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03 Site Valuation and Cost Approach > Ch 4-5 Quiz Site Valuation > Flashcards

Ch 4-5 Quiz Site Valuation Flashcards

1
Q

“A loss in property value from any cause” is _________.

A

Depreciation

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2
Q

“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat” is the definition of

A

Fee simple estate

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3
Q

“The difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date” is _____.

A

Depreciation

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4
Q

“The expectation of future profit” is called _______.

A

Entrepreneurial incentive

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5
Q

“The profit actually earned on a development or improvement” is called ______.

A

Entrepreneurial profit

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6
Q

A _________ cost estimate eliminates functional obsolescence.

A

Replacement

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7
Q

A comparable new property recently sold for $335,000 and contained 2,630 SF. You estimate the site value to be $70,000 and the value of the site improvements to be $15,000. What portion of the selling price would be attributed to the building improvements?

A
  1. 335,000 minus 70,000 minus 15,000 = 250,000.
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8
Q

A comparable new property recently sold for $380,000 and contained 2,450 SF. You estimate the site value to be $90,000 and the value of the site improvements to be $20,000. There was a garage that would cost $35,000. How much did the house sell for per SF?

A

95.92. First, subtract the site value, site improvements, and garage from the sale price. $380,000 - $90,000 - $20,000 - $35,000 = $235,000 cost of house. $235,000 / 2,450 = $95.92 per square foot, rounded. (Chapter 5)

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9
Q

A house contains 1,812 square feet. It was constructed in 1999 at a cost of $64.85 per square foot. The cost index at that time was 146.0. The current cost index is 204.4. What is the estimated cost to build the house today (rounded to the nearest $1)?

A
  1. 1,812 x 64.85 = $117,508.20 cost in 1999. 204.4 / 146.0 = 1.40. $117,508.20 x 1.40 = $164,511. (Chapter 5)
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10
Q

A house would cost $225,000 to build new. It is 25 years old and has sustained a total of 30% depreciation. It sits on a site worth $55,000. What is its value by the cost approach?

A
  1. Cost new $225,000 less 30% depreciation ($67,500) = $157,500 improvement value + $55,000 site value = $212,500. (Chapter 4)
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11
Q

A house would cost $300,000 to build new. It is 15 years old and has sustained a total of 20% depreciation. The site is worth $70,000. What is the value by the cost approach?

A
  1. 300,000 times 0.8 = 240,000 plus 70,000 = 310,000.
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12
Q

A house would cost $435,000 to build new. It is 8 years old and has sustained a total of 5% depreciation. It sits on a site worth $90,000. What is its value by the cost approach?

A
  1. Cost new $435,000 less 5% depreciation ($21,750) = $413,250 improvement value + 90,000 site value = $503,250. (Chapter 4)
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13
Q

Appraisal fees would be included in the _________ costs.

A

Indirect

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14
Q

Appraisals for insurance or accounting purposes often require that the land and improvements be valued ___________.

A

separately

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15
Q

Appraisals for insurance or accounting purposes often require that the land and improvements be valued separately.

A

TRUE

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16
Q

Cost services include direct and indirect costs in their cost figures, but NOT entrepreneurial profits or incentives.

A

TRUE

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17
Q

Direct costs would include all of the following

A

Materials, Labor, Building permits

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18
Q

Entrepreneurial incentive comes from _______________.

A

The market

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19
Q

Expenditures for labor and materials are called _________ costs.

A

Hard

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20
Q

Fannie Mae says the cost approach _________.

A

Is not required

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21
Q

If a property is older or exhibits unusual construction, then perhaps the more accurate method would be to use a reproduction cost.

A

TRUE

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22
Q

If a property worth $200,000 has a $200,000 addition, we can assume that the value upon completion will be $400,000.

A

FALSE

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23
Q

If the subject property improvements exhibit depreciation, the cost approach

A

May still be applicable

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24
Q

In the basic cost approach formula, we start with ____________, then subtract __________, and add ___________.

A

Cost new, depreciation, site value

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25
Q

In using the basic cost approach formula, a value is developed for the __________interest.

A

Fee simple

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26
Q

In which of these situations would the cost approach have the best applicability?

A

The subject is a special-purpose property, such as a school building

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27
Q

In which of these situations would the cost approach have the least applicability?

A

The property interest being appraised is not fee simple

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28
Q

Indirect costs are sometimes called ________ costs.

A

Soft

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29
Q

Most fire and casualty insurance is written to pay an amount equal to the replacement cost of the structure.

A

TRUE

30
Q

Of the three traditional methods, the simplest, quickest, least complicated and least accurate method of estimating costs is the ____________ method.

A

Comparative unit

31
Q

Reproduction cost estimates the cost to construct a building embodying all the deficiencies, superadequacies, and obsolescences of the subject building.

A

TRUE

32
Q

Reproduction cost involves estimating the cost of a __________, while replacement cost estimates the cost of a ___________ property.

A

Replica, substitute

33
Q

Reproduction cost involves estimating the costs using __________ materials, while replacement cost specifies ________ materials.

