12 Ch11 Case Study of Encumbered Ownership Interest quiz Flashcards
Which of these are factors that create value?
Transferability, Demand, Utility, Scarcity
Barb purchases a property from Tony, and immediately grants a life estate in the property to Henry. Which party is the reverter?
Barb
Life Tenant A has a life expectancy of 4 years. Life Tenant B has a life expectancy of 7 years. Which one of these would require the use of a LOWER discount rate when valuing a life estate?
Life Tenant A
The subject property has an effective age of 45, and a total economic life of 60 years. The cost new of the subject property improvements is $675,000. What percentage of depreciation should be applied in the cost approach?
75%. 45 / 60 = 0.75 or 75% Ch 11, Adjustments, continued
Despite the fact that the terms real estate and real property are often used interchangeably, a better term for a valuation professional is
Real property appraiser
The subject property has an effective age of 10, and a total economic life of 40 years. The cost new of the subject property improvements is $1,240,000. What is the dollar amount of accrued depreciation that should be applied in the cost approach?
$310,000
The subject property has an effective age of 5, and a remaining economic life of 35 years. The cost new of the subject property improvements is $900,000. What is the percentage of accrued depreciation that should be applied in the cost approach?
12.5%. Total economic life is 40 years (35+5). 5 / 40 = 12.5% depreciation. $900,000 x 0.125 = $112,500. Ch 11, Adjustments, continued
The subject property has a three-car detached garage/shop building, 1,200 square feet, which costs $35 per square foot to construct. Your research indicates that 30% of the cost of these buildings is typically returned in value. What adjustment would you make in the sales comparison approach to a comparable sale that does not have a detached garage building?
$12,600
When appraising a property subject to a life estate, the anticipated future value of the property must be discounted to a present value. Which statement is TRUE regarding this process?
The shorter the life expectancy of the tenant, the lower the discount rate
A comparable sale property has a three-car detached garage/shop building, 1,200 square feet, which costs $35 per square foot to construct. Your research indicates that 60% of the cost of these buildings is typically returned in value. The subject property does not have a garage. What adjustment would you make in the sales comparison approach to this comparable sale?
25200 Minus
Statistically-developed guides which are used for estimating the life expectancy and the probability of death of an individual are
Actuarial tables
“The interests, benefits, and rights inherent in ownership” of an identified property is the definition of
Real property
The subject property has an inground pool, which cost $50,000 to construct and install. Your research indicates that 60% of the cost of an improvement like this is typically returned in value. What adjustment would you make in the sales comparison approach to a comparable sale that does not have a pool?
- $50,000 x 60% = $30,000. This would be a positive adjustment. Ch 11, Adjustments
“An identified parcel or tract of land, including improvements” is the definition of
Real estate
Mary has a remaining life expectancy of 8 years. Helen has a remaining life expectancy of 7 years. As a life tenant, which one would require the use of a LOWER discount rate when valuing a life estate?
Helen
The subject property has a present value of $325,000. In valuing a life estate, you are forecasting that property values will increase at an annual rate of 4%. What is the estimated future value of the subject property after 5 years?
- Remember that annual increases compound one upon another. On your HP12C: 5 n, 4 i, $325,000 CHS PV, solve for FV = $395,412. Or on your 4-function calculator: $325,000 x 1.04 x 1.04 x 1.04 x 1.04 x 1.04 = $395,412. Ch 11, Reconciliation
The subject property has an effective age of 10, and a total economic life of 40 years. The cost new of the subject property improvements is $1,240,000. What is the percentage of accrued depreciation that should be applied in the cost approach?
25%. Effective age is 10 and total economic life is 40. 10 / 40 = 25% depreciation. $1,240,000 x 0.25 = $310,000. Ch 11, Adjustments, continued
Barb purchases a property from Tony, and immediately grants a life estate in the property to Henry. Which party is the life tenant?
Henry
When you are performing an appraisal on a four-unit residential property, you are valuing
The ownership rights of the property
The value of a home depends significantly on
The ownership rights of the property
Appraiser Al is valuing a property that is subject to a life estate. According to the actuarial table, the 92-year-old life tenant has a death probability of 0.228968, and a life expectancy of 3.15. Which statement is TRUE?
There is a 22.8% chance that the life tenant will die this year.
Rex decides to set up a small stand at a crossroads in the desert, selling bottled water. Which of these elements is MOST likely to be the reason why his business will be successful?
Scarcity
The subject property has an effective age of 45, and a total economic life of 60 years. The cost new of the subject property improvements is $675,000. What is the dollar amount of accrued depreciation that should be applied in the cost approach?
$506,250
The subject property has an effective age of 10, and a remaining economic life of 40 years. The cost new of the subject property improvements is $880,000. What is the dollar amount of accrued depreciation that should be applied in the cost approach?
- Total economic life is 50 years (10 + 40). 10 / 50 = 20%. $880,000 x 20% = $176,000. Ch 11, Adjustments, continued
