CG Test Prep Flashcards by Kamryn Handley

In preparing a market value appraisal with a retrospective date of value, is the appraiser allowed to consider any information after the effective date of value, and why?

A) Yes; as long as there was no appreciation or depreciation in value of the market area.

B) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends.

C) No; potential buyers could not have known about subsequent data on the effective date.

D) No; the use of newer sales and listing information is not permitted due to the difficulty of verifying
the information.

B) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends.

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An appraiser was employed by a bank to value the leasehold interest in a multiple-tenant
warehouse on leased land for a mortgage loan in a federally-related transaction. Under the
definition of value is the appraiser operating?

A) Use
B) Market
C) Going concern
D) Assessed

B) Market

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The subject property is a 10-year–old, 1,500 sf residence with wood siding in good condition. The contract sales price on the subject is $100,000.

Sale 1 sold for $114,500 and is a 10-year-old brick veneer residence in good condition with 1,600 sf
Sale 2 sold for $105,500 and is a 10-year-old brick veneer residence in good condition with 1,400 sf
Sale 3 sold for $102,500 and is a 10-year-old wood-veneer residence in good condition with 1,400 sf

What is the per unit size adjustment?
A) $42 per sf
B) $45 per sf
C) $47 per sf
D) $40 per sf

B) $45 per sf

Since Sale 1 and 2 are the same and only difference is size, you can pair them: $114,500-$105,500 = $9,000, then $9,000/200 SF = $45/SF

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A residential property has a 625 sf attached garage, an 1,100 sf basement area, 3,200 sf above grade living space, and an unheated 425 sf enclosed porch. What is the gross living area for appraisal adjustments?

A) 4,925 sf
B) 3,200 sf
C) 4,725 sf
D) 4,300 sf

B) 3,200 sf

GLA: finished areas above-grade heated/cooled

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What building component is identified as E “big arrows” in the diagram?

A) Joist
B) Plate
C) Firestopping
D) Double plate

B) Plate

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Which of the following values would a bank request for a new loan on an established hotel?

A) Liquidation value
B) Value in use
C) Investment value
D) Going concern value

D) Going concern value

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What economic principle is represented by the power trend line graph of the price per unit of local apartment complex sales?

A) Decreasing marginal return
B) Anticipation
C) Contribution
D) Surplus Productivity

A) Decreasing marginal return

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Which of the following demand-side economic factors creates value?

A) Desire and utility
B) Scarcity and effective purchasing power
C) Scarcity and utility
D) Desire and effective purchasing power

D) Desire and effective purchasing power

Supply side economic factors: Scarcity and Utility

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An appraiser concluded a market-derived 9% overall capitalization rate within the income capitalization approach. The user of the appraisal asked the appraiser to render a second value based upon the user’s required 8.75% overall rate. What definition of value applies to the secondary value conclusion?

A) Use value
B) Special purpose value
C) Going concern value
D) Investment value

D) Investment value

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What is the value called when intended use is for an individual?

Investment Value.
***

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Assuming the easement runs with the land, what term describes the easement?

A) Easement appurtenant
B) Dominant easement
C) Subservient easement
D) Determinable easement

A) Easement appurtenant

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If a co-owner in tenancy in common agreement is dissatisfied with the ownership arrangement, what remedies are available to the co-owner?

A) Sell the partial interest, seek voluntary partition, or demand the court sell the property

B) Seek voluntary partition, demand partition by the court, of demand buyout by the other co-owners

C) Seek voluntary partition, demand partition by the court, or request a court appointed referee sell the property

D) Sell the partial interest, seek voluntary partition, or demand partition by the court

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What influence on value is illustrated when a property’s value increases due to a water right being approved by an oversight board?

A) Governmental
B) Geographic
C) Economic
D) Social

A) Governmental

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The effective date of the appraisal is August 2008. The following table represents market conditions research completed for the assignment.
A comparable sale sold for $403,600 in May 2008. What is the rounded adjusted sale price due to market conditions of the comparable sale?
Property Prior Prior Current Current Number of
Sale Sale Date Sale Sale Date Months

235 Oak $375,000 Nov-07 $400,000 Jul-08 6
2543 Elm $500,000 Dec-07 $505,000 Aug-08 6
3325 Tam $300,000 Jan-08 $300,000 Aug-08 6

A) $408,700
B) $419,000
C) $416,400
D) $403,500

A) $408,700

Prior Sale total: $1,175,000
Current Sale total: $1,205,000
# of months total: 18 months
$30,000/18 mo.: $1,666/mo. ($1,700 rounded)
$1,700* 3 months = $5,000 adjustment. $403,600+$5,000 - $408,700.

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Which of the following methods of cost estimating is the most comprehensive and accurate?

A) Marshall and Swift
B) Quantity survey
C) Comparative unit
D) Unit in place

B) Quantity survey

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The “as vacant” highest and best use is for retail and the as improved highest and best use is for single-tenant office. Retail uses will support a $10 per sf land value whereas office uses will support a $5 per sf land value. The appraiser values the land at $10 per sf and the
improvements are valued at their interim contribution to value. What principle underlies this valuation process?

A) Consistent use
B) Diminishing returns
C) Increasing returns
D) Anticipation

A) Consistent use

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What additional steps, if any, are considered in the investigation of a use that is not currently a legal permissible use?

A) Conduct a marketability analysis

B) No further investigation is necessary for an existing improvement

C) Determine maximal return and assume a zoning change

D) Investigate reasonable probability of a change to a permissible use

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An appraiser is preparing a feasibility study of a distribution center and needs to consider interstate highway accessibility. The appraiser also considers air and rail transportation available in the area. All of items considered collectively would be and example of what relationship?

