Real Estate Chapter 13 Quiz

Chapter 13 Quiz - Appraising Special Interests

• Property Interest Evaluation: Appraisers are typically asked to evaluate complete ownership interests (fee simple) or leasehold interests. Other interests, like easements or partial interests, might also need evaluation.

• Condominium Sales: The sale of condominium units in a multi-story building is an example of vertical subdivision, not horizontal or diagonal subdivision.

• Easements: Easements in gross are often owned by utility companies or other entities rather than landlords, tenants, or neighboring landowners.

• Security Interests: A lien is a security interest that allows a lender to encumber a borrower's property.

• Legal Entities: A corporation is considered an "artificial person" in legal terms.

• Lease Equivalent Value: If lease terms are the same as current market terms, the value of the leased fee is considered equal to the value of the fee simple interest.

• Contract Rent vs. Market Rent: Contract rent may differ from market rent due to step-down leases, special concessions from the landlord, or lease stabilization without market adjustment.

• Lease Types: A step-down lease is one whose rent may change periodically based on the market value of the property. Other types include index lease and step-up lease.

• Lease Expenses: In a gross lease, responsibility for expenses, beyond rent, typically falls on the landlord or property owner. A tenant is responsible only for rent.

• Appraisal Methods: The income approach, sales comparison approach, or market approach are the most impactful ways of appraising interests in leased property. Cost approach isn't as effective.

• Easement Impact: To appraise the value of an easement, an analyst must calculate the value of the benefit to the easement holder or examine the effect of similar easements on comparable properties.

• Partial Ownership Appraisal: When appraising partial ownership, the value of the entire property is not the focus; individual factors are addressed to determine an accurate value.

• Condominium Ownership: Condo unit owners have ownership of their unit and a property interest in the common areas (e.g. hallways).

• Planned Unit Developments (PUDs): Physically, a PUD is most similar to a subdivision.

• Cooperative Ownership: In cooperative ownership, there's an ownership of shares in a corporation, not direct real estate ownership.

Additional Appraisal Concepts (from subsequent pages)

• Gross Lease: A lease where the tenant pays only rent, and the landlord/property owner pays other expenses.

• Income Approach: The primary way to analyze leasehold interests, examining their earning potential.

• Sales Comparison: Evaluating leasehold interests using comparable leasehold sales.

• Partial Interests: In appraising partial interests, the overall property value is not just multiplied by the percentage owned. Factors beyond the percentage of ownership influence value.

• Real Estate Appraisal: Proper appraisal methods are crucial for accurately assessing property value based on current market conditions.