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Questions and Answers
What is an appraisal in real estate?
What is the primary basis of an appraisal?
What is the main difference between a real estate appraiser and a real estate assessor?
What is NOT a part of the appraisal process?
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What is the purpose of an appraisal?
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Who is a real estate appraiser?
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What is the definition of appraisal under R.A. 9646 (RESA)?
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What is the difference between real estate and real property?
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What is the main difference between 'cost' and 'price' in the context of real estate?
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Which economic principle states that value is created by the expectation of certain events?
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What is the main characteristic of an arm's length transaction?
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What is the primary factor that determines the market value of a property?
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Which force refers to the nature of basic industry and business activity in a neighbourhood?
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What is the primary role of proper marketing in determining market value?
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Which economic principle states that excess profits tend to attract competition?
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What is the relationship between 'value' and a 'potential purchaser' in the context of real estate?
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What is the value of a property based on its continued operation?
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What is the estimated value of a property based on its potential for investment?
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What is the value of a large combined parcel of land over and above the sum of its smaller parcels?
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What is the process of determining the value of a property based on its potential for rental?
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What is the value of a property when a corporation is forced to sell its assets lower than the market value?
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What is the first step in the appraisal process?
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What is the final step in the appraisal process?
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What is the value of a property based on its original cost less accrued depreciation?
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What is the primary factor that influences the value of a property according to the Principle of Conformity?
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What is the aim of the Principle of Highest and Best Use?
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What is the Principle of Increasing and Diminishing Return related to?
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What is the function of the assessor in determining the value of a property?
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What is the Principle of Substitution based on?
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What is the primary factor that influences the value of a property according to the Principle of Supply and Demand?
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What is the order of priority of payment in the Surplus Productivity principle?
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What is the Insurable Value of a property?
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What is one of the main purposes of real estate appraisal in financing?
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What type of appraisal report is preferred by lenders and others handling large volumes of appraisals?
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What is the purpose of real estate appraisal in taxes and legal?
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What is the most formal and detailed type of appraisal report?
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What is the purpose of real estate appraisal in financing, development, and insurance?
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What is the purpose of real estate appraisal in transfer, valuation, and allocation of assets?
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What is the least formal written appraisal report?
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What is the purpose of real estate appraisal in determining the value of a property in mergers?
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Appraisal is the process of valuation, in a more technical usage, a systematic, analytical, determination and recording of property ______, based primarily on a personal inspection and inventory of the property.
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The accuracy of an appraisal depends on the ______ and Competence of the Appraiser.
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Appraisal does not create ______ but observes and interprets forces which create value.
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A real estate ______ is a duly registered and licensed natural person who performs appraisal services for a professional fee.
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A real estate ______ is a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties.
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The primary purpose of an appraisal is to arrive at a ______ estimate.
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The _______________ of a property refers to the estimated amount for which a property should exchange on the date of valuation.
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An appraisal includes ______ and Conclusions necessary to arrive at a value estimate.
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The Principle of _______________ states that value is created by the expectation that certain events will occur.
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The _______________ of a property is the actual amount spent to build or put a property into being.
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Real estate ______ is different from real property in terms of its definition.
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Economic Forces relate to the _______________ of industry and business activity in a neighbourhood.
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The _______________ of a property is the relationship between a thing desired and a potential purchaser.
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The Principle of _______________ states that excess profits tend to attract competition.
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The primary role of _______________ in determining market value is to ensure that the parties had each acted knowledgeably and prudently.
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Economic Principles of Value include the Principle of _______________ which states that value is achieved and maintained when all elements are in proper proportion.
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The ______________________ value of a property is the estimated value of property investment.
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The value of a large combined parcel, called an assemblage, over and above the sum of the smaller parcels is known as ______________________ value.
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The value of a property based on its original cost less accrued depreciation is known as ______________________ value.
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The estimated value of a property based on its potential for rental is known as ______________________ value.
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The value of a property when a corporation is forced to sell its assets lower than the market value is known as ______________________ value.
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The value of a property based on its continued operation is known as ______________________ value.