A) Location
B) Linkage
C) Siting
D) Environment

B) Linkage

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The data in the table are for the subject and three comparable properties. What is the adjustment to Sale 1 for a corner lot?
Subject Sale 1 Sale 2 Sale 3
Sale price $57,380 $52,600 $48,750
Size 19,000 sf 19,000 sf 20,000 sf 19,500 sf
Price per sf $3.02 $2.63 $2.50
Date Current 1 year ago current 1 year ago
Location Interior Corner Interior Interior

A) $0.39 per sf
B) $0.54 per sf
C) ($0.54) per sf
D) ($0.39) per sf

C) ($0.54) per sf

Adjust for market conditions first ($0.13/SF) then, corner adjust ($0.39/SF) = $0.54/SF

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An appraiser is contacted by a property manager to appraise a large and complex nonresidential property. The property manager requires the appraiser pay $3,000 to procure the assignment. How can the appraiser accept the assignment and still comply with
USPAP?

A) The appraiser must prepare a separate invoice for the property manager clearly showing the commission paid for the assignment.

B) The appraiser must reject the assignment since the payment of commissions or things of value to procure an assignment is unethical.

C) The appraiser must contact the property owner and make them aware of the commission requested by the property manager.

D) The appraiser must disclose the commission in the certification and any letter of transmittal that includes conclusions.

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A property’s site is leased for $40,000 per year, which is considered the market rate. The site represents 35% of the total value. The overall capitalization rate is 10% and the building capitalization rate is 11%. What is the site value?

A) $380,952
B) $147,368
C) $491,228
D) $400,000

C) $491,228

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As part of an analysis of an income producing property, three alternative investment possibilities were analyzed and compared. The alternatives were the subject, a government bond fund, and a collateralized mortgage obligations fund. Which of the following appraisal principles serves as the foundation of the analysis?

A) Opportunity cost
B) Utility
C) Effective purchasing power
D) Supply and demand

A) Opportunity cost

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The legal description of the property reads:
“East 1/2 of the NE 1/4 of the NE 1/4 of the NE 1/4 of Section 4”
The street frontage is along the north side of the site
What is the frontage of the site?
A) 220 ft
B) 660 ft
C) 440 ft
D) 330 ft

D) 330 ft

1 section has 640 acres. 640 divided by 2 divided by 4 divided by 4 divided by 4 = 5 acres is area of the site. Frontage divide 5 acres by 2, and find square root (convert to SF - 330 ft).

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Data collected about the comparables. Assignment is presented in the following table.
What is the indicated value of the subject property?
Rental Gross Cultavated Pasturized Buildings Sales
Rent Acres Acres Price
A $10,000.00 200 0 no $100,000.00
B $10,000.00 150 100 no $100,000.00
C $23,400.00 250 100 house $230,400.00
D $22,050.00 130 250 house /barns $220,500.00
Subject 160 100 house / barns

A) $198,000
B) $221,500
C) $201,500
D) $191,500

A) $198,000

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A property was purchased for $325,000 and the buyer expected to bold the property for five years. The pro forma projections call for a net operating income of $30,000 for Years 1 and 2, $35,000 for Years 3 and 4, and $37,000 for Year 5. The property is expected to increase in value to $375,000 at the end of the holding period. What is the overall capitalization rate from this investment? A) 9.2% B) 10.3% C) 12.5% D) 10.5%

A) 9.2%

The analysis of comparables sales of office buildings indicates that after the land value and depreciated direct indirect costs are subtracted from the sales price, there is still an increment of value remaining. What term describes the increment of value? A) Contractor’s incentive B) Entrepreneurial incentive C) Entrepreneurial profit D) Project return

C) Entrepreneurial profit

The table presents data about the subject. What is the equity dividend rate? Potential gross income 80 units @ $600 / month x 12 months $ 576,000 Less Vacancy and collection loss @ 6% $ (34,560) Effective gross income $ 541,440 Operating expenses Real estate taxes $ 90,000 Insurance $ 10,000 Variable expenses $125,000 Reserves for replacement $ 20,000 Total expenses $ 245,000 Net operating income $ 296,440 Debt service $ 237,000 Pre-tax cash flow $ 59,440 Purchase price $ 3,300,000 Loan amount $ 2,475,000 A) 10% B) 9% C) 7% D) 2%

C) 7%

A lender requires 2 points on a $250,000 loan with a 7% rate amortization over a 25 year-term, payable monthly. What is the effective yield to the lender if the loan runs full term? A) 9.0% B) 6.8% C) 7.2% D) 6.0%

C) 7.2%

A 40-acre parcel of land is in a multipurpose zone near an interstate highway requiring either 10-acre lot for residential, 10-acre lots for industrial or 20-acre lots for motels. The land is currently being utilized to grow fruit trees. The current owner sells 6 acres of trees each year, 700 trees per acre at $25 per tree. Residential lots sell for $75,000 each and the absorption rate would be one lot per year. Industrial lots will sell for $150,000 each and will sell in the tenth year. Motel sites sell for $300,000 each but the nearest projected need is 10 years. The discount rate is 10%. What is the highest and best use of the property? A) Industrial sites B) Residential lots C) Current use D) Motel sites

C) Current use

What type of roof is depicted in the diagram? A) Gambrel B) Gable C) Mansard D) Hip

C) Mansard ***

What construction class of buildings has wood or light steel frames and roof structures? A) Class C B) Class D C) Class A D) Class B

B) Class D

The building capitalization rate for a commercial building is 11.0%. The rate of land appreciation is 3.0%, and the yield rate is 7.0%. What is the useful life of the building? A) 10 years B) 30 years C) 14 years D) 25 years

D) 25 years Y = R + CR 7% = 11% + CR -4% = CR (building depreciates 4% annually 1/4% = 25 years until building deteriorate fully. ***

If the overall capitalization rate for the fee simple interest is 10% and the leased fee capitalization rate 8.5%, market net operating income is $20,000 and contract net operating income is $12,500. What is the implied leasehold capitalization rate? A) 10% B) 8.75% C) 14.17% D) 8.5%

