Ownership of real property entails with it certain inherent rights. These rights when assembled together are considered
to be a bundle, subject only to the limitations imposed by government and the rights of other property owners. These rights may be
grouped into 3 categories:
· Ownership: The right to sell, buy, bequeath, give, exchange,
or lease in whole or part real property. The right to split property or transfer whole or fractional interests.
· Quiet Possession: The right of an owner to possess property free of interference or encroachment from others, such as government,
without due process of law.
· Use: The right of an owner to use his property as he
sees fit, for example: extraction of minerals, agriculture, construction of structures and roads, fencing, dwellings, residential,
commercial, etc.
To reduce or eliminate one or more rights decreases the bundle and may have an impact upon value. In eminent domain,
a loss in value must be compensated for.
The rate that reflects the relationship between the value of a property
and its net operating or net rental income. See Income Approach. Mathematically, it is the result of dividing a property’s net income
by its value. It is sometimes called a rate-of-return or return-on-investment.
All out of pocket costs associated with
the closing of a real estate sales transaction. In Arizona the buyer typically pays ˝ escrow, underwriters policy if a loan is involved,
recording of deed and mortgages created, home inspection, environmental inspection, appraisal, percolation test, and loan fees. In
Arizona the seller typically pay ˝ escrow, title fee, owners policy, recording of Affidavit of Property Value, survey, septic test,
termite inspection, well inspection, sales commission, and home warranty. The costs listed here and their allocations are typical
and can vary from one sale to another.
A property, similar in character to the property being appraised (the subject), from
which market value, market rents, etc. may be derived, which in turn are used to estimate subject value or a value component.
The
action or process of taking property through the power of eminent domain.
A right in property established to
resist change, to preserve what already exists, or to preserve various features that may be deemed beneficial to the community at
large, such as: scenic vistas, timberland, riparian areas, historic structures, etc. Use of the encumbered area is limited by the
terms of the easement deed. It is separately owned and may cover the entire property or only a portion. If made in conformance with
IRS regulations, the underlying fee simple owner may benefit from reduced federal income taxes and, as a consequence, where state
income taxes are tied to federal income tax obligations, state income tax burdens may also be reduced. Additionally, heirs to an estate
may receive reduced estate taxes, due to reduced basis, and since real property taxes are generally based on value, property tax savings
are likely to occur.
Two or more properties that share a common side or boundary.
One of the 3 major approaches
to value estimation. It is based on the idea that the value of a property is equal to the value of the land plus the cost of all the
additions less depreciation from all causes. Generally people will not pay more for a property than it would otherwise cost to
buy a similar site and build a similar addition upon it. Therefore, under stable market conditions, this approach tends
to set an upper limit to value.
In summary:
+ cost new
- accumulated depreciation
+ land value
= value by cost approach
In condemnation, these are the costs associated
with the construction of facilities, such as: retaining walls, fences, barriers, walkways, driveways, culverts, piping, etc., that
will work to reduce or even eliminate, i.e. “cure,” the impact of a taking of rights and/or land from a condemned parcel.