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The first step in the appraisal process is to define the ______________________ of the assignment.
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The highest and best use of a property is specified in terms of use, time, and ______________________ participants.
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The primary purpose of real estate appraisal in financing, development, and insurance is to ______________________ the value of the security offered for a mortgage loan.
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A ______________________ report is the least formal written appraisal report.
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Real estate appraisal is used in taxes and legal to ______________________ property for property taxes.
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A ______________________ report is preferred by lenders and others handling large volumes of appraisals.
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The primary purpose of real estate appraisal in transfer, valuation, and allocation of assets is to ______________________ the fairness of the asking price.
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The Narrative Appraisal Report is the most ______________________ and detailed type of report.
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Real estate appraisal is used in financing, development, and insurance to ______________________ property insurance value.
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The purpose of real estate appraisal in taxes and legal is to ______________________ gift or inheritance taxes.
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Real estate refers to the physical land and all the ______ attached to the land.
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The rights to the water and other substances below the surface of land are referred to as ______ rights.
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The ability of a good or service to fill a need is referred to as ______.
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The shortage of supply relative to demand is referred to as ______.
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The good or service must be ______ to have value to anyone other than the person who owns it.
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Forces that relate to population growth, birth control measures, and migration are referred to as ______ forces.
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The primary factor that determines the market value of a property is influenced by ______ forces.
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The right to use and develop the space above the land without interference by others is referred to as ______ rights.
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Real estate refers to the physical land itself, including all improvements made to the land.
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Surface rights refer to the rights to the air above the surface of the land.
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Scarcity refers to an abundance of supply relative to demand.
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Social forces in real estate refer to government policies and regulations.
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Transferability is a characteristic of value that refers to the ability of a good or service to fill a need.
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Economic forces in real estate include social and political forces.
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Air rights are reserved by the State.
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Real property is the same as personal property.
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The Principle of Balance states that value is created by the expectation that certain events will occur.
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The estimated amount for which a property should exchange on the date of valuation is known as the Cost.
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The Principle of Competition states that excess profits tend to repel competition.
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The forces relating to the nature of basic industry and business activity in a neighbourhood are Physical Forces.
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The process of determining the value of a property is known as an assessment.
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The main difference between 'cost' and 'price' in the context of real estate is that cost refers to the amount spent to build or put a property into being, while price refers to the amount paid in a particular transaction.
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The primary role of proper marketing in determining market value is to provide a willing buyer and a willing seller.
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The definition of Market Value includes the assumption that the parties have each acted under compulsion.
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According to the Principle of Contribution, an improvement to a property is worth only what it adds to the value of the property, regardless of the cost.
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The Principle of Highest and Best Use states that the use of a property is worth only what it adds to the value of the property.
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The Principle of Increasing and Diminishing Return is related to the principle of balance as well as to the principle of contribution.
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The worth of a property is influenced by the cost of acquiring a substitute or comparable property according to the Principle of Substitution.
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The Surplus Productivity principle recognizes the four agents of production in the order of priority of payment as Land, Entrepreneurship, Capital, and Labor.
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The Principle of Supply and Demand states that the value of a property depends on the number of properties available in the market place and the prices of other properties.
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Insurable value is the value of a property established for property tax purposes.
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Assessed Value is the cost of total replacement of a property's destructible improvements.
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One of the purposes of real estate appraisal is to determine the value of a property in mergers.
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The Loan or Mortgage Value is the same as the market value of a property.
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The Letter Report is the most formal and detailed type of appraisal report.
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An appraisal is used to determine property insurance value.
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The Going-Concern Value is the value of a business that is not in operation.
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The Plottage Value is the decreased value of the large combined parcel over and above the sum of the smaller parcels.
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The Form Report is preferred by lenders and others handling small volumes of appraisals.
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The Liquidation Value is when a corporation sells its assets at a higher price than the market value.
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Real estate appraisal is used to determine the value of a property in condemnation proceedings.
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The Reconciliation of Value Indications is the first step in the appraisal process.
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The purpose of real estate appraisal is to determine the value of a property for property taxes.
