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Questions and Answers
What is the first step in the valuation process?
What is the first step in the valuation process?
- Apply approaches to value
- Pinpoint location
- Study pertinent documents (correct)
- Inspect properties
What is the purpose of the Geodetic Engineer's Plan in the valuation process?
What is the purpose of the Geodetic Engineer's Plan in the valuation process?
- To verify the title of the property
- To analyze the neighborhood
- To identify the location of the property (correct)
- To determine the market value of the property
What is the principle underlying the Market Data Approach?
What is the principle underlying the Market Data Approach?
- Principle of Substitution (correct)
- Principle of Diminishing Returns
- Principle of Increasing Returns
- Principle of Supply and Demand
What is the purpose of the site analysis in the valuation process?
What is the purpose of the site analysis in the valuation process?
What is the Inferential/Rectification Method used for in the Market Data Approach?
What is the Inferential/Rectification Method used for in the Market Data Approach?
Which principle underlies the Cost Approach?
Which principle underlies the Cost Approach?
What is the method of depreciation used to arrive at the depreciated value of an improvement?
What is the method of depreciation used to arrive at the depreciated value of an improvement?
What is the Development Approach used for in the valuation process?
What is the Development Approach used for in the valuation process?
What is the purpose of the Cost per Sq.Meter method?
What is the purpose of the Cost per Sq.Meter method?
What is the purpose of verifying the title in the valuation process?
What is the purpose of verifying the title in the valuation process?
Which approach is used in the valuation of income-generating properties?
Which approach is used in the valuation of income-generating properties?
What is the purpose of correlating values in the valuation process?
What is the purpose of correlating values in the valuation process?
What is the purpose of the HABU analysis in the valuation process?
What is the purpose of the HABU analysis in the valuation process?
What is the basic formula used in Direct Capitalization?
What is the basic formula used in Direct Capitalization?
What is Yield Capitalization also known as?
What is Yield Capitalization also known as?
What is the Market Data Approach based on?
What is the Market Data Approach based on?
What is the purpose of the Quantity Survey Method?
What is the purpose of the Quantity Survey Method?
What is the Unit-Cost-in-Place Method based on?
What is the Unit-Cost-in-Place Method based on?
What is the purpose of the Income Capitalization Approach?
What is the purpose of the Income Capitalization Approach?
What is the time value of money considered in?
What is the time value of money considered in?
The _______________ process involves checking for liens, encumbrances, authenticity and continuity.
The _______________ process involves checking for liens, encumbrances, authenticity and continuity.
The _______________ Engineer’s Plan is used to pinpoint the location of the property.
The _______________ Engineer’s Plan is used to pinpoint the location of the property.
The _______________ Approach involves gathering information concerning sales of properties that are comparable to the property appraised.
The _______________ Approach involves gathering information concerning sales of properties that are comparable to the property appraised.
The _______________ Method is used to gather opinions of values from reliable sources such as Real Estate Appraisers and Brokers.
The _______________ Method is used to gather opinions of values from reliable sources such as Real Estate Appraisers and Brokers.
The purpose of _______________ is to describe and classify the subject property, establish a time period, and determine the market area.
The purpose of _______________ is to describe and classify the subject property, establish a time period, and determine the market area.
The _______________ Approach is used for valuation of raw land properties that are suitable for development.
The _______________ Approach is used for valuation of raw land properties that are suitable for development.
The _______________ Analysis is used to analyze the neighborhood of the property.
The _______________ Analysis is used to analyze the neighborhood of the property.
The _______________ is a document that provides information about the property's floor plan and building features.
The _______________ is a document that provides information about the property's floor plan and building features.
The _______________ is a map that provides information about the property's location and boundaries.
The _______________ is a map that provides information about the property's location and boundaries.
The _______________ is a document that provides information about the property's taxes and ownership.
The _______________ is a document that provides information about the property's taxes and ownership.
The principle underlying the Cost Approach is the principle of ____________________.
The principle underlying the Cost Approach is the principle of ____________________.
The Cost Approach estimates the value of improvement as the ____________________ Replacement cost New.
The Cost Approach estimates the value of improvement as the ____________________ Replacement cost New.
The Quantity Survey Method includes a detailed inventory of all ____________________, labor including indirect costs.
The Quantity Survey Method includes a detailed inventory of all ____________________, labor including indirect costs.
The Unit-Cost-in-Place Method is the mathematical compression of the Quantity Survey ____________________.
