest in real property when it is executed and delivered
– Seller of property
– Buyer |
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Term
GRANT DEED
QUITCLAIM DEED |
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Definition
– Grantor does not expressly warrant the title as being free/clear from encumbrances and does not even warrant they are owner
– (Weakest form) Any interest grantor posseses in the property described is conveyed to the grantee without warranty of title |
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Term
BARGAIN AND SALE DEED
TAX DEED |
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Definition
– Convey real property from seller to buyer but does not guarantee clear title; used by court officials to convey property they hold by force of law, but do not hold title
– Bargain and sale deed used for tax sales where properties are taken over for NON-payment of real estate tax |
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Term
WARRENTY DEED
DEED OF TRUST |
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Definition
– (Best, most powerful) Conveys to grantee title to property free and clear of encumbrances, except those in document
– (Trust Deed) Title is vested in a third party, the trustee, until mortgage lein is payed (borrower/lender/trustee). Similar to martgage
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Term
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Definition
– Passing of title to real property back to original owner
– Record deed in public records at:
· Office of Country Clerk
· Recorder of Deeds
Prothontary
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Term
CONTRACT
PROMISE
ORAL CONTRACT |
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Definition
– Agreement between two people/businesses to Do/Not do something. Promise that the law will enforce
– Firm agreement to Do/Not do, pay, deliver spmething
– Details hard to prove, shorter statute of limitations than written contract |
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Term
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Definition
| – Cover sale of any “Goods” valued $500 plus, requires written contract |
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Term
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Definition
– Requires in writing:
· Real property title
· Conveyances
· 1yr + leases
· Wills
· Contracts start 1yr +
· Contracts not to be done in lifetime |
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Term
MUTUAL ASSENT
AGREEMENT
OFFER |
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Definition
– To the same terms (Offer/Acceptance)
– Offer, Accept, Performance (Live Up to Bargain)
– Ask someone to do something |
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Term
| OFFER STAYS OPEN TILL ONE OF THE FOLLOWING OCCURS: |
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Definition
· Accepted – (Contract is created and can be enforced)
· Rejected
· Retracted - (Revoked)
· Countered - (Counter-offer)
· Expired |
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Term
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Definition
| – Express/implied willingness to be bound by terms of offer |
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Term
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Definition
– Oral/Written (Stated)
o Leasing agreement
o Purchase offer
o Mortgages
o Installment contracts |
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Term
IMPLIED CONTRACT
BILATERAL CONTRACT
UNILATERAL CONTRACT |
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Definition
– Oral/Written (Inferred)
– Both parties make promise
o Real Estate – Buy/Sell
– One party makes promise to induce other party to do something
o Real Estate option to sell |
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Term
EXECUTED CONTRACT
EXECUTORY CONTRACT
VALID CONTRACT |
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Definition
– One that has been fully performed
– NOT fully performed/completed
– Binding/enforceable on all parties |
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Term
VOID CONTRACT
VOIDABLE CONTRACT
UNENFORCEABLE CONTRACT |
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Definition
– NO legal force/effect due to illegal element
– Failure of parties to meet legal requirements
o Will become valid if eligible party does not act)
– Appears to be valid but cont be enforced in court
o May still be valid if both parties agree |
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Term
5 ELEMENTS OF A CONTRACT:
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Definition
1. Competent parties (age/mental capacity)
2. Mutual agreement (Fraud, misrepresentation, duress)
3. Consideration (Something of value)
4. Lawful objective (not against public policy)
5. Written/signed (to be enforced) |
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Term
TERMINATION OF CONTRACTS BY:
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Definition
1. Agreement of both parties
2. Performance fo contract (full completion)
3. Impossibility of performance (unable to perform)
4. Operation of law (bankruptcy, statute of limitations, alteration of contract)
5. Release (releasing from obligation)
6. Assignment (transfer interest to another party
7. Novation (substitute new contract for old) |
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Term
EXECUTE
TIME OF ESSENCE CLAUSE
BREACH OF CONTRACT |
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Definition
– Finish, complete, perform as required
– Specific time to perform all by
– (Default) Failing to perform any term of a contract, written/oral, without a legitimate legal excuse
· Most common cause of lawsuits |
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Term
RECISSION
REFORMATION
INJUNCTION |
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Definition
– cancel by mutual agreement
– unintended language, omission, mistake
– writ (order issued by the court) |
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Term
SPECIFIC PERFORMANCE
COMPENSATORY DAMAGES
CONSEQUENTIAL DAMAGES |
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Definition
– be made to perform act
– payment for injury or economic loss
– payment for direct result of wrong doing |
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Term
ATTORNEY FEE/COST
LIQUIDATED DAMAGES
PUNITIVE DAMAGES |
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Definition
– must be specifically stated in contract
– payment agreed to by both parties
– payment for malicious, gross negligence |
