Ch 7-8

Question 1

Which approach may also be used for commercial and industrial properties. Income-producing properties are generally appraised with the income capitalization approach, but the x approach can also be developed on these types of properties, assuming adequate data is available.

Answer 1

sales comparison and cost approach

Question 2

Principle of Substitution relies on two important things:

Answer 2

(1) that there will be no long delay in acquiring a substitute; and
(2) that a buyer will accept a substitute.

Question 3

Properties that are in contract but have not closed produce x information; particularly in a market that is undergoing a xxx

Answer 3

valuable
rapid upward or downward change.

There may not have been closed transactions that would reflect the new price levels.

Question 4

“The process by which a value indication is derived in the sales comparison approach. Comparative analysis may employ quantitative or qualitative techniques, either separately or in combination.” defines

Answer 4

Comparative Analysis

Question 5

When doing paired sales analysis, we are not comparing “x” because we are not yet “comparing” the sales to a subject property. We are simply comparing xxx

Answer 5

comparables
two sales to each other.

Question 6

Sale A, which is a 1,600 square-foot home with a double garage, sold for $190,000 in February. Sale B, which is very similar except it had 1,700 square feet of living area and only a single garage, sold for $204,900 in October.
It has been determined that the indicated adjustment for square feet of living area is $38.00 per square foot and the adjustment for the difference in garages is $4,000.00. What is the market conditions (time) adjustment in $ total and % per month?

Assume the comparable sale we are adjusting sold 5 months ago for $200,000. What is the adjusted amount for this comp?

Answer 6

1,700 SF - 1,600 SF= 100 SF
100 SF x $38 = $3,800 size adjustment
Sale B price: Adjustment for size Adjustment for garage
Sale B adjusted price
Earlier sale (Sale A)
Difference (time of sale) $ 15,100
$15,100 / $190,000 = .0795 or 7.95% increase over 8 months. 7.9 / 8 = 0.993% per month.

5 months X 0.993% per month= 4.965%. 200,000 X 4.965% = $9,930.

You could make a positive adjustment for market conditions of $9,900 (rounded).

Question 7

The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative techniques. defines

Answer 7

Qualitative Analysis

Question 8

“A qualitative technique for analyzing comparable sales; used to determine whether the characteristics of a comparable property are inferior, superior, or similar to those of the subject property. Relative comparison analysis is similar to paired data analysis, but quantitative adjustments are not derived. “ defines

Answer 8

Relative comparison analysis

Question 9

“A qualitative technique for analyzing comparable sales; a variant of relative comparison analysis in which comparable sales are ranked in descending or ascending order of desirability and each is analyzed to determine its position relative to the subject. “ defines

Answer 9

Ranking Analysis

Question 10

Making adjustments in x is usually preferable, especially in x appraisals. In non- residential appraisals, x adjustments are often used.
The choice of method will depend upon the manner in which the adjustments are . For example, market conditions adjustments (sometimes called x adjustments) are typically expressed in terms of a xx.
In any case, percentage adjustments are typically converted into dollar amounts when the math is processed in the sales comparison approach grid.

Answer 10

dollars
residential
percentage
derived
time
percent change

Question 11

“Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest.” defines

Answer 11

Partial Interest

Question 12

For residential properties, leasehold on the form 1004 meant it was on x

Answer 12

leased land.

Question 13

If you are appraising a multi-unit property where at least one unit is rented, the property rights appraised consist of a xxx

Answer 13

leased fee interest.

Question 14

When we make adjustments for financing, we are x the comparable property’s financing terms to the subject property’s financing terms. We are comparing the comparable property’s financing to x that are available in the market. Adjustments for financing are typically (but not always) made on the basis of x

Answer 14

not comparing
“typical” financing terms
cash equivalency.

Question 15

Many conventional loans do have private mortgage insurance (PMI) covering part of the loan (that exceeds x).

Answer 15

80% loan-to-value

Question 16

The most common example of an insured loan would be FHA. As we know, FHA does x lend money; the originating lender does. However, FHA charges the borrower an upfront fee and a xxx to pay for the mortgage insurance. In the event of a default on an FHA loan, the lender would be reimbursed by the FHA’s insurance fund if xxx

Answer 16

not actually
monthly insurance premium (MIP)
the sale of the property does not generate an amount sufficient to pay the
outstanding loan balance.

