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Real Estate 306 Final Exam Questions And Answers Rated A+ New Update Assured Satisfaction
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professional appraisal practice - -imperfect information -reliable data & analysis applies -an appraisal is only as good as the appraiser & data available -OPINION of value -UNBIASED opinion of a 3rd PARTY with no direct interest in the property -Uniform Standards of Professional Appraisal Pra...

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  • August 2, 2024
  • 24
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • Real Estate 306
  • Real Estate 306

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PatrickKaylian

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Real Estate 306 Final Exam
professional appraisal practice - -imperfect information

-reliable data & analysis applies

-an appraisal is only as good as the appraiser & data available

-OPINION of value

-UNBIASED opinion of a 3rd PARTY with no direct interest in the property

-Uniform Standards of Professional Appraisal Practice (USPAP)

-Code of Ethics



sales comparison (market) approach - -value of RE can be determined by analyzing the sale prices
of similar properties

-in a competitive market, close substitutes should sell for similar prices

-difficulty: how many truly close substitutes exist & how many of these have sold recently?

-"one price" rule (i.e. equivalent goods sell for equivalent prices)

*arbitrage not available in RE (can't buy & sell RE quickly)




estimated reproduction cost of improvements - estimated accrued depreciation = depreciated cost of
building improvements

+estimated value of site

= indicated value by cost approach



-assumption: cost of creating a property is related to its market value



income approach - -"income capitalization"

-theory of anticipation

-value in investment property is a function of the income it is expected to produce (& inherent risk)

,-mimics analytics B&S use



value = PV of expected future CFs (PV of anticipated income



-2 methods: ratio models (direct capitalization & gross rent multiplier) & discounted cash flow (DCF)



assessed value - -value assigned by local government for property tax purposes

-WI: the assessor's opinion of "market value"



when are value calculations required? - -property acquisition is contemplated

-structure is: modernized, renovated, abandoned, demolished

-site is developed

-property is used for collateral for a loan



appraisal - -more narrow definition, estimation of value



market value - -most probable selling price, assuming normal sales conditions

-may not be fundamental value

-typical buyer/seller interaction in a typical market

3 approaches to value - 1. sales comparison (market) approach

2. cost approach

3. income approach



investment value - -value to a particular individual (investor)



transaction price - -price actually paid for a specific property

, cost - -amount paid to build, create



why do we have to estimate market value? - -in markets with perfect competition, all transactions
take place at true market value

-in such markets, no need for B&S to search for true market value of an asset (revealed by transaction
prices of perfect substitutes)

-RE markets do not exist within perfectly competitive conditions



what about private RE markets? - -every property is unique

-traded in: illiquid, highly segmented, & inefficient markets

-search costs with matching B&S are significant

-even the few transactions of comparable properties that we do observe may not be indicative of the
value of the "subject" property

-"fee appraisers" needed to estimate market value of RE assets



who uses market value appraisals? - -buyers

-sellers

-corporate acquisitions, mergers or dissolutions, tax & accounting

-courts (divorce, eminent domain, settlement of estates, bankruptcy)

-mortgage lenders




licensing & certification - -Federal legislation passed in response to collapse in RE markets in late
1980s

-requires appraisals to be state licensed or certified if they prepare federally related appraisals

-General Certified, Residential, Licensed

>each has min. education requirements, experience, & examination requirements

>all have continuing education requirements

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