12 Ch3 The Valuation Process quiz Flashcards
The test criteria for highest and best use include all of the following
Maximally productive, Financially feasible, Physically possible, Legally permissible
With regard to market area trends, an appraiser must avoid making
An unsupported assumption or premise
In the appraisal of a complex property, highest and best use analysis will help determine
What factors will require adjustments, Which properties will be used as comparables, Which approaches will be used
Which of these would be an example of a private land use regulation which must be considered in a market value appraisal?
Deed restrictions
Land is appraised on what basis?
As if vacant and available for development
In the appraisal of a complex property, highest and best use analysis will help determine
Which approaches will be used, Which properties will be used as comparables, What factors will require adjustments
Highest and best use requires that the potential use be
Financially feasible
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
Market value
With regard to effective age and remaining life, what must an appraiser avoid?
Making an unsupported assumption or premise
If the appraiser discovers that the subject property is not in compliance with existing land use regulations
It is likely that the value of the property is negatively impacted
In highest and best use analysis, legal permissibility considerations might include
Historic district controls, Environmental regulations, Building codes
Several smaller lots are purchased and combined into one lot to enhance the potential use. What is this called?
Assemblage
In highest and best use analysis, what is meant by the term “maximally productive” use?
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
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?
Physically possible
An appraiser states that converting an old single-family home into a duplex is financially feasible. What does this mean?
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
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?
Single family use is the only legally permissible use
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?
Continuation of present use
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?
If the improvement can be rebuilt if destroyed
In appraising residential properties for mortgage lending situations, what type of highest and best use opinion will typically be required?
As currently improved
In a residential subdivision, deed restrictions in place may make the appraiser’s highest and best use analysis
Easier
Why is highest and best use analysis often simpler in the appraisal of residential property, as opposed to commercial property?
The potential uses are already limited by zoning and deed restrictions
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?
Physically possible
A legal non-conforming use is sometimes referred to as
A grandfathered use
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?
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
When might the land residual technique BEST be used in analyzing a property’s highest and best use?
When it is necessary to analyze several potential uses
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?
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
The temporary use to which a site or improved property is put until a different use becomes maximally productive is the definition of
Interim use
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?
Surplus land
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?
Interim use
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?
Theory of Consistent Use
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
A legal non-conforming use
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?
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
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?
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
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?
Legal non-conforming use
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
An interim use
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
A legal non-conforming use
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?
Excess land
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?
No effect
When appraising a complex property, you must utilize the valuation approaches
in ways that go beyond normal practice
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?
A negative effect
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
Add value if the market reflects it, even though the proposed exit has not begun
In the application of the cost approach, historical cost data from the subject property may be brought current by
Indexing
Because long-term leases are often used in 1-4 unit residential properties, situations involving such leases are commonly encountered by residential appraisers.
FALSE
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
Add value if the market reflects it, even though the proposed exit has not begun
When appraising a complex single-family home, an appraiser may find that there are no comparable sales. In this situation
The appraiser may appraise the property using one or both of the other approaches
When appraising a complex property, an appraiser must complete those approaches to value which are
Necessary for credible assignment results
In the appraisal of a complex single-family home, an appraiser may find that there are no comparable sales. In this situation
The sales comparison approach may not be relevant
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?
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
