Basic Appraisal Procedure Flashcards
Who is responsible for identifying the intended use of an appraisal?
the appraiser
“An assignment-specific assumption, as of the effective date, which, if found to be false, could alter the appraiser’s opinions or conclusions” is the definition of
extraordinary assumption
True or False: The effective date of the valuation must be the date on which the appraiser inspected the subject property.
False
What is the final step in the valuation process?
report the final opinion of value
An appraisal report must contain sufficient information to allow ________ to understand the scope of work.
intended users
“Documentation necessary to support an appraiser’s analyses, opinions, and conclusions” is the appraiser’s
workfile
True or False: A workfile must be in existence prior to the issuance of a written or oral report.
True
True or False: Real property appraisal reports may be written or oral.
True
An appraiser encounters a small crack in a foundation slab on a house he is appraising. He discloses the crack in the appraisal report and states that he is not a structural engineer and assumes the crack is not structural in nature and does not require a repair. This is an example of the use of a(n) ______________.
Extraordinary assumption
An appraiser produces an appraisal report that includes the effective date of the value. What other date does the appraiser need to include in the appraisal report?
Date of report
Which would NOT be a sub-step in defining the problem?
- definition of value
- effective date of value
- identification of the property rights
- highest and best use
highest and best use
What is the first step in the valuation process?
Define the problem
Which appraisal term is defined as: “A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis”?
Hypothetical condition
An appraiser encounters an underground storage tank. If there is no evidence of any observable leaks, the appraiser could indicate a value opinion based on the ______________ that the tank is indeed not leaking.
extraordinary assumption
Which influences typically exert the greatest pressure on property values?
local influences
The largest source for demographic information is
U.S. Bureau of the Census
True or False: General data tends to influence all properties in an area equally.
True
Professional or trade associations offering general data include all of the following EXCEPT
- Federal National Mortgage Association
- National Association of Home Builders
- National Association of Realtors
- Appraisal Institute
Federal National Mortgage Association
FEMA stands for
Federal Emergency Management Agency
It is important for an appraiser to research and understand what when doing an appraisal?
both the zoning map and the ordinance
You check the FEMA flood map, and the subject property is located in Zone C. Is this a Special Flood Hazard Area (SFHA)?
No
In residential mortgage lending appraisals, it is more common for lenders and AMCs to ask for _________ maps to be included in appraisal reports.
aerial
Local and regional multiple listing services typically concentrate on ____________ properties.
Single unit residential
Which of the following pieces of information would MOST likely be found in the deed?
- Assessed value
- Current owner of record
- Zoning classification
- All of these
Current owner of record
Multiple Listing Services can be utilized for gathering ____________ .
both general and specific data
Which of these organizations is responsible for preparing flood maps for U.S. communities?
- FEMA
- HUD
- Fannie Mae
- NAHB
FEMA
The largest repository of demographic information in the U.S. is the
Census Bureau
Comparable sale and rental properties would be considered ________ data.
specific
Which would NOT be a possible source of general data?
- trade association
- university
- deed
- department of transportation
deed
BEA stands for
Bureau of Economic Analysis
True or False: Condemnation appraisals often require an appraiser to develop a separate opinion of site value.
True
Improvements that could be made to raw land in order to make a site would include:
- permits
- grading
- fill
- any of these
any of these
A parcel of raw land has been improved so that it is ready to be used for a specific purpose. The land has now become
a site
(True or False) In the sales comparison method, quantitative adjustments are based on dollars, while qualitative adjustments are based on percentages.
b. False
Note: When utilizing sales comparison, adjustments to the comparable sales may be made either on a quantitative or qualitative basis. Quantitative adjustments are usually made on a percentage or dollar basis.
A rectangular parcel of land has 114 feet of frontage and is 222 feet deep. It sold for $280,000. What did it sell for per front foot?
$2,456
Note: $280,000/114 front ft.
= $2,456 per front foot
True or False: GPS systems can be used to locate vacant land parcels.
True
True or False: A postal mailing address is equivalent to a legal description.
False
Another name for the extraction method of site valuation is
abstraction
A property sold for $120,000. An old building on the property has a cost new of $300,000 and it is 75% depreciated. What is the indicated site value by extraction?