C) 14.17% $20,000/.10 = $200,000 (Value of FS) $12,500/.085 = $147,059 (Value of LF) $200,000-$147,059 = $52,941 (Value of LH) $20,000-$12,500 = $7,500 (Income of LH) $7,500 (Income of LH) / $52,941 (Value of LH)= .1417

What term describes the lump sum benefit an investor receives upon termination of an investment or at the intermediate analysis period during the term of an investment? A) Return of capital B) Equity dividend C) Return on capital D) Reversion

D) Reversion

A staff appraiser, employed by a local bank for 5 years, plans to leave the bank to open an independent appraisal business. Must the appraiser remove all work files for assignments completed for the bank? A) No; the appraiser may make arrangements with the bank to access or retrieve the files. B) Yes; the appraiser must remove all files from the bank premises. C) No; they were completed for the bank and are the property of the bank. D) Yes; the appraiser must remove the files and destroy them.

A) No; the appraiser may make arrangements with the bank to access or retrieve the files.

The subject property is a 5,000 sf single tenant office building that is currently leased for $9.00 per sf per year with three years remaining on the lease. The current lease is assignable. Typical total vacancy credit loss for this type of property is 10% per year. Owner expenses are typically found to be 25% of the effective gross income. Market rent rates are $ 12.00 per sf per year. Market overall rates are 9.5% in the data collection, a sale of a leasehold interest sold for $29,000 with a net leasehold income of $12,000 per year with three years remaining. What is the value of the leasehold estate, rounded to the nearest $1,000? A) $34,000 B) $38,000 C) $45,000 D) $36,000

D) $36,000 $12 - $9 = $3/SF * 5,000 SF = $15,000 (Income of LH) $12,000/$29,000 = .4138 = R of LH $15,000/.4138 = $36,250

The buyer of one of the comparable sales in an appraisal of an industrial building assumed a mortgage at below market rates. Analysis of the other comparables indicates that a financing conditions adjustment is necessary. What is the direction of the adjustment to the sale, and why? A) A positive adjustment to the subject for advantageous financing B) A positive adjustment because the sale is adjusted to the subject C) A negative adjustment because the sale is adjusted to the subject D) A negative adjustment to the subject because it will be financed at market rates

C) A negative adjustment because the sale is adjusted to the subject

The subject property sold for $300,000 with a 20% down payment. The balance is seller financed for 20% down payment. The balance is seller financed for 25 years at 8%. Market research finds that sales of mortgage notes with a face value of $275,000 at 8% are in the range of $250,000. What is the subject’s sale price adjusted for seller financing, rounded to the nearest $100? A) $300,000 B) $261,800 C) $218,200 D) $278,200

A) $300,000 PV: (300,000*.80) = -240,000 i: 8% (divided by 12) n: 25 (multiply by 12) PMT: $1,852 change i to market 8% (divide by 12) "new" PV: 240,000 + down payment of $60,000 = $300,000.

An appraiser receives an appraisal assignment. The appraiser has not performed any services in connection with this property in the past three years. What disclosures are required under the USPAP? A) The appraiser must disclose the lack of knowledge and / or experience both to the client prior to accepting the assignment and also in appraisal B) The appraiser must disclose in the report’s certification that no prior services have been performed in the last three years C) The appraiser must disclose to the client prior to accepting the assignment and disclose in the report’s certification that no prior services have been performed in the past three years D) The appraiser must disclose to the client that no services have been performed in the past three years, prior to accepting the assignment

B) The appraiser must disclose in the report’s certification that no prior services have been performed in the last three years

A property sold for $330,000 with 10% down, financed at 7.5% interest for 20 years with monthly payments. The property has a gross annual income of $42,000. Vacancy / collection loss totals 8% and expenses are $8,000 per year. What is the equity dividend rate indicated by this sale? A) 5.85% B) 8.70% C) 7.25% D) 4.57%

A) 5.85% $42,000*0.92-$8,000 = $30,640 NOI $30,640/$330,000 = 0.0928 Ro 0.90*.0967+0.10*Re = 0.0928 Re = 5.85%

The assignment is to value a 9,600 sf church on a 25-acre single family parcel. Residential land is currently selling for $55,000 an acre. However, demand for new singlefamily construction is eight years out with a discount rate of 15%. Similar churches have sold recently for between $50 and $55 sf. What type of value is illustrated? A) Market Value B) Interim Value C) Value-in Use D) Investment Value

A) Market Value

A dairy farmer is currently milking 750 cows in the subject facility on 400 acres. The milking facility has stalls for 1,000 cows, but does not have the land base to house that many cows without a manure treatment facility. A manure treatment facility costs $600,000. Farms with manure treatment facilities sell for $1,600 per cow. Facilities without manure treatment sell for $1,200 per cow. It will be 15 years before the city grows outward enough to consider a subdivision. Subdivision land is currently selling for $5,000 per acre with a 10% discount rate. Dairy farming and residential subdivision are physically possible and legally permissible uses. What is the highest and best use of the subject? A) Interim use is current use, eventually residential subdivision B) Improve with a manure treatment facility C) Residential subdivision D) Current use

B) Improve with a manure treatment facility

A parcel in the path of development is zoned for high-density apartment use. It currently has a single-unit owner-occupied dwelling on the site. The improvements do not represent the high and best use of the site but the current use is likely to continue until competing sites are developed. How is the highest and best use of the site as improved described? A) Mixed use B) Value in use C) Interim use D) Special purpose use

C) Interim use

Comparables sales are presented in the table. Assuming the same compound rate of value change, what is the current indicated value of the 12,000 sf subject property? (Round to the nearest hundred) Comp 1 Comp 2 Comp 3 Sales price $852,240 $769,925 $763,750 Time 1 year ago 3 years ago 4 years ago Size 12,000 sf 11,500 sf 11,750 sf A) $877,800 B) $852,200 C) $803,400 D) $827,400

