Valuation and Market Analysis Flashcards

A set of vocabulary flashcards covering the principles and methods of real estate appraisal and market analysis.

Appraisal

The process of determining the fair market value of real property, which must be performed by a licensed or certified appraiser.

FHA and VA

Specific government lending programs that require formal appraisals by licensed or certified appraisers.

Broker Price Opinions (BPOs)

A professional estimation of property value by a broker for lenders during foreclosure or short sales; it is less formal than a full appraisal.

Appraisal Process Step 1

Define the appraisal problem.

Appraisal Process Step 2

Determine the scope of work.

Appraisal Process Step 4

Apply valuation approaches, which include sales comparison, cost, and income analysis.

Appraisal Process Step 5

Reconcile values for the final estimate.

Supply & Demand

An economic principle where scarcity increases the value of a property.

Highest & Best Use

The legal use of land that results in it being the most profitable.

Substitution

An economic principle stating that property value is influenced by the values of comparable properties.

Contribution

An economic principle where the value of an improvement is based on the worth it adds to the property.

Depreciation

The loss of property value resulting from wear, age, or obsolescence.

Sales Comparison Approach

A valuation method that uses recent comparable sales, known as "comps," to estimate value; it is considered ideal for residential homes.

Cost Approach

A valuation method based on the replacement cost minus depreciation; it is ideal for unique buildings such as churches, schools, and new construction.

Income Analysis

A valuation approach that estimates value based on potential income generation, used for rental properties and commercial buildings.

Comparative Market Analysis (CMA)

An agent-prepared informal valuation that uses similar recently sold properties to help set a listing price.

Automated Valuation Method (AVM)

A computer-generated valuation, such as a Zillow estimate, based on data algorithms and used for quick estimation rather than official appraisal.