Extraction Method Solution:
Depreciation: $300,000 x 0.75
= 225,000
Building Value: $300,000-$225,000
= $75,000
Property = Land + Building 120,000 = Land + 75,000
Land Value = $45,000
Which method of site valuation is based on a typical ratio of land value to total property value?
allocation
Note: The allocation method is defined as “A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed.”
An improved property has a net operating income of $75,000. The appraiser estimates that $61,000 of the income is attributable to the building. The land capitalization rate is 8%. What is the estimated land value?
$175,000
V (land) = I (land)/R (land)
Net income: $75,000
Income from building: $61,000
$75,000-$61,000
= $14,000 income from land
V (land) = I (land)/R (land)
V(land) = $14,000 / 0.08
V(land) = $175,000
Sidewalks, curbs, and landscaping are examples of
site improvements
A property contains 2.1 acres and is worth:
A. $115,000 as single home site
B. $40,000 per unit as a site for a triplex and
C. $60,000 per acre as a retail site.
All uses are physically possible, economically feasible and legally permitted. Which is the highest and best use?
C
A. Single home: $115,000 B. Triplex: $40,000 x 3 units = $120,000 C. Retail: $60,000 x 2.1 acres = $126,000
Property that fronts on a lake is often valued using what unit of comparison?
Price per front foot
A commercial site currently rents for $4,000 per month. The applicable land capitalization rate is 6%. What is the value of the site by the ground rent capitalization method?
$800,000
4,000 x 12 = 48,000
48,000/ .006 = 800,000
Which of the following is a technique for site valuation?
- Subdivision development
- Sales comparison
- Allocation
- All of the above
All of the above
The ___________method has good application in valuing land in rural areas and in older, urban areas.
extraction
A site is currently rented for $600 per month and the ground rent capitalization rate is 7.5%. What is the indicated value of the site?
$96,000
Note:
$600 month X 12 months
= $7,200 per year.
$7,200 ÷ .075
= $96,000
Developers usually value land on a basis of price per
buildable unit
A property with an old house sold for $220,000. The cost new of the house was $280,000 and it was 75% depreciated. What is the site value of the property by extraction?
$150,000
280,000 x .75 = 210,000
280,000 - 210,000 = 70,000
220,000 - 70,000 = 150,000
“Improved land or a lot in a finished state so that it is ready to be used for a specific purpose” is the definition of
Site
The Manufactured Home Construction and Safety Standards is also known as the
HUD Code
The _______ area of the site is used for family activities and is often found in the _______ yard.
private, rear
A bilevel home is also often referred to as a __________ home.
split entry
Which type of home is built to meet the HUD Code?
manufactured home
In framing, __________ are constructed above window and door openings.
headers
The main support beams for a home are called
girders
In modern construction, the most common subflooring material is
plywood or OSB board
A monolithic slab on grade foundation is essentially one ____ footing
giant
An inch of wood has an R-factor of approximately
1
Materials that transfer heat and energy more quickly are called
conductors
The most common type of heat system in new construction today is
forced warm air
In electricity, voltage measures __________ , while amperage measures __________ .
pressure, volume
U-shaped traps are installed under every plumbing fixture in order to
prevent sewer gases from venting back into the house
Slab-on-grade foundations are most popular in the ______________.
South and Southwest
With regard to electricity, voltage is equal to __________.
pressure
A roof has a pitch of 4 to 12. For every three feet the roof goes sideways, it goes up ________.
One foot
Which is the most recent type of construction materials?
- rafters
- floor trusses
- floor joists
- balloon framing
floor trusses
The earliest framing method was
post and beam
When calculating the gross living area of a dwelling, you would NOT include:
- The stairs from the first floor to the second floor
- Closets
- Interior hallways
- Covered porches
Covered porches
Gross living area should NOT include:
A basement family room
A manufactured home is built to meet which code?
the HUD code
With regard to electricity, amperage is equal to:
volume
A reversible air conditioner is called a(n) _______________.
heat pump
Marshall & Swift categorizes reinforced concrete frame commercial structures as Class
B
When measuring a condominium unit, you should calculate _____ using ______measurements.
