AI Exam Prep Flashcards
An example of a governmental force that affects real estate value would be
A) Market demand for mortgage loans
B) Population changes in the market
C) Changes in decorating styles
D) Changes in local building codes
Changes in local building codes
The four forces that influence real estate values are
Social, economic, governmental, and environmental
Land, labor, capital, and green space
Eminent domain, police power, escheat, and taxation
Governmental, social, taxation, and economic condition
Social, economic, governmental, and environmental
Zoning and environmental protection regulations are examples of
Clouds on a title
Public use
Escheat
Police power
Police power *
An example of a governmental influence on real estate values would be
An IRS credit for first-time homebuyers
National trends in residential decorating
Soil productivity levels
Local brokers’ customs and procedures
An IRS credit for first-time homebuyers
The location of a parcel of real estate next to a busy highway is best described as a ________ influence.
Governmental
Social
Generic
Geographic
Geographic
The subject real estate is a 0.23-acre site improved with a single-unit residence that is 22 years old. The house has not been updated since construction. The brokers are all reporting that first-time buyers want modern decorating rather than the styles in place in the subject property. This can be classified as a(n) ________ problem.
Governmental
Social
Ecological-environmental
Financial
Social
The current or prior ownership who owns the real estate property is
Very important to appraisers in all cases
Never important to appraisers
Very important to title insurance companies or abstractors
Never important to title insurance companies
Very important to title insurance companies or abstractors *
The Federal Reserve just raised interest rates between banks, and long-term mortgage rates increased 1.0%. This will most likely affect real estate prices
Very little
Very much
Only if the lenders also change underwriting standards
Only if buyers have offsetting earned income losses
Very much
Under pressure from parents in the city of Treemont, the local government passes an ordinance that lowers the speed limit to 15 miles per hour on all city streets. The result is many more speeding tickets and a more difficult time traversing the streets. This will likely cause
More drivers to commute through the town
Merchants to make more money due to slower traffic in the area
Merchants to suffer because people will avoid the area and therefore the merchants
Lower revenue for the city
Merchants to suffer because people will avoid the area and therefore the merchants
Several popular home decorating books have recently promoted an all-new motif, including a new color scheme, new plumbing and lighting styles, and new carpet designs. This motif is very different from any previous decorating scheme, and local builders report that 90% of the buyers are choosing it. This change in attitude will
Not affect prices of existing improved competing residences
Negatively affect vacant lot prices
Make houses less expensive to build
Cause most existing and older houses in the same market segment to suffer functional obsolescence because of changes in desired features that do not exist in the older homes
Cause most existing and older houses in the same market segment to suffer functional obsolescence because of changes in desired features that do not exist in the older homes
The subject is a vacant 0.75-acre lot on the side of a hill in a platted subdivision. All of the lots in the subdivision are priced at $75,000. The subject slopes 15% from left to right (as one faces the site). This lot will most likely be the last to sell because
Buyers prefer right-to-left rather than left-to-right slopes
Buyers prefer a building site that is low in the center and higher near the edges (shaped like a bowl)
Buyers know that a steep site is much more expensive to build a house on
It was underpriced
Buyers know that a steep site is much more expensive to build a house on
The subject is a commercial site improved with a 100,000-sq.-ft., multitenant retail building. This area has recently enjoyed a significant increase in employment because of the expansion of the widget plant at the edge of town. This increase in jobs will likely
Increase the unemployment rate
Decrease the number of families in the area
Increase the number of families in the area, the amount of income, and sales within the shopping center
Increase the population but decrease the sales volume in the shopping center
Increase the number of families in the area, the amount of income, and sales within the shopping center
The subject site is a 200-acre agricultural site. There is no demand for residential, commercial, or industrial land, and the soil productivity in this area has caused prices of farmland to increase. The most important economic factor for this parcel would be
The prices of the products grown on the parcel (the price per bushel of corn, beans, etc.)
The cost of crop production (fuel, seeds, fertilizer, etc.)
The level of taxation by the government (income and property taxes)
All of the above
All of the above
The subject real estate is a 90-unit apartment complex in Bigville. The apartment unit count in this market was recently increased substantially because of extra demand for apartments caused by a rash of recent single-unit foreclosures. Unfortunately, too many people got the idea to build new apartments at the same time, and now the market is overbuilt. This oversupply problem will cause
Market rents and market values to increase
Market rents to decrease and market values to increase
Market rents to increase and market values to decrease
Market rents and market values to decrease
Market rents and market values to decrease
The subject is a residential property in a remote location and is accessible only by a dirt road. In the winter months, the road is impassable. The dirt road is a public right of way. This is considered a(n) ________ limitation.
Governmental *
The subject real estate is located 28 miles north of downtown Bigville and improved with a single-unit residence. The local brokers have repeatedly stated that this property is too far from the employment centers and the drive time is inhibiting a sale. This is an example of ________ influence on real estate.
Governmental
Economic
Social
Geographic
Geographic
Under which circumstances would the climate affect real estate prices?
The subject real estate is improved with an apartment building in an area with high unemployment. There is a high vacancy rate due to people leaving the area to find employment.
