Certified Property Appraiser Exam flashcards

40 cards. Read the term and the definition here. The deck at the top of this page is optional.

Market value definition

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, and price not affected by undue stimulus.

Highest and best use

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value.

Principle of substitution

A buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property, assuming no costly delay.

Capitalization rate

The rate used to convert net operating income into an indication of property value; value = net operating income divided by capitalization rate.

Gross rent multiplier

Sale price divided by gross monthly rent; used to estimate value of income properties by applying the multiplier to the subject's gross rent.

External obsolescence

A loss in value caused by factors outside the property, such as neighborhood decline or highway noise; usually incurable and measured by capitalization of rent loss or paired sales.

Bundle of rights

The set of legal rights associated with property ownership: possession, use, enjoyment, exclusion, and disposition; taxation may attach to any interest unless exempt.

Fixture test

A three-part test to determine if an item is real property: annexation to the land, adaptation to the use of the property, and intention of the parties.

Trade fixture

Personal property attached to realty by a tenant for business purposes; remains the tenant's personal property and is removable before lease expiration.

Easement

A nonpossessory right to use another's land for a specific purpose; an encumbrance that may affect value and must be considered in appraisal.

Leased fee estate

The ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others; the right to receive rent and reversion.

Assessment date

The statutory date (also called lien date) on which taxable value is determined; property characteristics and market conditions as of that date are used.

Assessment ratio

The ratio of assessed value to market value, expressed as a percentage; used to derive assessed value from market value for property tax purposes.

Equalization

The process of ensuring that assessed values are uniform and equitable within and across taxing jurisdictions, often using state equalization ratios.

Millage rate

The property tax rate expressed in mills; one mill equals one dollar of tax per $1,000 of assessed value. Tax bill = assessed value × millage ÷ 1,000.

Board of review

A local administrative body that hears taxpayer appeals regarding assessed value, exemptions, or classifications; deadlines and procedures are statutory.

Special assessment

A charge levied on properties that benefit from a specific public improvement, such as a sidewalk or sewer, to fund that improvement rather than general government.

Mass appraisal

The process of valuing a group of properties as of a given date using standardized methods, statistical testing, and valuation models.

Coefficient of dispersion

A statistical measure of assessment uniformity: average absolute deviation from the median ratio divided by the median ratio, expressed as a percentage; lower values indicate greater uniformity.

Price-related differential

Mean ratio divided by weighted mean ratio; a measure of vertical equity that indicates whether assessments are regressive or progressive.

Sales ratio study

A statistical analysis comparing assessed values to sale prices to evaluate assessment level and uniformity; uses median ratio, COD, and PRD.

Regression analysis

A statistical technique that estimates the relationship between a dependent variable (value) and independent variables (property characteristics) to predict value.

Stratification

The division of a population into homogeneous subgroups based on characteristics such as location, style, or age, to improve mass appraisal model accuracy.

Automated valuation model

A computer-based system that estimates property value using statistical models and data; requires calibration, ratio testing, and periodic revalidation.

USPAP

Uniform Standards of Professional Appraisal Practice; sets requirements for appraisal development, reporting, ethics, competency, and record keeping.

Scope of work

The type and extent of research and analysis performed in an assignment; determined by the appraiser based on intended use and disclosed in the report.

Contingent fee

A fee that is contingent on the value reported or a direction in value; prohibited under USPAP ethics because it compromises independence and impartiality.

Record keeping

USPAP requires retention of workfiles for at least five years after delivery of the report, or two years after final disposition of an appeal, whichever is longer.

Jurisdictional exception

A USPAP provision that allows departure from a standard when it conflicts with law, provided the exception is disclosed in the report.

Allocation method

A land valuation method that derives land value by applying a typical land-to-total-value ratio from comparable sales to the subject property's total value.

Extraction method

A land valuation method that subtracts the depreciated cost of improvements from the total sale price to estimate land value.

Subdivision development method

A land valuation method that estimates value as the present value of finished lot sales minus development costs and profit.

Ground rent capitalization

A land valuation method that divides annual ground rent by a capitalization rate to estimate land value.

Excess land

Land that is not needed to support the existing use and has independent value; it can be sold separately or developed.

Surplus land

Land that is not needed to support the existing use but has no independent value because it cannot be sold separately; contributes only marginally to value.

Replacement cost

The cost to construct a building of equal utility using current materials and methods, without reproducing exact design or materials.

Reproduction cost

The cost to construct an exact replica of a building using the same materials, design, and workmanship as the original.

Age-life method

A depreciation method that estimates total depreciation as effective age divided by total economic life, multiplied by cost new.

Functional obsolescence

A loss in value due to deficiencies or superadequacies in design, layout, or utility; measured by cost to cure or capitalization of rent loss.

Breakdown method

A depreciation method that estimates physical deterioration, functional obsolescence, and external obsolescence separately and sums them for total depreciation.