A) $877,800

An appraiser completed an assignment about 2 months ago. This appraiser has recently been contacted by someone who claims to be a review appraiser hired by the appraiser’s client. The reviewer wanted to ask questions about the report. Are there any conditions under which the appraiser may discuss the appraisal with the reviewer, and why? A) No; authorization is not needed since the reviewer represents the client B) Yes; if the reviewer is considered to be the appraiser’s peer C) No; appraisers must never discuss report content with reviewers D) Yes; if the appraiser receives authorization from the client

D) Yes; if the appraiser receives authorization from the client

A subject has an actual age of 25 years, an effective age of 15 years and a remaining useful life of 45 years. What is the total economic life of the subject? A) 40 years B) 55 years C) 60 years D) 70 years

C) 60 years

The appraisal assignment is a residential property in a residential /commercial zone. Initial research indicates the contributory value of the improvements is $150,000, extracted from residential sales. The commercial lot value is $230,000. Residential lots sell for $100,000. Demolition costs are $15,000. What is the highest and best use? A) Interim use residential, future use commercial B) Residential C) Combination commercial/residential D) Commercial

B) Residential

Which influence on real estate is considered economic? A) Government planning B) Public and private restrictions C) Quality of schools D) Extent of owner occupancy

D) Extent of owner occupancy

The assignment is to value an approved subdivision. The project is expected to be sold out in three years, selling eight lots in the first year, four lots in the second year, and three lots in the third year. The lots will sell for $88,500 each the first year, $91,200 the second year, and $93,900 in the third year. From the sale proceeds, a 6% commission will be paid. The project will pay $10,000 in taxes in the first year, $4,000 in the second year, $2,000 in the third year. All other infrastructure costs are complete. Developers require a 25% return on investment. What is the value of the subdivision today, rounded to the nearest $100? A) $644,300 B) $1,355,100 C) $875,900 D) $1,258,400

C) $875,900

In what part of the appraisal report must prior services be disclosed? A) Summary Salient Facts B) Certification C) Letter of Transmittal D) Scope of Work

B) Certification ***

What type of assignment should be employed to determine general conditions of supply, demand and pricing for a specific property type? A) Marketability analysis B) Feasibility analysis C) Market analysis D) Highest and best use analysis

C) Market analysis

The effective date of the appraisal is August 2008. The following table represents market conditions research completed for the assignment. What is the average monthly percentage change in sale prices? Property Prior Prior Current Current Number Sale Sale Sale Sale of Date Date Months 235 Oak $375,000.00 Nov-07 $400,000.00 Jul-08 8 2542 Elm $500,000.00 Dec-07 $505,000.00 Aug-08 8 3325 Tam $300,000.00 Jan-08 $300,000.00 Aug-08 6 A) 0.83% B) 0.10% C) 0.13% D) 0.32%

D) 0.32%

A 50,000 sf office building is planned for a community with a total of 1,200 new office jobs forecast for the next five years. The existing available vacant office space totals 150,000 sf. No other new buildings are expected for the next five years. If the current office space to employee ration is 250:1, how much residual demand will be available over the next five years for the subject building? A) -150,000 sf B) 300,000 sf C) 150,000 sf D) -200,000 sf

C) 150,000 sf ***

The subject property is a 6,000 foot by 1,452 foot home site with a single-unit dwelling. When the site was platted, there was no zoning. The current zoning requires a 160-acre minimum site size for a residence. What is the status of the lot? A) External obsolescence B) Excess land C) Legal D) Surplus land

D) Surplus land ***

The market value of a property is $2,300,000 at stabilized occupancy. The direct building cost is $1,500,000. The indirect costs are $200,000 and the land costs are $125,000. What is the indicated entrepreneurial profit? A) $800,000 B) $600,000 C) $475,000 D) $675,000

C) $475,000

The appraisal assignment of a building under construction requires a value as of the date of stabilized occupancy. What value is required, and what assignment condition is employed? A) Prospective market value and hypothetical condition B) Prospective market value and extraordinary assumption C) Current market value and extraordinary assumption D) Current market value and hypothetical condition

B) Prospective market value and extraordinary assumption Building under construction requires a value as of completion date, prior to any leasing: Prospective value as complete.

The assignment is a 325-acre parcel of farmland with numerous outbuildings. The subject has 300 acres of Class I land and 25 acres of Class II land. The appraiser found three sales to indicate the site contribution for the cost approach. Sale 1 took place 18 months ago for $428,350. Sale 1 has 150 acres of Class I land and 150 acres of Class II land. Sale 2 has 290 acres of Class I land that sold for $591,000 nine months ago. Sale 3 has 225 acres of Class II land that sold for $170,875 six months ago. The market shows an annual decline of 2.5% in the last two years. What do these sales indicate for the site value of the subject farm in the cost approach, rounded to the nearest $1,000? A) $630,000 B) $464,000 C) $619,000 D) $637,000

C) $619,000

What principle describes the ability of an individual or group to participate in a market? A) Effective demand B) Effective purchasing power C) Utility D) Desire

B) Effective purchasing power

What term refers to a division of a total market based on the preferences of buyers and sellers? A) Broad market B) Secondary market C) Money market D) Submarket

D) Submarket

A 20,000 sf car dealership property included in a comparable set sold for $5,000,000 six months ago. The sale was confirmed to be arm’s length. Other comparables indicate economic conditions have declined at a compound rate of 2% per month. What is the adjusted price per sf indication from this sale, rounded to the nearest dollar? A) $282 B) $221 C) $220 D) $280

B) $221 Double-check? I got $220

An appraisal report allegedly contains misleading information. What entity has the authority to determine if a violation of USPAP has occurred? A) State appraiser regulatory agency B) The appraisal Subcommittee C) Appraisal Standards Board D) Appraiser Qualifications Board