The Unit-Cost-in-Place Method is the mathematical compression of the Quantity Survey ____________________.
The Income Capitalization Approach is used in the valuation of income-generating properties, such as ____________________ buildings.
The Income Capitalization Approach is used in the valuation of income-generating properties, such as ____________________ buildings.
The principle underlying the Income Capitalization Approach is the principle of ____________________.
The principle underlying the Income Capitalization Approach is the principle of ____________________.
Direct Capitalization applies an overall rate, or ____________________ yield, which when divided into a single year’s or stabilized net operating income.
Direct Capitalization applies an overall rate, or ____________________ yield, which when divided into a single year’s or stabilized net operating income.
Yield Capitalization is also known as ____________________ cash-flow analysis.
Yield Capitalization is also known as ____________________ cash-flow analysis.
The basic formula used in Direct Capitalization is: Income / ____________________ Rate.
The basic formula used in Direct Capitalization is: Income / ____________________ Rate.
Yield Capitalization considers the time value of ____________________.
Yield Capitalization considers the time value of ____________________.
The valuation process starts with studying ______ documents.
The valuation process starts with studying ______ documents.
The Geodetic Engineer's Plan is used to ______ the location of the property.
The Geodetic Engineer's Plan is used to ______ the location of the property.
The Market Data Approach is based on the principle of ______.
The Market Data Approach is based on the principle of ______.
The Direct Comparison Method involves ______ and classifying the subject property.
The Direct Comparison Method involves ______ and classifying the subject property.
The Development Approach is used for valuation of ______ land properties.
The Development Approach is used for valuation of ______ land properties.
The HABU Analysis is used to analyze the ______ of the property.
The HABU Analysis is used to analyze the ______ of the property.
The Floor Plan is a document that provides information about the property's ______ and building features.
The Floor Plan is a document that provides information about the property's ______ and building features.
The Cadastral Reference Map is a map that provides information about the property's ______ and boundaries.
The Cadastral Reference Map is a map that provides information about the property's ______ and boundaries.
The Tax Declaration is a document that provides information about the property's ______ and ownership.
The Tax Declaration is a document that provides information about the property's ______ and ownership.
The Correlate Values and Make Final Estimate step is the last step in the ______ process.
The Correlate Values and Make Final Estimate step is the last step in the ______ process.
The principle underlying the Cost Approach is the principle of _______________.
The principle underlying the Cost Approach is the principle of _______________.
The Cost Approach estimates the value of improvement as the _______________ Replacement cost New.
The Cost Approach estimates the value of improvement as the _______________ Replacement cost New.
The Quantity Survey Method includes a detailed inventory of all materials, _______________ including indirect costs.
The Quantity Survey Method includes a detailed inventory of all materials, _______________ including indirect costs.
The Unit-Cost-in-Place Method is the mathematical compression of the _______________ Survey Technique.
The Unit-Cost-in-Place Method is the mathematical compression of the _______________ Survey Technique.
The Income Capitalization Approach is used in the valuation of income-generating properties, such as _______________ buildings.
The Income Capitalization Approach is used in the valuation of income-generating properties, such as _______________ buildings.
The principle underlying the Income Capitalization Approach is the principle of _______________.
The principle underlying the Income Capitalization Approach is the principle of _______________.
Direct Capitalization applies an overall rate, or _______________ yield, which when divided into a single year’s or stabilized net operating income.
Direct Capitalization applies an overall rate, or _______________ yield, which when divided into a single year’s or stabilized net operating income.
Yield Capitalization is also known as _______________ cash-flow analysis.
Yield Capitalization is also known as _______________ cash-flow analysis.
The basic formula used in Direct Capitalization is: Income / _______________ Rate.
The basic formula used in Direct Capitalization is: Income / _______________ Rate.
Yield Capitalization considers the time value of _______________.
Yield Capitalization considers the time value of _______________.
The Market Data Approach is based on the principle of Substitution.
The Market Data Approach is based on the principle of Substitution.
The Cost Approach estimates the value of the land as the Original Purchase Price.
The Cost Approach estimates the value of the land as the Original Purchase Price.
The Income Capitalization Approach is used in the valuation of residential properties.
The Income Capitalization Approach is used in the valuation of residential properties.
Yield Capitalization is also known as Discounted Cash Flow analysis.
Yield Capitalization is also known as Discounted Cash Flow analysis.
The principle underlying the Income Capitalization Approach is the principle of Supply and Demand.
The principle underlying the Income Capitalization Approach is the principle of Supply and Demand.