The subject is an industrial building in a small town. The only users of such a building need a highly skilled workforce, which does not exist in the town or nearby areas.
The subject is a single-unit residence. There is an oversupply because there was a particularly hard winter last year and many owners are moving to warmer areas.
The subject is a fast food restaurant site, but the local government does not allow drive-through windows.
The subject is a single-unit residence. There is an oversupply because there was a particularly hard winter last year and many owners are moving to warmer areas.
The subject real estate is a 1.5-acre site improved with a gas station and located next to a six-lane local thoroughfare. The last two gas stations on the site failed. Which of the following options provides a possible reason for this failure?
Gas stations need low rather than high traffic counts.
Gas stations need easy ingress and egress; high traffic counts are useless if customers cannot get in or out conveniently.
Gas stations must have long-term leases to allow for continuity of use.
Gas stations do not need high-visibility locations.
Gas stations need easy ingress and egress; high traffic counts are useless if customers cannot get in or out conveniently.
The subject real estate is located in a county with no zoning or land use controls in place. The surrounding counties all have zoning controls. This will probably lead to
Excellent land use compatibility
Higher prices for commercial land than in similar areas with zoning controls
Fewer offensive land uses in the area (landfills, oil refineries, and other noisy, smelly, or ugly land uses)
More offensive land uses in the area (landfills, oil refineries, and other noisy, smelly, or ugly land uses)
More offensive land uses in the area (landfills, oil refineries, and other noisy, smelly, or ugly land uses)
Theodore died without a will or any known relatives. The state took the property and auctioned it off. The state’s right to do this is known as
Condemnation absolute
Police power
Eminent domain
Escheat
Escheat
Langley owned a small 100-acre farm in Hamilton County. He had no heirs, no friends, and no will when he died. Which of the following statements is true?
The land will stay in Langley’s name forever because he died without heirs.
The land will pass to the adjacent property owners equally.
The land will pass to the first person to occupy the land for seven years—i.e., squatter’s rights.
The state will take the property and sell it.
The state will take the property and sell it.
A fee simple interest in real property is limited by the government’s right of
Taxation, eminent domain, police power, and easements
Taxation, eminent domain, police power, and escheat
Eminent domain, police power, leases, and escheat
Eminent domain, police power, zoning, and escheat
Taxation, eminent domain, police power, and escheat
A state government decided to widen a road in front of the Anderson residence. The government’s right to acquire this property for the public use is known as
Eminent domain
Condemnation
Easement
Taxation
Eminent domain
The Fifth Amendment to the US Constitution
Prohibits the consumption of alcoholic beverages
Requires the government to pay just compensation for land taken for the common good
Limits the number of terms the president can serve
Gave women the right to vote
Requires the government to pay just compensation for land taken for the common good
An appraiser was asked to appraise a 200-acre farm and to give consideration to the productivity of the land. The owner was afraid the appraiser would not credit the property with its superior soil type, drainage, and fertility. There is no potential for any type of use on the land other than farming. If the appraiser did give consideration to the productivity of the land, this appraisal would be best described as
A market value appraisal *
A client asked an appraiser to value the ABC industrial property based on the assumptions that
The consummation of the sale occurred within a short time period
The seller was under extreme compulsion to sell
The exposure time was short
There was no special financing
This value is best described as
Market value
Liquidation value
Sheriff’s value
Value in use
Liquidation value
An REO (real estate owned) sale
Is the sale of a property by a bank after they have foreclosed and obtained control of the property by a sheriff’s sale or other processes; this type of sale can be made to an investor or owner/user
Is a sale in which a property transfers from the real estate owner (REO) to the next owner
Always involves the original mortgagor
Is between the lender and the court and only occurs at the order of the court
Is the sale of a property by a bank after they have foreclosed and obtained control of the property by a sheriff’s sale or other processes; this type of sale can be made to an investor or owner/user
A market that is declining is any market in which
Market values are lower today than they were one month ago
Market values are lower today than they were one year ago
Market values are lower today than they were one decade ago
Market values are lower today than they were at a prior specified date
Market values are lower today than they were at a prior specified date
An appraiser is asked to develop an opinion of market value for an assessment appeal. According to state law, the appraisal must provide an opinion of the assessed value of the subject. The assessed value
Group of answer choices
Is always defined in the Appraisal Institute’s appraisal dictionary
Is defined by state law
Is always 1⁄3 of the market value
Is always 1⁄2 of the market value
Is defined by state law
In most market value appraisals, the appraiser should assume
Group of answer choices
A 30-day exposure time
A 90-day exposure time
A 365-day exposure time
A reasonable exposure time based on the property type
A reasonable exposure time based on the property type
The most common definition of market value used in the United States includes the following specification:
Group of answer choices
The buyers are unmotivated
The sellers are indifferent to an offer
The buyers are motivated but the sellers are indifferent
Both the buyers and the sellers are typically motivated
Both the buyers and the sellers are typically motivated
The most common definition of market value used in the United States includes the following specification:
Group of answer choices
Buyers and sellers are well informed and acting in their own best interests
Buyers and sellers are uninformed about the market and/or their options
Buyers and sellers are well informed but do not look to their own best interests
Buyers and sellers are well informed or well advised about the market
Buyers and sellers are well informed and acting in their own best interests
Investment value is
The value of a specific property to anyone
The value of a property for a specific use
The value of a property to a specific investor with specific investment criteria
The value that lenders base loans on
The value of a property to a specific investor with specific investment criteria
Forces that influence real property values are
The land being mobile, durable, useful, and in infinite supply
Governmental and legal controls, economic characteristics, social trends, and geographic and environmental conditions
Land, labor, capital, and capitalism
Leasehold, leased fee, and fee simple
Governmental and legal controls, economic characteristics, social trends, and geographic and environmental conditions
When real property is sold by one person to another, the amount of money used to compensate the seller is called
The rent of the real property
The value of the real property
The price of the real property
The income of the real property
The price of the real property *
The four agents of production are
Land, labor, capital, and improvements
Land, labor, capital, and entrepreneurship
Land, labor, capital, and money
Land, improvements, labor, and materials
Land, labor, capital, and entrepreneurship
Which of the following benefits would a buyer for a single-unit residential property anticipate?
