CH 15 - The Real Estate Market & Analysis / CH 16 - RE Appraisal

Question 1

CELL

Answer 1

C- capital
E- entrepreneurial ability
L- land
L- labor

Question 2

4 phases of biz cycle

Answer 2

expansion, peak, contraction, trough

Question 3

what is the correct sequential order of the 4 criteria applied to determine highest and best use of a parcel of real estate?

Answer 3

legally permissible, physically possible, financially feasible, maximally productive

Question 4

what are the four elements that interact to create or affect the value of real estate?

Answer 4

Demand, utility, scarcity and transferability

Question 5

How is an appraiser compensated?

Answer 5

A fee based on the time and difficulty involved

Question 6

method used by appraisers to estimate amount of accrued depreciation

Answer 6

Economic Age-Life Method

Question 7

Economic Age-Life Method FORMULA

Answer 7

Effective age/Total economic life = total depreciation rate for entire time period

Question 8

Total depreciation (%) x Reproduction cost ($) =

Answer 8

Total accrued depreciation amount for entire time period ($)

Question 9

PGI

Answer 9

Projected gross income

Question 10

V&C

Answer 10

vacancy and collection losses

Question 11

EGI

Answer 11

effective gross income

Question 12

OE

Answer 12

operating expenses

Question 13

NOI

Answer 13

net operating income

Question 14

how to calculate the EGI (effective gross income)

Answer 14

PGI - V&C + OI =

EGI

Question 15

OI

Answer 15

other income

Question 16

how to calculate the OE

Answer 16

OE =
FE (fixed expenses) +
VE (variable expenses) +
R (reserves for replacements)

Question 17

3 approaches to value

Answer 17

• sales comparison approach
• cost-depreciation approach
• income approach

Question 18

Please
Visit
Every
Other
Night

Answer 18

PGI
V&C
EGI
OE
NOI

Question 19

How is a gross rent multiplier calculated?

Answer 19

Divide comparable property sales price by comparable property rent.

Question 20

What estimate is a result of income divided by a capitalization rate?

Answer 20

What estimate is a result of income divided by a capitalization rate?

Question 21

In the income approach, a capitalization rate can be derived from which of the following?

Answer 21

the relationship between sale prices and income of similar properties

Question 22

As used by an appraiser, what does the term “price” refer to?

Answer 22

The asking price in the listing contract

Question 23

Complete the statement. Highest and best use of a property is the single use that produces the greatest return on:

Answer 23

the land and any improvements to it.

Question 24

Which approach to value is typically used to estimate the value of special purpose properties?

Answer 24

Cost Depreciation Approach

Question 25

What will happen to the value of a property if the capitalization rate remains the same, but the net operating income is reduced?

Answer 25

The value will decrease.

Question 26

The various approaches to estimating value are based upon which principle?

Answer 26

Substitution