GLA, interior
The estimated cost to construct an exact duplicate or replica of the property being appraised, using the same materials, and embodying all the obsolescence of the subject building, is _______________ cost.
reproduction
The cost approach would likely be MOST applicable in a situation where:
- the improvements are older, and are constructed of outdated materials
- the subject is a special purpose property
- the improvements do not represent the highest and best use of the property as though vacant
- the land value is not well-supported
the subject is a special purpose property
The difference between the cost of an improvement and its market value on the effective date of the appraisal is
depreciation
The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout, is _______________ cost.
replacement
The most popular cost estimating service for residential appraisers is:
Marshall & Swift
When a published cost manual is used, the result is ____________ cost.
replacement
Which type of cost new would replicate a slate roof and a steam heating system in a 100-year-old home?
- reproduction cost
- replacement cost
reproduction cost
Direct costs are also called
hard costs
You are using the Marshall & Swift Residential Cost Handbook to estimate the cost new of a home built in the early 1900s. What should you do?
- not use Marshall & Swift because it has no data on homes built before 1966
- go to the Old Residence pages in the book
- go to the Manufactured Housing section in the book
- none of the above
go to the Old Residence pages in the book
A rectangular-shaped two-story home measures 28 feet by 40 feet. How many lineal feet are there in the foundation?
136
(28 x 2) + (40 x 2) = 136
A 2,800 square foot new home recently sold for $660,000. The site value was $180,000. What was the indicated cost per square foot of the home?
$171.43
$660,000 - $180,000 = $480,000 cost new. $480,000 divided by 2,800 = $171.43
Which of these is NOT one of the traditional cost estimating methods?
- comparative-unit
- direct-indirect
- unit-in-place
- quantity survey
direct-indirect
A building was constructed in September 2008 for $872,500. The cost index at that time was 174.6. The current cost index is 222.9. What is the indicated cost new of the building today? (Round the index to 2 decimal places)
$1,116,800
When does USPAP require the cost approach to be developed?
When it is necessary for credible results
An example of a special purpose property is
- 5,000 acre ranch
- geodesic dome house
- school building
- 8,000 square foot residence
school building (it has limited use)
The oldest of the three traditional appraisal approaches is the _________ approach.
cost
You examine a construction contract to build a 1,448 square foot house and the total cost is $197,450. What was the cost per square foot?
$136.36
Fannie Mae says the cost approach _______________.
is optional
A building was constructed in August 1999 for $2,340,000. The cost index at that time was 192.3. The current cost index is 302.1. What is the indicated cost new of the building today? (Round the index to 2 decimal places)
$3,673,800
You are performing the cost approach on an old house. By engaging in painstaking research, you are able to estimate the cost to construct an exact duplicate of the house, using all the actual materials that were used in its construction. What type of cost have you estimated?
Reproduction cost
The simplest, quickest, and least accurate method of estimating costs is the ______________ method.
comparative-unit
“Expenditures for the labor and materials used in the construction of improvements” is the definition of
direct costs
Unless adjustments are made for ownership interest, the cost approach will indicate the value of the ___________ interest.
fee simple
You are performing the cost approach on an old house. You use a cost manual to estimate the current cost of constructing a similar structure, using modern materials. Which type of cost have you estimated?
Replacement cost
Physical deterioration is best described as
wear and tear
Depreciation is defined as a loss in property value from
any cause
True or False: Functional obsolescence may be present in a brand-new structure.
True
In most situations, which of these would be considered an example of a superadequacy?
- gold-plated faucets
- R-90 insulation in walls and ceilings
- foundation walls that are 4 feet thick
- all of these
all of these
A building has an effective age of 12 and a total economic life of 60 years. It cost $320,000 new and its site value is $95,000. What is the indicated value by cost approach?
$351,000
12 / 60 = 20% depreciation. $320,000 x 20% = $64,000. $320,000 - $64,000 + $95,000 = $351,000
The number of years that have elapsed since a building was constructed is its
actual age
A new building is expected to remain standing for 80 years. This period is the building’s ____________ life.
physical
“The period over which improvements to real estate contribute to real property value” is the definition of
economic life
A roof on a building costs $18,000 to replace. It has an expected life of 25 years, and it is 10 years old. How much short-lived depreciation is attributable to this item?
