4 factors of value

- Utility
- Scarcity
- Desire
- Effective Purchasing Power
4 Factors of Production
- Capital
- Entrepreneurial Coordination
- Land
- Labor
Forces that influence real property markets
- Social Forces
- Economic circumstances
- Governmental controls and regulations
- Environmental Conditions
Life Cycle of a Market Area
- Growth
- Stability
- Decline
- Revitalization
Bundle of Rights
- Right to sell
- Right to lease
- Right to occupy
- Right to mortgage
- Right to give it away
4 Powers of Government
- Police Power
- Eminent domain
- Taxation
- Escheat
4 Forms of Ownership
- Community Property
- Joint Tenancy
- Tenancy by the entirety
- Tenancy in common
community property
System of ownership; each spouse has an equal interest in
property acquired during marriage: separate property is
that acquired before marriage
USPAP
current standards of the appraisal profession
utility
the ability of a product to satify a human want, need or
desire.
scarcity
the present or anticipated under supply of an item relative
to the demand for it

desire
a purchasers wish for an item to satisfy human needs
effective purchasing power
the ability of an individual or group to participate in a
market
Market Value
the most probable price, as of a specified date, in cash, or
in terms equivalent to cash, or in other other precisely
revealed terms, for which the specified property rights
should sell after reasonable exposure in a competitive
market under all conditions requisite to a fair sale, with the
buyer and seller each acting prudently, knowledgeably,
and for self-interest, and assuming that neither is under
undue duress.
investment value
the specific value of a property to a particular investor or
class of investors based on individual investment
requirements: distinguished from market value, which is
impersonal and detached.
Going Concern
All tangible and intangible assists of an established and
operating business with an indefinite life.
Anticipation
the perception that value is created by the expectation of
benefits to be derived in the future

Change
the result of the cause and effect relationship among the
forces that influence real property value
Supply and Demand
the principle of supply and demand states that the price of
real property varies directly, but not necessarily
proportionally with demand and inversely but not
necessarily proportionally, with supply.
Competition
between purchasers or tenants, the interactive efforts of
two or more potential purchasers or tenants to make a sale
or secure a lease; between sellers or landlord the
interactive efforts of two or more potential sellers or
landlords to complete a sale or lease; among competitive
properties, the level of productivity and amenities or
benefits characteristic of each property considering the
advantage our or disadvantageous position of the property
relative to the competitors.
Substitution
the appraisal principle that states that when several similar
or commensurate commodities, goods or services are

available, the one with the lowest price will attract the
greatest demand and widest distribution. This is the
primary principle upon which the cost and sales
comparison approaches are based.
principle of balance
decreasing marginal utility, contribution, surplus
productivity, and conformity explain how the integration of
property components affects property value.
Balance
the principle that real property value is created and
sustained when contrasting, opposing, or interacting
elements are in a state of equilibrium
Contribution
the concept that the value of a particular component is
measured in terms of its contribution to the value of the
whole property or as the amount that its absence would
detract from the value of the whole.
Conformity
the appraisal principal that real property value is created
and sustained when the characteristics of a property
conform to the demands of its market.
Progression
In appraisal, the concept that the value of an inferior
property is enhanced by its association with better
properties of the same type.
Regression
in appraisal, the concept that the value of a superior
property is adversely affected by its association with an
inferior property of the same type.
Forces that influence real property markets:
- Social forces
- Economic circumstances
- Governmental controls and regulations
- Environmental conditions
Disaggregation
grouping properties together based on similar attributes or
characteristics.
Growth
a period during which the market area gains public favor
and acceptance
Stability
a period of equilibrium without marked gains or losses
decline
a period of diminishing demand
Revitalization
a period of renewal, redevelopment, modernization, and
increasing demand.
Central business district (CBD)

the core or downtown area of a city where the major retail,

financial, governmental, professional, recreational, and
service activities of the community are concentrated.
Mortgage Money
real estate is normally bought with a combination of equity
capital and medium to long term debt funds.
Mortgage
a pledge of a described property interest as collateral or
security for the repayment of a loan under certain terms
and conditions.
deed of trust
a legal instrument similar to a mortgage, which, when
executed and delivered, conveys or transfers property title
to a trustee.
land contract
a contract in which a purchaser of real estate agrees to pay
a small portion of the purchase price when the contract is
signed and additional sums, at intervals and in amounts
specified in the contract, until the total purchase price is
paid and the seller delivers the deed; used primarily to
protect the sellers interest in the unpaid balance because
foreclosure can be exercised more quickly than it could d
be under a mortgage, also called a contact for deed or
installment (sale) contract.
equity
the ownership claim on property.
debt
one of two characteristics types of investment, the other
being equity. The debt investor expects a priority claim on
investment earnings and looks for security in the form of a
lien on the assets involved.
secondary mortgage market
a market created by government and private agencies for
the purchase and sale of existing mortgages, which
provides greater liquidity for mortgages. Fannie Mae,
Freddie Mac, and Ginny Mae are the principal operators in
the secondary mortgage market.
Fee Simple Absolute
The fullest freehold estate that can exist in real property
easement
an interest in real property that transfers use, buy not
ownership, of a portion of an owner's property. Access or
right of way easements may be acquired by private parties
or public utilities. Governments accept conservation, open
space, and preservation easements on private property.
taxation
the right of government to raise revenue through
assessments on valuable goods, products, and rights.

