Briefing Exam 3

Question 1

1. Demand being:

a. prices decrease as availability decreases.
b. prices increase as availability increases.
c. prices increase as availability decreases.
d. prices always increases.

Answer 1

c. prices increase as availability decreases.

This is an example of supply and demand.

Question 2

2. While the economy is experiencing inflation, interest rates:

a. drop and housing prices rise.
b. rise and housing prices drop.
c. and housing prices rise.
d. none of these.

Answer 2

c. and housing prices rise.

During inflationary periods, interest rates and housing prices usually rise.

Question 3

3. Of the following, value is best described as:

a. present worth of future benefits.
b. relationship between money and desire.
c. commodities in exchange.
d. speculative gain.

Answer 3

a. present worth of future benefits.

This definition of value is most applicable to income producing properties. “The present worth the future benefits” have to do with the projected income stream.

Question 4

4. Value is best described as:

a. disability.
b. worth.
c. equity.
d. cost.

Answer 4

b. worth.

Value is generally described as the amount of money deemed to be the equivalent in the worth of the subject property. Cost does not equal value, nor does equity.

Question 5

5. The relationship between a property and a prospective purchase is known as:

a. utility.
b. value.
c. highest and best use.
d. progression.

Answer 5

b. value.

Value can also be described as the relationship between a property and a prospective purchaser. The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale (market value).

Question 6

6. Market value is determined by:

a. value offered.
b. value paid.
c. appraised value.
d. all of the above.

Answer 6

b. value paid.

Market value: the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale. It is assumed that the buyer and seller acted prudently and knowledgeably and that the price is not affected by undo stimulus.

Question 7

7. Of the following, which would most likely be the highest value?

A. Loan value
B. Tax value
C. Market value
D. Book value

Answer 7

C. Market value

The other choices would most likely be lower than market value.

Question 8

8. Which of the following would most likely lower the value of a single-family residence?

A. Deferred maintenance
B. Strict zoning
C. Questionable neighborhood
D. Obsolescence

Answer 8

A. Deferred maintenance

Deferred maintenance is physical deterioration or loss in value of a building resulting from postponed maintenance to the building.

Question 9

9. When appraising a commercial property, an appraiser would be least interested in:

A. Changes in use.
B. Physical condition.
C. Past sales of similar property.
D. Original cost.

Answer 9

D. Original cost.

The value of commercial property is more often derived from its income earning potential.

Question 10

10. Which represents the four unities of market value?

A. Location, interest, demand, financing
B. Time, title, interest, possession
C. Possession, encumber, will, sell
D. Demand, utility, scarcity, transferability

Answer 10

D. Demand, utility, scarcity, transferability

Referred to as the four characteristics of market value: demand, utility, scarcity, transfer ability. On the state exam they are sometimes referred to as the “prime requisites a value.” Memory aid: DUST

Question 11

11. In order for demand to be effective, it must be implemented by:

A. Amenities.
B. Location.
C. Highest and best use.
D. Purchasing power.

Answer 11

D. Purchasing power.

The element of value known as “demand” is rendered ineffective by lack of purchasing power.

Question 12

12. Which of the following is not one of the three great forces affecting value?

A. Social ideals and standards
B. Economic adjustments
C. Political or governmental regulations
D. Private restrictions

Answer 12

D. Private restrictions

Real estate undergoes constant change from physical, economic, social, and political forces.

Question 13

13. A $260,000 house having been built among $100,000 to $145,000 homes would eventually see the value of the surrounding homes. This influence on the value of the $260,000 house is known as:

A. Supply and demand.
B. Social obsolescence.
C. Deterioration.
D. Regression.

Answer 13

D. Regression.

Principle of regression: between dissimilar properties, the worth of the better property is adversely affected by the presence of the lesser quality property.

Question 14

14. Which of the following is an appraiser’s primary concern and the appraisal of residential property?

A. Marketability
B. Square footage
C. Functional utility
D. Operating expenses

Answer 14

A. Marketability

If a residential property is not marketable it is worthless.

Question 15

15. Offers to purchase by prospect of buyers will tend to set:

A. Future prices
B. The ceiling price
C. The floor for prices
D. None of these

Answer 15

C. The floor for prices

Sellers list high and buyers usually offer to pay less than they might agree to pay. In bargaining circumstances, asking prices establish the upper limit for prices in an area while offers to purchase will set the lower limit to which prices might fall.

Question 16

16. In an appraisal, the term “utility value” would most nearly be described as:

A. Insurance value.
B. Liquidation value.
C. Market value.
D. Use value.

Answer 16

D. Use value.

Utility value is the value in use to an owner-user. A property that has no utility has no value.

Question 17

17. The ultimate test of functional utility is:

A. Marketability
B. Layout
C. Location
D. Desire

Answer 17

A. Marketability

Functional utility is defined as “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, as well as the efficiency of a building’s use in terms of architectural style, design & layout, traffic patterns, and size and type of rooms.” The ultimate test of functional utility is marketability. If the property can be marketed for the same price as others in the area, there is no functional obsolescence.