$7,200
A hot water furnace in a building costs $22,000 to replace. It has an expected life of 30 years, and it is 24 years old. How much shortlived depreciation is attributable to this item?
$17,600
A building has a cost new of $400,000. Deferred maintenance items have been identified at a cost of $9,000. Short-lived depreciation has been identified at $15,000; these short-lived items have a total cost of $45,000. The building has an effective age of 20 years and a total economic life of 50 years. What is the amount of depreciation attributable to the long-lived items?
$138,400
$400,000 - 9,000 - 45,000 = $346,000
Depreciation = 20/50 = 40%
$346,000 x 40% = 138,400 Long Lived Depreciation
A home suffers functional obsolescence of $10,000 because it lacks a second bathroom, which could be installed at a cost of $9,500. This type of obsolescence is considered
curable
Economic feasibility is indicated if the __________ is ______________ the ______________ of the property.
cost to cure, equal to or less than, anticipated increase in value
The amount of depreciation attributed to deferred maintenance is measured by
the cost to cure the deferred maintenance item
Which type of age is based on the amount of observed deterioration and obsolescence the improvement has sustained?
effective
“The ability of a property or building to be useful and perform the function for which it was intended according to current market tastes and standards” is the definition of __________________.
functional utility
Which of these factors is most likely to cause external obsolescence to a residential property?
- A roof that shows obvious signs of deterioration but is not yet leaking
- A gas station/convenience store located across the street
- A kitchen design that does not meet current market tastes and expectations
- All of these are examples of external obsolescence
A gas station/convenience store located across the street
External obsolescence can be
marketwide
The subject is a 15 year old duplex that would cost $240,000 to build new today. It is in good condition and you estimate the effective age to be 10 years. Your estimate of total economic life is 50 years. Its land value is $60,000. What is its value by the cost approach?
$252,000
10/50 = .2
240,000 x .2 = 48,000
240,000 - 48,000 + 60,000 = 252,000
A short-lived item is a building component with an ______________ life that is shorter than the _______________ life of the entire structure.
expected remaining economic, remaining economic
Which of these is an example of deferred maintenance?
- A hallway that is too narrow
- Outdated kitchen cabinets
- A bathroom with a tub but no shower
- A broken window
A broken window
The subject property has 1,200 square feet of GLA, and a comparable sale has 1,400 square feet. What type of adjustment are you likely to make in the sales comparison approach for GLA?
a downward adjustment to the comparable
You are conversing with an appraiser who has been in the profession for 40 years, and he mentions the term “market approach”. What approach to value is he probably referring to?
sales comparison
For what type of property might the sales comparison approach NOT be an applicable approach to value?
- a duplex
- a commercial office building
- an unusual or one-of-a-kind design home
- a tract home in a subdivision
an unusual or one-of-a-kind design home
What is the first step in the sales comparison approach process?
research the market
“The geographic region from which a majority of demand comes and in which the majority of competition is located” is the definition of
market area
Specific data is
different for each appraisal assignment
Which of these is an element of comparison listed in The Appraisal of Real Estate, 14th Edition?
- location
- financing terms
- property rights being appraised
- all of the above
all of the above
True or False: Qualitative analysis is used for elements that cannot be given a numerical value.
True
Comp A has three bedrooms and sold for $118,000. Comp B has four bedrooms and sold for $125,000. What is the indicated adjustment for a fourth bedroom, using these two paired sales?
$7,000
True or False: Qualitative analysis uses percentages adjustments, while quantitative analysis uses specific dollar adjustments.
False
A property sold for $129,000. It was not improved or added onto, and it re-sold 12 months later for $141,900. What is the annual change in market conditions indicated by this sale?
10% increase
141,900/129,000 = 1.1
Adjustments should be made for __________ differences between the subject property and a comparable property.
significant
Comparable 1 sells for $222,000 and contains 1,900 SF. Comparable 2 is similar in all aspects, except it contains 2,100 SF, and it sells for $234,000. How much should we adjust another comparable sale, per square foot?
