Learning Objectives: After successfully completing this chapter, you should be able to describe the types of assignments that an appraiser can receive, explain how the savings and loan crisis of the 1980s led to appraiser licensing, name the organization that assists Congress by developing appraiser and appraisal criteria, identify and explain the qualification criteria for the four categories of appraiser licensing, recognize other federal regulations that have an impact on appraisal practice, and list the major appraisal trade groups.

Learning Objectives After successfully completing this chapter, you should be able to convert percentages to decimals, decimals to percentages, and fractions to decimals; solve percentage problems; calculate the area of squares, rectangles, triangles, and irregular closed figures; convert various units of measure; compute the amount of living area in a house; compute the volume of triangular prisms; define terms used in the study of statistics; interpret and analyze statistical data when presented in an array and frequency distribution; calculate the mean, median, and mode; distinguish between the formula for finding the standard deviation of an entire population and the formula for finding the standard deviation of a sample; calculate the range, average deviation, and standard deviation; prepare statistical data in the form of tables, bar charts, histograms, and line graphs; and describe regression analysis.

Learning Objectives After successfully completing this chapter, you should be able to state what an appraisal is; identify the components of real estate; list the considerations in determining whether an item is a fixture; distinguish between public and private restrictions on land use; explain the methods that are used to create a legal description of land; define the types of freehold estate; define the types of nonfreehold estate; explain other interests in real estate, such as the easement and license; and distinguish the various forms of real estate co-ownership.

Learning Objectives After successfully completing this chapter, you should be able to list commonly used contracts involving real estate, explain the elements of a valid contract, state the requirements of the statute of frauds, describe the ways in which a contract is discharged, identify and explain the purpose of the most common types of deed, describe important terms of residential and commercial leases, and explain the benefits of a ground lease.

Learning Objectives After successfully completing this chapter, you should be able to discuss the characteristics of real estate markets, explain why the market for real estate is not like other markets, identify the types of market analysis that help define the market for real estate, discuss the ways in which real estate is financed, name the elements that create value, define market value and explain other types of value, identify influences on real estate value, and list and explain the basic value principles that must be considered in determining market value.

Learning Objectives After successfully completing this chapter, you should be able to identify the steps in the appraisal process, explain the importance of determining the appraiser’s scope of work, and discuss each of the three major approaches to appraising.

Learning Objectives After successfully completing this chapter, you should be able to compare and contrast: ranch, Cape Cod, two-story, split-level, and split-entry; critique a house and lot in terms of its orientation, topography, and view; identify the various components of a house from a diagram; identify common radon entry routes; and explain the term “low-E glass.”

Learning Objectives After successful completion of this chapter, you should be able to identify the steps in the appraisal process, use the Data Bank to determine and find information, evaluate the characteristics of a neighborhood, describe the four stages in the life cycle of a neighborhood, explain what is meant by an arm’s-length transaction, calculate the cash equivalency of a property sale, and explain how the Uniform Appraisal Dataset affects the appraisal report.

Learning Objectives After successfully completing this chapter, you should be able to distinguish vacant land from a building site, list reasons why a separate site valuation may be necessary, explain the concept of highest and best use, explain the importance of zoning in land valuation, describe some of the environmental concerns that can affect land value, and identify and demonstrate methods of site valuation.

Learning Objectives After successfully completing this chapter, you should be able to distinguish between reproduction cost and replacement cost; determine reproduction/replacement cost using the index, square-foot, unit-in-place, and quantity survey methods; explain what is meant by regional multipliers; use cost manuals; and compute the reproduction cost of a building based on building component costs.

Learning Objectives After successfully completing this chapter, you should be able to describe the various forms of depreciation; compare and contrast: economic life, physical life, remaining economic life, effective age, and chronological age; compute depreciation using the age-life (straight-line), observed condition, capitalized value, and market extraction methods; determine reproduction cost, cost per square foot of living area, accrued depreciation, and total property value using the cost approach; and complete the Cost Approach section of the URAR form.

Learning Objectives After successfully completing this chapter, you should be able to identify the property characteristics that are included in the sales comparison approach matrix, determine the suitability of properties as comparables, compute adjustment values, determine whether a dollar adjustment or percentage adjustment is appropriate, adjust the sales prices of comparable properties to reflect their differences from the subject property, complete a sales comparison analysis, and enter data on the Sales Comparison Approach section of the URAR form that complies with the requirements of the Uniform Appraisal Dataset (UAD).

Learning Objectives After successfully completing this chapter, you should be able to identify the principle that is fundamental to the income capitalization approach; define gross income and potential gross income; compare and contrast market rent, scheduled rent, and historical rent; define effective gross income and net operating income; calculate vacancy and collection loss; classify operating expenses as variable expenses, fixed expenses, or reserves for replacement; distinguish expenses for accounting purposes from expenses for appraisal purposes; reconstruct an operating statement; develop a GRM (or GIM) and opinion of value for a subject property; complete the Income section of the URAR form; and derive an operating expense ratio, net income ratio, and breakeven ratio.

Learning Objectives After successfully completing this chapter, you should be able to identify the two ways of capitalizing income; compare and contrast direct capitalization and yield capitalization; develop a capitalization rate; develop a cap rate using the band of investment method; explain the relationship between cap rate and risk; compute the value of a property using the building, land, and property residual techniques; explain the effects of the annuity and straight-line methods of recapture on income; and find the present worth of a property using the annuity method of capitalization.

Learning Objectives After successfully completing this chapter, you should be able to define the process of reconciliation, review each appraisal approach considering the value sought and subject property, analyze data collected for each of the approaches used to reach a final opinion of value, describe the three types of appraisal reports permitted by USPAP, explain the uses of the form appraisal report and the narrative appraisal report, state the purpose of Fannie Mae Form 2075, and work through an appraisal using the URAR form.

Learning Objectives After successfully completing this chapter, you should be able to define common partial interests, such as the condominium and tenancy in common; explain the difference between a time-share estate and a time-share use; identify when Fannie Mae Form 1073 is appropriate; state the differences between a tenancy in common and joint tenancy; define the terms applicable to leased fee and leasehold interests; and use a basic method for valuing leased fee and leasehold interests.