Question 18

18. The principle of “highest and best use” refers to the use:

A. That produces the greatest net income attributable to the land.
B. That produces the largest gross income.
C. Of improvements best adapted to the architectural style and design of the neighborhood.
D. Best suited to the environment.

Answer 18

A. That produces the greatest net income attributable to the land.

Highest and best use refers to use of land. It is that use of the land that will product the greatest net income designated and credited to the land.

Question 19

19. Which would be considered economic obsolescence?

A. Poor architectural design
B. Blighted neighborhood
C. Termite damage
D. Deferred maintenance

Answer 19

B. Blighted neighborhood

Economic onsolescence concerns influences outside the property limits and would include a blighted neighborhood.

Question 20

20. Any loss in value due to placing a building in an incompatible neighborhood would be an example of:

A. Functional obsolescence
B. Economic obsolescence
C. Physical wear and tear
D. Improper design techniques

Answer 20

B. Economic obsolescence

The fact that neighboring properties are hurting the value of a building would indicate that it is suffering from economic obsolescence.

Question 21

21. A flight pattern to a nearby airport was changed so that planes pass over a single-family residential neighborhood. Any loss in value to these properties would be attributed to:

A. Economic obsolescence
B. Functional obsolescence
C. Physical obsolescence
D. All of these

Answer 21

A. Economic obsolescence

This outside influence is considered economic obsolescence.

Question 22

22. Which of the following is an example of functional obsolescence?

A. New zoning laws
B. Encroachment of in harmonious land use
C. Deteriorated driveway
D. Ornate cornices

Answer 22

D. Ornate cornices

An ornate cornice is an outdated architectural design classified as functional obsolescence. A deteriorated driveway would be physical deterioration. New zoning laws and inharmonious land use would be examples of economic obsolescence.

Question 23

23. A loss in value due to a city sewer system in poor condition would be classified as:

A. Physical deterioration
B. Functional obsolescence
C. Wear and tear
D. Economic obsolescence

Answer 23

D. Economic obsolescence

A poor sewer system is an outside influence and is considered economic obsolescence.

Question 24

24. Economic obsolescence would be considered:

A. Curable
B. Incurable
C. Inherent
D. Wear and tear

Answer 24

B. Incurable

Whether an item of depreciation is curable or incurable depends solely on the cost to cure. Since economic obsolescence is caused by external forces, there is usually nothing that can be done to change it.

Question 25

25. Wear and tear to the load bearing members of a building would be classified as:

A. Functional obsolescence-curable
B. Physical deterioration-curable
C. Functional obsolescence-incurable
D. Physical deterioration-incurable

Answer 25

D. Physical deterioration-incurable

Physical damage to the load bearing members of a building would usually be considered too expensive to repair. If it is too expensive to repair, it is classified as incurable.

Question 26

26. Two different properties are located side-by-side in the same neighborhood. They were both built by the same contractor, at the same time, for the same cost, are maintained the same, and contain the same square footage. If one property is worth less than the other, it would be due to:

A. Functional obsolescence
B. Economic obsolescence
C. Deferred obsolescence
D. Physical deterioration

Answer 26

A. Functional obsolescence

The only possible difference is that the properties do not look the same. All forces and factors that could influence value operate on both properties. Possibly the floor plans are different. The difference must be architectural and is considered functional obsolescence.

Question 27

27. A four-bedroom house with a one-car garage would be an example of:

A. Physical deterioration
B. Functional obsolescence
C. Economic obsolescence
D. Environmental obsolescence

Answer 27

B. Functional obsolescence

Functional obsolescence is a loss in the value of a property resulting from deficiency in the floor plan of a house. A one-car garage would be inadequate for the four bedroom house.

Question 28

28. Evans owns a new personal residence. The transportation agency is widening the street in front of his residence. This will cause Evans to lose 10 feet along the front of this property which borders the street. This is an example of:

A. Functional obsolescence
B. Economic obsolescence
C. Physical deterioration
D. Accrued depreciation

Answer 28

B. Economic obsolescence

Any loss in value would be considered economic obsolescence because it is caused by a force which is outside the property lines.

Question 29

29. The period over which a property may be profitably utilized is called it’s:

A. Economic life
B. Amortized life
C. Income life
D. Net life

Answer 29

A. Economic life

Economic life is the estimated period over which it is anticipated that a property may be profitably utilized.

Question 30

30. The economic life of improved property is which of the following in relation to the physical life?

A. Longer
B. Shorter
C. The same
D. Depends on the type of building

Answer 30

B. Shorter

Economic life is the estimated period over which an improved property may be profitably utilized so it will yield a return. The physical life is the estimated period during which a physical thing is habitable if normally maintained. Typically, physical life is expected to be longer than economic life.

Question 31

31. If a building is in exceptionally good condition, it’s effective age is:

A. Less than its actual age
B. More then it’s actual age
C. The same as its actual age
D. Depends on the type of building

Answer 31

A. Less than its actual age

Effective age is the apparent age of a building based on observed condition rather than chronological age. The effective age of improvements to real property at the time of inspection differs from actual age by such variable factors as depreciation, quality of maintenance, and the like.