Shelter for the family, income if the property was to be rented, and resale value
Income from a business and tax benefits
Income security for the family
A location and facility to operate an industrial operation
Shelter for the family, income if the property was to be rented, and resale value
The value most commonly sought in real estate appraisals is
Investment value
Value in use
Insurable value
Market value
Market value
The principle of anticipation refers to
The concept that property value is based on anticipated future benefits from the property
The concept that value is limited to the cost of acquiring a substitute property
The concept that any value is equal to the cost of options foregone or opportunities not chosen
The concept that supply must equal demand
The concept that property value is based on anticipated future benefits from the property
If local builders build 127 houses in a market that can only absorb 100 houses, that market will soon
Become undersupplied
Become oversupplied
Become fully absorbed
Be in balance
Become oversupplied
Why are land prices in New York City so much higher than in Kansas City?
Everything costs more in big cities.
There is too much supply and not enough demand in New York City.
The buildings are taller in New York City, which takes away from the demand for vacant land.
The supply of land is very limited in New York City because of natural barriers (river and ocean), but demand for it is very high. Therefore, real estate prices are much higher in New York City than in Kansas City, where land is more available and has no boundaries to expansion except distance to employment and other amenities.
The supply of land is very limited in New York City because of natural barriers (river and ocean), but demand for it is very high. Therefore, real estate prices are much higher in New York City than in Kansas City, where land is more available and has no boundaries to expansion except distance to employment and other amenities.
The subject property is selling for $250,000 from mother to son. The property is very similar to other properties in the area that are selling for $350,000. Which of the following statements is true?
The price of the property is $350,000, but the value is $250,000.
The price of the property is $250,000, but the value is $350,000.
The cost of construction for the property is $350,000.
An appraisal of the subject property should provide a value indication of $250,000.
The price of the property is $250,000, but the value is $350,000.
An appraiser was asked to value a residential property as of one year ago. This retrospective value opinion should
Reflect the current market
Reflect the market one year ago
Be based on the cost of construction as of today
Not use any sales that are dated before the effective date of appraisal
Reflect the market one year ago
The owner of a commercial parcel of real estate told the appraiser that the “book value” of the real estate was $1,230,000. This means that
The assessor says the parcel is worth $1,230,000
The net amount that is “carried on the books” or reported in financial statements is $1,230,000; this is generally the asset’s cost at acquisition (building cost or purchase price) reduced by the amount of accumulated depreciation on the asset
The market value of the asset as of the date of acquisition is $1,230,000
The value of the parcel for insurance purposes is $1,230,000
The net amount that is “carried on the books” or reported in financial statements is $1,230,000; this is generally the asset’s cost at acquisition (building cost or purchase price) reduced by the amount of accumulated depreciation on the asset
The term value of the equity means
The market value of the real property
The market value of the real estate
The market value of the real property less the mortgage debt
The quality of the ownership—i.e., whether or not the owner is a quality person
The market value of the real property less the mortgage debt *
The value of the going concern is
The value of the real property that is a concern to the lender
The value of an asset that is associated with the real estate
The value of a business enterprise resulting from factors such as having a trained workforce, an operational plant, and the necessary licenses, systems, and procedures in place
The value that an investor considers, on the basis of an evaluation or available facts, to be the “true” or “real” value that will become the market value when other investors reach the same conclusion
The value of a business enterprise resulting from factors such as having a trained workforce, an operational plant, and the necessary licenses, systems, and procedures in place
The loan-to-value ratio refers to
The amount of a loan on a dollar basis—for example, $750,000
The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage
The equity amount divided by the mortgage amount
The equity amount divided by the property value
The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage
Salvage value is
The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)
The value of an item to an auctioneer
The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material of which it is made (such as plumbing fixtures sold for their metal content)
The value of the land after the building has been removed
The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)*
Scrap value is
The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)
The value of an item to an auctioneer
The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material it is made of (such as plumbing fixtures sold for their metal content)
The value of the land after the building has been removed
The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material it is made of (such as plumbing fixtures sold for their metal content)
As an agent of production, capital is
The necessary equipment, buildings, and infrastructure for development
The location of the center of government
A death sentence
The building in which a legislative body meets
The necessary equipment, buildings, and infrastructure for development
Consider the following statement:
“Property values are created and sustained when the characteristics of a property conform to the demand of its market.”
