Real Estate Principles

Flashcards covering key real estate principles including definitions of competition, conformity, contribution, externalities, and types of depreciation.

Competition

The active demand for real estate in short supply.

Conformity

The principle that properties that are similar in style, size, quality, etc. will maintain a higher value.

Contribution

The value of a particular component of a property.

Externalities

Conditions outside the property which affect the value of the property.

Highest and Best Use

The use which will bring the highest price for a particular property.

Progression / Regression

The effect that inferior and superior properties in the same vicinity have on each other.

Substitution

When two commodities are similar, the one with the lowest price will attract the greatest demand.

Surplus Productivity

If there is a difference in value in two similar properties, the difference is attributed to the land or location.

Cost Approach

Method of estimating value by calculating the cost to build it.

Replacement Cost

The cost at current prices to replace a building with one of equivalent utility.

Reproduction Cost

The cost at current prices to produce an exact duplicate of a building.

Physical Depreciation

Loss in value due to wear and tear.

Functional Depreciation

Loss in value due to outdated design or technology.

External Depreciation

Loss in value due to conditions outside the property.

Curable Depreciation

Any type of depreciation in which the amount of money spent to correct the deficiency is less than the resulting increase in value.