Chapter 10 economic principles and types of value

Question 1

The cost of options forgone or opportunities not chosen

Answer 1

principle of opportunity cost

Question 2

Residential investment properties are typically considered to be \_\_\_\_\_\_\_\_\_\_\_\_ properties.
Anything less than 10 units
Apartment
One- to four-unit
Duplexes and apartments up to 8 units

Answer 2

one to four unit

Question 3

The Principle of Anticipation is the basis for which valuation methodology?
Market study
Income Capitalization Approach
Cost Approach
Sales Comparison Approach

Answer 3

income capitalization approach

Question 4

The most common methodology used to value residential investment properties is the
Potential Gross Income Multiplier
Overall capitalization rate
Effective Gross Income Multiplier
Gross Rent Multiplier

Answer 4

gross rent multiplier

Question 5

A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user. Natural amenities may include a pleasant location near water or a scenic view of the surrounding area; man-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Answer 5

amenity

Question 6

Historically, which investment typically produces the lowest overall rate of return?
Savings account
Real estate
Bonds
Certificate of deposit

Answer 6

savings account

Question 7

“A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user, but is not essential to its use” is the definition of
Amenity
Homeownership
Real property
Bundle of rights

Answer 7

amenity

Question 8

Historically, which investment has typically produced the highest overall rate of return?
Savings account
Real estate
Bonds
Certificate of deposit

Answer 8

real estate

Question 9

The value of a property interest to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market

Answer 9

Investment value

Question 10

The value of a property according to the tax rolls in ad valorem taxation; may be higher or lower than Market Value, or based on an assessment ratio that is a percentage of Market Value

Answer 10

Assessed Value

Question 11

In real estate appraisal, the value a specific property has for a specific use; may be the Highest and Best Use of the property or some other use specified as a condition of the appraisal.

Answer 11

Use Value

Question 12

The value of a business enterprise that is expected to continue to operate into the future. The intangible elements of Going Concern Value result from factors such as having a trained work force, an operational plant, and the necessary licenses, systems, and procedures in place

Answer 12

Going Concern Value

Question 13

In addition to estimating the Market Value of the fee simple interest in an income producing property, an appraiser can also estimate its
Investment Value
Leasehold Value
Leased Fee Value
All of these

Answer 13

all of these

Question 14

Which investment typically incurs the highest burden of management?
Savings account
Real estate
Bonds
Certificate of deposit

Answer 14

real estate

Question 15

\_\_\_\_\_\_\_\_\_\_ is often referred to as the "bundle of rights".
Real property
Real estate
Leased fee estate
Warranty deed

Answer 15

real property

Question 16

The decision to purchase by an investor is motivated more by the property’s \_\_\_\_\_\_\_\_\_\_ and \_\_\_\_\_\_\_\_\_\_\_\_.
Appeal, risk
Income, appeal
Curb appeal, amenities
Income, risk

Answer 16

income, risk

Question 17

Multiplying the effects of the equity money is called
Leveraging
Averaging
The multiplier effect
Doubling down

Answer 17

leveraging

Question 18

Owners buy \_\_\_\_\_\_\_ – investors buy \_\_\_\_\_\_\_\_\_\_.
Houses, homes
Homes, vacant land
Houses, apartments
Homes, houses

Answer 18

homes, houses

Question 19

If you are appraising a specialized industrial property you might estimate \_\_\_\_\_\_\_\_ Value.
Investment
Disposition
Use
Intangible

Answer 19

use

Question 20

The primary principle upon which the Cost and Sales Comparison approaches are based is the principle of
Balance
Substitution
Change
Conformity

Answer 20

substitution

Question 21

“A value that cannot be imputed to any part of the physical property, e.g., the excess value attributable to a favorable lease or mortgage, the value attributable to goodwill” is the definition of \_\_\_\_\_\_\_\_\_\_\_ value.
Market
Insurable
Investment
Intangible

Answer 21

intangible

Question 22

"The cost of options forgone or opportunities not chosen” is the definition of the Principle of
Options Lost
Increasing and Decreasing Returns
Opportunity Cost
Anticipation

Answer 22

opportunity cost

Question 23

The principle of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ is defined as “the perception that value is created by the expectation of benefits to be derived in the future.”
Balance
Anticipation
Capitalization
Contribution

Answer 23

anticipation

Question 24

Which investment usually has the best liquidity?
Stocks
Real estate
Certificate of deposit
Savings account

Answer 24

savings account

Question 25

Ad Valorem means
Assessed Value
According to value
Adjusted to value
Added value

Answer 25

according to value

Question 26

Which investment has historically entailed the most risk?
Certificate of deposit
Savings account
Stocks
Real estate

Answer 26

stocks

Question 27

In an appraisal of the leased fee interest, a lease that is below Market Rent could have a \_\_\_\_\_\_\_\_ effect on value. A lease that is above Market Rent could have a \_\_\_\_\_\_\_\_\_ effect on value.
Positive, negative
Positive, decreasing
Negative, stabilized
Negative, positive

Answer 27

negative, positive

Question 28

The Income Approach considers the value of a property to a
Typical investor
Owner-occupant
Lender
Appraiser

Answer 28

typical investor