A) State appraiser regulatory agency ***

The subject has a .83-acre site, with 189 ft of street frontage that is zoned R-7, single – unit residential with a 7, 000 sf minimum size. Newly created lots must have 50 ft of street frontage. There is a house on the site. The house exhibits deferred maintenance. The cost to demolish the house is $32,000. The cost to update the house for sale is $20,000. The cost to subdivide the site is $12,000 per lot created after subdivision. The value of the property in its “as is” condition is $660,000. Sites similar to those which would be created after subdivision are selling for $200,000. If updated and subdivided, the house on its smaller site would have an estimated value of $325,000. The current time frame to complete necessary permit and infrastructure improvements is six months. The parcel that will be created with the existing home as the result of the subdivision will have land that is not needed to support the improvement, however, it cannot be separated from the property and sold. Which of the following terms identifies this land? A) Marginal land B) Surplus land C) Excess land D) Overage land

B) Surplus land ***

The subject property is a single-unit residence situated on a commercially zoned lot in a transitional neighborhood. The land is valued at $60,000 utilizing commercial use land sales in the immediate neighborhood. Overall property value, as a residence, is $80,000. Demolition costs are $5,000. Based on an allocation study, the typical ratio of land value to property value for residential property is 20%. Based on this data, what is the highest and best use both as vacant and as improved? A) Vacant is residential; highest and best use as improved is residential B) Vacant is residential; highest and best use as improved is commercial C) Vacant is commercial; highest and best use as improved is residential D) Vacant is commercial; highest and best use as improved is commercial

C) Vacant is commercial; highest and best use as improved is residential Similar question, but about contributory value: $20,000 contributory value and highest best use as vacant is commercial.

A large parcel of pasture land is located just off a new interstate interchange. Market conditions and municipal services are such that the highest and best use is for development of a major commercial or residential project, with a land value over $100,000 per acre. The property has been in the ownership of the same family for years. Cattle are grazing on the site. The local municipal property appraiser sets the value as agricultural land at $8,000 per acre, and the ad valorem taxes are based upon this lower figure. What value definition applies to the taxable value of this site? A) Investment value B) Use value C) Market value D) Going concern value

B) Use value Subject is a manufacturing warehouse with tall roof and potholes in the foundation. Not typical of industrial property. What type of value is this? Use value.

The subject property has 200 acres on improved pasture, 300 acres of native pasture, and 500 acres of woodland. Comparable A has 300 acres of improved pasture, 300 acres of native pasture, and 400 acres of woodland. Comparable A sold for $1,050 per acre. Assuming native pasture sells for 80% of improved pasture prices and woodland sells for 40% of improved pasture prices, what is the per acre value of the subject property? A) $1,050 per acre B) $960 per acre C) $950 per acre D) $1,000 per acre

B) $960 per acre

The appraiser found the following indications of contributory value (per square foot) for refrigerated storage in warehouses: Warehouse 1 - $16.00 Warehouse 2 - $15.00 Warehouse 3 - $18.00 Warehouse 4 - $17.50 Warehouse 5 - $16.50 Warehouse 6 - $15.00 Warehouse 7 - $17.50 Warehouse 8 - $14.10 Warehouse 9 - $15.50 Warehouse 10 - $15.00 Warehouse 11 – $14.90 What is the median contributory value? A) $14.90 B) $15.91 C) $16.10 D) $15.50

D) $15.50

The following metes and bounds description was provided: “North 60 deg. West 250’; North 30 deg. East 50’; South 60 deg. East 150’; North 30 deg. East 175’; South 60 deg. East 100’; and South 30 deg. West 225’ along the road to the point of beginning.” What is the size and shape of this parcel? A) 0.69 acres; T-shaped B) 0.69 acres; L-shaped C) 0.80 acres; T-shaped D) 0.80 acres; L-shaped

B) 0.69 acres; L-shaped ***

The assignment is a multi-unit apartment house. These comparable sales in the area that sold in the last year indicate landlords are having difficulty raising rents. In the last 15 days, the municipality announced a tax increase of 10% to update an aging water system. What is the effect on indication of value, and why? A) Value will decline; the net operating income will decline. B) Value will remain the same; the sales indicate the same value. C) Value will remain the same; the sales comparison approach does not include future occurrences. D) Value will rise; the water system is improved.

A) Value will decline; the net operating income will decline.

The appraiser developed an opinion of market value and analyzed all sales of the subject property that occurred within three years prior to the effective date. The appraiser did not analyze prior sales of the comparables sales used in the sales comparison approach. What does USPAP require regarding the analysis of prior sales? A) Three-year sales history of the subject and comparables sales are required to be analyzed B) Only a one-year sales history of the subject and comparables sales are required to be analyzed C) Three-year sales history of the subject and a one-year sales history of the comparable properties are required to be analyzed D) Only a three-year sales history of the subject is required to be analyzed

D) Only a three-year sales history of the subject is required to be analyzed ***

The scope of work of the assignment requires the development of an opinion of the leased fee interest in a commercial building. Which interest is being valued? A) Leasehold B) Landlord C) Tenant D) Fee simple

B) Landlord

An appraisal review assignment includes the client’s request that the reviewer either agree with the appraiser’s value, or disagree and conclude the reviewer’s value opinion in the report as of the date of review. Can the assignment be accepted, and why? A) No; the reviewer may not accept an assignment that requires an alternative value on any effective date. B) Yes; the reviewer may develop an alternative value, but the effective date must be the same as the date of the work under review. C) No; the reviewer must replicate the steps of the appraiser to develop an alternative value, but date can differ from the work under review. D) Yes; the reviewer may develop an alternative value and the effective date may be different than the date of the work under review.

D) Yes; the reviewer may develop an alternative value and the effective date may be different than the date of the work under review.

