Exam Prep

Question 1

The subject is a residential property in a remote location and is accessible only by a dirt road. In the winter months, the road is impassable. The dirt road is a public right of way. This is considered a(n) ________ limitation.

• Governmental
• Social
• Environmental
• Geographic

Answer 1

Governmental
The limitation is caused by government limits on road construction and maintenance.

Question 2

The current or prior ownership who owns the real estate property is:
- Very important to appraisers in all cases
- Never important to appraisers
- Very important to title insurance companies or abstractors
-Never important to title insurance companies

Answer 2

Very important to title insurance companies or abstractors

Question 3

The subject real estate is located 28 miles north of downtown Bigville and improved with a single-unit residence. The local brokers have repeatedly stated that this property is too far from the employment centers and the drive time is inhibiting a sale. This is an example of ________ influence on real estate.
- Governmental
- Economic
- Social
- Geographic

Answer 3

Geographic
The government (option a) did not create this problem. Economic conditions (option b) are not responsible for this problem, nor are social norms (option c).

Question 4

A fee simple interest in real property is limited by the government’s right of
- Taxation, eminent domain, police power, and easements
- Taxation, eminent domain, police power, and escheat
- Eminent domain, police power, leases, and escheat
- Eminent domain, police power, zoning, and escheat

Answer 4

Taxation, eminent domain, police power, and escheat

Zoning is a form of police power (option d).

Question 5

An appraiser was asked to appraise a 200-acre farm and to give consideration to the productivity of the land. The owner was afraid the appraiser would not credit the property with its superior soil type, drainage, and fertility. There is no potential for any type of use on the land other than farming. If the appraiser did give consideration to the productivity of the land, this appraisal would be best described as
A market value appraisal
An insurable value appraisal
An investment value appraisal
Unethical

Answer 5

A market value appraisal

Question 6

An REO (real estate owned) sale
- Is the sale of a property by a bank after they have foreclosed and obtained control of the property by a sheriff’s sale or other processes; this type of sale can be made to an investor or owner/user
- Is a sale in which a property transfers from the real estate owner (REO) to the next owner
- Always involves the original mortgagor
- Is between the lender and the court and only occurs at the order of the court

Answer 6

Is the sale of a property by a bank after they have foreclosed and obtained control of the property by a sheriff’s sale or other processes; this type of sale can be made to an investor or owner/user

REO stands for “real estate owned” rather than “real estate mortgaged.” Both types of sales are asset classes for a bank, but REOs involve foreclosed properties or sometimes branch bank properties (option b). In an REO sale, the original mortgagor lost the property through the foreclosure process. The sale occurs after the foreclosure, and the prior owner (mortgagor) has nothing to do with it (option c). The lender and the courts are involved in sheriff’s sales but not REO sales (option d).

Question 7

Forces that influence real property values are
- The land being mobile, durable, useful, and in infinite supply
- Governmental and legal controls, economic characteristics, social trends, and geographic and environmental conditions
- Land, labor, capital, and capitalism
- Leasehold, leased fee, and fee simple

Answer 7

Governmental and legal controls, economic characteristics, social trends, and geographic and environmental conditions

Question 8

The loan-to-value ratio refers to
- The amount of a loan on a dollar basis—for example, $750,000
- The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage
- The equity amount divided by the mortgage amount
- The equity amount divided by the property value

Answer 8

The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage

Question 9

Salvage value is
- The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)
- The value of an item to an auctioneer
- The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material of which it is made (such as plumbing fixtures sold for their metal content)
- The value of the land after the building has been removed

Answer 9

The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)

Question 10

Scrap value is
- The value of a property or part of a property (such as a fixture) that is removed from the premises, usually for use elsewhere (such as the value of a fixture as a fixture)
- The value of an item to an auctioneer
- The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material it is made of (such as plumbing fixtures sold for their metal content)
- The value of the land after the building has been removed

Answer 10

The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material it is made of (such as plumbing fixtures sold for their metal content)

