elect 7 - Midterm lesson 1
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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?

  • 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?

  • 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?

    <p>To evaluate the physical characteristics of the site</p> Signup and view all the answers

    What is the Inferential/Rectification Method used for in the Market Data Approach?

    <p>To gather opinions of values from reliable sources</p> Signup and view all the answers

    Which principle underlies the Cost Approach?

    <p>Principle of Substitution</p> Signup and view all the answers

    What is the method of depreciation used to arrive at the depreciated value of an improvement?

    <p>Straight-Line Method</p> Signup and view all the answers

    What is the Development Approach used for in the valuation process?

    <p>To value rawland properties</p> Signup and view all the answers

    What is the purpose of the Cost per Sq.Meter method?

    <p>To estimate the cost of a building per square meter</p> Signup and view all the answers

    What is the purpose of verifying the title in the valuation process?

    <p>To check for liens, encumbrances, and authenticity</p> Signup and view all the answers

    Which approach is used in the valuation of income-generating properties?

    <p>Income Capitalization Approach</p> Signup and view all the answers

    What is the purpose of correlating values in the valuation process?

    <p>To determine the final estimate of value</p> Signup and view all the answers

    What is the purpose of the HABU analysis in the valuation process?

    <p>To analyze the neighborhood</p> Signup and view all the answers

    What is the basic formula used in Direct Capitalization?

    <p>Income / Capitalization Rate</p> Signup and view all the answers

    What is Yield Capitalization also known as?

    <p>Discounted Cash Flow Analysis</p> Signup and view all the answers

    What is the Market Data Approach based on?

    <p>The Principle of Substitution</p> Signup and view all the answers

    What is the purpose of the Quantity Survey Method?

    <p>To make a detailed inventory of all materials and labor</p> Signup and view all the answers

    What is the Unit-Cost-in-Place Method based on?

    <p>The Quantity Survey Method</p> Signup and view all the answers

    What is the purpose of the Income Capitalization Approach?

    <p>To value income-generating properties</p> Signup and view all the answers

    What is the time value of money considered in?

    <p>Yield Capitalization</p> Signup and view all the answers

    The _______________ process involves checking for liens, encumbrances, authenticity and continuity.

    <p>title</p> Signup and view all the answers

    The _______________ Engineer’s Plan is used to pinpoint the location of the property.

    <p>Geodetic</p> Signup and view all the answers

    The _______________ Approach involves gathering information concerning sales of properties that are comparable to the property appraised.

    <p>Market Data</p> Signup and view all the answers

    The _______________ Method is used to gather opinions of values from reliable sources such as Real Estate Appraisers and Brokers.

    <p>Inferential/Rectification</p> Signup and view all the answers

    The purpose of _______________ is to describe and classify the subject property, establish a time period, and determine the market area.

    <p>Direct Comparison Method</p> Signup and view all the answers

    The _______________ Approach is used for valuation of raw land properties that are suitable for development.

    <p>Development</p> Signup and view all the answers

    The _______________ Analysis is used to analyze the neighborhood of the property.

    <p>HABU</p> Signup and view all the answers

    The _______________ is a document that provides information about the property's floor plan and building features.

    <p>Floor Plan</p> Signup and view all the answers

    The _______________ is a map that provides information about the property's location and boundaries.

    <p>Cadastral Reference</p> Signup and view all the answers

    The _______________ is a document that provides information about the property's taxes and ownership.

    <p>Tax Declaration</p> Signup and view all the answers

    The principle underlying the Cost Approach is the principle of ____________________.

    <p>Substitution</p> Signup and view all the answers

    The Cost Approach estimates the value of improvement as the ____________________ Replacement cost New.

    <p>Estimate</p> Signup and view all the answers

    The Quantity Survey Method includes a detailed inventory of all ____________________, labor including indirect costs.

    <p>materials</p> Signup and view all the answers

    The Unit-Cost-in-Place Method is the mathematical compression of the Quantity Survey ____________________.

    <p>Technique</p> Signup and view all the answers

    The Income Capitalization Approach is used in the valuation of income-generating properties, such as ____________________ buildings.

    <p>office</p> Signup and view all the answers

    The principle underlying the Income Capitalization Approach is the principle of ____________________.

    <p>Anticipation</p> Signup and view all the answers

    Direct Capitalization applies an overall rate, or ____________________ yield, which when divided into a single year’s or stabilized net operating income.

    <p>all risks</p> Signup and view all the answers

    Yield Capitalization is also known as ____________________ cash-flow analysis.

    <p>Discounted</p> Signup and view all the answers

    The basic formula used in Direct Capitalization is: Income / ____________________ Rate.

    <p>Capitalization</p> Signup and view all the answers

    Yield Capitalization considers the time value of ____________________.

    <p>money</p> Signup and view all the answers

    The valuation process starts with studying ______ documents.

    <p>pertinent</p> Signup and view all the answers

    The Geodetic Engineer's Plan is used to ______ the location of the property.

    <p>pinpoint</p> Signup and view all the answers

    The Market Data Approach is based on the principle of ______.

    <p>substitution</p> Signup and view all the answers

    The Direct Comparison Method involves ______ and classifying the subject property.

    <p>describing</p> Signup and view all the answers

    The Development Approach is used for valuation of ______ land properties.

    <p>raw</p> Signup and view all the answers

    The HABU Analysis is used to analyze the ______ of the property.