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Term
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Definition
| – something of value given by buyer to seller to bind a bargain |
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Term
|
IF SELLER DEFAULTS / BUYER MAY:
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Definition
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Rescind contract, recover earnest money
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Specific Performance suit
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Compensatory Damages suit
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Term
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IF BUYER DEFAULTS / SELLER MAY:
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Definition
Forfeit contract, retain earnest money
Rescind
Specific Performance suit
Compensatory Damages suit |
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Term
LEASE
FLAT RENTAL LEASE
GROSS LEASE
NET LEASE |
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Definition
– Right to use/occupy land are transferred by owner to another for specific time period in return for rent
· Must be written with specific term spelled out
– Specific level of rent through lease term
- (Full-service) Lease with all bills paid
– Landlord passes all expenses to tenant
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Term
GRADUATED RENTAL LEASE
INDEX LEASE
REVALUATION LEASE
ESCALATOR LEASE |
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Definition
– (Step up / Step down) Provides specified changes in rent at several points during term
– (CPI) Long-term usually with adjustments for economy
– (Appraisal) Periodic rent adjustments based on market rental rate (Long-term usually)
– Lessor pays expenses first year, lessee pays increase in expenses as additional rent |
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Term
PERCENTAGE LEASE
OVERAGE RENT |
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Definition
– (Retail typically) Rent or some portion represents specified percentage of volume of business, productivity, or use achieved by tenant
– Percentage of rent promised over guaranteed minimum, calculated as percentage sales |
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Term
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Definition
| – Set of arrangements in which buyer/seller brought together through the price mechanism, the aggregate of possible buyers and sellers and transactions between them. Gathering of people for buying/selling of things; by extension, the people gathered for this purpose |
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Term
SUPPLY & DEMAND
REAL ESTATE MARKET |
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Definition
– price of commodity, good, service, varies directly, nut not necessarily proportionately with demand and inversely but not necessarily with supply
– Buyers/sellers of particular real estate and the transactions that occur between them |
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Term
ACTIVE MARKET
BUYERS MARKET
SELLERS MARKET
DEPRESSED MARKET |
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Definition
– Numerous transactions
– Buyers have advantage, oversupply of property
– Seller have advantage, low supply of property
– Drop in demand, plus oversupply of property and price decline |
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Term
| CHARACTERISTICS OF A GOOD MARKET |
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Definition
|
HOMOGENEOUS PRODUCT – Basically same product
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RELATIVELY LOW PRICE – Available to many
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STABLE PRICE – CPI relatively stable
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PRODUCTS EASILY TRANSPORTABLE – Take home
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ORGANIZED MARKET MECHANISM – NYSE
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LARGE NUMBER OF BUYER/SELLER – Ebay
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BUYER/SELLER KNOWLEDGAEABLE
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BUYER/SELLER RATIONAL – Not emotional
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LITTLE REGULATION / GOVERNMENT
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FREE SUPPLY / DEMAND
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Term
NEIGHBORHOOD
DISTRICT
MARKET AREA |
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Definition
– Group of complementary land uses; a congruous grouping of inhabitants, buildings, or businesses
– Neighborhood characterized by homogeneous land use; apartment, commercial, industrial, agricultural
– Area associated with a subject property that contains its direct competition |
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Term
AMENITY
NATURAL AMENITY
MAN-MADE AMENITY |
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Definition
– Tangible/Intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user
– Location, water, scenic view
– Swimming pool, tennis court, community buildings |
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Term
MONEY
PRICE OF MONEY
MONETARY POLICY |
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Definition
– Means different things to different people
– Interest rate
– Federal reserve’s efforts to influence the level of economic activity by regulating the availability of money and rate of interest |
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Term
SECONDARY MORTGAGE MARKET |
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Definition
– Market created by government and private agencies for purchase and sale fo existing mortgages. Provides greater liquidity for mortgages
· FANNIE MAE
· FREDDIE MAC
· GINNIE MAE |
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Term
FANNIE MAE
GINNIE MAE
FREDDIE MAC |
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Definition
– Single family, multi family, FHA, VA, Conventional
– FHA & VA loans owned by federal government in portfolio
– Federal Home Loan Mortgage Corporation. Conventional mortgage purchase and resale |
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Term
DUE TO SALE
LAND CONTRACT |
|
Definition
– requires mortgage to be paid in full if sold
– (Contract for Deed or Installment Contract) Purchaser of real estate agrees to pay a small portion of the purchase price when contract is signed and additional sums, at intervals/amounts specified in contract until total purchase price is paid and seller delivers deed. “Owner Financed” |