Question 32

32. The basic valuation principle underlying the market approach is:

A. Change
B. Increase and decrease
C. Anticipation
D. Substitution

Answer 32

D. Substitution

The Principle of Substitution is the basis of all appraisal techniques in determining property value. Simply stated, value will tend to be set by the cost of acquiring an equally desirable substitute.

Question 33

33. The hardest and yet most important part of the market data method of appraising is:

A. Adjusting for differences between the comparable and the subject property
B. Analyzing the volume of sales data
C. Collecting a sufficient volume of sales data
D. Establishing the unit of comparison

Answer 33

A. Adjusting for differences between the comparable and the subject property

The most difficult part of the market data method of appraising for differences in the properties.

Question 34

34. In appraisal, the adjustment process whereby comparables are adjusted to the subject property is known as:

A. Averaging
B. Reconciliation
C. Weighing
D. Comparing

Answer 34

B. Reconciliation

In appraisal, reconciliation is the process of interpreting the data gathered by bringing the various value estimates into mutual relationship with one another to determine a final estimate of value. With this process, the comparable are always adjusted to the subject property.

Question 35

35. You are preparing a competitive market analysis on a vacant lot that you hope to list for sale. Which of the following approaches to value will be used in the development of the estimated value?

A. Cost approach
B. Gross rent multiplier
C. Income approach
D. Sales comparison approach

Answer 35

D. Sales comparison approach

The sales comparison approach is most applicable to the appraisal of vacant land. The cost approach is most applicable to the appraisal of special purpose properties such as a church. The gross rent multiplayer is used as a substitute for the income approach in the valuation of a single family home. The income approach is used in the appraisal of an income-producing property.

Question 36

36. When using the market data approach to appraise a single-family home, recent sales are compared to the subject property as to:

A. Capitalization rates
B. Exterior features only
C. The entire property
D. Rental income

Answer 36

C. The entire property

The entire property is examined for comparison purposes.

Question 37

37. The subjective value of a property is the:

A. Exchange value
B. Market value
C. Use value to the owner
D. Lenders value

Answer 37

C. Use value to the owner

Since value sometimes depends on the use by a specific owner, it tends to be considered subjective.

Question 38

38. The objective value of a property is closest to:

A. Market value
B. Club appeal
C. Listing price
D. Future value

Answer 38

A. Market value

Objective value is what a reasonable person ends up paying for a property.

Question 39

39. Which of the following approaches to real estate appraisal is concerned with “the present worth of future benefit of a property?

A. Market data
B. Income
C. Cost
D. Summation

Answer 39

B. Income

The income approach is based on the theory that the present worth or value of an income property is the present worth of future net income.

Question 40

40. The income approach would not be used when appraising:

A. Commercial retail property
B. Residences in a subdivision
C. Industrial buildings
D. Neighborhood shopping centers

Answer 40

B. Residences in a subdivision

When there are no suitable comparatives or, in this case, no income to capitalize, the income approach is not a viable method.

Question 41

41. The most difficult step in applying the income approach in the appraisal of income property is:

a. verifying the income and expense records
b. selecting a proper capitalization rate
c. locating similar properties to make a market comparison
d. establishing the net income

Answer 41

b. selecting a proper capitalization rate

Capitalization rates are usually established by examining established rates on similar properties. Since few comparables are usually available it can be difficult to establish an accurate rate.

Question 42

42. When analyzing the income produced by a property, an appraiser is concerned with:

A. Amount of income
B. Prospect of continued income
C. Quality of tenants
D. All of these

Answer 42

D. All of these

All of these are important factors to consider when calculating net income for capitalization purposes.

Question 43

43. The principle of anticipation applies when using the:

A. Market-data approach
B. Income approach
C. Cost approach
D. Summation approach

Answer 43

B. Income approach

The income approach estimates value based upon the amount of net income a property is anticipated to produce over its remaining economic life.

Question 44

44. An appraiser would determine the value of an apartment building by:

A. Capitalizing anticipated future income
B. Calculating the reproduction cost
C. Using comparables exclusively
D. Analyzing past income streams

Answer 44

A. Capitalizing anticipated future income

The income capitalization method analyzes a property’s anticipated future income.

Question 45

45. Capitalization is most closely related to:

A. Investment to equity ratio
B. Income to to equity ratio
C. Income to value ratio
D. Cost to equity ratio

Answer 45

C. Income to value ratio

The formula for capitalization:

VALUE = NET INCOME/CAPITALIZATION RATE

Question 46

46. Capitalization is a process whereby an appraiser:

A. Finds gross income of equity capital.
B. Converts income into capital value.
C. Establishes cost of capital investment.
D. All of these.

Answer 46

B. Converts income into capital value.

Capitalization is a mathematical process used in estimating the value of income producing promptly by applying a certain capitalization rate to the net operating income.

Question 47

47. The capitalization rate in the income approach provides for “return of” and “return on” the investment. “Return of” refers to:

A. Return of the land
B. Depreciation
C. Monthly savings
D. Principal payments

Answer 47

B. Depreciation

An investor is allowed a “return on” his/her investment, which is the same as interest, and a “return of”, which is depreciation. The “return of” allows for depreciation of the wasting asset.