    <p>neighborhood</p> Signup and view all the answers

    The Floor Plan is a document that provides information about the property's ______ and building features.

    <p>floor</p> Signup and view all the answers

    The Cadastral Reference Map is a map that provides information about the property's ______ and boundaries.

    <p>location</p> Signup and view all the answers

    The Tax Declaration is a document that provides information about the property's ______ and ownership.

    <p>taxes</p> Signup and view all the answers

    The Correlate Values and Make Final Estimate step is the last step in the ______ process.

    <p>valuation</p> Signup and view all the answers

    The principle underlying the Cost Approach is the principle of _______________.

    <p>substitution</p> Signup and view all the answers

    The Cost Approach estimates the value of improvement as the _______________ Replacement cost New.

    <p>Estimate</p> Signup and view all the answers

    The Quantity Survey Method includes a detailed inventory of all materials, _______________ including indirect costs.

    <p>labor</p> Signup and view all the answers

    The Unit-Cost-in-Place Method is the mathematical compression of the _______________ Survey Technique.

    <p>Quantity</p> Signup and view all the answers

    The Income Capitalization Approach is used in the valuation of income-generating properties, such as _______________ buildings.

    <p>office</p> Signup and view all the answers

    The principle underlying the Income Capitalization Approach is the principle of _______________.

    <p>Anticipation</p> Signup and view all the answers

    Direct Capitalization applies an overall rate, or _______________ yield, which when divided into a single year’s or stabilized net operating income.

    <p>all risks</p> Signup and view all the answers

    Yield Capitalization is also known as _______________ cash-flow analysis.

    <p>Discounted</p> Signup and view all the answers

    The basic formula used in Direct Capitalization is: Income / _______________ Rate.

    <p>Capitalization</p> Signup and view all the answers

    Yield Capitalization considers the time value of _______________.

    <p>money</p> Signup and view all the answers

    The Market Data Approach is based on the principle of Substitution.

    <p>True</p> Signup and view all the answers

    The Cost Approach estimates the value of the land as the Original Purchase Price.

    <p>False</p> Signup and view all the answers

    The Income Capitalization Approach is used in the valuation of residential properties.

    <p>False</p> Signup and view all the answers

    Yield Capitalization is also known as Discounted Cash Flow analysis.

    <p>True</p> Signup and view all the answers

    The principle underlying the Income Capitalization Approach is the principle of Supply and Demand.

    <p>False</p> Signup and view all the answers

    The Geodetic Engineer's Plan is used to determine the value of the property.

    <p>False</p> Signup and view all the answers

    The HABU Analysis is used to analyze the neighborhood of the property.

    <p>True</p> Signup and view all the answers

    The Floor Plan is a document that provides information about the property's taxes and ownership.

    <p>False</p> Signup and view all the answers

    The Cadastral Reference Map provides information about the property's floor plan and building features.

    <p>False</p> Signup and view all the answers

    The valuation process starts with inspecting the property.

    <p>False</p> Signup and view all the answers

    The Cost Approach estimates the value of improvement as the depreciated Replacement cost New.

    <p>False</p> Signup and view all the answers

    The Unit-Cost-in-Place Method is used by Engineers and Architects.

    <p>False</p> Signup and view all the answers

    The Income Capitalization Approach is used in the valuation of non-income generating properties.

    <p>False</p> Signup and view all the answers

    The principle underlying the Income Capitalization Approach is the principle of Substitution.

    <p>False</p> Signup and view all the answers

    Direct Capitalization is a method of Yield Capitalization.

    <p>False</p> Signup and view all the answers

    The basic formula used in Direct Capitalization is: Income x Capitalization Rate.

    <p>False</p> Signup and view all the answers

    Yield Capitalization does not consider the time value of money.

    <p>False</p> Signup and view all the answers

    The Cost per Sq.Meter method is used to estimate the value of improvements.

    <p>True</p> Signup and view all the answers

    The Quantity Survey Method is used to estimate the value of land.

    <p>False</p> Signup and view all the answers

    The Income Capitalization Approach is used in the valuation of raw land properties suitable for development.

    <p>False</p> Signup and view all the answers

    Match the following appraisal valuation process steps with their descriptions:

    <p>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</p> Signup and view all the answers

    Match the following approaches to value with their descriptions:

    <p>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</p> Signup and view all the answers

    Match the following valuation approaches with their underlying principles:

    <p>Cost Approach = Principle of Substitution Income Capitalization Approach = Principle of Anticipation Market Data Approach = Principle of Substitution Development Approach = Principle of Anticipation</p> Signup and view all the answers

    Match the following cost estimating methods with their descriptions:

    <p>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 &amp; Unit Cost in Place Direct Capitalization Method = Applied to income-generating properties</p> Signup and view all the answers

    Match the following documents/maps with their descriptions:

    <p>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</p> Signup and view all the answers

    Match the following income capitalization approaches with their characteristics:

    <p>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</p> Signup and view all the answers

    Match the following valuation methods with their descriptions:

    <p>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</p> Signup and view all the answers

    Match the following analysis/approaches with their descriptions:

    <p>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</p> Signup and view all the answers

    Match the following documents/maps with their purposes:

    <p>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</p> Signup and view all the answers

    Match the following valuation steps with their descriptions:

    <p>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</p> Signup and view all the answers

    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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    Description

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