chapter 1: the. valuation process

Question 1

A tax appeal assignment will commonly involve a ____ effective date.

Answer 1

retrospective

Question 2

Intended use affects both appraisal ____ and reporting.

Answer 2

development

Question 3

A systematic procedure appraisers can employ to provide the answer to a client’s question about the value of a property is called the ____.

Answer 3

valuation process

Question 4

In ____ analysis, the appraiser analyzes the ideal improvement for the property.

Answer 4

highest and best use

Question 5

The relevant characteristics of a property are part of ____ the problem.

Answer 5

identifying

Question 6

True or false: Scope of work is the type and extent of research and analyses in an appraisal or appraisal review assignment

Answer 6

true

Question 7

True or false: identifying relevant characteristics of the subject property is specific data rather than general data.

Answer 7

true

Question 8

True or false: the client and intended user are never the same

Answer 8

false

Question 9

True or false: A prospective appraisal has an effective date contemporaneous with the date of the report

Answer 9

false

Question 10

True or false: Developing an opinion of insurable value can be identified as the purpose of an appraisal assignment

Answer 10

true

Question 11

What are the first four steps of the valuation process?

Answer 11

1. identification of the problem
2. Scope of work determination
3. Data collection and Property Description
4. Data Analysis

Question 12

What are the six assignment elements that identify a client’s problem?

Answer 12

1. identify the client and intended users
2. Identify the intended use
3. Identify the type and definition of value
4. identify the effective date of the opinion
5. identify the relevant characteristics of the property
6. identify the assignment conditions

Question 13

What are the three data types in the valuation process?

Answer 13

1. Market area data
2. subject property data
3. comparable property data

Question 14

valuation process

Answer 14

a systematic set of procedures an appraiser follows to provide answers to a client’s questions about real property value

Question 15

client

Answer 15

the party or parties who engage an appraiser. by employment or contract in specific assignment, whether directly or through an agent

Question 16

intended user

Answer 16

the client and any other party as identified, by name or rtpe, as users of the appraisal or appraisal review report by the appraiser, based on communication with the client at the time of the assignment.

Question 17

identify the roles of the following parties in a FHA assignment for a bank with the intended use of assisting the bank in a lending decision:

a) Bank and its representatives
b )HUD/FHA
c) Appraisal Management Company (AMC)
d) Borroewer

Answer 17

a) client and other intended user
b) Intended user
c) May or not be an intended user
d) Not the client or intended user

Question 18

Intended use

Answer 18

the use of an appraiser’s reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client at the time of the assignment.. Intended use affects both appraisal develop and reporting.

Question 19

Indented use can affect the opinions and conclusions developed. Whats the difference in the two contrasting scenarios:

a) a lender requests an exterior-only appraisal of an owner’s property to be used for collateral purposes in an equity loan
b) a month later, the owner of thee same property retains an appraiser with an intended use to resolve a legal dispute in a jury jail

Answer 19

in the frist scenario, the appriser will carry out research/annalyses at a level commensurate with the intended use of an exterior-only appraisal.

in the second scenario, the appraiser’s research and analyses would be at a higher level under this new intended use, and the value opinion might differ from the one reached under the prior intended use.

Question 20

Purpose of an assignment

Answer 20

the objective of an assignment – e.g., in an appraisal assignment, to develop an opinion of the defined value of a specified interest in real estate.

Question 21

The purpose of Ann assignment us usually to develop an opinion of a certain type of value. what types of value could this include?

Answer 21

market value
use value
investment value
insurable value
assessed value
fair value

Question 22

Current effective data

Answer 22

the effective date is contemporaneous with the date of the report – doesn’t have to be same as appraisal report date but two dates should be fairly close. inspection date is often used by appraisers as effective date., especiallyt in mortage lending assignmeents

Question 23

Retrospective effective date

Answer 23

appraisals with an effective date in the past–commonly used for estates (such as for probate), casualty loss, property tax appeal, and marriage dissolution

Question 24

Prospective effective date

Answer 24

appraisals as of a future date– needed in assignments for proposed or renovated improvements when the value date is based on completion or stabilized occupancy–also used reversions at the end of a cash flow projection.

Question 25

Statement of dates

Answer 25

Professional standards require that the appraiser state two dates in each appraisal report: the effective date and date of the report.

