Ch 1

Question 1

APPRAISAL

Answer 1

the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Question 2

REPORT

Answer 2

any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.

Question 3

STANDARD 1 covers

Answer 3

real property appraisal development

Question 4

STANDARD 2 covers

Answer 4

STANDARD 2 covers real property appraisal reporting.

Question 5

STANDARD 1 of USPAP (Real Property Appraisal, Development) states:

Answer 5

In developing a real property appraisal, an appraiser must
identify the problem to be solved
determine the scope of work necessary to solve the problem
and correctly complete research and analyses necessary
to produce a credible appraisal.

Question 6

STANDARD 2 (Real Property Appraisal, Reporting) reads:

Answer 6

In reporting the results of a real property appraisal, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.

Question 7

The Steps in the Appraisal Process

Answer 7

Identification of the problem
Determination of the scope of work
Collection and analysis of the data
Determination of highest and best use
Application of the approaches to value
Reconciliation
Reporting of the appraisal

These questions are directed to the client

Question 8

EFFECTIVE DATE:

Answer 8

EFFECTIVE DATE: the date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value.5

Question 9

To determine the appropriate scope of work for the individual assignment, the appraiser must:

Answer 9

1. Rely on the information gained in the first step of the appraisal process. Proper identification of the problem is essential.
2. Ensure that he or she has the knowledge, experience, and competency to accomplish this assignment.
3. Determine the client’s expectations for this type of assignment.
4. Not allow the assignment conditions to limit his or her ability to arrive at a credible opinion of value, given the intended use of the appraisal.
5. Be able to support the decision for the level of work to be accomplished.
6. Be prepared to defend the research and analysis he or she decided was not required for this assignment’s credible opinion of value.

Question 10

Some of the basic elements in the consideration of the highest and best use (HBU) of the subject include, but are not limited to:

Answer 10

Supply and demand
Competition
Conformity
Site size
Building restrictions
Zoning requirements
Building codes
Market area trends

Question 11

Traditional theory holds that there are four tests (criteria) for highest and best use. In order to be considered the highest and best use for a property, the use must be:

Answer 11

Physically possible
Legally permissible
Financially feasible
Maximally productive

Question 12

The Sales Comparison Approach is based primarily on the principles of

Answer 12

The Sales Comparison Approach is based primarily on the principles of contribution and substitution.

Question 13

The Cost Approach is also known as the

Answer 13

The Cost Approach is also known as the

summation approach to value.

Question 14

That total loss in value is called _______. Accrued depreciation may include ____, _____, and _____.

Answer 14

That total loss in value is called accrued depreciation. Accrued depreciation may include physical deterioration, functional obsolescence, and external obsolescence.

Question 15

Physical deterioration is

Answer 15

that loss in value that occurs as a result of the normal deterioration or physical damage to the structure itself.

Question 16

Examples of Physical deterioration

Answer 16

Some examples of curable depreciation might be worn out carpet, broken windows, or interior paint required. These items can be repaired or replaced, and the incurred costs will be returned by the elimination of the deterioration and the increased value of the property.

Incurable physical depreciation may include such things as foundation settlement and deterioration of wood rafters or floor joists.
These items cannot be repaired or replaced in an economically feasible manner, meaning that repair or replacement of these items will not return the costs incurred in terms of increased value to the property.

Question 17

Examples of Functional obsolescence

Answer 17

Functional obsolescence occurs whenever a structure (or a component of the structure) is inadequate for use in the current marketplace. Outdated fixtures and cabinetry, and poor floor plans are examples of functional obsolescence. The curable or incurable labels will be assigned, depending on the costs incurred to relieve that form of obsolescence relative to the increase in value after elimination of the inadequacy. If the cost to correct the inadequacy is equal to or less than the anticipated increase in the property’s value, then the depreciation is said to be curable.

Question 18

What is external obsolescence

Answer 18

The third type of depreciation, known as external obsolescence, is always said to be incurable in nature. This type of obsolescence is caused by external factors outside the subject property’s boundaries. The subject property owner does not have any control over the situation and cannot remove the cause of the depreciation. An example of this type of obsolescence may be the presence of a convenience mart offering 24-hour service directly across the street from the subject residential property. The noise, gasoline smell, lights, and general appearance all serve to detract from the value of the subject. As with functional obsolescence, the market will determine the extent of the diminution of value for the subject.

Question 19

The principle of anticipation is at work with the ____ approach.

Answer 19

Income Approach

Question 20

VIM formula

Answer 20

Value = Income x Multiplier

Question 21

IRV formula

Answer 21

Income/Rate = Value

Question 22

Oral appraisal reports are ____ under USPAP; however this type of report is not permissible for mortgage lending appraisal assignments qualifying as ____ ____ ____.

Answer 22

Oral appraisal reports are recognized under USPAP; however this type of report is not permissible for mortgage lending appraisal assignments qualifying as federally related transactions.

Question 23

The federal regulators include

Answer 23

The federal regulators include the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and the National Credit Union Administration (NCUA).

Question 24

EXTRAORDINARY ASSUMPTION:

Answer 24

EXTRAORDINARY ASSUMPTION: an assignment-specific assumption, as of the effective date, which, if found to be false, could alter the appraiser’s opinions or conclusions.

Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trends; or the integrity of data used in an analysis.

it is something we do not know, but we take it to be true. Second, while an “ordinary” assumption may be made in virtually every appraisal assignment, an “extraordinary” assumption is directly related to a specific assignment.

Question 25

The difference between an extraordinary assumption and a hypothetical condition is

Answer 25

The difference between an extraordinary assumption and a hypothetical condition is the LEVEL OF CERTAINTY that the appraiser has about the issue addressed at the time of the appraisal report.

If the appraiser does not know for certain but must assume one of the available choices to complete the appraisal, the extraordinary assumption is used because the LEVEL OF CERTAINTY is less than absolute. However, if the appraiser knows something to be false and used the opposite in the appraisal, or knows it to be true and uses the opposite, the LEVEL OF CERTAINTY by the appraiser is absolute, therefore the hypothetical condition would be used. In other words, a hypothetical condition permits the appraiser to “tell a lie” in the appraisal but the disclosure of the hypothetical condition in the report informs the client that it is not currently true. (Thus, the client is not misled.)

Question 26

HYPOTHETICAL CONDITION:

Answer 26

HYPOTHETICAL CONDITION: a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.1