Question 48

48. If interest rates on loans increase, capitalization rates would tend to:

A. Increase
B. Decrease
C. Remain the same
D. Disappear

Answer 48

A. Increase

The “return on” part of the capitalization rate is the same as interest. If interest rates increase, the capitalization rate increases.

Question 49

49. After capitalizing the net income of a property and then deducting the replacement cost of the improvements, an appraiser has established the:

A. Value of the land.
B. Market value of the property.
C. Use value to the owner.
D. Potential value to an investor.

Answer 49

A. Value of the land.

The total value of a property is made up of the value of the land plus improvements.

Question 50

50. Which of the following should be included when estimating the value of an income property using the capitalization approach?

A. Vacancy loss
B. Principal payments on a loan
C. Interest payments on a loan
D. Management expenses

Answer 50

D. Management expenses

Management expenses should be considered when using the capitalization approach. Loan payments are not considered in capitalizing net income.

Question 51

51. To arrive at a capitalization rate in the appraisal of an income producing property, no provisions should be made for:

A. Manager’s salary
B. “Return of” the investment
C. Federal income taxes
D. All of these

Answer 51

C. Federal income taxes

To arrive at a capitalization rate, the appraiser makes an allowance for depreciation or a “return of” the investment. No provisions are made for federal income taxes that might become due on the property income.

Question 52

52. An individual owns an income property which is worth $100,000, based upon a capitalization rate of 6%. If an appraiser uses a capitalization rate of 8% on the same property, the estimate of value would be:

a. $70,000
b. $75,000
c. $80,000
d. $90,000

Answer 52

b. $75,000

Using a 6% capitalization rate, the net income is determined by multiplying the value by the capitalization rate: $100,00 x 0.6 = $6,000. Then capitalize the $6,000 at 8%: $6,000/.08 = $75,000.

Question 53

53. Assuming the total value of the property to be $190,000 and the total net income to be $13,680, the capitalization rate would be:

a. 6.5%
b. 7%
c. 7.2%
d. 7.5%

Answer 53

c. 7.2%

The basic capitalization formula is: VALUE = NET INCOME/CAPITALIZATION RATE

From this we get: CAPITALIZATION RATE = NET INCOME/VALUE

$13,680/$190,000 = 0.72 or 7.2%

Question 54

54. Two buildings are located in the same area, of comparable size, both under long-term leases. One is leased to the government for a post office and the other for a hardware store. Using the income capitalization approach to appraise the properties, which of the following is correct?

a. the same capitalization rate for both.
b. a lower capitalization rate for the hardware store.
c. a higher capitalization rate for the the hardware store.
d. proportional capitalization rates based upon the different uses.

Answer 54

c. a higher capitalization rate for the the hardware store.

Part of the capitalization rate measures the risk involved in an investment. Thus, the higher the risk, the higher the CAP rate: the lower the risk, the lower the CAP rate. Leasing a building for a hardware store involves higher risk of vacancy than leasing for a post office and results in a higher CAP rate.

Question 55

55. Property that is very seldom sold would be appraised by which of the following appraisal techniques?

a. market data approach
b. cost approach
c. capitalization approach
d. Hoskold or Inwood method

Answer 55

b. cost approach

An example of property that is seldom sold would be government buildings or churches. There is usually no comparative information available on these types of property. The cost approach relates to construction information which is readily available.

Question 56

56. In the appraisal of residential property, the cost approach is most appropriate in the case of:

a. new property
b. middle-age property
c. older property
d. multi-family property

Answer 56

a. new property

Cost estimates per square foot can more easily be ascertained with new property. This is not to imply that the cost approach is always the best method for the appraisal of new property.

Question 57

57. When using the cost approach, the appraiser may estimate the cost of reconstruction based on its “reproduction” cost or its “replacement” cost. “Reproduction” cost is:

a. The cost to replace the current improvements with another structure.
b. An estimate of the actual cost of the building when originally constructed.
c. The cost to build an exact replica using the actual materials and design of the present building.
d. The cost to remodel the existing structure so it meets current building codes.

Answer 57

c. The cost to build an exact replica using the actual materials and design of the present building.

“Reproduction” cost is the cost of reconstructing a replica of the existing structure using the same design and materials.

Question 58

58. An appraiser using the cost method can use the unit cost per square foot or per cubic foot in his/her computations. On a unit cost basis:

a. a small house would cost more than a large house per square foot or cubic foot
b. a small house would cost less than a large house per square foot or cubic foot
c. a large house would cost more than a small house per square foot or cubic foot
d. the cost would be the same for a small house as a large house

Answer 58

a. a small house would cost more than a large house per square foot or cubic foot

The cost of the essential core items such as the kitchen and bathrooms (which are usually the most expensive to produce) would be prorated over a smaller number of square feet so the unit cost would be higher in a small house.

