CHAPTER 7 -- VALUATION Flashcards
What is the final step of appraisal?
After all date has been collected and different appraisal approaches applied, the final step is to reconcile the values.
What is the first step of valuation?
Define the problem
What’s the difference between the “date of value” and the “date of appraisal?”
The “date of value” is the date of the inspection, the “date of appraisal” is the date of the final writing or delivery of the appraisal report.
What date is the appraiser most concerned with?
The date the price was agreed upon.
What are the three basic styles of written appraisal reports?
1 - Letter Form Report (least formal)
2 - Form Report (summary report, Uniform Residential Appraisal Report) – a checklist form used primarily for lending institutions.
3 - Narrative Report (most comprehensive)
After the appraiser has collected all the data and applied the appropriate method(s), what is the next step in the appraisal process?
(A) simply average out the value estimates; (B) reconcile or correlate the values found in the different approaches; (C) assign appropriate value to individual estimates and average the total number; (D) given an opinion of value.
(B) reconcile or correlate the values found in the different approaches
When an appraiser uses the market data approach to appraisal, she would be most interested in the date:
(A) the price was agreed upon; (B) escrow was opened; (C) recording occurred; (D) escrow closed.
(A) the price was agreed upon
Which type of appraisal report has the following headings: Introduction, Site and Improvement, Analysis, Supporting Data, Opinion of Value?
(A) letter report; (B) form report; (C) narrative report; (D) oral report.
(C) narrative report
What is the basis of the market data approach of appraisal?
The Principle of Substitution (used in all appraisal techniques). Also known as the comparison or substitution approach.
What appraisal license is required to appraise a strip mall valued at $500,000?
(A) certified general real estate appraiser; (B) certified residential real estate license; (C) residential license; (D) trainee license.
(A) certified general real estate appraiser
When the highest and best use of a property is expected to change, the current use is called:
(A) the temporary use; (B) the interim use; (C) the transitional use; (D) the possible use.
(B) the interim use
When homes in an area represent the highest and best use of the land and are similar in architectural design, this would best exemplify which of the following principles of appraisal?
(A) change; (B) conformity; (C) contribution; (D) progression and regression.
(B) conformity
What are the three things which define value (worth) to appraisers?
1 - Relationship between the thing desired and the purchaser
2 - Power of one commodity to attract other commodities
3 - Present worth of future benefits
An owner of a 40-unit apartment house is considering installing a swimming pool. He seeks a professional opinion from an appraiser. The appraiser would base his opinion upon which principal of appraisal?
(A) contribution; (B) regression; (C) substitution; (D) integration.
(A) contribution
The value of the best property in a neighborhood is adversely affected by a substandard property nearby. This can be described as the principle of:
(A) balance; (B) regression; (C) contribution; (D) progression.
(B) regression
Market value is the price a willing buyer will pay and a willing seller will accept with both being fully informed, and the property being exposed to the market for a reasonable period of time. Market value is best expressed:
(A) present value of future income; (B) cost to reproduce improvements new; (C) value of a property is in the eye of the beholder; (D) objective value.
(D) objective value
What is it called when property gains value due to inflation or an increase in population?
Unearned increment
Will changes in financing terms affect the value of a property?
No. It will affect the price – but not the value.
What are the essential elements of value?
D - Demand
U - Utility (ability of the property to satisfy a need or desire)
S - Scarcity
T - Transferability (to be marketable, the property must be transferrable)
What are three things that are NOT essential elements of value?
Cost
Appreciation
Expectation
What are the four “Great Forces” influencing value?
1 - Social Ideals and Standards
2 - Economic influences
3 - Environmental and Physical Characteristics
4 - Governmental or Political Influences (NOT PRIVATE)
The “improved value” of land is:
(A) the current market value of the land and improvements combined; (B) the present value of income to be received from the use of the land in the future; (C) the replacement cost of the improvements minus the depreciation; (D) the difference between the contract rent and the economic rent.
(A) the current market value of the land and improvements combined
When comparing the value of property and the price of property, changes in financing terms will affect:
(A) value only; (B) price, not value; (C) only properties that have been sold; (D) both value and price.
(B) price, not value
All of the following are essential elements of value, EXCEPT:
(A) utility; (B) expectation; (C) scarcity; (D) transferability.
(B) expectation
What corner of intersections are most desirable?
South/West
When developers select land for a residential subdivision they consider topography. Many developers believe that:
(A) subdivisions which are built on rolling hills are less attractive aesthetically than those located on flat land; (B) some limited irregularity in topography is generally desirable for residential subdivisions; (C) flat land is more aesthetically desirable than rolling hills; (D) none of the above.
(B) some limited irregularity in topography is generally desirable for residential subdivisions
The position of a building on a lot in relationship to exposure to the rays of the sun, prevailing wind, view, privacy from the street, etc., is known as:
(A) elevation; (B) plottage; (C) orientation; (D) assemblage.
(C) orientation
The market data approach to appraisal is based upon which of the following?
(A) principal of regression; (B) principle of anticipation; (C) principle of contribution; (D) principle of substitution.
(D) principle of substitution
What is the unit of comparison in the market data approach appraisal of a single family home?
The entire property.
What type of approach to appraisal is the LEAST appropriate for appraising older buildings?
The cost approach (replacement approach) due to depreciation becoming difficult to calculate as the building gets older.
What are the four steps of the cost approach?
1 - Estimate the value of the land
2 - Estimate replacement costs of improvements (as if new)
3 - Subtract accrued depreciation from the replacement cost of improvements
4 - Add the value of the land to the depreciated value of the improvements
In the market data approach to appraisal, any differences between the comparables and the subject property are handled in which of the following ways?
(A) subject property is adjusted to the standards set by the comparables; (B) the subject property values are averaged to form a price range; (C) the comparables are adjusted to a market average; (D) the comparables are adjusted to the characteristics of the subject property.
(D) the comparables are adjusted to the characteristics of the subject property
When a residential neighborhood is comprised mostly of owner occupied residential properties, it tends to:
(A) stabilize values; (B) attract commercial shopping centers to the neighborhood; (C) deteriorate faster than areas with many rental properties; (D) lower property values.
(A) stabilize values
The best appraisal method used by an appraiser to establish the value of a “specific property” would be which of the following:
(A) the market data approach; (B) the cost approach; (C) the capitalization or income approach; (D) the gross multiplier approach.
(B) the cost approach
How would the replacement cost of a warehouse be calculated?
The cubic foot method (used in multistory structures when the height between floors varies)
What method is the most detailed and accurate method of estimating cost of new improvements?
Quantity Survey Method
What is the method that adds the cost of the individual units as install, is time consuming, and seldom used?
Unit-in-Place Cost Method