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An appraisal report always includes extensive narrative supplements.
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The Sales Comparison Approach is one of the three approaches to estimate the value of a property.
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The Highest and Best Use of a property is specified in terms of Time, Market, and Participants.
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Real estate appraisal is used to set a fair basis for the exchange of real property.
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The Book Value is the estimated value of a property based on its potential for investment.
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Match the purposes of real estate appraisal with their descriptions:
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Match the types of written appraisal reports with their characteristics:
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Match the purposes of real estate appraisal with their corresponding categories:
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Match the types of appraisal documents with their descriptions:
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Match the purposes of real estate appraisal with their corresponding benefits:
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Match the categories of real estate appraisal with their corresponding purposes:
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Match the types of appraisal reports with their characteristics:
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Match the purposes of real estate appraisal with their corresponding categories:
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Match the types of appraisal documents with their descriptions:
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Match the purposes of real estate appraisal with their corresponding benefits:
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Study Notes
Appraisal Definition
- Appraisal is an estimate of value as of a given time and for a specific purpose.
- It is a systematic, analytical, determination and recording of property facts, based primarily on a personal inspection and inventory of the property.
Appraisal vs. Assessment
- Real Estate Appraiser: a duly registered and licensed natural person who performs services in estimating and arriving at an opinion of real estate values.
- Real Estate Assessor: a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes.
Real Estate vs. Real Property
- Real Estate: includes economic forces relating to the nature of basic industry and business activity in the neighborhood.
- Real Property: includes physical forces that refer to the location and age of the neighborhood.
Cost, Price, and Value
- Cost: the actual amount spent to build or put a property into being.
- Price: the actual amount paid in a particular transaction.
- Value: the relationship between a thing desired and a potential purchaser.
Market Value
- Market Value: the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction.
- Elements: estimated amount as of a given date, willingness of both parties, substantive knowledge and sound judgment by both parties, and known in the open market.
Economic Principles of Value
- Principle of Anticipation: value is created by the expectation that certain events will occur.
- Principle of Balance: value is achieved and maintained when all elements are in proper proportion.
- Principle of Change: real property uses are always in a state of change.
- Principle of Competition: excess profits tend to attract competition.
- Principle of Conformity: real property will generally be higher in value if it is similar in design, construction, age, and use to other properties in the neighborhood.
- Principle of Contribution: any improvement to property is worth only what it adds to the value of the property.
- Principle of Highest and Best Use: the use of the property that will give the most profit.
- Principle of Increasing and Diminishing Return: relates to the principle of balance and the principle of contribution.
- Principle of Substitution: the worth of a property is influenced by the cost of acquiring a substitute or comparable property.
- Principle of Supply and Demand: the value of the property depends on the number of properties available in the market place.
Multiple Meanings of Value
- Assessed Value: the value of property established for property tax purposes.
- Insurable Value: the cost of total replacement of a property's destructible improvements.
- Loan or Mortgage Value: the value set on a property for the purpose of making a loan.
- Going-Concern Value: the value of business based on operation, or property that will continue to be utilized.
- Plottage Value: the increased value of the large combined parcel, called an assemblage, over and above the sum of the smaller parcels.
- Investment Value: the estimated value of property investment.
- Book Value: the original cost of an asset or property less accrued depreciation.
- Rental Value: the price fixed for the right to use a certain property for a specific period of time.
- Liquidation Value: the value of a property in a situation where a corporation under receivership may sell its assets lower than the market value.
The Appraisal Process
- Definition of the Assignment: identification of the real property, valuation, and rights.
- Preliminary Analysis and Data Selection: collection of competitive supply and demand data, cost, and depreciation.
- Highest and Best Use: the use of the property that will give the most profit.
- Land Value Estimate: application of the three approaches: sales comparison, income, and cost.
- Reconciliation of Value Indications and Final Value Estimate: final estimate of value after reconciliation.
Purposes of Real Estate Appraisal
- Transfer, Valuation, and Allocation of Assets: to help buyers or sellers determine the fairness of the asking price.
- Financing, Development, and Insurance: to determine the value of the security offered for a mortgage loan.