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Term
WRAP AROUND CONTRACT
MORTGAGE |
|
Definition
– seller keeps existing mortgage on behalf of buyer plus lends additional money to cover price paid over balance of underlying loan
– Pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions |
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Term
CONVENTIONAL MORTGAGE
GUARANTEED LOAN
INSURED LOAN |
|
Definition
– neither insured/guaranteed by government agency…privately insured (PMI) 20% LTV
– Mortgage that party other than borrower assumes payment in default
– Mortgage that party other than borrower assures payment on default in return for payment of premium |
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Term
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Definition
– HUD/FHA do not loan money, instead charge (UFMIP) – Up Front Mortgage Insurance Premium based on percentage of loan plus (MIP) monthly
HUD reimburses lender on default |
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Term
FIRST MORTGAGE
JUNIOR LEIN
AMORTIZATION |
|
Definition
– Has priority over all other mortgages on property
– Lien placed after a previous lien has been recorded, 2nd/3rd mortgage
– part of payment goes to interest and part to principle |
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Term
FIXED RATE LOAN
BALLOON MORTGAGE
GRADUATED PAYMENT MORTGAGE |
|
Definition
– (Most common) Fixed interest rate mortgage with equal payments over length of loan
– Not fully amortized at maturity, thus requires lump sum or balloon payment of outstanding balance
– Mortgage payments matched to projected increases in borrowers income; start low and increase |
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Term
ADJUSTABLE RATE MORTGAGE (ARM)
REVERSE MORTGAGE |
|
Definition
– Interest rate move up/down based on movement of a standard or index to which interest is tied
– Homeowner borrow against equity in home, receiving monthly payment from lender, funds & interest come due when borrower dies. Must be 62, estate has 12 months to repay loan or sale home to pay off loan, all remaining equity paid to the estate |
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Term
ECONOMIC GOOD – Need all 4 elements for it to have value
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|
Definition
· Desire
· Utility - supply
· Scarcity - supply
· Effective purchasing power – demand |
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Term
DESIRE
UTILITY
FUNCTIONAL UTILITY |
|
Definition
– Purchaser wish for item to satisfy human need (shelter, clothes, food, companionship) or wants beyond life-supporting needs
– Ability of product to satisfy human want, need, desire. Need to be able to use it
– property/building to perform function it was intended for according to current market taste/standards |
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Term
SCARCITY
PURCHASING POWER |
|
Definition
– Present/anticipated undersupply of an item relative to demand for it. Contributes to value
– Individual/group to participate in a market to aquire good/service with cash or equivalent |
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Term
INFLUENCES ON VALUE
4 CATAGORIES OF EXTERNAL FORCES
|
|
Definition
– Value is created by external market forces. NOT by appraiser, buyer or seller
· GOVERNMENTAL
· ECONOMIC
· SOCIAL
· ENVIROMNMENTAL |
|
|
Term
CPI – Consumer Price Index
COST OF CONSTRUCTION |
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Definition
= cost of living tracker
– Residential / Commercial
· Land cost
· Material cost
· Labor cost |
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Term
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Definition
| – Between unrelated parties under do duress |
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Term
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Definition
| – Time property remains on market (or) estimated length would have been offered on market prior to sale at market value on effective date of appraisal. FUNCTION OF PRICE/TIME/USE…not time alone |
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Term
SOURCES FOR EXPOSURE TIME
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Definition
· Statistical information about days on market
· Information gatheres through sales verification
· Interviews of market participants
· Information from data collection services |
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Term
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Definition
| – Present worth of the future benefits that accrue to real property ownership at a given time. Monetary relationship between properties and those who buy/sell/use those properties. NOT A FACT – an opinion |
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Term
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Definition
– Amount asked/offered/paid for property. Once stated, price is FACT. Bargain between buyer/seller
– Amount required to create/produce/obtain a property |
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Term
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Definition
| – Most common type of value sought by real property appraisers. “WHAT WILL IT FETCH?”. Always pinned to a specific point in time |
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Term
ECONOMIC PRINCIPLES
PRINCIPLE OF ANTICIPATION
PRINCIPLE OF CHANGE |
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Definition
– Foundation of real property appraising
– (Income producing properties) Perception that value is created by the ecpectation of benefits to be derived in the future
– (4 External Market factors) Result of cause/effect amoung the forces that influence real property value |
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Term
PRINCIPLE OF SUPPLY & DEMAND
PRINCIPLE OF COMPETITION
PRINCIPLE OF SUBSTITUTION |
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Definition
– (Most basic economic principle) price of a good/service varies directly, but not necessarily proportionately with demand and inversely with supply
– (Always consider) Two or more potential buyer/seller in market
– (Cost & sales comparison) Lowest price will attract greatest demand and widest distribution. Assumes no delay in substitution and buyer will accept substitute |
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Term
PRINCIPLE OF CONTRIBUTION
PRINICPLE OF EXTERNALITIES |
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Definition
