BREA Broker Exam key terms

The reasonably probable, legally permissible, physically possible, financially feasible, and maximally productive use of a property that produces the greatest value as of the appraisal date.

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller acting prudently and knowledgeably.

The value of a property to a particular investor based on that investor's own requirements, expectations, and risk tolerance, rather than on typical market participants.

A valuation method that estimates value by analyzing prices paid for similar properties and adjusting those prices for differences from the subject property.

A property that has sold recently, is similar to the subject, and is used as a benchmark for estimating the subject's value through comparison and adjustment.

A dollar or percentage modification applied to a comparable sale's price to reflect a difference between that property and the subject, such as location, size, condition, or date of sale.

A technique that isolates the effect of a single variable by comparing two otherwise similar properties that differ only in that one characteristic.

A valuation method that estimates value by adding the current cost to replace or reproduce improvements, less depreciation, to the value of the underlying land.

The current cost to construct a building with equivalent utility using modern materials and methods, rather than duplicating the original construction exactly.

The current cost to construct an exact replica of the subject improvements using the same design, materials, and construction methods as the original.

The total loss in value of an improvement from all causes as of the appraisal date, measured as the difference between replacement cost and current contributory value.

A loss in value caused by deficiencies or superadequacies in a building's design, layout, or features relative to what the market currently expects and prefers.

A loss in value caused by factors outside the property itself, such as neighborhood decline, adverse zoning, or market conditions, that the owner cannot correct.

A loss in value from wear and tear, aging, or damage to building components, classified as either curable or incurable depending on whether repair cost is recovered in value.

A valuation method that converts anticipated future income from a property into an estimate of present value, typically through direct capitalization or discounted cash flow analysis.

A method that converts a single year's stabilized net operating income into a value estimate by dividing that income by an appropriate capitalization rate.

A ratio expressing the relationship between a property's net operating income and its value or sale price, reflecting return expectations and risk.

Effective gross income less all operating expenses, excluding debt service, income taxes, and capital expenditures, used as the income stream in capitalization.

Potential gross income adjusted for vacancy and collection losses, plus any miscellaneous income, representing the income a property is expected to actually collect.

A ratio of sale price to gross rental income used to compare and value income properties quickly, without accounting for operating expenses.

The final analytical step in which the appraiser weighs the indications of value from each approach and arrives at a single, supportable value conclusion.

The type and extent of research and analysis an appraiser determines is necessary to produce credible assignment results given the intended use and users.

The purpose or use of an appraisal, such as lending, litigation, or financial reporting, which drives the scope of work and reporting requirements.

The client and any other party the appraiser identifies at the outset as users of the appraisal report, which shapes the report's content and assumptions.

An assumption, directly stated in the report, that if found to be false could alter the appraiser's opinions or conclusions, often used for unverified facts.

A condition, directly stated in the report, that is contrary to what exists as of the effective date but is assumed for purposes of analysis or illustration.

The date at which the appraiser's opinion of value applies, which may differ from the date the report is prepared or delivered.

The estimated length of time a property would have been offered on the open market prior to the effective date to achieve the appraised value.

The study of supply and demand conditions, including absorption rates, vacancy, and pricing trends, for a property type within a defined market area.

The pace at which available space or units in a market are sold or leased over a given period, often expressed as units per month or year.

A temporary use of a property that is not its highest and best use but is reasonable until a more productive use becomes financially feasible.

The incremental value created when two or more adjacent parcels are assembled into one larger site that is worth more than the sum of the individual parcels.

Land that is larger than needed to support the existing or highest and best use of the improvements and that could be separately developed or sold.

Land that exceeds what is needed for the existing improvements but cannot be separately developed or sold because of physical or legal constraints.

A nonpossessory right held by one party to use another's land for a specific purpose, such as access, utilities, or drainage, which may affect value.

Any right, interest, lien, or restriction attached to a property that burdens it or limits its free use and transferability, such as mortgages or easements.

The legal evidence of a person's right to own, possess, use, and dispose of real property, subject to any recorded encumbrances or restrictions.

A USPAP requirement that an appraiser accept an assignment only after determining they have, or can acquire, the knowledge and experience needed to complete it credibly.

The USPAP section governing an appraiser's conduct, requiring impartiality, objectivity, independence, and avoidance of conflicts of interest in assignments.

A fee arrangement in which compensation depends on a predetermined value outcome or result, which is generally prohibited in appraisal assignments for lending purposes.