90 Questions
What is the first step in the valuation process?
Study pertinent documents
What is the purpose of the Geodetic Engineer's Plan in the valuation process?
To identify the location of the property
What is the principle underlying the Market Data Approach?
Principle of Substitution
What is the purpose of the site analysis in the valuation process?
To evaluate the physical characteristics of the site
What is the Inferential/Rectification Method used for in the Market Data Approach?
To gather opinions of values from reliable sources
Which principle underlies the Cost Approach?
Principle of Substitution
What is the method of depreciation used to arrive at the depreciated value of an improvement?
Straight-Line Method
What is the Development Approach used for in the valuation process?
To value rawland properties
What is the purpose of the Cost per Sq.Meter method?
To estimate the cost of a building per square meter
What is the purpose of verifying the title in the valuation process?
To check for liens, encumbrances, and authenticity
Which approach is used in the valuation of income-generating properties?
Income Capitalization Approach
What is the purpose of correlating values in the valuation process?
To determine the final estimate of value
What is the purpose of the HABU analysis in the valuation process?
To analyze the neighborhood
What is the basic formula used in Direct Capitalization?
Income / Capitalization Rate
What is Yield Capitalization also known as?
Discounted Cash Flow Analysis
What is the Market Data Approach based on?
The Principle of Substitution
What is the purpose of the Quantity Survey Method?
To make a detailed inventory of all materials and labor
What is the Unit-Cost-in-Place Method based on?
The Quantity Survey Method
What is the purpose of the Income Capitalization Approach?
To value income-generating properties
What is the time value of money considered in?
Yield Capitalization
The _______________ process involves checking for liens, encumbrances, authenticity and continuity.
title
The _______________ Engineer’s Plan is used to pinpoint the location of the property.
Geodetic
The _______________ Approach involves gathering information concerning sales of properties that are comparable to the property appraised.
Market Data
The _______________ Method is used to gather opinions of values from reliable sources such as Real Estate Appraisers and Brokers.
Inferential/Rectification
The purpose of _______________ is to describe and classify the subject property, establish a time period, and determine the market area.
Direct Comparison Method
The _______________ Approach is used for valuation of raw land properties that are suitable for development.
Development
The _______________ Analysis is used to analyze the neighborhood of the property.
HABU
The _______________ is a document that provides information about the property's floor plan and building features.
Floor Plan
The _______________ is a map that provides information about the property's location and boundaries.
Cadastral Reference
The _______________ is a document that provides information about the property's taxes and ownership.
Tax Declaration
The principle underlying the Cost Approach is the principle of ____________________.
Substitution
The Cost Approach estimates the value of improvement as the ____________________ Replacement cost New.
Estimate
The Quantity Survey Method includes a detailed inventory of all ____________________, labor including indirect costs.
materials
The Unit-Cost-in-Place Method is the mathematical compression of the Quantity Survey ____________________.
Technique
The Income Capitalization Approach is used in the valuation of income-generating properties, such as ____________________ buildings.
office
The principle underlying the Income Capitalization Approach is the principle of ____________________.
Anticipation
Direct Capitalization applies an overall rate, or ____________________ yield, which when divided into a single year’s or stabilized net operating income.
all risks
Yield Capitalization is also known as ____________________ cash-flow analysis.
Discounted
The basic formula used in Direct Capitalization is: Income / ____________________ Rate.
Capitalization
Yield Capitalization considers the time value of ____________________.
money
The valuation process starts with studying ______ documents.
pertinent
The Geodetic Engineer's Plan is used to ______ the location of the property.
pinpoint
The Market Data Approach is based on the principle of ______.
substitution
The Direct Comparison Method involves ______ and classifying the subject property.
describing
The Development Approach is used for valuation of ______ land properties.
raw
The HABU Analysis is used to analyze the ______ of the property.
neighborhood
The Floor Plan is a document that provides information about the property's ______ and building features.
floor
The Cadastral Reference Map is a map that provides information about the property's ______ and boundaries.
location
The Tax Declaration is a document that provides information about the property's ______ and ownership.
taxes
The Correlate Values and Make Final Estimate step is the last step in the ______ process.
valuation
The principle underlying the Cost Approach is the principle of _______________.
substitution
The Cost Approach estimates the value of improvement as the _______________ Replacement cost New.
Estimate
The Quantity Survey Method includes a detailed inventory of all materials, _______________ including indirect costs.
labor
The Unit-Cost-in-Place Method is the mathematical compression of the _______________ Survey Technique.
Quantity
The Income Capitalization Approach is used in the valuation of income-generating properties, such as _______________ buildings.
office
The principle underlying the Income Capitalization Approach is the principle of _______________.
