Custom Quiz Valuation Flashcards
These paragraph headings, Introduction, Description of General Neighborhood, Market Value & Economic Factors, and Final Estimate of Value, would be present in which type of appraisal? A) None of these B) Narrative (self-contained or summary) C) Letter (restricted) D) Form (summary)
B) Narrative (self-contained or summary)
The letter and form types of appraisal reports are abbreviations or variations of the complete narrative form of report. The narrative appraisal report gives the appraiser the opportunity to support opinions and conclusions. Those paragraphs mentioned in this question are generally included in the narrative report.
Of the four appraisal terms listed, which one has the LEAST relation to the others? A) Comparative B) Sales C) Reconciliation D) Comparable
C) Reconciliation
Reconciliation is the final step by the appraiser in any appraisal and is the act of bringing together conclusions in a short concise statement (it can also be called summation). The terms sales, comparative, and comparable are used in the sales comparison approach.
What is improved value?
A) Market value of land and improvements
B) Market value divided by total rents
C) Cost of reproduction less depreciation
D) Difference between economic and contract rent
A) Market value of land and improvements
Improved value is the combined value of land and building as distinguished from their separate values.
If there is a transition from a buyer’s market to a seller’s market, what would be the result?
A) Sales prices would increase because of an increase in demand and a lag in supply.
B) It would have no effect on the price.
C) Sales prices would decrease because of a decrease in demand and an increase in supply.
D) It would cause a decrease in land development and construction of new homes.
A) Sales prices would increase because of an increase in demand and a lag in supply.
A seller’s market is characterized by an increase in demand and a decrease in supply. In these circumstances, sales prices tend to increase.
On hot days, customers prefer to walk in the shade. Certain locations, due to the sun's fading effect on display window clothing, are the least desirable. Which is the least desirable side of the street for a clothing retailer? A) Northeast B) Southeast C) Southwest D) Northwest
A) Northeast
Because of the action of the sun, the southwest sides of the street are best. Therefore the northeast sides of the street are the least desirable corner of the street.
Smith owns an older apartment building and is considering the merits of an expensive remodeling plan. The deciding factor that would be instrumental on his final decision would be the
A) cost of the plan.
B) effect of the plan on the net income.
C) wishes of the tenants.
D) potential increases in the real property taxes.
B) effect of the plan on the net income.
The owner would apply the principle of contribution. He must be sure that the investment in the improvements will produce sufficient additional income to cover the expenditure. If the net income increases adequately, he should go ahead with the plan.
To analyze a leased property, an appraiser would consider
A) covenants, right of assignment, option for renewal and provisions for disaster, condemnation, improvements, and repairs.
B) none of these.
C) rent and other charges, date, parties, security, and term.
D) both of these.
D) both of these.
The relationship of contract and economic rental levels is important because of the effect on the value of the fee estate. Contract rent is the rent stated in the contract and economic rent is what you could rent the property for today if it was available. When making a gross income estimate, the appraiser would secure copies of all existing leases for study and would consider all the data in both choices.
An appraiser determines the accrual for depreciation in using A) market data. B) the income approach. C) none of these. D) cost.
B) the income approach.
The term accrual for depreciation means to provide for future depreciation. This is done by setting aside funds or charging off against the future income an amount to eventually replace or recapture the investment in the improvements. This is usually provided for in the capitalization rate in the income approach. Accrued depreciation (past) is used in the cost approach.
The greatest cause of loss of value to real property and the improvements thereon is A) wear and tear. B) deterioration. C) obsolescence. D) lack of maintenance.
C) obsolescence.
Obsolescence, combining both functional or economic factors, is a much greater cause of depreciation than age and other factors of deterioration.
An owner has a 100-unit apartment house. Which item would be deductible from the gross income in determining net operating income?
