Chapter 7

Question 1

The income approach to value would be most important in the appraisal of a(n):

Answer 1

Office building

Question 2

The effective gross annual income from a property is $112,000. Total expenses for this year are $53,700. What capitalization rate was used to obtain a valuation of $542,325?

Answer 2

10.75 percent

Question 3

When appraising real estate, the first consideration of the appraiser should be the:

Answer 3

Highest and best use of the property

Question 4

In the valuation of a large apartment complex, the most weight would be given to which of the following approaches to value?

The cost approach

The income approach

The sales comparison approach

All approaches equally weighted

Answer 4

The income approach

Question 5

In the cost approach to value, the appraiser makes use of:

Answer 5

The estimated replacement cost of the building

Question 6

An appraiser who is using the sales comparison approach to determine value would use all of the following comparable properties:

Answer 6

Sold over 6 months ago, Sold recently but is located in another similar neighborhood, Sold recently but is located on a much larger lot

Question 7

An appraiser who is using the sales comparison approach to determine value would use all of the following comparable properties EXCEPT a similar home that was:

Answer 7

Sold by the owners who were undergoing a foreclosure

Question 8

All of the following are characteristics of value:

Answer 8

scarcity, transferability, utility.

Question 9

All of the following are characteristics of value EXCEPT:

Answer 9

obsolescence.

Question 10

An appraiser is responsible for:

Answer 10

estimating value.

Question 11

The term depreciation refers to the:

Answer 11

real estate’s loss of value from any cause.

Question 12

Which of the following would be classified as external depreciation?

Answer 12

Poorly maintained properties in the neighborhood

Question 13

It is necessary to calculate a dollar value for depreciation when using which of the following?

Answer 13

The cost approach to value

Question 14

Using which of the following would require the value of the land to be calculated separately from the value of the improvements?

The income approach
The cost approach;
The sales comparison approach
The gross rent multiplier

Answer 14

The cost approach;

Question 14

The income approach as used by an appraiser makes use of which of the following?

Equalization
Depreciation
Appreciation
Capitalization

Answer 14

Capitalization

Question 15

The sales comparison approach to value would be most important when estimating, the value of a(n):

Answer 15

existing residence.

Question 16

Reconciliation is best described as:

Answer 16

analyzing the results obtained from the three approaches to value.

Question 17

A building is valued at $215,000 and contains 4 apartments that rent for $470 each per month. The owner estimates that the net operating income is 65 percent of the gross rental receipts. What is the capitalization rate?

Answer 17

6.8 percent

Question 18

The steps in the appraisal process include all of the following:

Answer 18

gathering specific data on the subject property, gathering general data for the area of the subject property, applying the three approaches to value to the collected data.

Question 19

The steps in the appraisal process include all of the following EXCEPT:

Answer 19

considering the seller’s estimate of the property’s value.

Question 20

The gross rent multiplier is used as a guideline for estimating value based on:

Answer 20

the relationship of the sales price to the gross monthly income.

Question 21

Defined as a loss in value from any cause, depreciation is generally divided into three categories. The loss of value due to the normal wear and tear on a property is called:

Answer 21

physical depreciation.

Question 22

To find the value of a property using the income approach to value, if the net operating income and the capitalization rate were known, the appraiser would:

Answer 22

divide the net operating income by the capitalization rate.

Question 23

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would include reference to all of the following:

Answer 23

he highest and best use of the parcel, the most probable price the parcel will bring, the physical dimensions of the parcel.

Question 24

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would include reference to all of the following EXCEPT:

Answer 24

the listed price of the parcel.

Question 25

When appraising a commercial property, the appraiser is most concerned with the:

Answer 25

income generated by the property.

Question 26

In the appraisal of an office building, which of the following would be classified as external depreciation?

Termite damage to the structural components of the building

A poor architectural design resulting in a cluttered floor plan

An inadequate number of elevators and antiquated restroom facilities

A law requiring the building to be retrofitted with fire sprinklers

Answer 26

A law requiring the building to be retrofitted with fire sprinklers

Question 27

The period of time over which an improvement to the property will contribute to its value is known as its:

Answer 27

economic life.

Question 28

Which of the following would be considered specific data?

The dimensions of the subject property

The employment opportunities in the area

The sales data for comparable properties

The gross rent multipliers for the area

Answer 28

The dimensions of the subject property

Question 29

When estimating the value of property using the cost approach, all of the following would be considered by the appraiser:

Answer 29

estimated loss attributable to an outdated heating system, quality of materials and workmanship in the original structure, excessive amount of traffic noise outside the property

Question 30

When estimating the value of property using the cost approach, all of the following would be considered by the appraiser EXCEPT the:

Answer 30

loss of value due to uncollected delinquent rent.

Question 31

The market price of real estate is generally the same as:

Answer 31

the sales price.

Question 32

Reconciliation is an appraisal term used to describe:

Answer 32

the appraiser’s analysis and comparison of the results of each appraisal approach.

Question 33

An appraiser has been hired to prepare an appraisal on a property that includes an elegant old mansion that is now used as an insurance company office. Which approach to value would the appraiser rely on most?

Answer 33

Income approach

Question 34

A house with outmoded plumbing is suffering from:

Answer 34

functional obsolescence.

Question 35

By today’s standards, a 4-bedroom house with 1 bathroom would be considered to be:

Answer 35

functionally obsolete.

Question 36

In the cost approach an appraiser uses which of the following?

Sales prices of similar properties

The owner’s original cost of construction

An estimate of the building’s replacement cost

The property’s depreciated value as used for income tax purposes

Answer 36

An estimate of the building’s replacement cost

Question 37

The purpose of an appraisal is to:

Answer 37

estimate the value of a property.

Question 38

In the income approach, which of the following is NOT considered when calculating the net operating income?

Answer 38

Debt service

Question 39

A buyer is considering the purchase of an apartment building in an area where there is limited multi-family zoning. This situation would be BEST described by the economic characteristic of:

Answer 39

scarcity.

Question 40

An appraisal report must contain all of the following:

Answer 40

a reconciliation of value, the date of the appraisal, the highest and best use

Question 41

An appraisal report must contain all of the following EXCEPT:

Answer 41

a copy of the sales contract.

Question 42

The subject property has 3 bedrooms and 2 baths. A comparable property has 2 bedrooms and 1 bath. Which of the following is true?

The value of the subject property will be adjusted up.

The value of the subject property will be adjusted down.

The value of the comparable will be adjusted up.

The value of the comparable will be adjusted down.

Answer 42

The value of the comparable will be adjusted up.