$60
2100 - 1900 = 200SF
234000 - 222000 = 12000
12000 / 200 = 60
The principle of _________________ is used when determining how much to adjust for differences between various components of a property.
contribution
A transaction could be verified through any of the following EXCEPT
- buyer
- seller
- home inspector
- listing agent
home inspector
“A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural” is the definition of ____________.
district
Which of the following would be considered a source of comparable sale data?
- MLS
- appraiser’s own files
- the internet
- all of the above
all of the above
Which approach is most widely used in the appraisal of residential properties?
sales comparison approach
A VA mortgage is an example of
a guaranteed mortgage
Bob grants his aunt, Mary, the right to occupy a property he owns for the rest of her life. In this situation, Mary is the
life tenant
Tenancy in severalty means the property is owned by
one person
According to Fannie Mae, all of the following are unacceptable appraisal practices EXCEPT
- not supporting adjustments in the sales comparison approach
- selection and use of inappropriate comparable sales
- use of comparables that are over six months old
- failure to make adjustments when they are clearly indicated
use of comparables that are over six months old
When adjusting a comparable sale for financing terms in an FHA appraisal, FHA instructs the appraiser to adjust
downward
An appraiser uses a comparable sale that sold as a result of the owner’s bankruptcy, and the appraiser adjusts the sale because it is not an arms-length transaction. This is an example of ___________ adjustment.
a conditions of sale
Market conditions adjustments are referred to by some appraisers as _________ adjustments.
Time
A buyer purchases a home, knowing that it needs a new roof. The buyer offers $104,000 and anticipates the cost of the roof to be $4,000. The roof actually ends up costing $8,000 because of unforeseen circumstances. How much should this sale be adjusted for expenditures made immediately after purchase?
+$4,000 (based on the buyer prediction, regardless of actual cost)
A property sold for $183,950, and the purchaser made no significant improvements. One year later it sold again for $195,000. What is the percentage of increase indicated by this sale?
6%
$183,950 - $195,000 = $11,050 increase.
$11,050 / $183,950 = 6%
True or False: In a residential appraisal, the comparable sales must always be located in the same market area as the subject.
False
When calculating room and bathroom count in a residential property, how is a “three-quarter bath” typically counted?
as a full bath
According to the requirements of the Uniform Appraisal Dataset, an appraiser is required to rate a location as
N, B, or A
When completing an appraisal using the Uniform Appraisal Dataset, in the “Age” section of the sales comparison grid, the appraiser is required to enter
actual age only
“The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards” is the definition of
functional utility
A comparable sale required the following adjustments: +8,000, -4,500, +5,000, -2,000, -1,000. What is the gross adjustment total?
$20,500
An appraisal of which of these types of properties would NOT be reported using the Fannie Mae URAR form?
- a unit in a shopping mall
- a unit in a planned unit development
- a one-unit property with an accessory unit
- a one-unit property
a unit in a shopping mall
Which of these items is NOT required by Fannie Mae to be included as an exhibit in an appraisal report?
- exterior photographs of the front, rear, and street of the subject property
- an exterior building sketch of the improvements
- a copy of the deed or legal description
- photos of the front of each comparable sale
a copy of the deed or legal description
With real property, the value of the whole __________ the sum of the separate estates or parts.
may be equal to, more than, or less than
A property sold for $200,000, there was a $20,000 down payment and the rest was in the form of a 30 year mortgage at 6% interest. The seller paid 3 points at the closing. How much was that?
$5,400
The third step in the life cycle of a market area is
decline
A ___________ is a lump-sum payment to the lender that reduces the interest rate of the borrower’s mortgage.
buydown
“Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest” is the definition of
partial interest
A “point” is equal to _____% of a _______________.
1, mortgage loan amount
Market condition adjustments to comparable sales should always be calculated from the time of the _________ to the ____________.
contract, effective date of the appraisal
The first step in the life cycle of a market area is
growth
GLA includes ___________ but not____________.
above grade heated area, garages
Fannie Mae says that positive adjustments for sales or financing concessions
are not acceptable
The formula for applying the income capitalization approach is
value = income / rate
True or False: If a property is rented, its market rent is always the same as its contract rent.