Question 59

59. The quantity survey method, unit-in-place method, and square foot/cubic foot methods of real estate appraisal most directly relate to the:

a. cost approach
b. income approach
c. sales comparison approach
d. all of these

Answer 59

a. cost approach

In the cost approach, an appraiser may use all of these methods to determine the cost to build.

Question 60

60. Which of the following is the biggest problem in using the cost approach to appraise and older building?

a. economic conditions have changed
b. construction materials and methods have changed
c. estimating accrued depreciation
d. lack of comparable properties recently sold

Answer 60

c. estimating accrued depreciation

For appraisal purposes, accrued depreciation is the difference between the cost to reproduce the property (as of the appraisal date) and the property’s current value as judged by its condition. Accused depreciation is difficult to estimate on very old properties.

Question 61

61. Which of the following appraisal techniques requires a separate estimate for the value of the land?

a. market data approach
b. income capitalization approach
c. cost approach
d. all of these

Answer 61

c. cost approach

The primary steps of the cost approach are to (1) estimate the land value, (2) estimate the replacement cost of the building new, (3) deduct all accrued depreciation from the replacement cost and (4) add the estimated land value to the depreciated replacement cost.

Question 62

62. Which of the following is true about the replacement cost method?

a. it works best with new properties
b. it tends to set the upper value of a property
c. it works best for libraries
d. all of these

Answer 62

d. all of these

Since the cost approach looks at the cost of constructing an identical building with current materials and techniques, it tends to se the upper value of the property. The cost approach is ideal for new properties and special purpose properties that have no comparable in the area or which produce no income. Examples are museums, schools, churches, and libraries.

Question 63

63. An appraisal under the cost approach method places the value of landscaping, fences, and walkways:

a. always as a separate item
b. as part of the building
c. usually in the land value
d. none of these

Answer 63

c. usually in the land value

Landscaping, fences, and walkways are considered as improvements or simply as part of the land itself.

Question 64

64. A gross rent multiplier is obtained by:

A. dividing gross monthly rent by the property’s value
B. Dividing gross monthly rent by the selling price
C. Dividing sales price by gross monthly rent
D. Dividing net income by the gross monthly rent

Answer 64

C. Dividing sales price by gross monthly rent

The gross rent multiplier is obtained by dividing the sales price or value by the gross monthly rent.

Question 65

65. Which of the following appraisal methods prices all labor and material in construction?

A. Quantity survey
B. Unit-in-place
C. Capitalization
D. Comparison

Answer 65

A. Quantity survey

The quantity survey method involves a detailed estimate of the quantities of raw materials (lumber, plaster, brick, cement) used, as well as the current price of the material and installation costs. It also includes indirect costs, such as building permit, land survey, and overhead.

Question 66

66. Which appraisal method values electrical work by number of light fixtures per square yard?

A. Quantity survey method
B. Unit-in-place method
C. Comparison method
D. Construction cost method

Answer 66

B. Unit-in-place method

The unit-in-place method is a method for computing replacement cost which uses prices for various building components, as installed, based on specific units of use such as square footage or cubic footage. For example, insulation may cost $.07 per square foot, drywall $1.50 per square yard, painting $.08 per square foot and so on.

Question 67

67. Amenities are:

A. Features that add to the value or desirability of a property
B. Items of personal property that may be depreciated
C. Capital improvements that add to the cost basis
D. None of the above

Answer 67

A. Features that add to the value or desirability of a property

Amenities are features, both tangible and intangible, that enhance and add to the value of desirability of real estate. In a condominium, for example, common amenities include a swimming pool, clubhouse, and a good view.

Question 68

68. A property with great amenity value would best be appraised by using the:

A. Reproduction cost method
B. Comparison method
C. Capitalization method
D. Replacement cost method

Answer 68

B. Comparison Method

The comparison method would be used intros case by adjusting comparable to compensate for the amenities of the subject property.

Question 69

69. A corner lot would most likely add value to:

A. Residential property
B. Retail property
C. Industrial property
D. Agricultural property

Answer 69

B. Retail property

Retail property would benefit from the added traffic and visual exposure of a corner lot.

Question 70

70. A cul-de-sac is which of the following?

A. Street
B. Drainage ditch
C. French door
D. Wood molding

Answer 70

A. Street

A cul-de-sac is a dead-end street or a street open at only one end.

Question 71

71. An increase in value as a result of taking several small parcels and joining them together to form a larger parcel is called:

A. Plottage value
B. Combined increment
C. Combination factor
D. Combined worth

Answer 71

A. Plottage value

Assemblage is the combining of two or more adjoining lots into one large tract. This is usually done to increase the value of the individual lots because a larger building capable of producing a larger net return may be erected on a larger parcel. The resulting added value is called plottage value.

Question 72

72. Which of the following is not a method of depreciation?

A. Straight line
B. Sum of the years digits
C. Sinking fund
D. Obsolescence

Answer 72

D. Obsolescence

Straight line, sum-of-the-years-digits, and sinking fund are all methods of calculating depreciation. Obsolescence is also in value due to a decrease in the usefulness of property cause by decay, changes in technology, people’s behavior, patterns and tastes, or environmental changes.