A) Income tax
B) Wages for part time gardeners and maintenance personnel
C) Depreciation
D) Mortgage payments of principal and interest
B) Wages for part time gardeners and maintenance personnel
For appraisal purposes, mortgage payments and income tax are not allowable deductions to arrive at net operating income. Depreciation adjusts the cost basis but is not an expense for appraisal purposes. Wages paid for gardeners and maintenance personnel are deductible from gross income as operating expenses.
The standards that a state-licensed or state-certified appraiser must follow are found in the A) MAI. B) USPAP. C) NAR. D) URAR.
B) USPAP.
USPAP stands for Uniform Standards of Professional Appraisal Practice.
In order to arrive at an effective gross income for rental properties, an appraiser should deduct what from gross income? A) Depreciation B) Repairs C) Real property taxes D) Vacancies and collection losses
D) Vacancies and collection losses
Effective gross income is that income remaining after deducting vacancies and collection losses from gross income.
In the appraisal of property, the principle of substitution would apply to A) the income approach. B) any of these. C) the sales comparison approach. D) the cost approach.
B) any of these.
Which would LEAST likely protect a single-family residential neighborhood from losing value?
A) Introduction of average-priced homes in an area of better quality properties of the same type
B) Residents in the area have the same income
C) Most families are from the same religious and ethnic group
D) Minor change in zoning regulations
A) Introduction of average-priced homes in an area of better quality properties of the same type
The principle of regression maintains that as properties of dissimilar value are placed in a neighborhood of better properties, the worth of the better homes is adversely affected and they tend to lose value.
In appraising a property using the market data approach, how would an appraiser treat a feature value found in the comparable property but not found in the subject property?
A) Treat the amenity as not included in the valuation
B) Disregard the feature value as no two properties are exactly alike
C) Subtract the value of the amenity from the sales price of the comparable property
D) Add the value of the amenity to the subject property
C) Subtract the value of the amenity from the sales price of the comparable property
An appraiser would consider all of these as contributing to the stability of a neighborhood EXCEPT
A) residence in the path of urban directional growth.
B) increased density and rapid turnover of population.
C) homogeneity of buildings, people, and uses.
D) many families with children going to school.
B) increased density and rapid turnover of population.
An increase in density and rapid turnover may occur from undesirable causes. The principle of conformity holds that maximum value is realized when a reasonable degree of homogeneity is present in buildings, uses of property, and income levels of residents.
The expansion and contraction of available space to meet demand is stimulated most by market fluctuations of A) prices and rents. B) financing terms. C) permanence of residence. D) elasticity of demand.
A) prices and rents.
If prices to build are relatively low and rents are high, builders will expand the available space to meet demand.
Under the cost approach, the replacement cost is distinguished from the reproduction cost because replacement cost is defined as the cost of constructing an improvement with
A) substantially the same utility as the property being appraised.
B) neither of these.
C) either of these.
D) the same materials as were used in the original construction.
A) substantially the same utility as the property being appraised.
eplacement cost is defined as the cost of constructing an improvement with the same utility, but with today’s materials and costs. Reproduction cost is defined as the cost of constructing (reproducing a replica) an improvement with the material used in the original construction.
The expenditure of dollars necessary for the creation of an improved residential property is called its A) investment. B) value. C) cost. D) price.
C) cost.
Cost, as it applies to real estate, means the amount expended (labor, material, and/or money) in acquiring or producing the commodity.
In determining the value of income-producing property, an appraiser may use which appraisal technique? A) All of these B) Property residual technique C) Land residual technique D) Building residual technique
A) All of these
An appraiser using the replacement cost approach on an older residential property would use all of these EXCEPT A) cost of improvements new. B) land value. C) depreciation. D) capitalization of income.
D) capitalization of income.
Capitalization of net income is unrelated to the cost approach to appraisal.
The best definition of capitalization is
A) the relationship between value and net worth.
B) the minimum rate of return on an investment.
C) the result of dividing net income by a percentage rate of return to determine value.
D) the highest rate of return on an investment.
C) the result of dividing net income by a percentage rate of return to determine value.