Question 17

A two-unit property can be purchased for $400,000. Typical financing terms would require a 20% down payment, with a fully-amortized mortgage at 5.5% for a term of 30 years, with monthly payments. What is the amount of the monthly payment?

Answer 17

CLEAR FIN
30 g n
5.5 g i
320000 CHS PV
PMT
1816.92
The monthly payment for a $320,000 loan at 5.5% interest would be $1,816.92.

Question 18

Adjustments for financing terms are always adjustments.

Answer 18

negative

Question 19

A home that cost $200,000. The first mortgage was $150,000, and the seller paid 1.5 points. What is the adjusted selling price?

Answer 19

Selling price of home $200,000
Less value of points (0.015 x $150,000) - 2,250
Adjusted selling price $197,750

Question 20

“An element of comparison in the sales comparison approach; comparable properties can be adjusted for any additional investment (e.g., curing deferred maintenance) that the buyer needed to make immediately after purchase for the properties to have similar utility to the subject property being valued. “ defines

Answer 20

Expenditures made immediately after purchase

Question 21

Assume that a house has all the windows broken out, the heating pipes have burst, and there has been some obvious water damage.
A buyer has a contractor’s estimate of $12,000 to repair the damage. The buyer made an offer of $75,000 for the property, anticipating that it would take $12,000 to put the property in reasonable condition. He felt it was a fair deal at that price.
If you use that property as a comparable sale, your adjustment would be…

How would this change if the repairs were cheaper or more expensive?

Answer 21

…of $12,000 for expenditures made immediately after purchase added to the sales price would result in an adjusted sale price of $87,000. That would be the correct procedure.

The adjustment amount does not change.

Question 22

A sale and re-sale comparison provides the x data for a market conditions adjustment. It represents the x paired data analysis - two sales with only one significant difference (in this case, time).

Answer 22

best
perfect

Question 23

You may have abundant evidence that properties of a certain class, perhaps similar models in a subdivision, were selling six months ago for $300,000 and now are selling generally for $320,000. This is called

Answer 23

group data analysis

Question 24

Market conditions adjustments (and location adjustments) are generally calculated on a x basis. That’s the way people think.

Answer 24

percentage

Question 25

Which dates are to be reported for each comp and what is the format?

Answer 25

sales contract and settlement/closing date
Month and Year

Question 26

Time adjustments must reflect the difference in market conditions between the x date of the comparable and the effective date of appraisal for the subject property.

Answer 26

contract

Question 27

Traditionally, appraisers have rated location as

Answer 27

Poor
Fair
Average
Good
Very Good
Excellent

Note: The Uniform Appraisal Dataset (UAD)has protocols for reporting location for the subject and comparables for appraisals prepared for Fannie Mae and Freddie Mac lenders, as well as FHA and VA lenders. Rather than rating location as “Good”, “Average”, “Poor”, etc., the UAD requires that locations be rated as B, N, or A (Beneficial, Neutral, or Adverse) and appropriate descriptors provided.

Question 28

Quality ratings are assigned to the subject on a scale from 01 (best) to 06 (worst). These six ratings do not necessarily correspond with the six ratings that appear in xxx

Answer 28

the Marshall & Swift Residential Cost Handbook.

Question 29

Age adjustments are used to calculate differences in between properties.

Answer 29

long-lived incurable deterioration

Question 30

The primary difference between GBA and GLA is that xxx

Answer 30

GBA can include finished below-grade area, while GLA does not.

Question 31

Rooms that are below grade are noted x on the URAR form, and must be xxx

Answer 31

separately
finished (having ceiling, walls and floor).

Question 32

In many markets, the cost for natural gas is much lower than electricity, so a gas forced air system may be perceived x as to electric radiant baseboard heaters. Newer energy-efficient xxx may also need to be adjusted. Heat pumps deliver both hot and cold air and the adjustment might be significant due to this dual function.

Answer 32

superior
heat pump systems

Question 33

Required Exhibits

Answer 33

Street Map (Subject and Comps)

Sketch or Floorplan (if atypical floorpan)
= exterior dimensions for SFR and interior for condo/co-op

Photos
= Subject Exterior (Front, Back, Street)
= Subject Interior ( Kitchen, Baths, Living, physical deterioration, upgrades)
= Comps (Front, MLS ok)