False
“A ratio of one year’s net operating income provided by an asset to the value of the asset” is the definition of ____ rate
capitalization rate
A property is currently rented for $1,200 per month, however market rent is only $1,000. The $200 difference between the contract rent and the market rent is
excess rent
Which of these would be considered an operating expense?
management fee
If we subtract vacancy and collection loss from potential gross income, we get
effective gross income
A method of valuing property by discounting the anticipated income stream at an appropriate rate, plus discounting the value of the reversion is
yield capitalization
Which type of expenses do not vary with the occupancy of the property?
fixed expenses
The basic formula for income capitalization states that value equals _______________ divided by a __________.
income, rate
_______________ income is “the anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income.”
Effective gross income
A comparable sale sold for $940,000. It had a verified NOI of $122,500. The capitalization rate (Ro) from the comparable sale is calculated as:
.13
122500/940000 = .13
A 12 unit apartment building has 6 units rented at $900 per month and 6 units rented at $1,050 per month. What is its gross income?
$140,400
Which method converts a single year’s net operating income into an indication of property value?
Direct capitalization
Typical replacement allowance items would NOT include
- roof
- plumbing repairs
- appliances
- boiler
plumbing repairs
_____________ rent is defined as ”the actual rental income specified in a lease.”
Contract
“The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted” is the definition of
potential gross income
GRM assumes there is __________ relationship between rental income and value.
a direct linear
True or False: An appraiser would typically not value a 50-unit apartment complex with a gross rent multiplier (GRM).
True
Properties with more than _____ living units are considered to be non-residential properties.
4
True or False: GRM analysis should not be used in areas with rent controls.
True
Why does an appraiser need as much information as he or she can get about rental comparables?
to make sure that accurate and appropriate comparisons are made
True or False: New single-unit homes are frequently purchased as rental investment properties.
False
The gross monthly unfurnished rent of the subject property is $760. The appraiser reconciles the GRM at 115. What is the indicated value of the subject property by income approach?
$87,400
760 x 115
The Fannie Mae 1007 form is intended to
estimate the market rent of the subject property
What type of property is MOST likely to be appraised using a gross income multiplier?
- 1-unit
- 2-unit
- 4-unit
- 10-unit
10-unit
When developing an appraisal, you calculate the following GRMs from comparable properties: 94.3, 90.1, 95.6, 109.2, 84.5, 100.7, 99.9. What is the mode of the GRMs?
there is no mode
“The sum of values for a variable in a sample or population divided by the number of items in the sample or population” is the definition of
mean
GRM analysis is based on the assumption that there is a __________ relationship between income and ________.
direct, value
The Fannie Mae Single Family Comparable Rent Schedule is also known as Form
1007
“A measure of central tendency identified as the middle value in an ordered array of numerical values …” is the definition of
median
A property sells for $95,750. At the time of sale it is rented for $975. What is the GRM?
98.2
95750 / 975
Which term is defined as: “The relationship or ratio between the sale price or value of a property and its periodic gross rental income”?
Gross rent multiplier
GRMs are derived by dividing the _______________ by the _______________ at the time of sale.
sale price, gross monthly unfurnished market rent
A set of numbers that has two modes is referred to as a:
bi-modal distribution
Residential properties are considered to be ________ unit(s).
one to four
To appraise a non-complex 6-unit property for a federally-related transaction, you need to be a _______________
Certified General Appraiser
The process of reconciliation occurs
in several places throughout the appraisal process
True or False: The reconciliation process means simply proofreading the report for typos and math errors.
False
When reconciling to a value conclusion, USPAP requires an appraiser to consider:
- The quality of the data available
- The applicability and relevance of the approaches used
- The quantity of the data available
- All of these
All of these
An appraiser discovers that the indicated values of her comparable sales, after adjustment, have a range of over 20%. What should the appraiser do?
leave the indications as they are and explain it
True or False: Good appraisal practice dictates brief boilerplate statements in the reconciliation section of an appraisal report.
False
Which of these final value conclusions is MOST appropriately rounded?
- $889,500
- $1,211,000
- $44,500
- $87,545
$44,500
Which of these is a reason why appraisers typically use at least three comparable sales in the sales comparison approach?
