CHAPTER THREE QUIZ

Question 1

What does the acronym DUST stand for?

Answer 1

Demand, utility, scarcity, transferability

Question 2

Before determining the sales price, you should take what final step?

Answer 2

Do a walk-through of the property to get an idea of the overall condition.

Question 3

Which of the following properties may be used as a comparable property in a CMA?

Answer 3

A similar, recently sold property in the neighborhood

Question 4

If the subject property is inferior in one component relative to the comparable property, a ………adjustment should be made.

Answer 4

negative

Question 5

The reconciled price is equal to the ………… of the indicated values.

Answer 5

average

Question 6

When conducting a CMA, the listing price is typically based on which of the following?

Answer 6

Reconciled price

Question 7

A comparative market analysis is typically performed by which of the following parties?

Answer 7

Listing broker

Question 8

Which is true of the sales comparison appraisal method?

Answer 8

It’s generally the most useful method for single families homes.

Question 9

Which is true of the income appraisal method?

Answer 9

To determine value, the appraiser needs to know the net operating income and the capitalization rate

Question 10

What is the purpose of an appraisal?

Answer 10

To arrive at a market value of a given property.

Question 11

Is data from recent sales enough to establish value?

Answer 11

No, combining recent sales only gives you an estimate.

Question 12

What happens to property values if lenders freeze lending?

Answer 12

Property values drop because of a lack of capital.

Question 13

What happens when interest rates increase?

Answer 13

Fewer people are eligible for mortgages and property values decrease.

Question 14

A playground is being built in a neighborhood with primarily senior housing. Is this good for property values?

Answer 14

No, because it lacks utility.

Question 15

This principle affirms the value is created by anticipated benefits to be derived in the future…?

Answer 15

Principle of anticipation

Question 16

Do higher property taxes impact home values?

Answer 16

Yes, the properties will be less valuable.

Question 17

What is the principle of change?

Answer 17

Changing market conditions such as supply and demand, interest rates, and property conditions.

Question 18

What is highest and best use?

Answer 18

When a property is used in the manner it is best suited for.

Question 19

There are 100 three-bedroom homes available, and there are 200 buyers, what happens to the property value?

Answer 19

The property values increase because of high demand.

Question 20

A town has decided to build a school and a playground in a neighborhood. Property values are increasing. Why does this occur?

Answer 20

In anticipation of the school and playground, more families are interested in homes.

Question 21

What occurs when a subdivision built 10 years ago suddenly has a brand new home added?

Answer 21

The newer home will have a lower value because the other homes are not as new or modern.

Question 22

If all the homes sold recently have finished basements and the appraised property has an unfinished basement, what happens?

Answer 22

The appraiser takes the cost of finishing and deducts from the value.

Question 23

Does a brand new roof make a property more valuable?

Answer 23

Yes, the new roof should increase the value.

Question 24

The seller has a ranch home. There are three ranch homes and three Tudors that have sold in the last six months. What should the appraiser do?

Answer 24

AUsing the ranch homes is how he would do the comparison.

Question 25

If three homes used for comparison all have different square footage, what does the appraiser do?

Answer 25

The appraiser will get the average square feet and cost per square foot for the new property.

Question 26

An appraisal comes in at $300,000, and the seller has the property listed for $350,000. What should he do?

Answer 26

The sales price should be reduced to be in line with the value.

Question 27

What is an arm’s length sale?

Answer 27

When the buyer and seller are unrelated.

Question 28

What goes into a land valuation?

Answer 28

Shape, location, size of lot and frontage are considered

Question 29

What costs are considered in valuations based on the cost approach?

Answer 29

The price of the lot and all costs associated with constructing the property to specifications.

Question 30

What does depreciation mean?

Answer 30

Depreciation is the loss in value over time.

Question 31

The cost approach is primarily used to value which of the following properties?

Answer 31

Schools

Question 32

What types of properties are appraised using the income capitalization approach?

Answer 32

Property that is expected to generate income for the owner.

Question 33

What property expenses are fixed?

Answer 33

Taxes and insurance

Question 34

Which of the following numbers is used to calculate the value of a property using the income capitalization approach?

Answer 34

Net operating income

Question 35

Real estate agent Gabe Brown prepares a CMA to present to seller Wendy Kleinfelter. Recent comparable sales in the area range from $250,000 to $270,000, with the suggested sales price coming to $260,000. Gabe tells Wendy to list the property at $280,000, believing that the market is heating up and that, given time, they will get the higher amount. Wendy is very reluctant to agree to this, since she and her husband are moving out of state the following month. Nevertheless, she agrees to the sales price and the listing agreement is signed. What should Gabe have done if Wendy demanded a price way above or below market value?

Answer 35

List the property for sale as requested by the seller.

Question 36

Which of the following principles states that the worth of a lesser valued residence tends to be enhanced by association with higher valued residences in the same area…?

Answer 36

Principle of progression

Question 37

Which of the following is true of a listing contract signed by the agent and seller?

Answer 37

It is legally binding.

Question 38

What is true of a listing contract NOT signed by the agent and seller?

Answer 38

It is not legally binding.