eminent domain
the right government to take private property for public
use upon the payment of just compensation.
police power
the right of government through which property is
regulated to protect public safety, health, morals, and
general welfare.
escheat
the right of government that gives the state titular
ownership of a property when its owner dies without a will
or any ascertainable heirs.
tenancy
the holding of property by any form of title
joint tenancy
joint ownership by two or more persons with the right of
survivor-ship.
tenancy by the entirety
an estate held by husband and wife in which neither has a
disposable interest in the property during the lifetime of
the other, except through joint
tenancy in common
estate held by two or more persons, each of whom has an
undivided interest. In this estate the undivided interests
may or may not be equally shared by the holders and there
is NO right of survivorship.

condo ownership
a form of fee ownership of separate units or portions of
multi-unit buildings that provides for formal filing and
recording of a divided interest in real property.
coop ownership
a form of ownership in which each owner of stock in a
cooperative apartment building or housing corporation
receives a proprietary lease on a specific apartment and is
obligated to pay a monthly maintenance charge that
represents the proportionate share of operating expenses
and debt service on the undying mortgage, which is paid
by the corporation. This proportionate share is based on
the proportion of the total stock owned.
timesharing
limited ownership interests in, or the rights of use and
occupancy of, residential apartments or hotel rooms. There
are two forms of timesharing; fee timeshares and nonfee
timeshares, fee timeshares may be based on timeshare
ownership or interval ownership. There are three types of

nonfee timeshares: a prepaid lease arrangement, a

vacation license, and a club membership.
scope of work
the type and extent of research and analyses in an
assignment.
sales comparison approach
an appraiser produces a value indication by comparing the
subject property with similar properties.
Geographic Information Systems (GIS
an organized collection of computer hardware, software,
geographic data, and personnel delighted to efficiently
capture, store, update, manipulate, analyze, and display all
forms of geographically referenced information.
market analysis
a process for examining the demand for and supply of a
property type and the geographic market area for that
property type. This process is sometimes referred to as a
use in search of a site.
marketability analysis
a process that investigates how a particular piece of
property will be absorbed, sold, or leased under current or
anticipated market conditions; includes a market study or
analysis of the general call of property being studied. This
process is sometimes referred to as a site in search of a
use.
economic base analysis
a survey of the industries and businesses that generate
employment and income in a community as well as the
rate of population growth and levels of income, both of
which are functions of employment. Economic base
analysis is used to forecast the level and composition of
further economic activity. Specifically the relationship
between basic employment and non-basic employment is
studied to predict population, income, or other variables
that affect real estate values or land utilization.

market study
a macroeconomic analysis that examines the general
market conditions of supply, demand, and pricing or the
demographics of demand for a specific area or property
type.

marketability study
examines the marketability of a given property or class of
properties, usually focusing on the market segments in
which the property is likely to generate demand.

Feasibility analysis
a study of the cost benefit relationship of an economic
endeavor.

3 types of depreciation
- physical
- functional
- external

3 approaches to estimating value

- cost
- market (sales comparison)
- income

Highest & Best Use

Comparing the indications of the analysis performed to
indicate the greatest value

fee simple
the greatest estate (ownership) that one can have in real
property because it is transferable, inheritable, and of
indefinite duration, with no conditions on title.

lot and block system

a type of legal description use for plattered property. the
description states only the property's lot number and block
number in a particular subdivision. to find the exact
location, a plat map must be consulted.

metes and bounds system

a type of legal description that starts at an easily
identifiable point of being (pob), then describes the
property's boundaries in terms of courses (compass
directions) and distances, returning point of beginning.

natural attachments
are plants growing on the land. weather naturally occurring
or planted by people,are essentially treated the same.

plat map
a detailed survey map of a subdivision.

Unities of Ownership

Possession
Interest
Time
Title

PUD
Planned Uni Development

Condominium
Ownership of a space in a building without ownership of
the land its on.

nonconforming use
When land doesn't conform to zoning laws but is
grandfathered

variances
Grant permission to a property owner by the zoning
authority allowing deviation from strict zoning laws

subdivision regulations
regulations on land before it is subdivided

superfund
huge gov. tax fund used to clean up hazardous waste in the
environmental (i.e. oil spill in wetlands,etc...) when no ne
accepts responsibility. under CERCLA

CERCLA
Comprehensive Environmental Response, Compensation,
and Liability Act (addresses what to do with closed or
abandoned waste sites)
see super fund

Nuisance
anything from OUTSIDE property boundaries that interferes
with owners quite enjoyment

Typography
Contour of the land

Stigmatized Properties
Property held undesirable by most people because of a
past event or condition

Appraisal Step 1
Identify the problem

Appraisal Step 2
Scope Of Work

Command Market
Gov. or central authority make all decisions about
production and distribution.

hypothetical condition
knows to be false

extraordinary assumption
reasonable belief by appraiser about something he or she
is uncertain about and cannot prove (without dismantling a
physical structure)

community property
acquired before marriage

separate property
acquired after marriage

workfile
Preserves evidence of the appraiser's observance of USPAP