This statement refers to
Use value
Contribution
Conformity
Supply and demand analysis
Conformity *
Andrew is an appraiser in Bigville. After careful analysis, he has concluded that the market for single-unit housing between $400,000 and $500,000 is very oversupplied. However, the market for single-unit housing between $300,000 and $400,000 is in balance. The subject property should compete in the higher price range. Identifying and dividing these markets into groups based on probable buyers for the subject is called:
Testing the market
Market gentrification
Identification of the marketing plans
Market segmentation
Market segmentation
The subject real estate is located in a market with a stable population. The home builders have not paid attention to the market signs and have built too many new homes. There appears to be a three-year supply of new homes for sale in this market, which normally has six months of inventory. This would indicate that there has been
Too much demand
Too much population growth
Too much supply
Not enough supply
Too much supply
Demographic considerations in real estate appraisals would include
The sale prices of residential properties
The soil types on the subject property
The income level of the property owners
The age of the residences in a market
The income level of the property owners *
In a market where there are too many sellers and not enough buyers,
Prices tend to be lower
Prices tend to be higher
Prices are not affected
Values are higher
Prices tend to be lower
The subject real estate is a platted lot located in a subdivision improved with a newer single-unit residence. It is located in a high-demand market with very little land available for development. The existing home market data shows that there have been 33 sales of properties in direct competition with the subject in the last 12 months, and there are currently only four available listings. The sellers clearly have an advantage over the buyers. This is an example of
An undersupply of demand and therefore increasing prices
An oversupply of inventory and therefore decreasing prices
An undersupplied market and decreasing prices
An undersupplied market and increasing prices
An undersupplied market and increasing prices
The subject property is located in a market where the largest employer just closed its doors and 1,000 people lost their jobs. The city planning department estimates that the loss of the employer will cause 600 families in the community to move elsewhere in order to find other jobs. This represents about 10% of the current housing in the city. This will cause an immediate
Increase in the demand for housing
Decrease in the demand for housing
Increase in the supply of housing
Decrease in the supply of housing
Decrease in the demand for housing
Demand for owner-occupied residential real estate may be affected by
Increasing population and employment
The availability of mortgage financing
Increases in purchasing power
All of the above
All of the above
The supply of one-unit residential properties is most affected by
An increase in employment in the area
A decrease in mortgage interest rates
An increase in the number of apartments built
An increase in the number of single-unit homes built
An increase in the number of single-unit homes built
Two homes in the same addition have the same amenities, size, features, and location. One is priced at $100,000, and the other is priced at $110,000. Which of the following statements is true?
The lower-priced home will require a longer marketing time.
The lower-priced home will attract more demand.
The lower-priced home will get fewer showings.
The lower-priced home will always sell for more than the full list price.
The lower-priced home will attract more demand.
In a high-demand market, the cost of building new properties increases substantially until
It becomes impossible for prices to go any higher
Supply increases because builders’ profits are high and new builders get into the market or existing builders work overtime (If profits are high enough, builders and construction workers will work day and night, weekdays and weekends.)
The rates charged by suppliers and subcontractors decrease
The Federal Reserve System lowers interest rates
Supply increases because builders’ profits are high and new builders get into the market or existing builders work overtime (If profits are high enough, builders and construction workers will work day and night, weekdays and weekends.)
When demand for housing increases, the supply
Increases immediately
Increases slowly
Is unaffected
Will diminish
Increases slowly *
The overproduction of new homes
Causes increases in demand
Causes prices to increase
Causes the market to move toward a state of equilibrium
Causes oversupply and lower prices
Causes oversupply and lower prices
The subject property is a six-unit commercial retail center. The tenants in this facility are all heavily reliant on traffic on the adjacent two-lane highway for their customers. The city highway department just announced plans to build another four-lane road about a half-mile north, but this road will not have any traffic lights or stop signs. The city anticipates that the traffic levels on the highway will decrease by 50% in the next five years due to this new road. This will cause
An increase in demand for space in the subject property
An increase in the rental rate of the subject property
A decrease in the number of possible buyers for the subject property
A decrease in sales from the retail center and a decrease in the rental rate of the subject property
A decrease in sales from the retail center and a decrease in the rental rate of the subject property
The birth rate in an area decreases by 50%. This will most likely cause
An increase in the demand for residential properties today
An increase in the demand for retail properties today
A decrease in the number of possible buyers for nearly all real estate in the future
An increase in real estate supply today
A decrease in the number of possible buyers for nearly all real estate in the future
A submarket can be defined by
The value of the properties
The room count
The income level of the typical owner
All of the above
All of the above
An efficient market is characterized by
Many buyers and sellers with a mechanism to facilitate exposure to the market
Few buyers and sellers with a mechanism to facilitate exposure to the market
Many buyers and sellers with no mechanism to facilitate exposure to the market
Few buyers and sellers with no mechanism to facilitate exposure to the market
Many buyers and sellers with a mechanism to facilitate exposure to the market
The subject is located in a market where there are currently 44 homes for sale within the subject’s price range. In the last 12 months, there have been 21 sales within the same price range and market. The subject’s market
Has a 1.75-month supply
Has a 2.09-month supply
Has a 5.73-month supply
Has a 25.14-month supply
Has a 25.14-month supply (The correct calculation is:
21 sales / 12 months = 1.75
44 homes / 1.75 = 25.14-month supply) *
Demand for housing would be affected in a situation in which
Builders cannot find enough building materials to complete the job
A new factory opens and hires several hundred new employees
Zoning laws restrict new construction to the point that not enough homes are built
Builders do not recognize a downturn in the market
A new factory opens and hires several hundred new employees
The subject is located in a market where the population is stable but the average number of persons per household has increased from 2.35 to 2.77. What does this imply about the apartment market in the subject’s area?