- USPAP requires a minimum of two sales
- if one sale is a bad indicator, it will show up in contrast with the other sales
- the first appraisal ever prepared had three sales, so that became the required number
- over the years, appraisers found that four sales were too many
if one sale is a bad indicator, it will show up in contrast with the other sales
True or False: The indicated values in the sales comparison approach should ideally be within 10% of each other.
False
An old gas station on a good corner location in a desirable older neighborhood recently sold for $375,000. The reproduction cost of the improvements today would be $350,000 and the total depreciation is estimated to be 80%. What is the land value?
$305,000
$350,000 X .20 = $70,000 (remaining building value). $375,000 - $70,000 = $305,000 (land value).
Which would NOT be a form of concurrent ownership?
- tenancy in severalty
- tenancy in common
- joint tenancy
- tenancy by the entirety
tenancy in severalty
An 8-unit apartment building has 5 units rented at $850 per month and 3 units rented at $925 per month. What is its gross income?
$84,300
(850 x 5) + (925 x 3) *12 = 84,300
The _______________ method has good application in valuing land in rural areas and in older, urban areas.
extraction
What are the three general types of depreciation?
physical, functional, and external
A factory-built house constructed in compliance with the HUD code is _________ home.
manufactured
A single parcel is valued at $450,000. Zoning allows it to be subdivided into 8 lots and it is estimated that each lot could sell for $50,000. Site development costs (sewer, grading, road, etc.) would cost $50,000. What is the highest and best use?
Leave it as one parcel
A property has a cost new of $350,000. It has an effective age of 20 years and a total expected economic life of 65 years. There are curable items totaling $45,000. If they are cured, it will reduce the effective age to 15 years. What is the value of the improvements on a modified age-life basis, before including the site value?
$234,545
$350,000 - $45,000 = $305,000. 15 ÷ 65 = .231 or 23.1%. $305,000 X .231 = $70,455. $305,000 - $70,455 = $234,545.
“An element of comparison in the sales comparison approach; comparable properties can be adjusted for differences in the motivations of either the buyer or a seller in a transaction” is the definition of
conditions of sale
The intended user of an appraisal is the __________ and any other user, as identified by _________.
client, name or type
Multiple listing services can be utilized for gathering _______________.
both general and specific data
In what type of heating system would you find an expansion tank?
hot water
“The type of data and the extent of research and analyses” is the definition of
scope of work
The most common type of framing in residential construction today is
platform frame
A ___________ home has a permanent steel chassis, wheels and axles.
manufactured
A house is rented for $1,050 per month, but lacks air conditioning. Comparable houses with air conditioning rent for $1,100 per month. The appropriate gross rent multiplier is 85. By the capitalized value method, how much is the depreciation attributable to the lack of air conditioning?
$4,250
Capitalization of Income Loss. $1,100 - $1,050 = $50 rent loss. $50 X 85 = $4,250.
An estimate of remaining economic life is required by
- Fannie Mac
- Freddie Mac
- VA
- all of the above
VA (& FHA)
The following statement is a definition for what? “Improved land or a lot in a finished state so that it is ready to be used for a specific purpose”.
Site
Which would NOT be an appropriate legal description of a subject property?
- postal address
- metes and bounds description
- rectangular survey description
- lot and block description
postal address
The summation approach is another name for the _______________ approach.
Cost
It is common in appraisal reports to include a map that shows the location of the _______________.
subject property and comparable sales
“The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease” is the definition of _______________.
leasehold interest
Functional obsolescence could be caused by all of the following EXCEPT
- superadequacies
- layout problems
- deferred maintenance
- outmoded items
deferred maintenance
Functional Obsolescence. Deferred maintenance is a physical form of depreciation.
“The estimated cost to construct, at current prices as of the effective appraisal date, an exact duplicate or replica of the building being appraised, using the same materials…” is the definition of _______________ cost.
reproduction
Which entity produces the most commonly-used land appraisal report form?
