The government provides many necessary services that impact land use patterns and value. These public services are defined as governmental forces. Political and legal activities at all levels of government can have a great impact on property values. The natural market forces of supply and demand may be overshadowed by the legal climate in a particular area.

Private ownership is subject to the four powers of government. Police power, taxation, eminent domain, taxation and escheat. The acronym PETE can be used to remember the four powers of government. Taxation is the right of government to raise revenue through assessments. Eminent domain is the right of government to take private property for public use. Policy power is the right of government through which property is regulated to protect public safety, health, morals and general welfare. Escheat is the right of government that gives the state or local government titular ownership of a property when its owner dies without a will or any statutory heirs.

Insurable value is the value of an asset or asset group that is covered by an insurance policy and may be specified as either replacement or reproduction costs. Replacement cost is the cost to replace the subject property with a substitute property of similar size and use. Reproduction cost is the cost to produce an exact replica of the subject property. Business and going-concern value is market value that includes assets of an operating business, while investment value is the value of a property to a particular investor.

Market analysis is defined as the study of real estate market conditions for a specific type of property. Knowledge of existing land use regulations, the potential for modification of those land use regulations and economic supply and demand are the background for influences that impact the value of properties.

In considering an investment property, an investor will consider many different measures of investment performance. Used alone, each of the measures are not perfect, but when they are considered together, they have proven effectiveness. Net present value (NPV) and the internal rate of return (IRR) are two discounted cash flow models widely used for measuring investment performance. The payback period is the length of time required for the stream of cash flows produced by the investment to equal the original cash outlay. All of these would impact the investor's decisions

In describing the site, or land, an appraiser must describe and analyze comprehensive factual information, including, but not limited to, those items above. The site description will include a comprehensive listing of data, including a legal description, other title and recorded data, and information on the physical characteristics of the site.

Gross building area is the total of finished areas of all floors and includes the total enclosed area of a building's exterior dimensions. Gross living area does not include any garages, basements, or finished areas below grade.

The leasehold interest is the right held by the lessee to occupy and use the real estate for a stated term and under the conditions of the lease. Leased fee interest is the ownership interest held by the lessor (the owner).

An agreement in which the tenant in an existing lease conveys to a third party their interest in the right of use and occupancy of the property is known as a sublease. Angela Ward has a sandwich lease where she is the lessee of one party and the lessor of another.

Ad valorem translated from Latin means "according to value" and, in tax terms, means a tax that is proportional to the thing's value. This is different than a specific tax where a tax amount is constant. The assessed value of a property is based upon, but may not be equivalent to, its market value. Assessment ratio is the ratio of assessed value to market value (also known as common level ratio).

The date of value (or effective date) should not be confused with the date the appraisal report is signed, transmitted or received by the client. The date of value establishes the context for the value opinion and may be retrospective, current, or prospective according to the intended use of the appraisal assignment.

The concept of determining highest and best use goes beyond comparing the existing improvements with the ideal improvements. The costs/value of any needed remodeling or renovation needs to be weighed and a determination must be made as to what type of occupancy would best meet the four tests of the highest and best use.

By adding 1% per month for 6 months, the buyer would expect to receive $222,500.

209,900 x 6% = $12,594 + 209,900 = $222,494, rounded to $222,500.)

Properties that are located in areas undergoing transition can be some of the most difficult appraisal assignments due to the highest and best use analysis. Neighborhood and area analyses are especially critical when the use of the subject property may be about to change. All the questions above, and many more about the neighborhood and comparable properties, will be necessary for Judy Baker to determine the highest and best of the subject property.

All of the listed access issues could negatively affect the value of the subject site. The appraiser would need to clearly disclose any access issues in the description of the subject site and would also need to search for sales of properties with similar access issues, as well as research the market for the exact impact.

In the sales comparison approach to value, the appraiser develops an opinion of value for a property analyzing closed sales, listings or pending sales (supply and demand) of properties that are similar to (substitution) the subject property.

.67-acre x 43,560 sq. ft. per acre = 29,185 sq. ft.; $80,000 / 29,185 sf = $2.74 per square foot

Market participants, such as sellers and lenders, will use creative financing terms to sustain the demand for real estate at current price levels when interest rates are high. Financing considerations must be measured to determine how they impact sales prices.

The fact that the same emphasis is placed on all amenities is a weakness of the qualitative analysis. For example, an adjustment for a shed would receive the same consideration as the adjustment for a swimming pool. Qualitative analysis is much easier for an untrained reader to understand as it simply uses "superior/inferior" and it is much faster to develop than quantitative analysis. If the data pool is relatively small, however, the strength of qualitative analysis is diminished.

Response D is correct. In estimating construction costs for real estate appraisal, it is best to stay with a recognized authority such as RS Means Data from Gordian, Dodge Data and Analytics, or Marshall & Swift (Core Logic).

Reconciliation involves reducing a range of value indications by the sales comparison approach into an appropriate conclusion. Reconciliation requires the value indication to be tested for appropriateness of the adjustments applied, the accuracy of the data, and the quantity of evidence analyzed. The use of averaging or only relying on the mean, mode, or median are inappropriate in reconciliation.

Appraisal judgment and proper application of techniques are critical in the final reconciliation. The final reconciliation provides the appraiser opportunity to identify key factors that must be cited and explained. The final opinion of value is not merely an averaging of the three value indications derived. Reconciliation relies on the proper application of appraisal techniques and the appraiser's judgment.

The three ways that residential appraisers value a residential site as if it were vacant and available to be put to its highest and best use are the Sales Comparison Approach, allocation (aka ratio analysis), and extraction from comparable improved sales.

All of the answers will affect the marketability and the buildability of a vacant site, thus potentially limit its market value.

There are three principal methods for estimating depreciation:

• The market extraction method
• The economic age-life method
• The breakdown method

In the cost approach, calculating depreciation as a single number is to calculate age-life depreciation, rather than any single component of depreciation. Therefore, response D is correct.