Question 73

73. Putting aside money each year for five consecutive years to replace the roof is an example of:

A. A trust fund
B. A depreciation allowance
C. A sinking fund
D. An emergency plan

Answer 73

C. A sinking fund

A sinking fun is established to gradually amass enough money to satisfy a debt or to meet a specific requirement. The sinking fund method of depreciation contemplates produce investments of equal amounts of money in a compound-interesting-bearing account wherein the investment, plus the compound interest, will be used to replace the improvement at the end of its economic life.

Question 74

74. Which of the following best identifies the three phases normally involved in a single-family dwelling?

A. Construction proposal, map approval, and buyer qualification
B. Land acquisition, development, and construction
C. Financing, building, and resale
D. Syndication, subdivision, and recordation

Answer 74

B. Land acquisition, development, and construction

These are the 3 stages of building a single family dwelling.

Question 75

75. An appraiser would most likely use a depth table when confronted with a valuation problem involving:

a. capitalization of net income
b. a sinking fund
c. commercial property
d. residential property

Answer 75

c. commercial property

Depth tables are tables of percentage used to provide a uniform system of measuring additional value of lots which may be more valuable because of added depth. Depth tables are used on vacant land usually for commercial property.

Question 76

76. Which of the following appraisal reports is the most complete and detailed?

a. certificate
b. letter
c. short form
d. narrative

Answer 76

d. narrative

A narrative report is a complete document including all pertinent information about the area and the subject property as well as the reasons and computations for the value consideration. It includes maps, photographs, charts, and plot plans.

Question 77

77. The increase of value with the passage of time describes:

a. appreciation
b. “return on” investment
c. “return of” investment
d. depreciation

Answer 77

a. appreciation

Appreciation is a temporary or permanent increase in the worth or value of property due to economic causes; the opposite of depreciation.

Question 78

78. Restoring an old home to its original condition without making any changes in the floor plan or style is referred to as:

a. rehabilitation
b. reclamation
c. remodeling
d. modernization

Answer 78

a. rehabilitation

Rehabilitation is the restoration of a property to a satisfactory condition without changing the plan, form, or style of the structure.

Question 79

79. An appraiser was hired by Williams to appraise Henderson’s property. With whom should the appraiser discuss his findings?

a. Mr. Williams
b. Mr. Henderson
c. any interested party
d. any party willing to pay

Answer 79

a. Mr. Williams

The results of an appraisal are confidential.

Question 80

80. An appraiser is appraising a property which is next door to an abandoned gas station. The appraiser should recommend a:

a. soil engineering study
b. toxic waste study
c. seismic study
d. all of these

Answer 80

b. toxic waste study

There is possibility that the old underground fuel storage tanks used by the gas station were left in the ground and may be leaking. A toxic waste study would require a soil analysis to determine if the tanks have leaked. A soil engineering study is used to test the soils ability to support a structure.

Question 81

81. What is a “fee appraiser”?

a. an appraiser who works for a lending institution
b. a certified appraiser who works on salary
c. an appraiser who works for a federally insured lender
d. an independent appraiser who works on a fee basis

Answer 81

d. an independent appraiser who works on a fee basis

A fee appraiser is a non-salaried professional who furnishes appraisal services for a fee.

Question 82

82. What part of portion of the narrative report contains the estimate of value?

a. Letter of Transmittal
b. Body
c. Conclusion
d. Preface

Answer 82

a. Letter of Transmittal

The letter of transmittal identifies the property, purpose of the appraisal, methods used, and value estimate.

Question 83

83. As far as sales are concerned, the most important date on an appraisal is the:

a. date of the offer
b. date escrow is opened
c. date of acceptance of the offer
d. date of recording

Answer 83

d. date of recording

Since the value could change for a variety of reasons during escrow, the most important date on an appraisal is the date escrow closes, or in this question, the date of recording.

Question 84

84. What is the first step in the appraisal process?

a. define the appraisal problem
b. make an appraisal plan
c. classify the date
d. organize the date program

Answer 84

a. define the appraisal problem

The first step in the appraisal process is to write a concise statement of the appraisal problem.

Question 85

85. A plot drown by an architect is destined to:

A. Show the side and exterior views
B. Outline the foundation system
C. Give detailed specifications of the building components
D. Define the lot and show the location of the improvements on the site

Answer 85

D. Define the lot and show the location of the improvements on the site

A plot plan shows the layout of improvement on a property site. The plot plan usually includes location, dimensions, parking areas, landscaping, and the like.

Question 86

86. A group of buildings developed in a line along the frontage of a main highway would most likely be a(n):

a. neighborhood shopping center
b. industrial park
c. strip shopping center
d. commercial strip development

Answer 86

c. strip shopping center

Strip centers (sometimes referred to as convenience centers), are characterized by adjoining buildings that are narrow in depth relative to their length. The typical design for these districts is a straight line of stores set back far enough from the street to allow for perpendicular parking.

Question 87

87. When referring to his development, a contractor mentions his elevation sheet. He is referring to:

a. reinforcing steel rods in the side walls of the building.
b. the inside dimensions of each room.
c. the exterior and architectural appearance.
d. the building and sit relative to other sites.