It is a generic form
Which site valuation methods should only be utilized when the subject property is income-producing by nature?
land residual and ground rent capitalization
“The relationship or ratio between the sale price or value of a property and its periodic gross rental income” is the definition of
gross rent multiplier
An old gas station on a good corner location in a desirable older neighborhood recently sold for $375,000. The reproduction cost of the improvements today would be $350,000 and the total depreciation is estimated to be 75%. What is the land value?
$287,500
Architectural and engineering fees are examples of _____________ costs.
indirect
When developing an appraisal, you calculate the following GRMs for comparable properties: 94.3, 90.1, 95.6, 109.2, 84.5, 100.7, 99.9. What is the median of the GRMs?
95.6
A dwelling has a reproduction cost of $625,000. It is 10 years old and has an effective age of 12. Its remaining economic life is estimated to be 48 years. What is the depreciated value of the improvements by the age-life method, before including the site value?
$500,000
500,000 - 12 + 48 = 60 years, 12/60 = .2 625,000*.2 = 125,000 depreciation 625,000-125,0000 = 500,000
An appraiser must not allow the intended use of an assignment or a client’s objectives to cause the assignment results to be __________.
biased
The first step in the valuation process is
define the problem
A cement mixture that is applied to the exterior of a foundation wall is called
parging
The URAR form can be used to report the appraisal of which of the following property types?
- one-unit property
- one-unit with an accessory unit
- unit in a PUD
- all of the above
all of the above
In your sales comparison grid, you made adjustments of +$5,000, +$3,500, -$2,500, + $8,000, and -$4,000. What is your net adjustment?
+$10,000
Flood maps are prepared by
FEMA
“The age of property that is based on the amount of observed deterioration and obsolescence it has sustained” is the definition of ____________ age.
effective
“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat” is the definition of
fee simple estate
“The amount an entrepreneur expects to receive for his or her contribution to a project” is the definition of
entrepreneurial incentive
A mortgage in which a party other than the borrower assures payment in the event of default is a(n) _____________ mortgage.
guaranteed
A comparable new house just sold for $340,000. You estimate the value of the site at $95,000 and the cost of the site improvements at $10,000. It has 2,030 square feet of GLA. What is its unit cost?
$115.76
In a federally related transaction, a licensed residential appraiser is permitted to appraise non-complex 1-4 unit residential properties with a transaction value of less than ________ and complex 1-4 unit residential properties with a transaction value less than _________.
$1,000,000, $250,000
You examine a construction contract to build a 2,448 square foot house and the total cost is $197,450. What was the cost per square foot?
$80.66
Materials that transfer energy quickly are called __________ and those that transfer energy slowly are called __________.
conductors, insulators
Which cost estimating method is the most detailed and time-consuming to develop?
quantity survey
“The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted” is the definition of
net operating income
“A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis” is the definition of
hypothetical condition
The most complex method of site valuation is the _______________ method.
subdivision development
A property sold for $250,000. The reproduction cost of the building was $380,000 and it was 60% depreciated. By extraction, what is the value of the land?
$98,000
Example 1. $380,000 X .40 = $152,000 (building value). $250,000 - $152,000 = $98,000 (land value).
Fill, grading and permits are examples of improvements that create a
Site improvement
J-bolts are used to anchor the _________ to the __________.
sill plate, foundation
“A method of estimating land value in which the depreciated cost of the improvements on an improved property is calculated and deducted from the total sale price to arrive at an estimated sale price for the land” is the definition of the ___________ method of site valuation.
extraction
Condemnation occurs when a municipality exercises
eminent domain
In most residential appraisals, the appraiser values
site
A deed could provide which of the following information about a property?
- owner of record
- easements
- deed restrictions
- all of the above
all of the above
A one-and-a-half-story house is commonly known as a
cape cod
You calculate the following gross rent multipliers for comparable properties: 121.2, 105.3, 111.2, 150.1, 108.3, 105.3, 109.8, 108.8. What is the range of the GRMs?
44.8 (organize & subtract highest from lowest)
“Real property for which the expansion, redevelopment, or reuse of the real estate may be complicated by the presence of environmental contamination that needs to be remediated to appropriate regulatory standards ” is the definition of
brownfield
The valuation process is a systematic procedure employed to provide the answer to a(n) _______ question about the value of _________.
client’s, real property