A

The same, modern

34
Q

The ________ approach has diminishing applicability as a property ages.

A

Cost

35
Q

The basic principle underlying the cost approach is the principle of _________.

A

Substitution

36
Q

The contract cost for constructing a house in January 2004 was $214,500. The index for that month was 168.6 and the current index is 227.1. This means the costs have increased ________%.

A
  1. 227.1 / 168.6 = 1.35, which means that construction costs have increased by 35%. (Chapter 5)
37
Q

The contract cost for constructing a house in September 2006 was $288,412. The index for that month was 202.8 and the current index is 294.3. What is the estimated cost to build the house today?

A
  1. 294.3 / 202.8 = 1.45. $288,412 x 1.45 = $418,197. (Chapter 5)
38
Q

The cost approach has good applicability _______.

A

When the building improvements are new or relatively new

39
Q

The cost approach has good applicability when the improvements we are appraising are _____________.

A

new or relatively new

40
Q

The cost approach has good applicability when the improvements we are appraising are new or relatively new.

A

TRUE

41
Q

The cost approach has good applicability when the site value is

A

Well supported

42
Q

The cost approach has the best applicability when the site value is not well supported.

A

FALSE

43
Q

The cost to construct a building “embodying all the deficiencies, superadequacies, and obsolescence of the subject building” is the ____________ cost.

A

Reproduction

44
Q

The cost to construct a building that is “a substitute for a building being or other improvements appraised, using modern materials and current standards, design, and layout.” is the ______________ cost.

A

Replacement

45
Q

The definition of replacement cost includes using _______materials and _________ standards, design and layout.

A

Modern, current

46
Q

The difference between the market value of a property after completion and its total cost of development (i.e., the amount the entrepeneur actually receives for contribution and risk) is _____________.

A

Entrepreneurial profit

47
Q

The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout is the definition of replacement cost.

A

TRUE

48
Q

The ideal situation for developing a cost approach is when the current building improvements truly do represent the highest and best use of the land as though vacant.

A

TRUE

49
Q

The ideal situation for developing a cost approach is where the current building improvements

A

Represent the highest and best use of the land as though vacant

50
Q

The most popular published cost service among residential appraisers is _______.

A

Marshall and Swift

51
Q

The one approach that can be applied to any type of improved property is the ________ approach.

A

Cost

52
Q

The subject property is a house that would cost $300,000 to build new. It is 15 years old and has sustained a total of 20% depreciation. It sits on a site worth $70,000. What is the subject property value by the cost approach?

A
  1. $300,000 less 20% depreciation ($60,000) = $240,000 improvement value + site value $70,000 = $310,000.
53
Q

The subject property suffers from a type of depreciation that is difficult to estimate. Which statement is true regarding the applicability of the cost approach in this situation?

A

The cost approach has limited applicability because of the difficulty estimating depreciation.

54
Q

The usual measure of area for residential appraisers is cost per cubic foot.

A

FALSE

55
Q

Using the Marshall & Swift Residential Cost Handbook will result in an estimate of __________ cost.

A

Replacement

56
Q

We stated in the course materials that there are three legs supporting the value estimate by the cost approach. What are they?

A

Cost, depreciation, land value

57
Q

Which are the traditional methods of cost estimating?

A

Comparative unit, Unit-in-place, Quantity survey

58
Q

Which of the traditional appraisal approaches is the oldest?

A

Cost

59
Q

Which of these is a source of building costs?

A

Marshall & Swift

60
Q

Which of these would be considered a direct cost?

A

Building permits

61
Q

Which of these would be considered indirect costs?

A

Insurance during construction, Interest on a construction loan, Professional fees

62
Q

Which of these would be considered soft costs?

A

Accounting and legal fees

63
Q

Which type of cost estimate eliminates functional obsolescence?

A

Replacement cost only

64
Q

You examine a construction contract to build a 2,388 square foot house. The total replacement cost is $305,850, including site improvements. The site improvements cost $16,000. How much is the indicated cost per square foot of the building improvements?

A

121.38. $305,850 - $16,000 = $289,850 / 2,388 = $121.38 rounded. (Chapter 5)

65
Q

You examine a construction contract to build a 2,612 square foot house and the total cost, excluding the site and site improvements, is $248,598. How much is the indicated cost per square foot?

A

95.18. $248,598 / 2,612 = $95.18 (rounded). (Chapter 5)

66
Q

Entrepreneurial incentive/profit can be calculated on all of the following bases

A

Direct costs only, Direct and indirect costs, Direct and indirect costs plus site value

67
Q

Reproduction cost is the more accurate method if a property is:

A

older and exhibits unusual construction

68
Q

The estimated cost to construct a substitute for a the building or improvements being appraised, using ___________ and ________, design, and _______ is the definition of replacement cost.

A

modern materials, current standards and layout

69
Q

Most _________________________ is written to pay an amount equal to the replacement cost of the structure.

A

fire insurance

70
Q

Which would be an example of direct costs?

A

Building permits

03 Site Valuation and Cost Approach (13 decks)

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