Valuation Concepts

These flashcards cover key concepts related to property valuation, including elements of value, market considerations, and factors influencing property pricing.

What is value in the context of valuation?

Value is an opinion and not a fact.

What do lenders need to know about the home's value?

Lenders want to know that the home is worth at least the purchase price to maintain an acceptable loan to value ratio.

What is the purpose of an appraisal?

An appraisal is a report detailing the appraiser's opinion of value based on documentation.

Who governs the education requirements for appraisers?

The Appraisal Qualification Board (AQB) governs education requirements for appraisers.

What are the three components that determine market value?

1) Cash price a willing, informed buyer would pay; 2) Cash price the willing, informed seller would receive; 3) A reasonable amount of time for the property to be marketed.

What does the principle of anticipation refer to?

Anticipation is the expected future value based on potential events.

How does zoning create value?

Zoning creates security as buyers anticipate future use will remain consistent with current use.

What does competition do to property value?

Increased competition can decrease profits for the first store as customers are shared between multiple stores.

What is the highest and best use concept?

The highest and best use refers to the legal use of a property that generates maximum value.

What is assemblage in real estate?

Assemblage is merging adjacent properties into one larger parcel to increase value.

How does progression and regression affect property value?

The least valuable home in a higher-priced area seems more valuable, while the most expensive home in a lower-priced area loses value.

What is the principle of substitution?

Two equally similar homes will have equal value, and a buyer will not pay more for one than the other.

What factor is least important in determining property value?

What was previously paid for the subject property is the least important factor.

What are the four essential elements of value?

1) Demand, 2) Utility, 3) Scarcity, 4) Transferability.

What does demand in property valuation refer to?

Demand is the need or desire to own a property.

What does utility mean in terms of property value?

Utility refers to a property's intended purpose and usefulness.

How does scarcity influence property prices?

Scarcity affects prices; many similar properties will decrease prices, while a few will increase prices.

What physical characteristics can influence property value?

Topography, shape, size, exposure, soil, and location can all influence property value.

What economic factors can affect property value?

Local economic conditions, inflation, unemployment, and interest rates can all influence property value.

What social factors can influence property value?

Household size, recreational amenities, and population movement can all influence property value.

What is the term used for a preference for a specific economic location?

Citus.

What impact does inflation have on real estate prices?

During periods of inflation, real estate prices may tend to rise.

What impact do lower interest rates have on housing?

Lower interest rates encourage more first-time buyers, increasing demand for housing.

What role does political regulation play in property valuation?

Political regulations can impact property value by affecting demand and development.

What does transferability refer to in property value?

Transferability refers to whether the title of a property is readily transferable.

How can community and physical changes affect property value?

Physical changes like natural phenomena and community changes can significantly impact property value.

What is competition in relation to real estate?

Competition refers to how multiple similar properties can affect demand and value for each property.

What is the significance of timing in property appraisal?

An appraisal is based on the specific time it is completed, as value can change quickly.