12 Ch3 The Valuation Process quiz

Question 1

The test criteria for highest and best use include all of the following

Answer 1

Maximally productive, Financially feasible, Physically possible, Legally permissible

Question 2

With regard to market area trends, an appraiser must avoid making

Answer 2

An unsupported assumption or premise

Question 3

In the appraisal of a complex property, highest and best use analysis will help determine

Answer 3

What factors will require adjustments, Which properties will be used as comparables, Which approaches will be used

Question 4

Which of these would be an example of a private land use regulation which must be considered in a market value appraisal?

Answer 4

Deed restrictions

Question 5

Land is appraised on what basis?

Answer 5

As if vacant and available for development

Question 6

In the appraisal of a complex property, highest and best use analysis will help determine

Answer 6

Which approaches will be used, Which properties will be used as comparables, What factors will require adjustments

Question 7

Highest and best use requires that the potential use be

Answer 7

Financially feasible

Question 8

Certain requirements of STANDARD 1, such as requirements to analyze market area trends and develop a highest and best use opinion, are only required when the appraiser is forming an opinion of

Answer 8

Market value

Question 9

With regard to effective age and remaining life, what must an appraiser avoid?

Answer 9

Making an unsupported assumption or premise

Question 10

If the appraiser discovers that the subject property is not in compliance with existing land use regulations

Answer 10

It is likely that the value of the property is negatively impacted

Question 11

In highest and best use analysis, legal permissibility considerations might include

Answer 11

Historic district controls, Environmental regulations, Building codes

Question 12

Several smaller lots are purchased and combined into one lot to enhance the potential use. What is this called?

Answer 12

Assemblage

Question 13

In highest and best use analysis, what is meant by the term “maximally productive” use?

Answer 13

The use that produces the greatest residual land value. The maximally productive use is the use that produces the greatest residual land value. The use that produces a positive return is the definition of financially feasible. The use that is permitted by zoning is the definition of legally permissible. Ch 3, Maximally Productive

Question 14

An appraiser is developing a highest and best use analysis on a vacant lot with steep topography. Which highest and best use test will likely require the most consideration?

Answer 14

Physically possible

Question 15

An appraiser states that converting an old single-family home into a duplex is financially feasible. What does this mean?

Answer 15

The use is expected to produce a positive return. After the uses that did not meet the legally permissible and physically possible tests have been eliminated, all the remaining uses that are expected to produce a positive return are regarded as financially feasible.Ch 3, Financially Feasible

Question 16

An appraiser is performing a highest and best use analysis of a site that is zoned only for single-family use. Which statement is TRUE regarding this situation?

Answer 16

Single family use is the only legally permissible use

Question 17

An appraiser is analyzing the highest and best use of an old home, which although in fair condition, still contributes value to the site. What is the MOST LIKELY conclusion of highest and best use as improved?

Answer 17

Continuation of present use

Question 18

Bertha is appraising a single-family home that is situated on a commercially-zoned lot, for a residential mortgage lender. Based on the facts of the situation, what is the lender is likely to ask her?

Answer 18

If the improvement can be rebuilt if destroyed

Question 19

In appraising residential properties for mortgage lending situations, what type of highest and best use opinion will typically be required?

Answer 19

As currently improved

Question 20

In a residential subdivision, deed restrictions in place may make the appraiser’s highest and best use analysis

Answer 20

Easier

Question 21

Why is highest and best use analysis often simpler in the appraisal of residential property, as opposed to commercial property?

Answer 21

The potential uses are already limited by zoning and deed restrictions

Question 22

An appraiser is analyzing the highest and best use of a 10,000 square foot residential lot. The minimum lot size for a single-family homesite is 10,000 square feet. However, the lot is rectangular, long and narrow, and measures 10’ x 1000’. Which highest and best use test will likely require the most consideration?

Answer 22

Physically possible

Question 23

A legal non-conforming use is sometimes referred to as

Answer 23

A grandfathered use

Question 24

A property is suitable for the construction of either a 1,400 square foot one-story home, or a 2,400 square foot two-story home. The cost to construct the one-story home is $240,000, the developer’s fee is $30,000, and it will be worth $345,000 when it is completed. The two-story home will cost $300,000, the developer’s fee is $37,500, and it will be worth $430,000 when completed. Which use produces the greatest land value?

Answer 24

The two-story home. The maximally productive use is the use that produces the greatest residual land value. Smaller home: $345,000 - $240,000 - $30,000 = $75,000. Larger home: $430,000 - $300,000 - $37,500 = $92,500. The larger home produces a higher residual land value.Ch 3, Residual Technique

Question 25

When might the land residual technique BEST be used in analyzing a property’s highest and best use?

Answer 25

When it is necessary to analyze several potential uses

Question 26

A property is suitable for the construction of either a 1,700 square foot manufactured home, or a 2,000 square foot two-story site-built home. The cost to construct the manufactured home is $105,000, and it will be worth $150,000 when it is completed. The two-story home will cost $175,000 and it will be worth $210,000 when completed. Which is the highest and best use?