What is NOT an assignment condition? a. due date b. utilize sales comparison approach c. detailed inspection of subject d. detailed inspection of comparables

a. due date

An apartment complex was purchased 5 years ago for $850,000. The owner received the following net cash flows: Year 1: $50,000 Year 2: $52,000 Year 3: $48,000 Year 4: $53,000 Year 5: $54,000 At end of Year 5, the owner sold the property for $975,000. What is the internal rate of return from this investment? A) 5.53% B) 8.51% C) 6.05% D) 7.24%

B) 8.51% ***

When potential homebuyers investigate the zoning of nearby properties, what influence on value are they considering? A) Governmental B) Social C) Environmental D) Economic

A) Governmental

An office building is expected to generate the following income stream over its 5-year holding period: Year 1: $120,000 Year 2: $130,000 Year 3: $120,000 Year 4: $140,000 Year 5: $145,000 If the appropriate yield rate is 13%, what is the level income equivalent of this income stream? A) $129,572 B) $120,000 C) $131,000 D) $455,735

A) $129,572 Find NPV using blue CF keys and then plug NPV into PV, i = 13% N = 5 and find PMT.

All one-to four unit residential properties are required six-mouth redemption period after foreclosure sale so the borrower might be able to pay any deficiencies and redeem the property. What type of influence on real estate is described by this action? A) Governmental B) Social C) Environmental D) Economic

A) Governmental

Based on the data in the table, what is the value of the equity position if the required equity yield rate is 14.0%? Annual NOI $28,500 Holding period 10 Years Mortgage amount $198,000 Interest rate 8.50% Amortization term (pay monthly) 30 years Sale price of reversion $280,000 A) $81,570 B) $94,700 C) $117,500 D) $120,550

A) $81,570 Double check? Rm = $18,269.38/$198,000 = 0.0923 Mortgage % of total value = $198,000/$280,000 = 70.71% 1-70.71% = 29.29% (Equity % of total value) Io $28,500 - Im $18,269.38 = Ie $10,230.62 $10,230.62/.14 = $73,076

The result of a simple linear regression of sales data are presented below. a = Sales price constant is equal to $50,000 b = independent variable is equal to $75 per sf The subject is a 2,120 sf single-tenant building with a net operating income of $25,000. What is the indicated value of the subject? A) $209,000 B) $234,000 C) $159,000 D) $184,000

A) $209,000 y = ma + b y = $75*2,120 SF + $50,000

The subject property is a 450-acre grain farm with storage capacity of 120,000 bushels. There are no sales of local grain farms but two farms about 45 miles west sold this year and the sales indicated that the bins contributed $0.15 per bushel. Residential land values have been rising rapidly in the immediate area of the subject as local developers have continued to buy farms for subdivision purposes. Local land values rose from $1,200 per acre to $3,000 per acre last year and from $3,000 to $5,000 per acre this year. The appraiser concludes the value of the subject based on the local land sales plus the contributory value of the bins. What principle has the appraiser violated? A) Substitution B) Consistent use C) Highest and best use D) Anticipation

B) Consistent use

A property is described as the E 1/2 of the SE 1/4, Section 1 and the N 1/2 of the NW 1/4, Section 12. Assuming both descriptions are from the dame township and range and the sections are of standard size, how many acres are contained within this description and are the two parcels contiguous? A) 80 acres, they are not contiguous B) 160 acres, they are contiguous C) 160 acres, they are not contiguous D) 80 acres, they are contiguous

C) 160 acres, they are not contiguous

A property sold for $850,000 with a net operating income of $97,800, a down payment of $350,000, and an annual debt service of $55,084. What is the mortgage capitalization rate? A) 6.5% B) 12.0% C) 11.5% D) 11.0%

D) 11.0% Rm = annual debt pmt/initial loan amount $55,084/$500,000 = .11

What force is represented by the mean and median household income level? A) Social B) Economic C) Governmental D) Environmental

B) Economic

In appraisal assignment, the definition of market value includes exposure time as a component. What USPAP requirement is relevant to this assignment? A) An opinion of reasonable marketing time must be developed and reported. B) An opinion of reasonable exposure time must be developed, but not reported. C) An opinion of reasonable exposure time must be developed and reported. D) An opinion of reasonable exposure time must be developed, but not reported.

C) An opinion of reasonable exposure time must be developed and reported.

An appraiser was asked to update an appraisal performed by another appraiser who works at a different firm. May the appraiser accept this assignment, and why? A) Yes; this is an update only, and therefore it is not a new assignment B) No; the appraiser would be violating confidentiality by considering the work from a different firm C) Yes; the appraiser may prepare a new report and incorporated the original report D) No; the appraiser must not rely on the work of another and must perform all new research and analysis

C) Yes; the appraiser may prepare a new report and incorporated the original report

Which of the following techniques should be used to perform a qualitative analysis? A) Regression B) Graphic C) Ranking D) Paired sales

C) Ranking *** Another question: what is the technique when using "inferior, superior, similar"? Ranking.

In preparing a market value appraisal with a retrospective date of value, is the appraiser allowed to consider any information after the effective date of value, and why? A) Yes; as long as there was no appreciation or depreciation in value of the market area. B) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends. C) No; potential buyers could not have known about subsequent data on the effective date. D) No; the use of newer sales and listing information is not permitted due to the difficulty of verifying the information.

B) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends.