Question 26

relevant characteristics

Answer 26

features that may affect a property’s value or marketability such as legal, economic, or physical chharacteristics

Question 27

physical characteristics

Answer 27

attributes of a property that are observable or measurable as a matter of fact, as distinguished from opinions and conclusions, which are the result of some level of analysis or judgement.

Question 28

Whats included when identifying the characteristics of the subject property that are relevant to the purpose and intended use of the appraisal ?

Answer 28

• relevent characterics - features that may affect a property’s value or marketability such as legal, economic, or physical chharacteristics
• physical characteristics - attributes of a property that are observable or measurable as a matter of fact, as distinguished from opinions and conclusions, which are the result of some level of analysis or judgement.
• its location and physical, legal, and econic characteristics
• the real property interest to be valued such as fee simple interest, leased fee interest, leasehold interest, or a partial interest
• any personal property, trade fixtures, leased solar photovoltaic systems, or intangible assets that are not real property but are included in the appraisal
• any known encumbrances, easements, leases, restrictions, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of similar nature
• wheather the subject of the appraisal is fractional interest, physical segment, or partial holding of property.

Question 29

Extraordinary assumption

Answer 29

an assignment-s[ecific assumption as of the effective date regarding uncertain information used in analysis which, if found to be false, could alter the appraiser’s opinion or conclusions – something you don’t know that’s true to false but you assume its true

Question 30

Special assumption

Answer 30

an assumption, directly applicable to a specific appraisal or review, which, if found to be false, could alter the options or conclusions in an appraisal or review

Question 31

Hypothetical condition

Answer 31

this is a condition that is contrary to what exists but is supposed for the purpose of analysis – something that you know is false but you assume its true.

Question 32

What are some other assignment conditions?

Answer 32

laws, regulations, guidelines, and other conditions that can affect the scope of work.

ex) FHA appraisal assignment would have assignment conditions based on regulations issued by the department of housing and urban development

Question 33

Scope of work

Answer 33

the type and extent of research and analyses in an appraisal or appraisal review assignment– includes and not limited to:

• how extensively the. property is identified
• the level an extent that the tangible property is inspected
• the amount of research data required (i.e. collected, confirmed, and reported) and what type of data
• the type and extent of analyses applied

Question 34

type of assignment

Answer 34

as the appraiser considers intended use, identification the assignment type is part of the process. does the evaluation require an appraisal or appraisal review? the assignment may include one or both of these services., as well as other services performed while acting as an appraiser.

Question 35

type of property

Answer 35

this helps the appraiser identify wheather the assignment includes real property, personal property, intangible property, or moe than one of the these property types.

Question 36

what’s the third steep in the valutation process?

Answer 36

data collection and property description.

Question 37

What are the two types of data needed by appraisers when collecting data and property description?

Answer 37

1. general data

2. specific data

Question 38

General data

Answer 38

data that relates to the four forces that affect real property value– social, economic, governmental, and environmental forces

Question 39

Specific data

Answer 39

Details about the property being appraised, comparable sale and rental properties, and relvevent local market characteristics

Question 40

Market area data

Answer 40

data that falls into category of general data and focuses on trends that are affected by the four forces that influence value

Question 41

Trend

Answer 41

a series of related changes brought about by a chain of causes and effects. trends are forecast through economic base analysis, statistical analysis, market analysis, and analysis of economic indicators and surveys.

Market area trends as general data can include population shifts, declining office buildings occupancy rates, and increased housing starts.

Question 42

subject property data

Answer 42

1. relevant geographic and geologic characteristics of the land or site and characteristics of the improvements (such as type of building, physical components, legal comments, and personal property)
2. ownership history
3. cost and depreciation data
4. income and expense data

Question 43

comparables

Answer 43

a shortened term for similar property sales, rentals, or operating expenses used for comparison in the valuation process. in best usage, the thing being compared should be specified, e.g., comparable sales, comparable properties, comparable rentals

Question 44

Comparable property data

Answer 44

1. comparables
   - physical and legal components
   - sale date and price, cost, and depreciation date, income and expense data, capitalization rates
   - fiancing arrangements that could affect selling price
   - supply and demand data pertaining to comparable properties
   - –supply data: inventories of existing and proposed competitive properties, vacancy rates, and absorption rates
   - –demand data: population, income and employment data pertaining to potential property users and the impact future demand might have on the present (or proposed) use of properties comparable tp subject property

Question 45

Market analysis

Answer 45

the study of the supply and demand in a specific area for a specific type of property