- Taxes and Legal: to assess property for property taxes, determine gift or inheritance taxes, and value property in condemnation proceedings.
Types of Written Appraisal Reports
- Letter Report: the least formal written report, used when the supporting data is not required by the client.
- Form Report: a standardized report preferred by lenders and others handling large volumes of appraisals.
- Narrative Appraisal Report: the most formal and detailed type of report, preferred when the user needs to follow the appraiser's step-by-step analysis.
Real Estate Appraisal
- A real estate appraisal is an estimate of value as of a given time and for a specific purpose.
- It is a systematic, analytical, and impartial process of determining the value of a property.
- The accuracy of an appraisal depends on the integrity and competence of the appraiser.
Definition of Appraisal under R.A. 9646 (RESA)
- The process of developing an estimate of the value of an adequately identified and described property as of a specific date, supported by logical presentation of factual and relevant data.
Real Estate Appraiser vs. Real Estate Assessor
- A real estate appraiser is a duly registered and licensed natural person who, for a professional fee, compensation, or other valuable consideration, performs or renders services in estimating and arriving at an opinion of or acts as an expert on real estate values.
- A real estate assessor is a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes.
Real Estate vs. Real Property vs. Personal Property
- Real estate refers to the physical land and all improvements attached to it.
- Real property refers to the rights, interests, and benefits related to the ownership of real estate (bundle of rights).
- Personal property refers to tangible, movable items or objects not permanently attached to real estate.
Property Rights
- Surface rights refer to ownership rights in a parcel of real estate that are limited to the surface.
- Subsurface rights refer to the landowner's rights to the water and other substances below the surface of the land.
- Air rights refer to the property interest in the "space" above the earth's surface.
Characteristics of Value
- Demand refers to the need or desire coupled with the purchasing power to fill it.
- Utility refers to the ability of a good or service to fill that need.
- Scarcity refers to the shortage of supply relative to the demand.
- Transferability refers to the good or service must be transferable to have value to anyone other than the person who owns it.
Forces that Affect Real Estate Values
- Social forces refer to population growth, birth control measures, and migration.
- Political forces refer to the efficiency of government in the maintenance of peace and order, and provision of primary services and legislation.
- Economic forces refer to the nature of basic industry and business activity in the neighborhood, including employment, income, and housing.
- Physical forces refer to the location and age of the neighborhood, including the size, area, shape, and topography of the land, as well as the improvements, trends, etc.
Real Property and Personal Property
- Real property refers to the physical land and all improvements attached to the land, including buildings, structures, and other man-made objects.
- Personal property, on the other hand, refers to tangible, movable objects that are not permanently attached to real estate.
Property Rights
- Surface rights refer to ownership rights limited to the surface of the land, excluding air rights and subsurface rights.
- Subsurface rights refer to the landowner's rights to water and other substances beneath the surface of the land.
- Air rights refer to the property interest in the "space" above the earth's surface, including the right to use and develop the space without interference.
Characteristics of Value
- Demand refers to the need or desire coupled with the purchasing power to fulfill that need.
- Utility refers to the ability of a good or service to fulfill a need.
- Scarcity refers to the shortage of supply relative to demand.
- Transferability refers to the ability to transfer ownership of a good or service.
Forces that Affect Real Estate Values
- Social forces relate to population growth, birth control measures, and migration.
- Political forces relate to the efficiency of government in maintaining peace and order, providing primary services, and legislation.
- Economic forces relate to the nature of basic industry and business activities in the neighborhood.
- Physical forces relate to the location, size, area, shape, topography, and improvements of the neighborhood.
Cost vs. Price vs. Value
- Cost refers to the actual amount spent to build or put a property into being.
- Price refers to the actual amount paid in a particular transaction.
- Value refers to the relationship between a thing desired and a potential purchaser.
Marketing Value
- Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing.
- Elements of market value include the estimated amount as of a given date, willingness of both parties, substantive knowledge and sound judgment by both parties, and knowledge in the open market.
Economic Principles of Value
- Principle of Anticipation: value is created by the expectation that certain events will occur.
