Chapter 13-20 Flashcards
The six procedures for analyzing and deriving a land value opinion
- Sales comparison
- Extraction
- Allocation
- Land residual
- Ground rent capitalization
- Subdivision development analysis
Transferable development right (TDR)
A development right that
cannot be used by the landowner, or that the owner chooses not to
use, but can be conveyed to landowners in another location or leased
for a period of years to then revert back to the original owner
Elements of comparison
The characteristics or attributes of properties
and transactions that cause the prices of real property to vary
Units of comparison
The components into which a property may be
divided for purposes of comparison, e.g., price per square foot, front foot,
cubic foot, room, bed, seat, apartment unit
Gross adjustments
This is the total dollar amount of adjustments
regardless of whether they are positive or negative
Net adjustments
This is the net dollar amount after all plus and minus
adjustments have been applied
Which land/site valuation procedure requires a cost estimate of the improvements
for each of the comparable sales?
A. extraction
B. ground rent capitalization
C. land residual technique
D. sales comparison
A
Assemblage is the process of combining two or more sites in order to produce
greater utility. The increment of value created from assemblage is called
A. ground capitalization.
B. plottage.
C. residual value.
D. subdivision incremental value.
B
An appraiser made the following dollar adjustments to a comparable sale of
vacant land: +$5,000; −$2,000; and −$6,000. What is the gross adjustment for
the land comparable?
A. −$8,000
B. −$2,000
C. +$3,000
D. +$13,000
D
Components into which a property may be divided for purposes of comparison
are called
A. adjustment items.
B. attribute characteristics.
C. elements of comparison.
D. units of comparison.
D
What is the preferred method of land or site valuation when adequate data is
available?
A. allocation
B. extraction
C. land residual technique
D. sales comparison
D
All of the following data can be considered on sales comparable to the subject
property EXCEPT
A. active listings.
B. closed sales.
C. expired listings.
D. fraudulent contracts.
D
What unit of comparison is appropriate in the appraisal of a hotel?
A. price per apartment
B. price per bed
C. price per cubic foot
D. price per guest room
D
Which type of market would provide the best market conditions for an appraiser to
employ the sales comparison approach?
A. active market
B. buyer’s market
C. seller’s market
D. slow market
A
What does grandfathered use mean?
A. a legal use that is permitted only for a specified time
B. an illegal use
C. a use that is nonconforming to the current zoning, but is permitted
D. housing adapted for the elderly
C
What type of factory-built structure must have a HUD seal affixed to the exterior?
A. manufactured home
B. modular home
C. panelized housing
D. sectionalized housing
A
In the appraisal of manufactured homes, which of the following is NOT required by
a lending client?
A. The manufactured home must assume the characteristics of a site-built
housing.
B. The manufactured home must be built on a permanent foundation.
C. The manufactured home must be legally classified as real estate.
D. The towing hitch and axles must remain in place and not be removed.
D
A buyer paid more for a property because he was uninformed about the cost to petition for a zoning change. What element of comparison would this fall under?
A. expenditure made immediately after purchase
B. financing
C. market conditions
D. use
A
Lenders concerned about adverse conditions affecting a property may require
appraisers to apply the 3-S Rule, which stands for
A. safety, soundness, and security.
B. sanitary, safe, and stable.
C. sturdy, safe, and strong.
D. none of the above
A
What components in a residence should NOT be accounted for in the value of the
property?
A. built-in cabinetry for a home theater
B. free-standing kitchen appliances
C. installed fiber-optic cables in the walls
D. termites living in the crawl space and wall cavities
B
Bob is using a comparable sale in which the seller paid discount points to
lower the buyer’s monthly mortgage payment. The property sold for $300,000 and
the buyer is paying 20% down. If the seller paid 5 discount points on the mortgage
amount, what is the cash-equivalent sale price?
A. $285,000
B. $288,000
C. $300,000
D. $315,000
B
($240,000 mortgage × 0.05 = $12,000 for points)
Comparative analysis
This is a general term used to identify the process in which
quantitative and qualitative techniques are applied to comparable sales so you
can derive a value indication in the sales comparison approach
Quantitative adjustments
use a mathematical process
Paired data analysis
This technique is based on the premise that when
two properties are equivalent in all respects but one, the value of a single
difference can be measured to indicate the difference in price between the
two properties
Statistical analysis
Quantitative techniques used, for example, to estimate value and identify and measure adjustments to the sale prices of comparable
properties
Graphic analysis
a variant of statistical
analysis in which an appraiser interprets graphically displayed data visually or
through curve fit analysis
Cost-analysis/cost-related adjustments
Cost indicators such as depreciated
building costs are used as a basis for adjustments
Capitalization of income differences
Capitalization of differences in net
operating income, such as inadequate parking facilities for a retail store
Qualitative analysis
recognizes the inefficiencies of real estate markets and the difficulty in expressing adjustments with mathematical precision.