Answer 87

c. the exterior and architectural appearance.

Elevations show the exterior sides of a building as it appears after all structural work has been completed. Views are often identified as front, rear, left, and right elevation. Symbols on elevation drawings indicate the kind of exterior materials, their placement, and the height of their construction.

Question 88

88. What is a kiosk?

a. an outside utility sink
b. a term for a sunken living room
c. a gazebo or pavilion
d. a type of foundation footing

Answer 88

c. a gazebo or pavilion

A kiosk is a freestanding structure (open sides, usually multi-sided) located in a shopping center or mall from which merchandise is sold. Another answer encountered on the state exam may be “a multi-sided structure found in a shopping mall.”

Question 89

89. In order to find the architectural details of the footing, pier blocks, and sub-floor, a contractor or real estate broker would look at a(n):

a. plot plan
b. floor plan
c. elevation plan
d. foundation plan

Answer 89

d. foundation plan

A foundation plan provides details concerning size of footings, size, and dimensions of piers, and construction measurements with details of sub-floor areas.

Question 90

90. The term “walk-up” refers to a(n):

a. drive-in restaurant
b. agricultural subdivision
c. apartment house
d. subdivider’s elevation sheet

Answer 90

c. apartment house

The term “walk-up” usually refers to three or more story apartment buildings with no elevators.

Question 91

91. Which of the following is NOT considered dry-wall construction?

a. plywood
b. sheetrock
c. wallboard
d. plaster

Answer 91

d. plaster

Dry wall construction is any type of masonry work laid up without the use of mortar. It is the type of interior wall construction where finished material is used (other than plaster), such as wood paneling, plywood, plasterboard, or other types of wall board.

Question 92

92. Depression, expansion, prosperity, and recession are all terms related to the:

a. real estate cycle
b. mortgage market cycle
c. capital market cycle
d. business cycle

Answer 92

d. business cycle

Depression, expansion, prosperity, and recession are all terms that refer to the business cycle.

Question 93

93. The framing members over windows and doors are called:

a. headers
b. braces
c. plates
d. guides

Answer 93

a. headers

A header is a framing member over an opening in a wall. The most common are those over windows and doorways which serve to transfer the load.

Question 94

94. The parallel framing members under the flooring boards and in the ceiling are called:

a. beams
b. ledges
c. joists
d. piers

Answer 94

c. joists

A joist is a heavy piece of horizontal timber to which the boards of a floor or the lath of a ceiling are nailed. Joists are laid edgewise to form the floor support.

Question 95

95. What is the unutilized space between the floor and ground of a structure called?

a. air space
b. belly space
c. crawl space
d. lee space

Answer 95

c. crawl space

The minimum required crawl space is 18”. This is measured from the ground level to the bottom of the floor joists.

Question 96

96. The insects that are considered to be the most destructive to wood are:

a. dry-wood termites
b. wood beetles
c. silverfish
d. spiders

Answer 96

a. dry-wood termites

One of the most damaging types of termites is the dry-wood termite. Also look for subterranean termite as a possible answer on the state exam.

Question 97

97. The metal used by builders to prevent the seepage of water at certain joints in buildings is known as:

a. guttering
b. draining
c. stoving
d. flashing

Answer 97

d. flashing

Flashing serves as protection against water exerting the building framework at valleys in the roof and at the other critical joints between the roof and wall sections. Flashing is usually made of galvanized steel.

Question 98

98. The word “percolation” deals with:

a. coffee pots
b. water mains
c. smog
d. septic tanks

Answer 98

d. septic tanks

Percolation refers to the returning of water to the land. It is important that a septic tank system has good percolation. Percolation also refers to the recharging of the underground water system (water table).

Question 99

99. Insulation materials are rated by their effectiveness according to their “R-value.” The rating system is used to rate the material’s:

a. heat replacement rate
b. energy efficiency
c. resistance to flow of heat
d. restance to moisture

Answer 99

c. resistance to flow of heat

The “R-value” rating system is used to measure a material’s resistance to the flow of heat.

Question 100

100. If the interior side of an exterior wall is the same temperature to the touch on a winter day as the interior adjacent wall, this would indicate:

a. it’s not that cold outside
b. there is plenty of heating duct work in that room
c. the home has a good heating system
d. there is adequate wall insulation

Answer 100

d. there is adequate wall insulation

When an exterior wall is adequately insulated, the interior surface will be about the same temperature as the surface of interior walls because warm air will not be seeping through the walls.

Question 101

101. The vertical structural support members are attached to the:

a. mud sill
b. header
c. sole plate
d. none of these

Answer 101

c. sole plate

The vertical structural support members (studs) are nailed to the horizontal plate (sole plate) which is attached to the subfloor.

Question 102

102. Because of roofing regulations regarding load factor:

a. manufactures are making stronger plywood
b. builders are spacing roofing rafters closer together
c. manufactures are making stronger joists
d. none of the above

Answer 102

b. builders are spacing roofing rafters closer together

Placing rafters closer together strengthens a roof.

