Chapter 7 Appraisal

Question 1

The income approach is used for:

Answer 1

Income producing properties like

• apartment buildings
• office buildings
• shopping centers

Question 2

What are the steps in an appraisal process?

Answer 2

• gather specific data on the subject property
• gather general data for the area of the subject property
• apply the 3 approaches to value to the collected data

Question 3

What would require the value of the land to be calculated separately from the value of the improvements

Answer 3

The cost approach

Question 4

It is necessary to calculate a dollar value for depreciation when using which approach?

Answer 4

The cost approach to value

Question 5

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

Answer 5

The relationship of the sales price to the gross monthly income

Question 6

What would the appraisal report reference?

Answer 6

• Highest and best use of the parcel
• the most probable price the parcel will bring
• physical dimensions of the parcel

Question 7

Reconciliation is an appraisal term used to describe:

Answer 7

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

Question 8

What are some comparable properties an appraiser would use in the sales comparison approach?

Answer 8

• sold recently but located in similar area
• sold by owners who are undergoing a foreclosure
• sold recently but on a much larger lot

Question 9

An appraisal report should contain:

Answer 9

• a reconciliation of value
• date of appraisal
• highest and best use

Question 10

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

Answer 10

The estimated replacement cost of the building

Question 11

Reconciliation is best described as:

Answer 11

Analyzing the results obtained from the three approaches to value

Question 12

What is functional obsolescence?

Answer 12

Loss in value from market’s response. Outmoded or unacceptable physical or design features that are no longer considered desirable by purchasers. (Curable)

Question 13

With the income-approach-to-value, if the operating income and capitalization rate were known, the appraiser would:

Answer 13

Divide the net operating income by the capitalization rate

Question 14

The loss of value due to normal wear and tear on a property is called:

Answer 14

Physical depreciation
(Functional and external are other 2)

Question 15

The purpose of an appraisal is to:

Answer 15

Estimate the value of a property

Question 16

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

Answer 16

Income generated by the property

Question 17

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

Answer 17

Office buildings, apartment buildings, and shopping centers.

Question 18

What is considered by the appraiser in the cost approach?

Answer 18

• estimate cost of land
• estimate current cost of constructing the building and improvements
• estimate amount of accrued depreciation

Question 19

The term depreciation refers to the:

Answer 19

Real estate’s loss of value from any cause

Question 20

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

Answer 20

The sales price

Question 21

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

Answer 21

Selling prices of similar properties

Question 22

In the valuation of a large apartment complex, the most weight would be given to:

Answer 22

Income approach

Question 23

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

Answer 23

Economic life

Question 24

What is external depreciation?

Answer 24

Negative factors not on the subject property

Question 25

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

Answer 25

Existing residence

Question 26

What is specific data?

Answer 26

Details and comparative data on subject property and comparative properties like costs, sales, income, and expenses

Question 27

The income approach uses:

Answer 27

Capitalization rate

Question 28

A building is valued at $215,000 and contains 4 apartments that rent at $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 28

6.8 percent

Question 29

An appraiser is responsible for:

Answer 29

Estimating value

Question 30

What are the characteristics of value?

Answer 30

Demand
Utility
Scarcity
Transferability