- Principle of Balance: value is achieved and maintained when all elements are in proper proportion.
- Principle of Change: real property uses are always in a state of change.
- Principle of Competition: excess profits tend to attract competition.
- Principle of Conformity: real property will generally be higher in value if it is similar in design, construction, age, and use to other properties in the neighborhood.
- Principle of Contribution: any improvement to property is worth only what it adds to the value of the property regardless of the cost.
- Principle of Highest and Best Use: the use of the property that will give the most profit, the greatest net income.
- Principle of Increasing and Diminishing Return: as capital units are added, a certain point is reached where the added units do not contribute value commensurate with their costs.
- Principle of Substitution: the worth of a property is influenced by the cost of acquiring a substitute or comparable property.
- Principle of Supply and Demand: the value of the property depends on the number of properties available in the market place.
Multiple Meanings of Value
- Assessed Value: the value of property established for property tax purposes.
- Insurable Value: the cost of total replacement of a property's destructible improvements.
- Loan or Mortgage Value: the value set on a property for the purpose of making a loan.
- Going-Concern Value: the value of a business based on its operation.
- Plottage Value: the increased value of a large combined parcel over and above the sum of the smaller parcels.
- Investment Value: the estimated value of a property investment.
- Book Value: the original cost of an asset or property less accrued depreciation.
- Rental Value: the price fixed for the right to use a certain property for a specific period.
- Liquidation Value: the value of a property sold in a forced sale.
The Appraisal Process
- Definition of the Assignment: identifying the real property to be appraised and the purpose of the appraisal.
- Preliminary Investigation: collecting general and specific data about the subject property and comparable properties.
- Land Value Estimate: estimating the value of the land as though vacant.
- Application of the Three Approaches: applying the sales comparison, income, and cost approaches to estimate the value of the property.
Purposes of Real Estate Appraisal
- Transfer, Valuation, and Allocation of Assets
- Financing, Development, and Insurance
- Taxes and Legal Purposes
Real Estate Appraisal
- A real estate appraisal is an estimate of value as of a given time and for a specific purpose.
- It is a systematic, analytical, and impartial process of determining the value of a property.
- The accuracy of an appraisal depends on the integrity and competence of the appraiser.
Definition of Appraisal under R.A. 9646 (RESA)
- The process of developing an estimate of the value of an adequately identified and described property as of a specific date, supported by logical presentation of factual and relevant data.
Real Estate Appraiser vs. Real Estate Assessor
- A real estate appraiser is a duly registered and licensed natural person who, for a professional fee, compensation, or other valuable consideration, performs or renders services in estimating and arriving at an opinion of or acts as an expert on real estate values.
- A real estate assessor is a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes.
Real Estate vs. Real Property vs. Personal Property
- Real estate refers to the physical land and all improvements attached to it.
- Real property refers to the rights, interests, and benefits related to the ownership of real estate (bundle of rights).
- Personal property refers to tangible, movable items or objects not permanently attached to real estate.
Property Rights
- Surface rights refer to ownership rights in a parcel of real estate that are limited to the surface.
- Subsurface rights refer to the landowner's rights to the water and other substances below the surface of the land.
- Air rights refer to the property interest in the "space" above the earth's surface.
Characteristics of Value
- Demand refers to the need or desire coupled with the purchasing power to fill it.
- Utility refers to the ability of a good or service to fill that need.
- Scarcity refers to the shortage of supply relative to the demand.
- Transferability refers to the good or service must be transferable to have value to anyone other than the person who owns it.
Forces that Affect Real Estate Values
- Social forces refer to population growth, birth control measures, and migration.
- Political forces refer to the efficiency of government in the maintenance of peace and order, and provision of primary services and legislation.
- Economic forces refer to the nature of basic industry and business activity in the neighborhood, including employment, income, and housing.
- Physical forces refer to the location and age of the neighborhood, including the size, area, shape, and topography of the land, as well as the improvements, trends, etc.
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Description
Understand the definition of appraisal and how it differs from assessment in the context of real estate. Learn about the roles of appraisers and assessors.