B) Prospective market value and extraordinary assumption What is the condition if you are valuing a property as if complete (but not actually complete) on the effective date? Hypothetical condition. ***

What technique can be utilized to value a leasehold estate? A) Present worth of the reversion B) Present worth of the rent advantage C) Present worth of the contract rent D) Present worth of the overage rent

B) Present worth of the rent advantage

What type of risk affect operating income due to shifts in demand and/ or supply? A) Management B) Financial C) Market D) Capital market

C) Market

An attorney requested an oral opinion of value prior to the completion of a written appraisal report. At a minimum, the substantive matters of which of the following reporting options must be met in the oral report? A) Self-Contained Appraisal Report B) Restricted Use Appraisal Report C) Narrative Appraisal Report D) Summary Appraisal Report

B) Restricted Use Appraisal Report

An appraiser receives an assignment to review an appraisal six months ago. In the development of the review, the appraiser had gathered the pertinent information and began the reporting process. Which of the following information must be included in the report? A) Identity of the client in the report under review; the closed dates of the pending sales; date the review was ordered B) Identity of the person ordering the review; prior three year history of market sales in report under review; intended use C) Identity of the client and intended user; intended use; effective date of the original appraisal D) Identity of the client and intended users; intended use; current sale history if similar

C) Identity of the client and intended user; intended use; effective date of the original appraisal

The subject property is a 10,000-sf office building encumbered by a full-service lease with a contract base rent of $1.25 per square foot monthly. Stabilized vacancy/credit loss allowance for similar properties within the market area is 7% of PGI. The operating expense ratio for similar properties is 30% of EGI, plus reserves for replacement of $0.15 per square foot. What is the projected net operating income? A) $93,000 B) $94,500 C) $96,150 D) $97,650

C) $96,150

The subject assignment is to appraise a vintage house built in 1880 using the cost approach. The house has metal stamped ceilings, lath, and plaster walls, which are items not easily available in today’s construction. The estimated replacement cost using modern materials is $120 per square foot. Contractors charge $15 more per square foot to work on older houses. The estimated reproduction cost is $185 per square foot. What is the estimated loss in utility? A) $15 per square foot B) $33 per square foot C) $65 per square foot D) $80 per square foot

C) $65 per square foot

The occupants of a dwelling have been granted a life estate by their daughter. What interest does the daughter hold in the property? A) Life tenant B) Remainder C) Trustee D) Trustor

B) Remainder

A client requires the cost approach be completed for a warehouse located in an industrial park. There are no vacant land comparables in the market area. There are three sales of commercial buildings in the industrial park with similar lots that the appraiser has researched extensively. The appraiser found the following information: Sale 1 sold for $1,750,000. The buyer allocated 20% of the value to the site and 80% to the value of the structure. Sale 2 sold for $1,000,000. The buyer was not available for verification, but the seller was available. The seller had just built the structure after holding the lot for 10 years as an investment property. The seller paid $100,000 for the lot and had earned 25% straight line annual return on his investment over the cost of the structure and its entrepreneurial profit. Sale 3 sold for $3,500,000. The buyer estimated that 90% of what he paid was for the structure. What is the indicated value of the lot using the allocation approach? A) $125,000 B) $135,000 C) $350,000 D) $500,000

C) $350,000

A homeowner purchased two adjacent lots in a tract subdivision 20 years ago and built a single-unit dwelling entirely on one lot, utilizing the second lot as a side yard. The homeowner has decided to build a smaller home on the vacant side lot and retain the existing home as a rental. What term applies to the second yard? A) Excess land B) Surplus land C) Underutilized site D) Vacant site

A) Excess land

While working on an appraisal of a residential property in a new home subdivision, the appraiser finds that the builders have a total of 100 home sites currently offered for sale. In measuring market demand, the appraiser notes that all of the builders combined are currently averaging two new sales contracts per month, and are expecting to sell 24 dwellings within the next year. What conclusion can be drawn with regard to the 100 available home sites and a market period of the next 12 months? A) The market is in a condition of supply and demand B) The market is in a condition of balance C) The market is in a condition of undersupply D) The market is in a condition of oversupply

D) The market is in a condition of oversupply

Marketing and exposure time is 1 month. What comparable can we use?

Court-ordered sale.

This property has an encumbrance that states the property can only be one-story building. Previous owner put this in the deed in 1950. What type of encumbrance is this?

Private encumbrance

What type of value relates mostly to cost?

Insurable value

Certificate of Need: What element of comparison is this? What type of property is this?

Non-realty Intangible

What is the interest of an office condo?

Fee simple in the office unit and undivided interest in common areas

A 50-unit apartment complex is being appraised. The appraiser is calculating annual replacement reserve allowance. Several items are new, but were determined to have useful lives shorter than the physical structure: appliances are $750 per unit, roofs are $200,000, clubhouse furniture is $11,000. The appraiser believes management can earn a safe rate of 4.5% on their reserve funds. What average annual reserve per unit must be allocated in order to take care of the short-lived items, assuming they must be replaced every seven years and have no salvage value? What if there is a salvage value of $10,000?

$620 $595

The owner of a self-service car wash has a $900,000 self-amortizing, 25-year mortgage at a 9.25% interest rate, payable monthly. The loan must be paid off after 10 years. What is the amount of the balloon payment due at that time, rounded to the nearest $1,000?

$749,000

Subject market value is 24.9 times gross income. The expense ratio is 45%, what is the overall rate?

2.2% .55 / 24.9

What is the net income that remains after costs of various agents of production have been paid?

Surplus productivity

Comparable Properties have been selling for 6.0 or 6.5 times gross income. The typical expense ratio is 45% What is the indicated overall rate range? A) 0.069 to 0.075 B) 0.085 to 0.092 C) 0.109 to 0.118 D) 0.133 to 0.144

B) 0.085 to 0.092 Gross income (100%) minus expenses (45%) is net income (55%). Net income (55%) divided by 6.0 equals 0.092 (overall rate) while 55% divided by 6.5 equals an overall rate of 0.085

Types of depreciation methods?

Age-life, breakdown, straight-line

What is Coefficient of Variation?

standard deviation divided by mean

What is the efficiency ratio?

NRA/GBA

What kind of value would you need for real estate planning?

