Project Evaluation: Real Estate Market and Appraisal Approaches

This set of flashcards covers key vocabulary related to project evaluation and real estate appraisal concepts.

Market Value

The estimated amount for which the asset should be exchanged on the valuation date between a willing buyer and a willing seller in an arm’s length transaction.

Investment Value

The value a particular investor places on a property, based on their unique expectations, which may differ from market value.

Arm's Length Transaction

A transaction between two parties who act independently, ensuring the price is characteristic of the market.

Sales Comparison Approach

A method used to appraise the market value of single family homes by comparing it to similar properties.

Cost Approach

An appraisal method used for special purpose buildings by estimating the cost to reproduce the property.

Income Approach

An appraisal method used to estimate the market value of income-producing properties based on income generation.

Economic Principle of Substitution

The principle stating that a property's value will be comparable to similar properties or the cost to build an equivalent property.

Valuation Date

The specific date on which the estimated market value is assessed, which may differ from the date the report is prepared.

Hypothetical Buyer

A buyer assumed for valuation purposes who is willing but not compelled to buy.

Highest and Best Use

The most profitable legal use of a property, considering its potential to generate maximum value.

Market Conditions

The state of the market affecting prices and valuations at the time of assessment.

Transparency in Evaluation Reports

The principle that the evaluation report should be clear and understandable to all parties involved.