Question 103

103. What are the units used to measure the length of a nail?

a. common
b. mil
c. centimeter
d. penny

Answer 103

d. penny

The original system was to measure the nail in relation to a silver penny. Thus, a ten-penny nail weighed as much as ten silver pennies.

Question 104

104. The spread part at the bottom of the exterior of the foundation in a single family dwelling is a:

a. foundation
b. pier
c. base
d. footing

Answer 104

d. footing

The spread part of the foundation below the ground is referred to as the foundation footing.

Question 105

105. Which of the following are known as artificial monuments?

a. canals and streets
b. streets and trees
c. trees and fences
d. fences and rocks

Answer 105

a. canals and streets

A monument is an object that marks property lines or the like. Streets may or may not be artificial. Canals are not natural, therefore artificial.

Question 106

106. Which of the following generally installs conduit?

a. electrician
b. plumber
c. carpenter
d. inspector

Answer 106

a. electrician

Conduit is usually a metal pipe in which electrical wiring is installed.

Question 107

107. A builder was going to build a home on a 75’ x 125’ lot and wanted it to fit in relation to its surroundings. this placement would be known as:

a. orientation
b. elevations
c. pottage
d. topography

Answer 107

a. orientation

Orientation is the placing or positioning of a structure on a lot with regard to exposure to the sun, prevailing winds, privacy, and protection from noise.

Question 108

108. Which of the following is NOT a type of soil or a soil condition?

a. alkaline
b. expansive
c. adobe
d. deciduous

Answer 108

d. deciduous

Deciduous pertains to plants that lose their leaves, not found. Expansive soil is tightly packed, such as clay or adobe. Alkaline refers to the condition of the soil as to alkali content (salt).

Question 109

109. The person most likely to use a “bench mark” in his or her profession would be a:

a. lawyer
b. carpenter
c. general contractor
d. surveyor

Answer 109

d. surveyor

A bench mark is an identification symbol on stone, metal, or other durable matter permanently fixed to the ground, from which differences of elevation are measured, such as tidal observations or topographical surveys.

Question 110

110. Soil pipe is usually used for:

a. sewers
b. water systems
c. gas lines
d. sprinkler systems

Answer 110

a. sewers

Soil pipe is the pipe that carries waste from the house to the sewer in the street.

Question 111

111. The higher the EER rating:

a. the lower the BTU’s
b. the higher the BTU’s
c. the bigger the unit is
d. the more watts needed to run the unit

Answer 111

a. the lower the BTU’s

The efficiency rating of an air conditioning unit is called its ERR or Energy Efficiency Rating. The higher the ERR, the more efficient the unit and the more money saved on cooling bills. With this question, it is correct to say the higher the ERR rating, the lower the BTU’s
(British Thermal Unit).

Question 112

112. A developer ordered two truckloads of backfill during the construction of a home. He ordered this for the purpose of:

a. filling the area around the foundation
b. landscaping
c. septic tanks
d. drainage

Answer 112

a. filling the area around the foundation

Backfill is earth, or selected material such as aggregate, usually used to fill in around foundation walls after they are completed.

Question 113

113. B.T.U’s would indicate:

a. water output
b. butane gas pressure
c. heating output
d. electrical resistance

Answer 113

c. heating output

B.T.U stands for British Thermal Unit. One BTU is the amount of heat required to raise one pound of water one degree Fahrenheit in temperature.

Question 114

114. A bearing wall:

a. generally has stronger supportive members
b. can be built at any angle to the door
c. is usually left alone during remodeling
d. all of the above

Answer 114

d. all of the above

A bearing wall is a main or supporting wall referred to as a load-bearing wall, usually supporting a roof above. It usually is of stronger construction than other members and is usually left alone when remodeling. It is possible for a bearing wall to be built in a variety of angles to a door.

Question 115

115. The measurement or the length of road that abuts a thoroughfare is referred to as:

a. front foot
b. frontage
c. width
d. the side of the parcel

Answer 115

b. frontage

Frontage is a term used to describe or identify that part of a parcel of land or an improvement on the land which faces the street.

Question 116

116. What is meant by the expression “turnkey project?”

a. low income, federally funded housing project
b. a development where everything is ready for the buyer to move in
c. a development where there is a lock-box on each door
d. urban redevelopment

Answer 116

b. a development where everything is ready for the buyer to move in

A turnkey project is a development term meaning the complete construction package from ground breaking to building completion.

Question 117

117. Which of the following includes site plans, elevations, drawings, and street locations?

a. Schematics
b. Plottage
c. Subdivision Map
d. Public Report

Answer 117

c. Subdivision Map

A Subdivision Map would include all of these.

Question 118

118. When subdividers evaluate the topography of land,

a. hillside topography is highly considered
b. hillside topography is least considered
c. hillside topography property is less desirable than flat mainstream property
d. topography is not a concern

Answer 118

c. hillside topography property is less desirable than flat mainstream property

Topography is a graphic representation of the surface features or contour of a place or region on a map, indicating their relative positions and elevations. Flat land is cheaper and easier to build on. The subdivider can build more homes on flat land compared to hillside land.