There should be more demand for apartments.
There should be less demand for apartments.
The demand for housing and the apartment market should not be affected.
The market demand for single-unit housing should increase, which will decrease the demand for apartments.
There should be less demand for apartments. *
An appraiser researched a market and found that the comparable sales in that market took twice as long to sell as they did one year earlier. She also found that the sale price-to-list price ratio had dropped by 5% in the past year, meaning that properties sold for 98.75% of the list price one year ago but now sell for 93.75% of the list price. What can be concluded from this information?
The market is oversupplied.
The market is undersupplied.
Nothing can be drawn from this data.
One indication shows an oversupplied market, but the other shows an undersupplied market.
The market is oversupplied.
Which of the following has the most efficient market?
One-unit residences
Two- to four-unit residences
Five- to 50-unit apartments
51- to 500-unit apartment projects
One-unit residences *
The town of Oakville (pop. 2,500) has only two homebuilding companies. These two companies have each been building about five houses per year in Oakville for the past 15 years. The subcontractors used by the companies came from neighboring towns or occasionally from further away. The state recently decided to build a new law enforcement academy in Oakville, which would cause an influx of about 500 people and an increase of about 200 households in the town. There is almost no excess inventory of residences in town now. What will most likely happen in Oakville?
The existing builders will gear up to handle the demand, and prices will remain stable.
The existing builders will gear up to handle some of the demand, but some subcontractors will become builders and some workers will become subcontractors. Prices will increase in the short run.
The demand will wait for the supply to catch up, and no new players will enter the business. Prices will remain stable.
The majority of the new households will double up, and demand for housing will not increase. Prices will remain stable.
The existing builders will gear up to handle some of the demand, but some subcontractors will become builders and some workers will become subcontractors. Prices will increase in the short run.
In most cities, the residential real estate market is much more efficient than the nonresidential real estate market because
Homes are better designed and thus more efficient
Houses make more economic sense as investments than nonresidential properties
There are more buyers and sellers, and the MLS system organizes data
Residential real estate brokers are smarter than nonresidential brokers
There are more buyers and sellers, and the MLS system organizes data
Market analysis is included in all single-unit residential appraisal reports in order to
Show changes in the neighborhood’s demographics
Show support for the estimated highest and best use and the existence of market demand
Add bulk to the appraisal report and thus raise the fee charged
Give support for the conclusion that prices are always increasing
Show support for the estimated highest and best use and the existence of market demand
Office space demand is most affected by
The percentage of owner-occupied residences
The availability of water and sewer services
School taxes
The expansion trends of local businesses
The expansion trends of local businesses
Office space supply is most affected by
Population changes in the subject’s area
Changes in retail buying habits
The conversion or new construction of office buildings
Increases in the regulation of retail (shopping center) construction
The conversion or new construction of office buildings
To analyze the market for a one-unit home, the appraiser should investigate
The number of listings and recent sales of homes that would appeal to the same buyers as those for the subject
The number of expired listings for all price ranges in the same geographic area
The number of listings and recent sales for all prices within the subject’s platted subdivision
The number of apartments that are vacant in that geographic area
The number of listings and recent sales of homes that would appeal to the same buyers as those for the subject
The economic base of a community is
The lower line in a graph or bar chart illustrating the economy of a community
The ratio of basic industries to technical industries in a community
An expensive, large stringed instrument
The economic activity of a community that enables it to attract income from outside its borders
The economic activity of a community that enables it to attract income from outside its borders
The subject real estate is located in a market where a new employer just created 200 new jobs manufacturing widgets that are sold all over the country. The jobs in this plant are known as
Basic industry jobs
Service industry jobs
Demand analysis
Economic base analysis
Basic industry jobs
What type of analysis has to do with the characteristics of a particular parcel of real estate?