The Geodetic Engineer's Plan is used to determine the value of the property.
The Geodetic Engineer's Plan is used to determine the value of the property.
The HABU Analysis is used to analyze the neighborhood of the property.
The HABU Analysis is used to analyze the neighborhood of the property.
The Floor Plan is a document that provides information about the property's taxes and ownership.
The Floor Plan is a document that provides information about the property's taxes and ownership.
The Cadastral Reference Map provides information about the property's floor plan and building features.
The Cadastral Reference Map provides information about the property's floor plan and building features.
The valuation process starts with inspecting the property.
The valuation process starts with inspecting the property.
The Cost Approach estimates the value of improvement as the depreciated Replacement cost New.
The Cost Approach estimates the value of improvement as the depreciated Replacement cost New.
The Unit-Cost-in-Place Method is used by Engineers and Architects.
The Unit-Cost-in-Place Method is used by Engineers and Architects.
The Income Capitalization Approach is used in the valuation of non-income generating properties.
The Income Capitalization Approach is used in the valuation of non-income generating properties.
The principle underlying the Income Capitalization Approach is the principle of Substitution.
The principle underlying the Income Capitalization Approach is the principle of Substitution.
Direct Capitalization is a method of Yield Capitalization.
Direct Capitalization is a method of Yield Capitalization.
The basic formula used in Direct Capitalization is: Income x Capitalization Rate.
The basic formula used in Direct Capitalization is: Income x Capitalization Rate.
Yield Capitalization does not consider the time value of money.
Yield Capitalization does not consider the time value of money.
The Cost per Sq.Meter method is used to estimate the value of improvements.
The Cost per Sq.Meter method is used to estimate the value of improvements.
The Quantity Survey Method is used to estimate the value of land.
The Quantity Survey Method is used to estimate the value of land.
The Income Capitalization Approach is used in the valuation of raw land properties suitable for development.
The Income Capitalization Approach is used in the valuation of raw land properties suitable for development.
Match the following appraisal valuation process steps with their descriptions:
Match the following appraisal valuation process steps with their descriptions:
Match the following approaches to value with their descriptions:
Match the following approaches to value with their descriptions:
Match the following valuation approaches with their underlying principles:
Match the following valuation approaches with their underlying principles:
Match the following cost estimating methods with their descriptions:
Match the following cost estimating methods with their descriptions:
Match the following documents/maps with their descriptions:
Match the following documents/maps with their descriptions:
Match the following income capitalization approaches with their characteristics:
Match the following income capitalization approaches with their characteristics:
Match the following valuation methods with their descriptions:
Match the following valuation methods with their descriptions:
Match the following analysis/approaches with their descriptions:
Match the following analysis/approaches with their descriptions:
Match the following documents/maps with their purposes:
Match the following documents/maps with their purposes:
Match the following valuation steps with their descriptions:
Match the following valuation steps with their descriptions:
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Study Notes
Appraisal Process
- The appraisal process involves six stages: studying pertinent documents, pinpointing location, checking/verifying title, inspecting properties, applying approaches to value, and correlating values.
Valuation Process
- Stage 1: Study pertinent documents, including copy of title, geodetic engineer's plan, floor plan, tax declaration, and tax receipts.
- Stage 2: Pinpoint location using appraiser's plotting, cadastral reference maps, geodetic engineer's plan, and base topographical map.
- Stage 3: Check/verify title for liens, encumbrances, authenticity, and continuity.
- Stage 4: Inspect properties, including site analysis, improvement analysis, and neighborhood analysis (HABU).
- Stage 5: Apply approaches to value, including market data approach, cost approach, and income approach.
- Stage 6: Correlate values and make final estimate.
Approaches to Value
Market Data Approach
- Principle: Principle of Substitution
- Methods:
- Direct Comparison Method: gather sales data of comparable properties, describe and classify subject property, establish time period, determine market area, analyze and modify sales data.
- Inferential/Rectification Method: gather opinions of values from reliable sources, assign weights to sources based on knowledge and familiarity.
- Development Approach: valuation of raw land properties, suitable for development, flat, and economical to develop.
Cost Approach
- Principle: Principle of Substitution
- Estimate replacement cost new (RCN) and arrive at depreciated value using straight-line method of depreciation and cost-to-cure technique.
- Methods:
- Quantity Survey Method: detailed inventory of materials, labor, and indirect costs.
- Unit-Cost-in-Place Method: mathematical compression of quantity survey technique.