Assessed value

You're trying to find the typical lot size. There are 43 lots; 39 lots are between 7,000-9,000 SF and 4 are 20,000 SF. What do you use to find the typical lot size? a. mean, median, mode b. mode, because most lot sizes land between 7,000-9,000 c. average, to capture all lots

b. mode, because most lot sizes land between 7,000-9,000

Which rate is best for DCF?

Yield rate

Two appraisers signed the Letter of Transmittal but only one signed the certification. Is this allowed under USPAP?

Anyone who signs the letter of transmittal must also sign the certification.

Assumption on Going Concern

Assume operations will continue for the foreseeable future

What principle is a combination of a want for and ability to participate in a market

effective demand

Subject is a manufacturing warehouse with tall roof and potholes in the foundation. Not typical of industrial property. What type of value is this?

Use value

What is NOT an assignment condition? a. due date b. utilize sales comparison approach c. detailed inspection of subject d. detailed inspection of comparables

a. due date

What is the technique when using "inferior, superior, similar"?

Ranking

The subject is a building with eight apartments without air conditioning, in a market where air conditioning is standard and expected by purchasers. If it had been installed when the building was built, it would have cost $10,000, but the cost of retrofitting now is $12,400. Installing A/C would allow the owner to raise rents and increase his gross monthly rents by $20 per unit. The current gross income multiplier (GIM) is 7.5. What is the depreciation for functional obsolescence?

$2,400 Functional Curable - Requiring an Addition Procedure: Cost of existing item 0 Less depreciation previously charged - 0 Plus cost to cure (all costs) OR value of the loss 12,400 Less cost if installed new -10,000 Equals depreciation for functional obsolescence $2,400 Steps 1 and 2 are zero because the item does not currently exist in the property. In Step 3, the cost to cure is $12,400. In Step 4, the cost, if it had been installed when the building was new, is $10,000. Step 5 represents the excess cost to cure at this point in time. This penalty is curable functional obsolescence.

The subject is a building with eight apartments that has air conditioning but it is inefficient and breaks down frequently. The reproduction cost of the existing unit is $6,000 and it is 30% depreciated. If it had been installed when the building was built, it would have cost $10,000 It will cost $2,000 to remove the old system but there is a salvage value of $1,000. It will cost $12,000 to install an appropriate, more efficient system ($10,000 for the equipment + $2,000 in additional retrofit costs). Installing reliable A/C would allow the owner to raise rents and increase his gross monthly rents by $20 per unit. The current gross income multiplier (GIM) is 7.5. What is the depreciation for functional obsolescence?

Cost of existing item $ 6,000 Less depreciation previously charged - 1,800 Plus cost to cure (all costs) 13,000 Less cost if installed new - 10,000 Equals depreciation for functional obsolescence $ 7,200 In Step 2, the depreciation was calculated as .30 x $6,000, or $1,800. In Step 3, the cost to cure will be $12,000 to retrofit the installation plus $2,000 to remove the old system - minus $1,000 that can be reclaimed as salvage value of the old equipment. Essentially Steps 1 and 2 calculate the loss for disposing of equipment that still has 70% of its life left, and Steps 3 and 4 calculate the penalty for not installing the proper system when the building was new.

The subject property is a light manufacturing facility that had been rented to a tenant engaged in a manufacturing process which employed the use of toxic chemicals. They had installed an extensive, expensive filtration and ventilation system for the safety of their employees. The building is now vacant and the owner is in search of new tenants. The filtration and ventilation system is atypical and considered overkill to a typical manufacturing operation for this type of space. Assume that it would cost $10,000 to remove the existing air handling system which would then command a salvage value of $15,000. Installing a new system that would be adequate and typical of the market would cost $35,000. What is the depreciation for functional obsolescence?

Functional Curable - Caused by a Superadequacy: Cost of existing item $ 0 Less depreciation previously charged - 0 Plus cost to cure (all costs) $30,000 Less cost if installed new - 0 Equals depreciation for functional obsolescence $30,000 Steps 1 and 2 are blank because the superadequate item would not exist in the substitute building. Step 3 is calculated as the cost of the new air handling system ($35,000) + the removal costs of the old system ($10,000) - the salvage value ($15,000) = $30,000.

Our subject is a 30,000 square foot warehouse without any loading docks. Typical warehouses that size would have a minimum of 5 loading docks. To install 5 loading docks with doors and hydraulic levels would cost $60,000. If they had been installed when the building was built, it would have cost $40,000. Market evidence suggests that the presence of the loading docks would increase the annual rent by 30 cents per square foot. The Gross Income Multiplier for that type of property is 5.0. What is the depreciation for functional obsolescence?

Functional Incurable - Caused by a Deficiency: Cost of existing item $ 0 Less depreciation previously charged - 0 Plus value of loss 45,000 Less cost if installed new - 40,000 Equals depreciation for functional obsolescence $ 5,000 Steps 1 and 2 are zero because the item does not exist now. Step 3 is the value of the income lost. Step 4 is what the cost would have been if the docks had been installed when the warehouse was originally built. Step 5 is the amount of incurable functional depreciation because the building was built without an important ingredient.

You are appraising a manufacturing facility in the northeast that was constructed with a heat pump system for heating and cooling. Most similar properties have been constructed with hot air heat. The hot air heat is cheaper in the winter and they rarely have any need for cooling. The annual utility costs in the subject building run about $15,000 a year more than comparable manufacturing buildings. The market indicated a typical building capitalization rate of 11%. If you are calculating a replacement cost estimate, how much would the charge be for functional incurable obsolescence?

Functional Incurable - Caused by a Deficiency: Cost of existing item $ 0 Less depreciation previously charged - 0 Plus value of loss $136,363 Less cost if installed new - 0 Equals depreciation for functional obsolescence $136,363 Steps 1, 2, and 4 are zero because with replacement cost, the building would not have been constructed with the heat pump. The loss in value would be $15,000 ÷ .11 = $136,363.