Question 11

The subject real estate is a platted lot located in a subdivision improved with a newer single-unit residence. It is located in a high-demand market with very little land available for development. The existing home market data shows that there have been 33 sales of properties in direct competition with the subject in the last 12 months, and there are currently only four available listings. The sellers clearly have an advantage over the buyers. This is an example of
- An undersupply of demand and therefore increasing prices
- An oversupply of inventory and therefore decreasing prices
- An undersupplied market and decreasing prices
- An undersupplied market and increasing prices

Answer 11

An undersupplied market and increasing prices

Question 12

The subject property is located in a market where the largest employer just closed its doors and 1,000 people lost their jobs. The city planning department estimates that the loss of the employer will cause 600 families in the community to move elsewhere in order to find other jobs. This represents about 10% of the current housing in the city. This will cause an immediate
- Increase in the demand for housing
- Decrease in the demand for housing
- Increase in the supply of housing
- Decrease in the supply of housing

Answer 12

Decrease in the demand for housing

Question 13

In a high-demand market, the cost of building new properties increases substantially until
- It becomes impossible for prices to go any higher
- Supply increases because builders’ profits are high and new builders get into the market or existing builders work overtime
- The rates charged by suppliers and subcontractors decrease
- The Federal Reserve System lowers interest rates

Answer 13

Supply increases because builders’ profits are high and new builders get into the market or existing builders work overtime (If profits are high enough, builders and construction workers will work day and night, weekdays and weekends.)

Question 14

The economic base of a community is

• The lower line in a graph or bar chart illustrating the economy of a community
• The ratio of basic industries to technical industries in a community
• An expensive, large stringed instrument
• The economic activity of a community that enables it to attract income from outside its borders

Answer 14

The economic activity of a community that enables it to attract income from outside its borders

In real estate, the economic base is the primary industries and activities that drive a region’s economy and real estate demand. The economic base includes sectors that: generate income, attract investment, and support employment

Question 15

When demand for housing increases, the supply
Increases immediately
Increases slowly
Is unaffected
Will diminish

Answer 15

Increases slowly

Question 16

Linkages are the
- Devices used to change a property from one use to another
- Relationships between a buyer and seller in a real estate deal
- Time-distance relationships between a property use and supporting facilities
- Tools necessary to market real estate

Answer 16

Linkages are the time-distance relationships between a property use and supporting facilities.

Question 17

The market area life cycle
- Includes three periods: growth, stability, and revitalization
- Describes fixed and equal periods of time that a market area will go through in the future
- Describes variable periods of time that a market area will go through or has gone through in the past
- Consists of periods of time describing balanced supply and demand

Answer 17

Describes variable periods of time that a market area will go through or has gone through in the past

A market area life cycle can be long or short and can be in the past or future. Balanced markets are not a requirement for market area life cycles.

Question 18

An appraiser is valuing a site for highest and best use or for the cost approach.
The site has a building on it. The appraiser should
- Assume that the subject site is vacant
- Assume that the subject site’s highest and best use is the same as the improvement’s design
- Use comparable sales with a highest and best use that is the same as the subject’s improvement design
- Use comparable sales with the same zoning as the subject

Answer 18

Assume that the subject site is vacant

The land value is always based on the site as though vacant. In highest and best use analysis, the site as though vacant is used and compared to the value of the improved property to ensure that the vacant site value does not exceed the improved property value.

Question 19

Highest and best use analysis is required in
- All appraisals
- Value in use appraisals
- Investment value appraisals
- Market value appraisals

Answer 19

Market value appraisals
Highest and best use is not required in value in use or other values in which the highest and best use is ignored (option a). Highest and best use is not required in value in use appraisals (option b). Highest and best use may not be required in investment value appraisals because the client stipulates the criteria for analysis (option c).