Answer 26

The one-story manufactured home, because it produces the greatest land value. The maximally productive use is the use that produces the greatest residual land value. Manufactured home: $150,000 - $105,000 = $45,000. Larger two-story home: $210,000 - $175,000 = $35,000. The manufactured home produces a higher residual land value, and is therefore the highest and best use.Ch 3, Residual Technique

Question 27

The temporary use to which a site or improved property is put until a different use becomes maximally productive is the definition of

Answer 27

Interim use

Question 28

A single-family home is constructed on two residential lots, right on the lot line. As a result, neither lot can be sold off. How would this situation BEST be described?

Answer 28

Surplus land

Question 29

A property at the edge of the city is currently used as a parking lot, but due to growth patterns, it is likely to be used as a building site within the foreseeable future. How would its current use as a parking lot BEST be described?

Answer 29

Interim use

Question 30

What appraisal principle states that land cannot be valued on the basis of one use while the improvements are valued on the basis of another?

Answer 30

Theory of Consistent Use

Question 31

A use that was lawfully established and maintained, but no longer conforms to the use regulations in the area where the property is located is

Answer 31

A legal non-conforming use

Question 32

A property is zoned R-3, and is suitable for construction of up to three residential units. A single-family home can be built at a cost of $125,000, which will be worth $200,000 when complete. A duplex can be built at a cost of $250,000, which will be worth $310,000 when complete. A three-unit can be built at a cost of $325,000, and it will be worth $375,000 when complete. What is the maximally productive use?

Answer 32

Single-family home. The maximally productive use is the use that produces the greatest residual land value. The single-family home produces a residual land value of $75,000, which is greater than the residual land value for a duplex or three-unit, which are $60,000 and $50,000 respectively. Ch 3, Residual Technique

Question 33

A property is suitable for the construction of either a 1,400 square foot one-story home, or a 2,400 square foot two-story home. The cost to construct the one-story home is $240,000, the developer’s fee is $30,000, and it will be worth $375,000 when it is completed. The two-story home will cost $300,000, the developer’s fee is $37,500, and it will be worth $425,000 when completed. Which use produces the greatest land value?

Answer 33

The one-story home. The maximally productive use is the use that produces the greatest residual land value. Smaller home: $375,000 - $240,000 - $30,000 = $105,000. Larger home: $425,000 - $300,000 - $37,500 = $87,500. The smaller home produces a higher residual land value.Ch 3, Residual Technique

Question 34

A grocery store is constructed on a property in 1950. The local municipality passes a zoning ordinance in 1970, and the property is zoned for residential use only. The grocery store is permitted to continue operating, even though it is in a residential zone. How is this situation best described?

Answer 34

Legal non-conforming use

Question 35

A farm is located in a rapidly growing area, but public sewage is not available to the property. The community sewage system is expected to be completed in 4-5 years, at which time the property may be suitable for a high-density residential development. The property’s current use as a farm would likely be considered

Answer 35

An interim use

Question 36

A use that was lawfully established and maintained, but no longer conforms to the use regulations in the area where the property is located is

Answer 36

A legal non-conforming use

Question 37

A single-family home is constructed on two half-acre residential lots, and the home is situated on one of the lots. The other lot has frontage and would be suitable to be sold off and developed with a new home. How would this situation BEST be described?

Answer 37

Excess land

Question 38

In the appraisal of a four-unit property, which is 100% leased at market rent with the leases transferring to the buyer, what effect would these leases likely have on the market value?

Answer 38

No effect

Question 39

When appraising a complex property, you must utilize the valuation approaches

Answer 39

in ways that go beyond normal practice

Question 40

In the appraisal of the leased fee market value of a luxury single-family home, a current lease which is not scheduled to expire for two years would likely have what effect on the market value?

Answer 40

A negative effect

Question 41

It has been announced that there will be a new exit from a freeway, but work has not begun yet. You are appraising some land near the proposed exit. You should

Answer 41

Add value if the market reflects it, even though the proposed exit has not begun

Question 42

In the application of the cost approach, historical cost data from the subject property may be brought current by

Answer 42

Indexing

Question 43

Because long-term leases are often used in 1-4 unit residential properties, situations involving such leases are commonly encountered by residential appraisers.

Answer 43

FALSE

Question 44

It has been announced that there will be a new exit from a freeway, but work has not begun yet. You are appraising some land near the proposed exit. You should

Answer 44

Add value if the market reflects it, even though the proposed exit has not begun

Question 45

When appraising a complex single-family home, an appraiser may find that there are no comparable sales. In this situation

Answer 45

The appraiser may appraise the property using one or both of the other approaches

Question 46

When appraising a complex property, an appraiser must complete those approaches to value which are

Answer 46

Necessary for credible assignment results

Question 47

In the appraisal of a complex single-family home, an appraiser may find that there are no comparable sales. In this situation

Answer 47

The sales comparison approach may not be relevant

Question 48

A property is suitable for the construction of either a 1,700 square foot manufactured home, or a 2,000 square foot two-story site-built home. The cost to construct the manufactured home is $105,000, and it will be worth $150,000 when it is completed. The two-story home will cost $175,000 and it will be worth $210,000 when completed. Which is the highest and best use?

Answer 48

The one-story manufactured home, because it produces the greatest land value. The maximally productive use is the use that produces the greatest residual land value. Manufactured home: $150,000 - $105,000 = $45,000. Larger two-story home: $210,000 - $175,000 = $35,000. The manufactured home produces a higher residual land value, and is therefore the highest and best use.Ch 3, Residual Technique