chapter 12 quiz Flashcards
when a property’s value increases due to the impact of physical, governmental, economic, and social forces at work affecting the subject property, that rise in value is called:
unearned increment:
The cost approach would be the least reliable method to use in estimating the value of a seventy year old building because of:
the problem associated with estimating depreciation.
the actual selling price can be described as which of the following?
Market price: the actual price paid in a market transaction. (contrasts w/market value)
in attempting to estimate the market value of a house he is listing, a licensee discovers that the owner paid $310k for the house six yrs ago. what effect will this number have on this estimate?
NO effect at all
after a neighborhood expiriences a period of growth, expansion, and rising property values; the next phase of change that it will expirience is:
progression
what’s principals of progression?
Principle of progression is the idea that the value of a house increases when more valuable houses are built in the area.
what’s principle of regression?
which is based on the concept that larger, more expensive houses lose value when they are near smaller, less valuable homes.
in appraising, the term location is most closely associated with:
situs
in the capitalization approach, which of the following steps comes first.
Determining potential gross income
on an operating statement, the allowance for items that have a useful life of more than one year is called:
reserve for replacements
which of the following is used when estimating value by using the gross rent multiplier method?
Market rent of subject property
Karlie Sinclair has paid $300,000 for a new house in a neighborhood of properties that are worth a similar price. Now she is considering some major improvements to both the house and lot, which would cost $200,000, which principle of valuation might suggest that this is not a wise move?
Progression and regression
using a 12% capitalization rate, an apartment complex is valued at $480,000. what will be the value of the same property if a 10% capitalization rate is used?
$576,000
12% X 480,000 = 5,750,000
5,750,000 X 10% = 576,000
a key lot is:
essential for plottage
what’s plottage?
creating plottage value of land by assembling small, adjacent parcels of land into a larger, more useful parcel.
A method of estimating proposed construction costs by adding the cost of all the building’s component parts is the:
Unit in place method.
When using the sales comparison approach, the appraiser would utilize data derived from:
data from multiple listing services
The gross rent multiplier produces the best results when used to estimate the value of:
an apartment building
When estimating the capitalized value of a property:
the lower the capitalization rate, the higher the estimated value.
which of the following would not be considered an operating expense of an apartment building?
collection losses
*manager’s salary, utilities, repairs and reserve for replacements.
when selecting comparable for a comparison approach to market value, it is a good practice to:
place emphasis on the ones that require the fewest adjustments.
(like 3 bedroom house instead of 4)
an investor wants to purchase a 20 unit apartment complex. 10 units rent $300 per month, 5 for $325, and 5 for $350. Vacancy and collection losses are estimated to be 5% of the potential gross income and operating expenses are expected to be $31,950. using a capitalization rate of 10%, what should the investor pay for the property?
$407,250
step one - find PGI (Potential gross Income) (10 units X $300 X 12 months)=$36,000.00 (5 units X $325 X 12 months)= $19500.00 (5 units X $350 X 12 months) = $21,000.00 ------ total PGI 36,000 21,000 19,500 ======= 76,500 vac and losses = 5% PGI 76,500 X 5% = 3825 EGI = PGI - vac and loss EGI = 76500-3825 EGI = $72,675.00 NOI = EGI - OPEX NOI = 72675-31950 NOI = 40725 V = NOI/CAP V = 40725/10% V = 407250
in the capitalization approach to establishing value, the selection of the cap rate to use reflects all of the following EXCEPT:
HOW SOON THE PROPERTY CAN BE RESOLD FOR PROFIT
- an investment return currently sought by investors.
- how much net income the property will produce.
- how long the property will continue to produce the projected net income.
which of the following approaches to value estimation is based upon the calculation of construction cost at current prices of a property that serves the same purpose or function as an original property.
replacement cost.: the cost of erecting a building to replace or serve the functions of a previous structure.
which of the following may be used to figure accrued depreciation?
age-life or straight line method
in the appraisal of residential property, the cost approach is most reliable in the case of:
a new home
the most difficult depreciation to correct would be:
economic
in the sales comparison approach, the value of a feature present in the subject property but NOT in the comparable would be:
added to the selling price of comparable property