Question 20

Highest and best use analysis requires an estimate of the best use as though vacant and the best use as improved to
- Estimate the value of the improvements
- Ensure that appraisers recognize that the property could be worth more without the buildings than with them
- Estimate any functional obsolescence caused by inappropriate improvements
- All of the above

Answer 20

All of the above

Question 21

The subject is 80% covered with a legal wetland. What type of constraint on development is this an example of?
- Topographical
- Legal
- Physical
- All of the above

Answer 21

All of the above

Question 22

The highest and best use as though vacant is important in market value appraisals and cannot be ignored because

• If an appraiser ignores this step, it is possible that he or she cannot see that the value of the site as though vacant is higher than the value of the improved property
• It is required to ensure compliance with zoning
• It helps appraisers decide what the value of the improved property is
• It is needed for the estimate of the zoning compliance
  The appraiser must develop the highest and best use as though vacant opinion to ensure that the value as though vacant is not higher than the value as improved.

Answer 22

If an appraiser ignores this step, it is possible that he or she cannot see that the value of the site as though vacant is higher than the value of the improved property

Question 23

In a market value appraisal report, the appraiser stated, “The highest and best use of the site as though vacant is continued use as an office building site.” This also means that
- The land sales used to value the site would likely be office site sales
- The land sales used to value the site could be from any market and have any use
- The land sales used to value the land in the analysis must not be office site sales
- The appraiser has ignored any other uses

Answer 23

The land sales used to value the site would likely be office site sales

If the appraiser states that the highest and best use of the site as though vacant is an office site, then the appraiser is saying that the valuation of the site would be in line with that use and office site sales would be used.

Question 24

In a highest and best use analysis of a subject property in which the building(s) are obstacles to a higher use, the cost of demolition of the improvements should be
- Subtracted from the vacant land value opinion
- Subtracted from the improved property value opinion
- Added to the vacant land value opinion
- Added to the improved property value opinion

Answer 24

Subtracted from the vacant land value opinion

For an improved property in which the highest and best use is removing the buildings, the demolition cost must be subtracted from the value of the land as though vacant. Because the buildings are obstacles to a higher use in this case, a buyer would compare this site to a vacant site and choose the subject only if it could be purchased at a price low enough to cover the cost of removal.

Question 25

When an appraiser completes a secondary market residential form (such as a Fannie Mae form), the highest and best use as though vacant is
- Included on the form and in the analysis
- Not included because the form instructions state that the form is only to be used when the highest and best use is to leave the residence on the site; if the highest and best use is to remove the residence from the site, these types of forms should not be used
- Included in an addenda only if the site is zoned residential
- Not needed, not required, and not permitted

Answer 25

Not included because the form instructions state that the form is only to be used when the highest and best use is to leave the residence on the site; if the highest and best use is to remove the residence from the site, these types of forms should not be used

The highest and best use of the site as though vacant is not included on the forms, but the instructions state that the form is not to be used when the highest and best use does not include leaving the residence on site.

Question 26

If asked to develop an opinion of the market value of a public library, an appraiser
- Must find sales of libraries that were used as libraries before and after the sale; this would include sales of property from a county government to a city government based on appraised value
- Must estimate an alternative use for which a market exists and then find comparable sales of buildings that are similar to the alternative use
- Must find sales of a library property from one governmental organization to another
- Must find comparable sales of bookstores in retail locations

Answer 26

Must estimate an alternative use for which a market exists and then find comparable sales of buildings that are similar to the alternative use

Question 27

The subject real estate is a five-acre site located near a major river. The site is designated as a flood hazard area. This site is buildable because there is no zoning in this area. However, the site is not worth very much because of
- Governmental limitations
- The fact that properties in flood hazard areas cannot be rented
- Social limitations
- Physical or geographical limitations

Answer 27

Physical or geographical limitations

Question 28

An appraiser is preparing an appraisal report for a property located in a market where there appears to be a distinct segregation based on the age of the inhabitants—i.e., they are all over 50 years old. The appraiser should
- Define the market by the age of the inhabitants
- Define the market by the age of the potential buyers for the subject property
- Define the market by how old the previous buyers were when they purchased the property
- Refrain from defining a market by demographics such as age, race, religion, etc.

Answer 28

Refrain from defining a market by demographics such as age, race, religion, etc.