Marketability study
Regional industrial property supply and demand analysis
Market analysis
Neighborhood level demand analysis for single-unit residences
Marketability study
The subject property is located in a market where there is an oversupply of competitive properties for sale. The builders in this market should
Increase production
Decrease production
Keep production at historical levels
Increase production by 10%
Decrease production
If there is an oversupply of new shoes in Kansas City and an undersupply of shoes in Denver, the market will
Move some of the supply to Denver
Discount the shoes in Denver or raise the prices in Kansas City
Do nothing
Move some of the demand to Denver
Move some of the supply to Denver
What type of analysis is concerned with the characteristics of a property type, such as the office market?
Market analysis
Neighborhood analysis
Primary data analysis
Secondary data analysis
Market analysis
If the rate of inflation in the United States is increasing from 2.0% to 3.1%, the prices of most goods and services should
Decrease at a decreasing rate
Decrease at an increasing rate
Increase at a decreasing rate
Increase at an increasing rate
Increase at an increasing rate
Builders in Smallville are building more homes than can be sold in the market.
This is an example of
Oversupply
Equilibrium
Undersupply
Excessive demand
Oversupply *
If an office market is in balance but a developer adds 25% more office space to that market without any change in demand, what will the likely short-term result be?
Office rents will decline due to oversupply.
Office rents will increase because there is more supply.
Office rents will stay the same since most markets absorb oversupply.
Office rents will remain unaffected.
Office rents will decline due to oversupply.
When an appraiser researches the market directly with participants and the data has not been previously collected, this is known as
Secondary data
Primary data
Useful data
Quantitative data
Primary data
A neighborhood is always
A residential subdivision
An area with similar zoning and density
A group of complementary land uses
An area with homes of the same price
A group of complementary land uses
A district is
An area within a neighborhood in which all the properties are vacant
A neighborhood characterized by homogenous land use, e.g., apartment, commercial, industrial, agricultural
The delineation of an area according to demographic criteria
An area in which city attorneys reside
A neighborhood characterized by homogenous land use, e.g., apartment, commercial, industrial, agricultural*
Market area life cycles include
Growth, stability, decline, and revitalization
Growth, stability, decline, and replacement
Growth, stability, appreciation, and decline
Growth, level-off, appreciation, and decline
Growth, stability, decline, and revitalization
Social influences include all of the following except
Property rent levels
Crime levels
The occupant’s religious affiliation
The popularity of building architecture and design
Property rent levels
Governmental influences include
Migration into a neighborhood from outside the area
Voluntary assessments by the homeowners association
Construction cost levels
Tax burdens
Tax burdens
Gentrification is
A class of citizens who live in blighted areas
A process by which older homes in a neighborhood are remodeled and different residents replace the lower-income residents
A group of complementary land uses
A part of the life cycle of a market area in which property values are stable and the maintenance levels are adequate
A process by which older homes in a neighborhood are remodeled and different residents replace the lower-income residents
Linkages are the
Devices used to change a property from one use to another
Relationships between a buyer and seller in a real estate deal
Time-distance relationships between a property use and supporting facilities
Tools necessary to market real estate
Time-distance relationships between a property use and supporting facilities
Which of the following can serve as evidence that a neighborhood is in the growth cycle?
Abandoned automobiles on site
Several newspapers on front porches
Older structures being remodeled
New construction of buildings
New construction of buildings
Land use planners tend to place low-density residential land uses next to
Light industrial land uses
Heavy industrial land uses
Commercial land uses
Higher-density residential uses
Higher-density residential uses *
Commercial districts might be further delineated as
Retail, office, and central business districts
Multifamily, single-family, and condominiums
Warehousing, manufacturing, and storage
Churches, schools, and street maintenance facilities
Retail, office, and central business districts
In a medical district, planners often approve
Hospitals
Medical office buildings
High-density, single-unit housing
All of the above
All of the above
In a retail district, an appropriate land use would be
Product manufacturing
The bulk storage of products
Product sales
Product recycling
Product sales
A neighborhood land area must be
Less than 20 square miles
More than five square miles
Rectangular
A size that incorporates complementary land uses
A size that incorporates complementary land uses
Understanding the characteristics of a neighborhood and market are important to appraisers because
Appraisers have to write detailed and lengthy reports about the neighborhood
Appraisers need to understand how one neighborhood or market competes with another to ensure comparability
An appraiser cannot know what rights to real property to include if the neighborhood is not identified well
Comparable sales must come from the same neighborhood as the subject; comparable sales from outside the subject’s neighborhood can never be used
Appraisers need to understand how one neighborhood or market competes with another to ensure comparability
The market area life cycle
Includes three periods: growth, stability, and revitalization
Describes fixed and equal periods of time that a market area will go through in the future
Describes variable periods of time that a market area will go through or has gone through in the past
Consists of periods of time describing balanced supply and demand
Describes variable periods of time that a market area will go through or has gone through in the past
A property that would be found in a medical district would be a
Site improved with a building in which general merchandise is sold
Site improved with a building in which medical devices are manufactured
Site improved with a medical office building
Site improved with a school facility
Site improved with a medical office building
An appraiser described an area of the city that includes single-unit housing, some two-unit housing, several retail buildings, a religious facility, and two office buildings. This land area would be best described as a
Commercial district
Residential district
Neighborhood
Gentrification
Neighborhood
General data is
Data about the subject property
The sale prices of the comparables
Items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised
The comparable rentals
Items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised
A residential property with a small improvement is located in a neighborhood of much larger homes. The property value should be enhanced by the surrounding properties. This is an example of
Progression
Regression
Surplus productivity
Competition
Progression
Zoning
Controls land use
Controls building construction
Is controlled and regulated by the federal government
Is only used in cities and metropolitan areas
Controls land use
The subject property is a one-acre parcel improved with a 24-year-old residence. This parcel is zoned for commercial use only. The residential use was established 30 years ago. This is an example of a(n)
Legal nonconforming use
Illegal use
Legal conforming use
Illegal conforming use
Legal nonconforming use *
The subject property is restricted to residential use by local land use laws.