- Cost per Sq.Meter Method: product of quantity survey and unit cost in place.
Income Capitalization Approach
- Principle: Principle of Anticipation
- Value is arrived by capitalizing income.
- Used for income-generating properties, such as retail stores, apartments, shopping centers, office buildings, hotels, leased commercial and industrial buildings.
- Methods:
- Direct Capitalization: applies overall rate or all risks yield to a single year's or stabilized net operating income.
- Yield Capitalization (Discounted Cash-Flow): considers time value of money, applied to a series of net operating incomes for a period of years.
Appraisal Process
- The appraisal process involves six stages: studying pertinent documents, pinpointing location, checking/verifying title, inspecting properties, applying approaches to value, and correlating values.
Valuation Process
- Stage 1: Study pertinent documents, including copy of title, geodetic engineer's plan, floor plan, tax declaration, and tax receipts.
- Stage 2: Pinpoint location using appraiser's plotting, cadastral reference maps, geodetic engineer's plan, and base topographical map.
- Stage 3: Check/verify title for liens, encumbrances, authenticity, and continuity.
- Stage 4: Inspect properties, including site analysis, improvement analysis, and neighborhood analysis (HABU).
- Stage 5: Apply approaches to value, including market data approach, cost approach, and income approach.
- Stage 6: Correlate values and make final estimate.
Approaches to Value
Market Data Approach
- Principle: Principle of Substitution
- Methods:
- Direct Comparison Method: gather sales data of comparable properties, describe and classify subject property, establish time period, determine market area, analyze and modify sales data.
- Inferential/Rectification Method: gather opinions of values from reliable sources, assign weights to sources based on knowledge and familiarity.
- Development Approach: valuation of raw land properties, suitable for development, flat, and economical to develop.
Cost Approach
- Principle: Principle of Substitution
- Estimate replacement cost new (RCN) and arrive at depreciated value using straight-line method of depreciation and cost-to-cure technique.
- Methods:
- Quantity Survey Method: detailed inventory of materials, labor, and indirect costs.
- Unit-Cost-in-Place Method: mathematical compression of quantity survey technique.
- Cost per Sq.Meter Method: product of quantity survey and unit cost in place.
Income Capitalization Approach
- Principle: Principle of Anticipation
- Value is arrived by capitalizing income.
- Used for income-generating properties, such as retail stores, apartments, shopping centers, office buildings, hotels, leased commercial and industrial buildings.
- Methods:
- Direct Capitalization: applies overall rate or all risks yield to a single year's or stabilized net operating income.
- Yield Capitalization (Discounted Cash-Flow): considers time value of money, applied to a series of net operating incomes for a period of years.
Appraisal Process
- The appraisal process involves six stages: studying pertinent documents, pinpointing location, checking/verifying title, inspecting properties, applying approaches to value, and correlating values.
Valuation Process
- Stage 1: Study pertinent documents, including copy of title, geodetic engineer's plan, floor plan, tax declaration, and tax receipts.
- Stage 2: Pinpoint location using appraiser's plotting, cadastral reference maps, geodetic engineer's plan, and base topographical map.
- Stage 3: Check/verify title for liens, encumbrances, authenticity, and continuity.
- Stage 4: Inspect properties, including site analysis, improvement analysis, and neighborhood analysis (HABU).
- Stage 5: Apply approaches to value, including market data approach, cost approach, and income approach.
- Stage 6: Correlate values and make final estimate.
Approaches to Value
Market Data Approach
- Principle: Principle of Substitution
- Methods:
- Direct Comparison Method: gather sales data of comparable properties, describe and classify subject property, establish time period, determine market area, analyze and modify sales data.
- Inferential/Rectification Method: gather opinions of values from reliable sources, assign weights to sources based on knowledge and familiarity.
- Development Approach: valuation of raw land properties, suitable for development, flat, and economical to develop.
Cost Approach
- Principle: Principle of Substitution
- Estimate replacement cost new (RCN) and arrive at depreciated value using straight-line method of depreciation and cost-to-cure technique.
- Methods:
- Quantity Survey Method: detailed inventory of materials, labor, and indirect costs.
- Unit-Cost-in-Place Method: mathematical compression of quantity survey technique.
- Cost per Sq.Meter Method: product of quantity survey and unit cost in place.
Income Capitalization Approach
- Principle: Principle of Anticipation
- Value is arrived by capitalizing income.
- Used for income-generating properties, such as retail stores, apartments, shopping centers, office buildings, hotels, leased commercial and industrial buildings.
