Ch 16 - Real estate appraisal

Question 1

True or false, appraisers commonly use the comparative market analysis to determine value?

Answer 1

False

Appraisers commonly use the cost appreciation approach, the comparable sales approach, or the income approach within an appraisal to determine value. Whereas real estate licensees commonly use the comparative market analysis to determine value

Question 2

True or false, when figuring operating expenses to calculate net operating income, you can include the cost of the mortgage as an expense.

Answer 2

False

Operating expenses include fixed expenses, variable expenses, and reserves for replacements of building components. Not included in operating expenses are depreciation, cost of mortgage, and income taxes.

Question 3

True or false, progression is the value of an inferior property being enhanced by association with superior properties where as regression is the value of a superior property that is adversely affected by Association with inferior properties.

Answer 3

True

Question 4

True or false, the concept of substitution means that a buyer will be willing to pay more for a property that has lower quality features substituted with higher quality features.

Answer 4

False

The concept of substitution means that a prudent buyer or investor will pay no more for a property than the cost of acquiring, through purchase or construction, and equally desirable alternative property.

Question 5

True or false, the financial institutions reform, recovery, and enforcement act (FIRREA)is a provision under title XI that mandates states to license and certified appraisers.

Answer 5

True

Question 6

True or false, according to Florida statutes 475, real estate licensees may perform appraisal for a commission as long as the appraisal follows USPAP standards, are not being perform for a federally related transaction, and the licensee is not referring to him or herself as an actual certified appraiser.

Answer 6

False

According to Florida statutes 475, real estate licensees may perform appraisal for compensation as long as the appraisal follows USPAP standards, are not being performed for a federally related transactions, and the licensee is not referring to him or herself as an actual certified appraiser. Must be a flat fee not a percentage of the value.

Question 7

True or false, In real estate, the definition of highest and best use is always based on how the property is currently being used.

Answer 7

False

The definition of highest and best use involves for tests. It is 1. The most probable use of land or improved property that is legally possible, 2. Physically possible, 3. Financially feasible (and appropriately supportable) from the market, and 4. Which results in maximum profitability

Question 8

True or false, Rather than ordering a full appraisal, lenders may utilize an automated valuation model which is a computer program that provides a quick synopsis of value.

Answer 8

True

Question 9

True or false, cost is how much money is required to produce the item. Price is the amount actually paid for an item. And value is how much something is worth to the average buyer and seller at the time value is being determined.

Answer 9

True

Question 10

True or false, Liquidation value is when property is sold piece by piece rather than as a whole unit.

Answer 10

Falls

Salvage value is when property sold piece by piece rather than as a whole unit. Liquidation value is when money is needed quickly, a property can be sold at a value less than it would be within a normal time frame

Question 11

Combining two or more adjoining properties is called?

Assemblage
Plottage
Accretion
Alluvium

Answer 11

Assemblage

Question 12

The cost depreciation approach is commonly used to find value for all of the following reasons except:

New construction
Verify values found through other approaches
To calculate income
Special purpose properties

Answer 12

To calculate income

Question 13

Kevin knows that rental property in the area averages a gross income multiplier of 7.5. If the property is producing annual rental income of $55,000 plus additional income of $20,000, how much should he offer for the property?

$412,500
$150,000
$562,500
$262,500

Answer 13

$562,500

($55,000 + $20,000) $75000 X 7.5 = $562,500 value

Question 14

What is the value of a property with a net operating income of $120,000 and a capitalization rate of 10.5%?

$61,900
$12,600
$151,200
$1,142,857

Answer 14

$1,142,857

NOI/capitalization rate = value

$120,000/.105 (10.5%) = $1,142,857

Question 15

A nine-year-old condominium was estimated by an appraiser to have a reproduction cost of $240,000. It has an effective age of three years and an economic life of 60 years. What is the accrued depreciation?

$12,000
$4000
$36,000
$3500

Answer 15

$12,000

$240,000/60 = $4000 annual depreciation, $4000 X 3 = $12,000 accrued depreciation

Question 16

Carlisle managed an apartment building that has 10 units which rent at $1100 each per month. Last month he had combined vacancy and collection losses of $3300. His insurance payment was $400, and the utility bills for the comment area was $700. What was his effective gross income last month?

$7700
$6600
$9900
$7300

Answer 16

$7700

Question 17

Danny’s house didn’t appraise as high as he expected. The appraisal report cited a railroad track running along the back of the property as having a negative affect on the value. This is an example of:

Property progression
Physical deterioration
External obsolescence
Functional obsolescence

Answer 17

External obsolescence

Question 18

When you create a CMA you collect data from the MLS. You would get all the following data from the MLS except?

Recently sold properties
Recently expired listings
Currently listed properties
Appraisal values

Answer 18

Appraisal values

Question 19

Using the sales comparison approach to valuation: the subject property has four bedrooms, two bathrooms and no lanai. The comparable property has three bedrooms, two bathrooms and a lanai. The comparable property is priced at $212,000. The value of an extra bedroom is $7000 and the lanai is $8000. How much did you price the subject property?

$243,500
$227,000
$211,000
$213,000

Answer 19

$211,000

$212,000 + $7000 - $8000 = $211,000

Question 20

The characteristics of value includes all the following except:

Demand
Utility
Scarcity
Transferability

Answer 20

Scarcity