Anticipation
Direct Capitalization applies an overall rate, or _______________ yield, which when divided into a single year’s or stabilized net operating income.
all risks
Yield Capitalization is also known as _______________ cash-flow analysis.
Discounted
The basic formula used in Direct Capitalization is: Income / _______________ Rate.
Capitalization
Yield Capitalization considers the time value of _______________.
money
The Market Data Approach is based on the principle of Substitution.
True
The Cost Approach estimates the value of the land as the Original Purchase Price.
False
The Income Capitalization Approach is used in the valuation of residential properties.
False
Yield Capitalization is also known as Discounted Cash Flow analysis.
True
The principle underlying the Income Capitalization Approach is the principle of Supply and Demand.
False
The Geodetic Engineer's Plan is used to determine the value of the property.
False
The HABU Analysis is used to analyze the neighborhood of the property.
True
The Floor Plan is a document that provides information about the property's taxes and ownership.
False
The Cadastral Reference Map provides information about the property's floor plan and building features.
False
The valuation process starts with inspecting the property.
False
The Cost Approach estimates the value of improvement as the depreciated Replacement cost New.
False
The Unit-Cost-in-Place Method is used by Engineers and Architects.
False
The Income Capitalization Approach is used in the valuation of non-income generating properties.
False
The principle underlying the Income Capitalization Approach is the principle of Substitution.
False
Direct Capitalization is a method of Yield Capitalization.
False
The basic formula used in Direct Capitalization is: Income x Capitalization Rate.
False
Yield Capitalization does not consider the time value of money.
False
The Cost per Sq.Meter method is used to estimate the value of improvements.
True
The Quantity Survey Method is used to estimate the value of land.
False
The Income Capitalization Approach is used in the valuation of raw land properties suitable for development.
False
Match the following appraisal valuation process steps with their descriptions:
Study Pertinent Documents = Check/Verify Title/s Pinpoint Location = Appraiser’s Plotting and Cadastral Reference Maps Check/Verify Title/s = Inspect properties Correlate Values and Make Final Estimate = Make a final valuation estimate
Match the following approaches to value with their descriptions:
Market Data Approach = Gathering information concerning sales of comparable properties Cost Approach = Estimating value as the cost of replacement or reproduction Income Approach = Estimating value based on income-generating potential Development Approach = Valuing raw land properties suitable for development
Match the following valuation approaches with their underlying principles:
Cost Approach = Principle of Substitution Income Capitalization Approach = Principle of Anticipation Market Data Approach = Principle of Substitution Development Approach = Principle of Anticipation
Match the following cost estimating methods with their descriptions:
Quantity Survey Method = Detailed inventory of all materials, labor including indirect costs Unit-Cost-in-Place Method = Mathematical compression of Quantity Survey Technique Cost per Sq.Meter Method = Product of Quantity Survey & Unit Cost in Place Direct Capitalization Method = Applied to income-generating properties
Match the following documents/maps with their descriptions:
Floor Plan = Provides information about the property's floor plan and building features Geodetic Engineer’s Plan = Provides information about the property's location and boundaries Tax Declaration = Provides information about the property's taxes and ownership Cadastral Reference Map = Provides information about the property's location and boundaries
Match the following income capitalization approaches with their characteristics:
Direct Capitalization = Applies an overall rate, or all risks yield Yield Capitalization = Considers the time value of money Cost Approach = Estimates the value of improvement as the replacement cost new Market Data Approach = Based on the principle of substitution
Match the following valuation methods with their descriptions:
Direct Comparison Method = Analyzing sales data of comparable properties Inferential/Rectification Method = Gathering opinions of values from reliable sources Quantity Survey Method = Estimating value based on detailed inventory of construction costs Unit-Cost-in-Place Method = Estimating value based on mathematical compression of Quantity Survey results
Match the following analysis/approaches with their descriptions:
HABU Analysis = Analyzing the neighborhood of the property Site Analysis = Analyzing the property's site characteristics Cost Approach = Estimating value based on the cost of replacement or reproduction Income Capitalization Approach = Estimating value based on income-generating potential
Match the following documents/maps with their purposes:
Floor Plan = Provides information about the property's floor plan and building features Cadastral Reference Map = Provides information about the property's location and boundaries Tax Declaration = Provides information about the property's taxes and ownership Site Analysis = Analyzes the neighborhood of the property
Match the following valuation steps with their descriptions:
Verifying the Title = Involves checking for liens, encumbrances, authenticity and continuity Site Analysis = Analyzes the neighborhood of the property Correlate Values and Make Final Estimate = Last step in the valuation process Quantity Survey Method = Estimates the cost of improvement
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.
Learn about the steps involved in the real estate appraisal process, including studying pertinent documents and verifying title information.
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