Ch 5 Quiz Flashcards
Which would be an example of a direct cost when constructing a building?
building permit
True or False: Cost estimating services do not include an allowance for entrepreneurial profit or incentive.
TRUE
You examine a construction contract to build a 1,448 square foot house and the total cost is $197,450. What was the cost per square foot?
136.36
The most popular cost service among residential appraisers is
Marshall & Swift
True or False: Fee simple ownership is not subject to the governmental powers of police power and escheat.
FALSE
Direct costs are also called
hard costs
Which would NOT be a typical source of building costs for an appraiser?
the property owner. he property owner would not be a reliable source.
Which type of cost new would replicate a slate roof and a steam heating system in a 100-year-old home?
reproduction cost
After an appraiser estimates cost new, he/she subtracts ____________ then adds _______________ to arrive at an indicated value by cost approach.
depreciation, site value.
“Expenditures for the labor and materials used in the construction of improvements” is the definition of
direct costs
Financing costs and marketing costs necessary to achieve occupancy are examples of ____________ costs.
indirect
The simplest, quickest, and least accurate method of estimating costs is the ______________ method.
comparative-unit
A rectangular-shaped two-story home measures 28 feet by 40 feet. How many lineal feet are there in the foundation?
136
Of the traditional methods of cost estimating, the least complicated and least accurate method is the _________ method.
comparative-unit
Which of these is NOT one of the traditional cost estimating methods?
direct-indirect
The most common unit of construction cost in residential properties is cost per
square foot
Appraisal, accounting and legal fees are examples of ____________ costs.
indirect
The cost approach is primarily based on which valuation principle?
substitution
Most fire and casualty insurance is written to pay an amount equal to the _______________ cost of the structure.
replacement
True or False: If appraising something other than fee simple interest, an appraiser can make an adjustment to the indicated value by cost approach in order to reflect the value of the property interest being appraised.
TRUE
When is an appraiser required by USPAP to develop the cost approach?
whenever it is necessary to produce credible assignment results
Which of these would be considered an indirect cost when constructing an office building?
lease-up costs to achieve occupancy
The unit-in-place method is sometimes called the ____________ method.
segregated cost
Unless adjustments are made for ownership interest, the cost approach will indicate the value of the ___________ interest.
fee simple
A property has a cost new of $345,000, site value of $90,000, and accrued depreciation of $75,000. What is its value by the cost approach?
360000
Fannie Mae says the cost approach _______________.
is optional. USPAP Obligations. Fannie Mae says it is optional – but you can always do it anyway; or certainly, when it is necessary for credible results.
The basic principle underlying the cost approach is the principle of ___________.
substitution
A 2,800 square foot new home recently sold for $660,000. The site value was $180,000. What was the indicated cost per square foot of the home?
171.43
You are using the Marshall & Swift Residential Cost Handbook to estimate the cost new of a home built in the early 1900s. What should you do?
go to the Old Residence pages in the book
Which of the following are the two major cost estimating services?
Marshall & Swift and RS Means Company, Inc.
The estimated cost to construct an exact duplicate or replica of the property being appraised, using the same materials, and embodying all the obsolescence of the subject building, is _______________ cost.
reproduction
The oldest of the three traditional appraisal approaches is the _________ approach.
cost
In producing a cost estimate, Derek has estimated the number of 2x4s, sheets of plywood, and how many pounds of nails would be necessary to construct the home. What cost estimating method has he employed?
quantity survey
When ____________ cost is used, it eliminates any functional obsolescence that may be present in the structure.
replacement
An example of a special purpose property is a ____________.
school building
You are performing the cost approach on an old house. You use a cost manual to estimate the current cost of constructing a similar structure, using modern materials. Which type of cost have you estimated?
Replacement cost
“A loss in value from any cause” is the definition of what appraisal term?
Depreciation
_______________ is defined as “a loss in property value from any cause.”
Depreciation
You read a construction contract for a new house and its cost is $675,330. It has 3,150 square feet. What is its construction cost per square foot?
214.39
When a published cost manual is used, the result is ____________ cost.
replacement
The cost to produce “an exact duplicate or replica of the building being appraised” is called _____________ cost.
reproduction
Another name for soft costs is ________.
indirect costs
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 _______________ cost.
replacement
A building was constructed in August 1999 for $2,340,000. The cost index at that time was 192.3. The current cost index is 302.1. What is the indicated cost new of the building today? (Round the index to 2 decimal places)
- 302.1 ÷ 192.3 = 1.57. $2,340,000 X 1.57 = $3,673,800.
Contractor’s overhead and profit is an example of ____________ cost.
direct
True or False: Most appraisers do not possess the level of expertise needed to apply the quantity survey method of cost estimating.
TRUE
The cost approach has good applicability when the improvements we are appraising are _________________.
new or relatively new
With Marshall & Swift, you can produce a cost estimate using the
comparative unit or unit-in-place method
Which of these is the best example of a special purpose property?
Church
A house contains 2,312 square feet. It was constructed in 2009 at a cost of $72.32 per SF. The cost index at that time was 201.4 and the cost index today is 265.8. What is the estimated cost to build the building today? (Round the index to 2 decimal places)
- 2,312 X $72.32 = $167,204. 265.8 ÷ 201.4 = 1.32. $167,204 X 1.32 = $220,709.
If a property is older or exhibits unusual construction, then perhaps the more accurate method would be to use _______________ cost.
reproduction
True or False: The cost approach is most applicable in situations where the site value is not well-supported.
FALSE
A 2,800 square foot new home recently sold for $660,000. The site value was $180,000. The subject home has 2,945 square feet. What was the indicated cost of the subject home?
504861
A building was constructed in September 2008 for $872,500. The cost index at that time was 174.6. The current cost index is 222.9. What is the indicated cost new of the building today? (Round the index to 2 decimal places)
- 222.9 ÷ 174.6 = 1.28. $872,500 X 1.28 = $1,116,800.
The most comprehensive and accurate method of cost estimating is the ___________ method.
quantity survey
The basic cost approach formula is reproduction or replacement cost new, ___________________, __________________, = property value.
– accrued depreciation, + site value
The one universal approach that can be applied to any kind of improved real property is the _______________ approach.
cost. Yes, no matter what, you can always do a cost approach. It is the one universal approach that can be applied to any kind of real property. In some cases, it may not be the best approach or the most supportable opinion of value - but one can always do a cost approach. This explanation assumes that the property is improved with building and site improvements. A parcel of unimproved land would, obviously, not be appraised using a cost approach as there is nothing to “cost estimate” on the subject.
“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
The cost approach would likely be MOST applicable in a situation where
the subject is a special purpose property
True or False: If the sales comparison approach cannot be developed because of a lack of sales data, the cost approach cannot be developed either.
FALSE
The difference between the cost of an improvement and its market value on the effective date of the appraisal is
depreciation
When using Marshall & Swift, adjustments need to be made for construction costs in various locations of the country. This is accomplished through use of
local multipliers