Trend analysis
A qualitative technique used to identify and measure trends in
the sale prices of comparable properties
Relative comparison analysis
Studies the relationships indicated by market data without recourse to quantification
Ranking analysis
sales are ranked in ascending or descending order of desirability. Next, each
sale is analyzed to determine the relative position of the subject property in
the array
Gross adjustments
The total dollar amount of adjustments made to each
comparable sale
Net adjustments
the dollar amount that results after the plus adjustments
offset the minus adjustments
Gross adjustments as a percentage of sale price
May be helpful when the
dollar amounts of adjustments are quite similar
The part of the valuation process that uses experienced judgment and results in a
value opinion is called the
A. adjustment analysis.
B. interpolation.
C. reconciliation.
D. weighted average.
C
An appraiser used cost-related indicators to derive an adjustment, which is
considered what type of adjustment technique?
A. paired sales
B. qualitative
C. quantitative
D. relative comparison
C
While appraising an apartment building, an appraiser found that the location of
a comparable sale was superior by $25,000, but the smaller size was inferior by
$50,000. What is the indicated value if the comparable sale sold for $600,000?
A. $525,000
B. $575,000
C. $625,000
D. $650,000
C
($600,000 + $50,000 − $25,000 = answer)
Using the following percentages in the appropriate sequence of adjustments, what
is the indicated value of a comparable property that sold for $200,000?
−5% Property rights conveyed
+15% Location
+5% Economic
−5% Conditions of sale
−10% Financing
A. $194,940
B. $196,158
C. $200,000
D. $215,460
A
(Property rights 0.95 × financing 0.90 × sale conditions
0.95 × [location 1.15 + economic 1.05])
Comparable sales are adjusted to the subject property as the base, except
financing, which is adjusted to what?
A. cash equivalency based on the market
B. consumer price index
C. nominal interest rates
D. the other comparable sales
A
The sale price of a comparable sale is $120,000. The lot size is 10,000 sq. ft.,
and the GLA is 1,600 sq. ft. What is the price per gross living area for this sale?
A. $10.34
B. $12.00
C. $14.28
D. $75.00
D
($120,000 / 1,600 sq. ft. = answer)
An appraiser has selected two sale properties that are alike except for one feature. Comparing the two sales to derive a market adjustment for the feature is
called
A. paired data analysis.
B. ranking analysis.
C. statistical analysis.
D. trend analysis
A
A comparable sale sold in which the seller paid points on the buyer’s $200,000
mortgage. If the appraiser made an adjustment of $12,000 for the points, how
many points did the seller pay to lower the buyer’s mortgage payment?
A. 2 points
B. 3 points
C. 4 points
D. 6 points
D
($12,000 / $200,000 = 0.06, or 6 points)
An appraiser adjusted a comparable sale to the subject property because it sold 12 months ago. In this instance, the adjustment is for
A. conditions of sale.
B. financing terms.
C. market conditions.
D. property rights conveyed.
C
Appropriateness, accuracy, and quantity of evidence are terms associated with the
A. adjustment process.
B. appraisal review of another appraiser’s work.
C. reconciliation criteria.
D. scope of work decision.
C
If the subject property and the comparable sales all have fee simple title, no adjustment is required for
A. conditions of sale.
B. market conditions.
C. property rights conveyed.
D. use.
C
An appraiser has appeared in court and testified to a value opinion on a specific property. The testimony of the appraiser is considered to be
A. a consulting report.
B. an appraisal review report.
C. an oral appraisal report.
D. testimony and nothing more
C
Every written appraisal must contain
A. a detailed legal description.
B. a signed certification.
C. the highest and best use of the property as improved.
D. the land value
B
Labor and materials fall into the category of
A. direct cost.
B. indirect cost.
C. replacement cost.
D. reproduction cost
A
A 10-unit apartment building has a PGI of $78,000 and a 3% vacancy rate. The
operating expenses and replacement allowance are $25,000. If the capitalization
rate is 9%, what is the value by direct capitalization?
A. $562,889
B. $588,889
C. $614,888
D. $975,000
A
($78,000 × 0.97 = $75,660 EGI − $25,000 = $50,660 IO/ 0.09)
An appraisal is required for determining just compensation in an eminent domain
hearing. What type of final opinion of value should the appraiser provide in this
assignment?
A. point estimate
B. probability range
C. range of value
D. trend estimate
A
Site value is $76,000, and the remaining economic life of the improvements is
60 years with an effective age of 20 years. If replacement cost is $550,000, what
is the indicated value of the property by the cost approach?
A. $259,332
B. $442,667
C. $488,500
D. $516,000
C
(20/80 = 0.25
$550,000 × 0.75 = $412,500 + $76,000)
Price per cubic foot, price per front foot, and price per apartment are used as
A. elements of comparison.
B. measures of dispersion.
C. units of comparison.
D. ways to measure land
C
A 20-story hotel with 300 rooms, which is serviced by two elevators, is an
example of
A. capitalization exceeding demand.
B. functional obsolescence.
C. reversion.
D. the breakdown method
B