– (Value not measured in cost) a value of a component is measured in its contribution to the value of whole property or amount its absence would detract from value
– (Location, Location) Good or bad things can happen to property value depending on whats around it |
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Term
PRINCIPLE OF BALANCE
PRINCIPLE OF COMFORMITY |
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Definition
– (Proper balance = max value) Real property value is created and sustained when contrasting, opposing, interacting elements are in equilibrium
– (Meet demands of “Normal” to area) Real property value is created and sustained when property conform to demands of market |
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Term
PRINCIPLE OF PROGRESSION
PRINCIPLE OF REGRESSION |
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Definition
– (Cheapest home on block) Value of inferior property is enhanced by association with better properties of same type
– (Nicest home on block) Value of superior property is adversely affected by association with inferior property of same type |
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Term
PRINCIPLE OF OPPORTUNITY COST |
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Definition
| – Give up to get) Options for gome or not chosen |
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Term
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Definition
– (Value = cost to produce) Land, labor, capital, entrepreneurial coordination. Each component requires a return
Land = Rent labor = Wage Capital = Interest Entrepreneurship = Profit |
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Term
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Definition
| – Net income after costs of agents of production have been paid |
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Term
INCREASING/DECREASING RETURNS |
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Definition
| – Successive increments of one or more agents of production added to fixed amount of other agents of production will enhance income, in dollars, benefits or amenities at increasing rate till max return is reached then income will decrease |
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Term
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Definition
– (vacant & improved property) For which property is best suited, will produce the best utility, and will bring highest return based on 4 criteria
1. Legally Permissable – (Zoning, Private restrictions)
2. Physically Possible – (Characteristics of Land)
3. Financially Feasible – (Viable market & demand)
4. Maximally Productive – (Highest return) |
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Term
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Definition
| – (Any economic good) Process for examining the demand for and supply of a property type and the geographic market area for that property type |
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Term
REAL ESTATE MARKET
MARKET AREA |
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Definition
– buyers/sellers of particular real estate and the transactions that occur among them
– Area associated with a subject property that contains direct competition |
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Term
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Definition
| – (Social, economic, governmental, environmental) Objective analysis of observable, quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values, focuses on 4 external forces that affect value |
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Term
MACROECONOMICS
MICROECONOMICS |
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Definition
– (Big Picture) Study of econoy as an aggregate system, focusing on national/domestic production, income, supply or money, inflation rate, national budget, balance of trade and relationship among constituent sectors
– (Local market) Study of economic of individual spheres of activity or patterns and bahaviors (Ex) firm, industry, retail market, comsumer segment, pricing, local employment |
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Term
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Definition
| – Division of a total market that reflects the preferences of a particular set of buyers/sellers (Ex) gfast food restaurants as a submarket of overall restaurant market |
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Term
MARKET SEGMENTATION
DISAGGREGATION |
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Definition
– (Identify submarket process) Process by which submarkets within a larger market are identified and analyzed
– (3-4 important factors & 1-2 influences) Differentiation of a subject property on the basis of subclassifications with differing product chafacteristics |
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Term
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Definition
· Property type
· Particular characteristics
· Most probable user (Demand)
· Available competing properties (Supply)
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Term
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Definition
| – Macroeconomic analysis that examines the general market conditions of supply, demand, pricing, or demographics of demand for specific area/property type may also include analysis of construction and absorption trends |
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Term
ABSORPTION RATE
ABSORPTION PERIOD |
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Definition
– Rate at which for sale/lease properties are expected to be marketed, sold, leased in a given area over a duration of time
– Actual/expected period required from time property, group of properties, or commodity is initially offered for lease/purchase/use by eventual users until all portions have been sold/leased |
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Term
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Definition
| – Microeconomic study that ez=xamines the marketability of a given property or class, usually focusing on market segments that property likely to generate demand. USEFUL for highest/best use, developmental proposal, projecting appropriate tenet mix |
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Term
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Definition
| – (Investment analysis) Investigation to determine whether a project will fulfill the objectives or investor. Profitability, highest/best (Investment value to investor) |
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