- Methods:
- Direct Capitalization: applies overall rate or all risks yield to a single year's or stabilized net operating income.
- Yield Capitalization (Discounted Cash-Flow): considers time value of money, applied to a series of net operating incomes for a period of years.
Appraisal Process
- The appraisal process involves six stages: studying pertinent documents, pinpointing location, checking/verifying title, inspecting properties, applying approaches to value, and correlating values.
Valuation Process
- Stage 1: Study pertinent documents, including copy of title, geodetic engineer's plan, floor plan, tax declaration, and tax receipts.
- Stage 2: Pinpoint location using appraiser's plotting, cadastral reference maps, geodetic engineer's plan, and base topographical map.
- Stage 3: Check/verify title for liens, encumbrances, authenticity, and continuity.
- Stage 4: Inspect properties, including site analysis, improvement analysis, and neighborhood analysis (HABU).
- Stage 5: Apply approaches to value, including market data approach, cost approach, and income approach.
- Stage 6: Correlate values and make final estimate.
Approaches to Value
Market Data Approach
- Principle: Principle of Substitution
- Methods:
- Direct Comparison Method: gather sales data of comparable properties, describe and classify subject property, establish time period, determine market area, analyze and modify sales data.
- Inferential/Rectification Method: gather opinions of values from reliable sources, assign weights to sources based on knowledge and familiarity.
- Development Approach: valuation of raw land properties, suitable for development, flat, and economical to develop.
Cost Approach
- Principle: Principle of Substitution
- Estimate replacement cost new (RCN) and arrive at depreciated value using straight-line method of depreciation and cost-to-cure technique.
- Methods:
- Quantity Survey Method: detailed inventory of materials, labor, and indirect costs.
- Unit-Cost-in-Place Method: mathematical compression of quantity survey technique.
- Cost per Sq.Meter Method: product of quantity survey and unit cost in place.
Income Capitalization Approach
- Principle: Principle of Anticipation
- Value is arrived by capitalizing income.
- Used for income-generating properties, such as retail stores, apartments, shopping centers, office buildings, hotels, leased commercial and industrial buildings.
- Methods:
- Direct Capitalization: applies overall rate or all risks yield to a single year's or stabilized net operating income.
- Yield Capitalization (Discounted Cash-Flow): considers time value of money, applied to a series of net operating incomes for a period of years.
Appraisal Process
- The appraisal process involves six stages: studying pertinent documents, pinpointing location, checking/verifying title, inspecting properties, applying approaches to value, and correlating values.
Valuation Process
- Stage 1: Study pertinent documents, including copy of title, geodetic engineer's plan, floor plan, tax declaration, and tax receipts.
- Stage 2: Pinpoint location using appraiser's plotting, cadastral reference maps, geodetic engineer's plan, and base topographical map.
- Stage 3: Check/verify title for liens, encumbrances, authenticity, and continuity.
- Stage 4: Inspect properties, including site analysis, improvement analysis, and neighborhood analysis (HABU).
- Stage 5: Apply approaches to value, including market data approach, cost approach, and income approach.
- Stage 6: Correlate values and make final estimate.
Approaches to Value
Market Data Approach
- Principle: Principle of Substitution
- Methods:
- Direct Comparison Method: gather sales data of comparable properties, describe and classify subject property, establish time period, determine market area, analyze and modify sales data.
- Inferential/Rectification Method: gather opinions of values from reliable sources, assign weights to sources based on knowledge and familiarity.
- Development Approach: valuation of raw land properties, suitable for development, flat, and economical to develop.
Cost Approach
- Principle: Principle of Substitution
- Estimate replacement cost new (RCN) and arrive at depreciated value using straight-line method of depreciation and cost-to-cure technique.
- Methods:
- Quantity Survey Method: detailed inventory of materials, labor, and indirect costs.
- Unit-Cost-in-Place Method: mathematical compression of quantity survey technique.
- Cost per Sq.Meter Method: product of quantity survey and unit cost in place.
Income Capitalization Approach
- Principle: Principle of Anticipation
- Value is arrived by capitalizing income.
- Used for income-generating properties, such as retail stores, apartments, shopping centers, office buildings, hotels, leased commercial and industrial buildings.
- Methods:
- Direct Capitalization: applies overall rate or all risks yield to a single year's or stabilized net operating income.
- Yield Capitalization (Discounted Cash-Flow): considers time value of money, applied to a series of net operating incomes for a period of years.
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