Valuation & Appraisal Flashcards
7 cards from real RES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Valuation & Appraisal flashcards as text
Which three approaches are used by appraisers to estimate property value?
Answer: Sales Comparison, Income, and Cost Approaches
The three recognized approaches to value are the Sales Comparison Approach, the Income Approach, and the Cost Approach.
The Sales Comparison Approach to value is primarily based on:
Answer: Recent sales of similar properties in the area
The Sales Comparison Approach determines value by comparing the subject property to recent sales of similar (comparable) properties in the market.
What does GRM stand for in real estate valuation?
Answer: Gross Rent Multiplier
GRM stands for Gross Rent Multiplier, which estimates value of income-producing properties by multiplying gross rents by a derived multiplier.
In appraisal, depreciation is defined as:
Answer: Any loss in value from any cause
In appraisal, depreciation refers to any loss in value from any cause, including physical deterioration, functional obsolescence, and external obsolescence.
The principle of substitution states that:
Answer: A prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute
The principle of substitution holds that a prudent buyer will pay no more for a property than the cost to purchase a comparable substitute property.
Functional obsolescence in a property refers to:
Answer: Loss in value due to outdated design, poor floor plan, or inadequate features
Functional obsolescence is a loss in value resulting from deficiencies or superadequacies in the design, layout, or features of the property, such as an outdated floor plan.
The Cost Approach to value estimates:
Answer: The cost to reproduce or replace improvements plus land value, minus accrued depreciation
The Cost Approach estimates value by calculating the cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the separately estimated land value.