APPRAISAL CHP 11

Question 1

Which is NOT necessary to develop the direct capitalization technique?
a. expenses
b. income
c. rate
d. debt service

Answer 1

d. debt service

Question 2

The theory of anticipation says
a. a buyer won’t pay more for the subject than for a comparable property.
b. a property is worth more if an investor is excited about acquiring the property.
c. real estate will always appreciate in value.
d. value is created by the expectation of future benefits.

Answer 2

d. value is created by the expectation of future benefits.

Question 3

Which would NOT be considered an operating expense?
a. debt service/loan payment
b. fixed expenses
c. reserves
d. variable expenses

Answer 3

a. debt service/loan payment

Question 4

Vacancy and collection losses
a. are always 10%.
b. are considered when using a GMRM.
c. are not considered when doing a direct capitalization method appraisal.
d. determined by analysis of market data.

Answer 4

d. determined by analysis of market data.

Question 5

Which element is used to determine the gross monthly rent multiplier?
a. collection losses
b. expenses
c. vacancy losses
d. sale price

Answer 5

d. sale price

Question 6

A main disadvantage of the gross monthly rent multiplier is
a. the capitalization rate is not accurate enough.
b. it can be used only to support the cost approach, not the sales comparison approach.
c. the lack of very similar comparable data.
d. using the GMRM is more complicated than the capitalization rate.

Answer 6

c. the lack of very similar comparable data.

Question 7

Potential gross income, less vacancy and collection losses is the
a. capitalization rate.
b. effective gross income (EGI).
c. gross rent multiplier (GRM).
d. net operating income (NOI).

Answer 7

b. effective gross income (EGI).

Question 8

Using IRV, what would be the indicated value (rounded to the nearest one hundred dollars) of a property that has NOI of $8,000 if the overall capitalization rate is indicated at 9.25%?
a. $65,300
b. $74,000
c. $86,500
d. $92,400

Answer 8

c. $86,500

Question 9

If a subject property has a market rent of $625 per month and a GMRM of 183.75 is deemed applicable, what is the appraiser’s indicated value conclusion (rounded to the nearest one thousand dollars)?
a. $103,000
b. $115,000
c. $132,000
d. $184,000

Answer 9

b. $115,000

Question 10

A six-unit apartment building with a net operating income of $24,000 recently sold for $390,000. What is the indicated overall capitalization rate (carried to two places) derived from this data?
a. 6.15%
b. 6.95%
c. 7.10%
d. 7.25%

Answer 10

a. 6.15%

Question 11

An unfurnished house rents for $8,100 per year, which is determined to represent market level. The property recently sold for $147,000 in an arm’s length transaction. What is the GMRM indicated (rounded to two places)?
a. 5.51
b. 18.15
c. 181.48
d. 217.78

Answer 11

d. 217.78

Question 12

A GMRM is applied to value indication. to produce a
a. contract rent
b. effective gross income
c. market rent
d. net operating income

Answer 12

c. market rent