Real Estate Appraisal Fundamentals Practice Flashcards

A comprehensive vocabulary review of key concepts and formulas from the Real Estate Appraisal Practice Exam fundamentals.

Appraisal

An opinion of value based on analysis and market data.

Real Estate Value Determination

Determined by supply and demand in the market.

Characteristics of Value

Utility, Scarcity, Transferability, and Effective Demand.

Market Value

The most probable price in an open and competitive market.

Three Approaches to Value

Sales comparison, Cost approach, and Income approach.

Sales Comparison Approach

The approach most widely used for residential homes.

Income Approach

The approach used for valuation of rental property.

Depreciation

The loss of property value from any cause.

Three Types of Depreciation

Physical deterioration, Functional obsolescence, and External obsolescence.

Highest and Best Use

The most profitable legal use of a property.

Four Tests of Highest and Best Use

Legally permissible, Physically possible, Financially feasible, and Maximally productive.

USPAP

Uniform Standards of Professional Appraisal Practice.

GRM

Gross Rent Multiplier.

Income Approach Formula

$$\text{Value} = \frac{\text{Income}}{\text{Cap Rate}}$$

Cap Rate Formula

$$\text{Cap Rate} = \frac{\text{Income}}{\text{Value}}$$

Cost Approach Formula

$$\text{Value} = \text{Land Value} + \text{Replacement Cost} - \text{Depreciation}$$

Comparable Sale

A recently sold similar property used to estimate value.

Reconciliation

The process of combining value indications into a final estimate.

Bundle of Rights

Rights of ownership including use, lease, sell, and exclude.

Fee Simple Ownership

The full ownership interest in a property.