These regulations are also known as
The fee simple interest
Zoning or police power
Lease codicils
An agreement with the tenants
Zoning or police power
The legal rights associated with real estate
May affect highest and best use and therefore value
Are only zoning restrictions
Are only lease provisions associated with the subject
Never affect highest and best use
May affect highest and best use and therefore value
An appraiser is valuing a site for highest and best use or for the cost approach.
The site has a building on it. The appraiser should
Assume that the subject site is vacant
Assume that the subject site’s highest and best use is the same as the improvement’s design
Use comparable sales with a highest and best use that is the same as the subject’s improvement design
Use comparable sales with the same zoning as the subject
Assume that the subject site is vacant
Excess land is
Land that is not needed to support the subject’s primary highest and best use or not needed to support existing improvements that can be sold separately
Land that is not needed to support the subject’s primary highest and best use or not needed to support existing improvements that cannot be sold separately
Land included with the subject that is above the lender’s limits
Land value that is above the assessor’s estimate of value
Land that is not needed to support the subject’s primary highest and best use or not needed to support existing improvements that can be sold separately
Highest and best use analysis is required in
All appraisals
Value in use appraisals
Investment value appraisals
Market value appraisals
Market value appraisals
Highest and best use analysis requires an estimate of the best use as though vacant and the best use as improved to
Estimate the value of the improvements
Ensure that appraisers recognize that the property could be worth more without the buildings than with them
Estimate any functional obsolescence caused by inappropriate improvements
All of the above
All of the above
The highest and best use analysis of the site as though vacant
Group of answer choices
Is necessary to value the site
May assume a change in zoning classification
Assumes the site is vacant or could be made vacant by demolishing the improvements
All of the above
All of the above
Which of the following is not a criterion for highest and best use?
Legally permissible use
Physically possible use
Financially feasible use
Maximum-sized improvement
Maximum-sized improvement
Common interim uses include
Surface parking lots
Parking lots with five-story parking structures
Small office buildings with short leases
New car automobile dealerships
Surface parking lots
In real estate appraisal terms, when a property’s highest and best use is likely to change in the near future, the prevailing highest and best use is called a(n)
Pending use
Temporary use
Interim use
Alternative use
Interim use
Land values are never penalized due to functional problems in existing buildings because
Buildings can be removed or altered
Buildings do not contribute value
Land can change
All of the above
Buildings can be removed or altered
A legally nonconforming use is
A use that was legally established and maintained but no longer conforms to existing zoning
A use that was illegally established and maintained
A use that was not legally established and maintained and still does not conform to existing zoning
A use that was not legally established and maintained but the government is not enforcing the laws
A use that was legally established and maintained but no longer conforms to existing zoning
To be considered the highest and best use, a use must
Be physically possible, legally permissible, financially feasible, and maximally productive
Be physically correct and legally possible, must utilize the current building to its fullest extent, and must have no functional obsolescence
Be already in existence and legal
Be physically possible and appropriate
Be physically possible, legally permissible, financially feasible, and maximally productive
The subject real estate is a 0.5-acre site located in an area zoned for single-unit residential properties. It has a small office building on it. The office use was established prior to the imposition of the current zoning classification and would not be permitted now. Commercial land prices in this area are $15 per square foot of land, and residential site values are $2.00 per square foot. What is the value of the site?
$0 (because it is nonconforming)
$43,560
$87,120
$326,700
$43,560
The subject real estate includes two platted lots in a residential subdivision. Both parcels are buildable, but one owner purchased both lots and built a house in the middle of the two lots that straddles the property lines. Every other property in the addition includes only one lot. The site value in this market is $50,000 per lot. The market value of both parcels (land only) is
Less than $100,000
$100,000
More than $100,000
Not calculable because there is not enough information
$100,000* (Land is always valued as though vacant. If the two lots were vacant, there would be two residential sites at $50,000 each.)
