Market Data Comparison Approach 1. examination and comparison of actual sales

Prep-Agent Value to Economic Obsolescence Flashcards ValueWhat a willing buyer will pay on the open market AppraisalAn estimate of the current value of the property or Estimate of value.Market Data (Comparison) Approach1. examination and comparison of actual sales ofcomparable properties2. best used to find values of houses and vacant lots Principle of Highest and Best useThe use of the property which will produce the greatest Net Return Physical DeteriorationThe loss in value due to wear and tear of the structure.PRINCIPLE OF SUBSTITUTIONThe maximum value of a property tends to be set by the cost of purchasing an equally desirable substitute property.Gross MultipliersPrice divided by rent DepreciationA decrease or loss in value Section640 acres; there are 36 sections in a township PlottageThe added value as a result of combining two or more properties into one large parcel.Cap rateHigher Cap rate represents higher risk Principle of ProgressionProgression states that the value of less expensive properties will increase when placed in the area of more expensive properties.Principle of ContributionHow much does an item contribute to the net income of a property Essential Elements of Value(DUST) Demand Utility Scarcity Transferability Principle of RegressionThe Value of more expensive home placed in a neighborhood of less expensive homes will drop in value Economic Obsolescenceany loss of value due to conditions outside of the property itself. aka social obsolescence. (outside causes) Functional ObsolescenceA loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design (poor planning) Narrative AppraisalA comprehensive appraisal report is a "Complete" Appraisal.Capitalization (Income) ApproachConverts income into value; Most appropriate for a shopping center.Cost (Replacement) ApproachThe process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the replacement cost of the building, less depreciation.Acre43,560 square feet