Maryland Real Estate - Chapter 16

what is an appraisal?

opinion of value based on evidence

what is an appraisal based off of?

market value

what is Title XI of financial instituitons reform and recovery and enforcement act?

its an appraisal for a federal loan and must be done by professionals only

what properties dont need an appraisal?

federal loan properties selling for under $250k

what properties are eligible for property inspection waivers?

some fannie mae properties

who determines appraisaer licenser requirements

the appraiser qualification board

who does a CMA

not an appraiser, an agent

what does a CMA focus on?

properties similar to the subject property in size, location, and amentities to get a listing price

what are used as CMA comps?

sold properties, current compeition, and expired-unsold properties

what is a broker price opinion?

less expensive than a CMA and usually used in HELOC, refinances and portfolion mangaement or mitigation

what do BPOs usually take photos of?

the exterior of properties

what is the appraisal process?

define the problem

define scope fo work

gather the neighrbohood info, improvements, and sale/cost data

form opinion of value

reconcile values for final opinion

report final opinion of value

who comes up with the listing price

always the seller, regardless of what the appraisal and CMA states

what are the best rooms in a CMA?

bathrooms, lot sizes and if they are move in ready

what does the value of a property rely on

Dustwh

what does DUST stand for

demand

Utility

Scarcity

Transferability

what is market value

the most probably price a property should be to be competitive in a market

what is market price

the properties asking price or the offers on it

what does market value not equal

cost

what is anticipation

value based on events to occur

what is an example of anticipation

like a company bringing new jobs to the area

what is competition

interaction of supply and demandw

what is principal of change

whether natural or from market changes

what is principle of conformity

maximum value which makes properties harmonious with surroundings

what is principal of contribution

value of any part of property measured by how it affects a whole parcel

what is an example of principal of contribution

an updated kitchen or bathroom

what is the highest and best use

it gets the best profit, can change with social, political, and economical factors

what is the law of increasing returns

money spent on improvements produces increase in value

what is law of diminishing returns

additional improvements do not increase value

what is principle of plottage

bringing together lots into one to create better value

what is assemblage

merging 2 lots owned under one owner

what is regression

a better quality property affected by a lesser quality property

what is progression

modest home compared to luxury homes

what is principle of substitution

max value of a property tends to be set my how much it would cost to buy an equal value home

what is principle of supply and demand

they increase and decrease in accordance with eachother

what are the 3 methods of appraisal

sales comparison approach, cost approach, and income approach

what is the sales income approach

comparing subject to recently sold comps and analyze for differences

in a sales income approach, which property is adjusted for cost

the comp is always adjusted

what is the most reliable appraisal approach for single family homes

the sales income approach

what is the cost approach

it is the principle of substituition and they estimate vacant land, cost of construction, and accrued depreciation

what is never a depreciating aspect

land

what is physical deterioration

curable by repair and it will help increase value

what is functional obsolescence

loss in value from markets response to item, like updated kitchen and bathrooms

what is external obsolescence

environmental, social, or economical depreciation

what is the straight line method

depreciation assumed at an even rate of a structures economic life, like the period its expected to remain useful

how is economic life calculated

property cost divided by # of years

what is the income approach

based on present value of right to future income

what is the best approach for new or special use buildings

the coast approach

what is the best use for income approach

on apartments, offices, retail stores and shopping centers

how to find the effective gross income

deduct allowances for vacancies and rent loss

how to calculate net operating income

deduct annual operating expenses from the effective gross income

what are operating expenses example

management costs in apartment buildings

what is capitilization rate

the estimation of what an investor would payw

how to calculate the estimated property value

capitilzation rate and net operating income combined

what is the gross rent multiplier

monthly rental income for rough approximation of value on 1-4 family residences

what is gross income multiplier

annual income used on 5 or more units

what is reconciliation

act of analyzing the findings of the 3 appraisal approaches

what do you never do with the three appraisal approaches?

AVERAGE THEM