The subject parcel contains 1.0 acre. It is zoned residential and is currently improved with a 21-year-old, 2,500-sq.-ft., one-story, single-unit residence. The residence is configured with four bedrooms and 2.5 bathrooms. The market in this area has recently shifted; demand for four-bedroom homes is significantly less than it was, and demand for two-bedroom homes has increased substantially. The market for four-bedroom homes is oversupplied, and properties are suffering at a 10% loss due to this lack of demand. The ideal improvement
Is a residence with two bedrooms
Is a residence with three bedrooms
Is a residence with four bedrooms
Cannot be determined because appraisers do not need to determine the ideal improvement
Is a residence with two bedrooms
The subject parcel measures one acre. It is improved with a 2,400-sq.-ft. residence that was built 35 years ago. It is located adjacent to a river and therefore sells for a premium. The site is located deep in a flood hazard area, and the zoning prohibits anything from being built in flood hazard areas. This zoning law that prohibits construction in a flood hazard area was passed 24 years ago. The subject’s residential use is likely to be
Illegal
Legal
Legal nonconforming
A violation of FEMA laws and the property must be demolished
Legal nonconforming
The subject site is 3.45 acres and is improved with a residence on the northern-most part of the site. Considering the location of the house, a building site could be partitioned off legally, with the remainder also being a legal parcel. The extra land not needed for the original structure would be called
Excess land
Surplus land
Bonus land
Functional obsolescence
Excess land
The subject site is zoned for commercial use in a market that is significantly oversupplied. The appraiser thinks that new construction of commercial or office buildings is at least five years away. The zoning only allows retail or office use but not residential, industrial, or special-purpose use. The owner is currently using the site for used car sales, and the office is in a modular building.
This would be considered
An interim use
A consistent use
A value in use
The long-term highest and best use
An interim use
The subject real estate is a 0.5-acre site improved with a 24-year-old, 1,400-sq.-ft. residence. The market is overwhelmed with bank-owned properties for sale. The buyers for the subject are only speculators. In this market,
Properties should sell for the same amount to speculators or owner-occupants
Properties that only appeal to speculators must have a discount equal to the required speculator’s incentive
The value of properties that appeal to speculators is 20% more than ones that appeal to owner-occupants
Speculators are entitled to a 25% discount, and sellers must accept that
Properties that only appeal to speculators must have a discount equal to the required speculator’s incentive
Transferable development rights (TDRs)
Are a method by which developers design and approve their own zoning
Are a method by which the density of zoning is controlled by planning, but the density (one unit per acre vs. 10 units per acre) is marketable between the owners in the community
Allow for temporary development rights for interim uses
Are a way to buy and sell zoning classifications, such as trading commercial zoning for residential zoning
Are a method by which the density of zoning is controlled by planning, but the density (one unit per acre vs. 10 units per acre) is marketable between the owners in the community
Feasibility analysis is a procedure by which an appraiser
Determines whether the existing building is financially viable
Determines whether the proposed project is financially feasible to build
Estimates the net income to equity of an existing building
Estimates the operating expense ratio (OER)
Determines whether the proposed project is financially feasible to build
The subject is 80% covered with a legal wetland. What type of constraint on development is this an example of?
Topographical
Legal
Physical
All of the above
All of the above
In a highest and best use analysis in an oversupplied market, it is likely that the ________ is/are more significant than in a balanced market.
Physically possible uses
Current use of the property
Timing of the use
Brokerage fees
Timing of the use*
The highest and best use as though vacant is important in market value appraisals and cannot be ignored because
If an appraiser ignores this step, it is possible that he or she cannot see that the value of the site as though vacant is higher than the value of the improved property
It is required to ensure compliance with zoning
It helps appraisers decide what the value of the improved property is
It is needed for the estimate of the zoning compliance
If an appraiser ignores this step, it is possible that he or she cannot see that the value of the site as though vacant is higher than the value of the improved property
Access to public water and sewer utilities is most important in which type of property?
An agricultural property
A truck transfer facility
A hotel
An aggregate mining property
A hotel
If market trends are shifting from larger homes to smaller homes, appraisers should expect to see
Existing homes getting smaller
Remodeling jobs being done to make homes smaller
Builders touting the benefits of larger homes
More smaller homes than larger homes being built
More smaller homes than larger homes being built
Which of the following statements is correct?
A residential appraiser must analyze highest and best use in all appraisal assignments.
A residential appraiser must analyze highest and best use as though vacant and as improved in all market value appraisals.
A residential appraiser must analyze highest and best use only when it is a possible issue in an appraisal.
A residential appraiser never has to analyze highest and best use.
A residential appraiser must analyze highest and best use as though vacant and as improved in all market value appraisals.
When the highest and best use of the site as though vacant is different than the highest and best use as improved,
This usually results in functional obsolescence
This always increases the physical depreciation
This always results in the removal of the building
This never results in the removal of the building
This usually results in functional obsolescence
In a market value appraisal report, the appraiser stated, “The highest and best use of the site as though vacant is continued use as an office building site.” This also means that
The land sales used to value the site would likely be office site sales
The land sales used to value the site could be from any market and have any use
The land sales used to value the land in the analysis must not be office site sales
The appraiser has ignored any other uses
The land sales used to value the site would likely be office site sales
The subject site is a 90-acre vacant parcel in a suburban location. It is zoned industrial, and the owner thinks it would make a good industrial park. In the highest and best use analysis, the appraiser must consider
The depth of the market—i.e., how many buyers are in the market now and in the future
The amount of time it will take to sell several industrial parcels, including the holding costs
The price that the lots could be sold for now and in the future
All of the above
All of the above
