Chapter 22 Appraisal Flashcards
The principle of substitution in the comparative approach of appraisal states that:
(1) “market value” equals “value to owner”.
(2) similar properties which have recently sold are comparable.
(3) properties have to be identical in order to be comparable.
(4) the market value of land plus the cost of a newly constructed building equals the market value of a property.
2
In the comparative approach of appraisal, one method of making final adjustments to price is to use a Rating Grid. In using a Rating Grid, it is MOST important that:
(1) the final market value be determined by averaging the comparable sale prices (after adjustments).
(2) the comparable properties have the same lot size as the subject property.
(3) the subject property be the basis of comparison and all comparables be adjusted to it.
(4) the comparable properties have the same cost of improvements as the ect property
3
When using the cost method of appraisal, cost of the improvements is normally determined by utilizing:
(1) current replacement cost.
(2) current reproduction cost.
(3) current value based on historic cost.
(4) actual cost.
1
In applying the cost method of appraisal to the valuation of a single family residence built in 1954, the value of improvements is determined by:
(1) the actual construction costs, or if unavailable, historic construction cost data.
(2) the current costs of constructing a modern equivalent of the subject property.
(3) the current costs of constructing an exact replica of the property being appraised.
(4) the construction costs for a builder of average efficiency measured in 1954 stan
2
The comparative method of appraisal is based on an analysis of recent sale prices for similar properties. Which of the following best defines the word “recent”?
(1) a period of time during which at least four properties have sold in the subject property’s neighbourhood
(2) a period of time of no less than one week and no more than six months
(3) a period of time during which supply and demand conditions have not changed
(4) a period of time during which the prime interest rate has been stable
3
In using the cost method of appraisal, the MAJOR difficulty is experienced in calculating:
(1) curable physical depreciation.
(2) curable functional depreciation.
(3) incurable physical depreciation.
(4) replacement cost of the building as new.
3
You are to appraise a single attached dwelling in an ordinary neighbourhood. If supply and demand factors have remained relatively stable for the last three months, a good comparable property is a similar property which:
(1) has just been sold at a below market price through a court ordered sale.
(2) after two months exposure to the market, was sold one week ago.
(3) is currently listed for sale as $125,000.
(4) (1) and (2) are correct.
2
When using the cost method of appraisal to estimate the value of a building which currently contains urea formaldehyde foam insulation (UFFI), insulation should be considered in your calculation as:
(1) part of the overall replacement costs.
(2) a deduction for depreciation.
(3) both (1) and (2).
(4) None of the above
3
Using the comparative method of appraisal to value properties with redevelopment potential, it is NOT necessary that the comparables and the subject property:
(1) have a similar highest and best use after redevelopment.
(2) have a similar current use.
(3) have a market value of zero in their current use.
(4) expect to undergo redevelopment at a similar point in time.
3
The appraisal of condominium units using the market comparison method has some distinct differences from the appraisal of other types of real property. Which one of the following factors might be applicable to condominiums ONLY?
(1) location and neighbourhood
(2) quality of construction
(3) common area charges
(4) interest rate on the mortgage
3
The consumer price index is a good method to adjust sales prices to the level of values prevailing as of the date of appraisal:
(1) where the comparable sales are deemed to be not recent.
(2) where there are inadequate numbers of comparable sales within a particular neighbourhood.
(3) where the cost method of appraisal is deemed to be inappropriate.
(4) under no circumstances.
4
An appraiser is using the market approach for his appraisal of a single family house. By proper adjustment the appraiser can use sales prices of all the following properties for comparison purposes, EXCEPT:
(1) houses in different neighbourhoods.
(2) houses with different square footage.
(3) houses recently sold between related parties.
(4) houses sold over six months ago.
3
Wally Walters wants to determine the market value of his property. Unfortunately, he lives in a sparsely inhabited region where there are no recently-sold, similar properties. However, he does know that the replacement cost (new) of his 2,600 square foot house is $42.50 per square foot. The land value estimate using the comparative method of appraisal is $41,500.
Mr. Walters has not taken adequate care of his house: it has depreciated in value. There has been $16,300 of curable physical depreciation. In addition, the bathroom and kitchen fixtures are outdated; their replacement cost is $13,200.
Based on the above information, what is the market value of Mr. Walters’ property?
(1) $122,500
(2) $81,000
(3) $152,000
(4) $135,700
1
2600 X 42.50
+41500
-16,300
-13,200
=122,500
In the comparative method of appraisal, one method of making final adjustments to price is to use a rating grid. In using a rating grid, it is MOST important that:
(1) the subject property be the basis of comparison and all comparables be adjusted to it.
(2) the final market value be determined by averaging the comparable sales prices (after adjustments).
(3) the comparable properties have the same square footage of improvements as the subject property.
(4) the comparable properties have the same lot size as the subject prope
1
Which one of the following statements is FALSE?
(1) The principle on which the comparative method of appraisal rests is that the price paid for a commodity will be equal to the cost of acquiring a substitute in the same circumstances.
(2) In the comparative method of appraisal, “recent” refers to the period immediately preceding the appraisal date during which values have remained stable.
(3) If a comparable which has vendor financing at below market rates is used in the comparative method of appraisal, the value of the below-market financing will be added to the sale price of the comparable to determine the adjusted sale price.
(4) If the adjusted sale prices of five comparables are $100,000, $90,000, $95,000, $100,000 and
$100,000, the appraiser could estimate the market value of the subject property to be $100,000.
3