Question 29

Market value can be described as
- The price a person paid for real property
- The cost of the land plus the cost of the building
- The present worth of future benefits as anticipated by market participants
- Whatever someone would pay for something

Answer 29

The present worth of future benefits as anticipated by market participants

Question 30

The value of improved residential real estate is most influenced by the
- Passage of time
- Brokers’ opinions of the property values
- Changes in shopping patterns for consumers of goods and services
- Increases in the cost of construction

Answer 30

Increases in the cost of construction

Question 31

A trade area is
- An area where property owners trade rather than sell properties
- A geographic area from which a retail center draws its customers
- An area where the owners/inhabitants are generally employed
- An area where an office building owner will trade tenants with other office building owners

Answer 31

A geographic area from which a retail center draws its customers

Question 32

Market analysis is important in appraisals because it
- Is needed for market conditions adjustments in the sales comparison approach
- Is needed for future forecasts of income and vacancy in the income capitalization approach
- Is needed in the selection of comparable sales to ensure that they reflect the same market conditions
- All of the above

Answer 32

All of the above

Question 33

Retail space demand is affected by
- Changes in the gross building area (in square feet) needed per employee
- Changes in parking ratios in shopping centers
- Increases or decreases in disposable income
- All of the above

Answer 33

Increases or decreases in disposable income

Question 34

The current market in Smallburg is in balance, but the largest employer just shut down operations, resulting in a 10% increase in unemployment and a sharp increase in the number of people moving out of Smallburg. In the short run,
- The overall supply of housing will increase
- The overall supply of housing will decrease
- The overall demand for housing will increase
- The overall demand for housing will decrease

Answer 34

The overall demand for housing will decrease

Question 35

Lowering mortgage loan interest rates usually
- Increases the demand for apartment rental units
- Decreases the demand for apartment rental units
- Does not cause a change in the demand for apartment rental units
- Increases the supply of single-unit residences in the short run

Answer 35

Decreases the demand for apartment rental units

Question 36

An appraiser is asked to develop an opinion of market value for an owner-occupied residential property in a volatile market. In this case, it would be appropriate to emphasize
- A cost analysis
- The comparable leases
- The current comparable listings
- The opinions of professional brokers in that market

Answer 36

The current comparable listings

Question 37

An example of disaggregation in real estate markets would be
- Reclassifying several submarkets into one larger market
- Market segmentation
- Disintermediation
- Market trends

Answer 37

Market segmentation

Question 38

The subject site measures 125 feet by 255 feet and is improved with a single-unit residence. (Frontage is always the first dimension.) The local planning and zoning department indicated that the zoning classification is single-unit residential. The minimum lot size is 26,000 square feet, and the minimum frontage on the road is 150 feet. The subject would be best described as
- A legal use that conforms to development standards
- A legal nonconforming use
- A legal use that does not conform to development standards
- An illegal use that conforms to development standards

Answer 38

A legal use that does not conform to development standards

Question 39

The subject is a one-acre site currently zoned for commercial use. The maximum building size according to the floor area ratio rule is 2:1, which means that the building area cannot exceed twice the size of the land. The subject is improved with a 100,000-sq.-ft. commercial building. It was built when the subject site was two acres, but the owner sold off one acre to an adjacent owner. This would best be called a(n)
- Legal use that does not conform to development standards
- Illegal use
- Legal but nonconforming use
- Illegal but conforming use

Answer 39

Illegal use

Question 40

Paul went to a real estate closing to buy a residential property. At the closing, he signed a document that pledged the real estate as collateral for the loan. This document is called a

Mortgage
Mortgage note
Long-term lease
Debt collector

Answer 40

Mortgage

Question 41

The Federal Reserve System

Was established by and is now controlled by Congress
Was established by but is now independent of Congress
Was established by the president and is controlled by the president
Was established by and is controlled by the national banks of the United States

Answer 41

Was established by but is now independent of Congress

Question 42

The term “commercial paper” refers to
- Loans made by commercial banks
- Loans made by the Federal Reserve System to its members
A corporation’s short-term notes
A corporation’s long-term notes

Answer 42

A corporation’s short-term notes

“Commercial paper” refers to short-term notes issued by corporations to generate cash; these notes are not issued by banks (option a) or the Federal Reserve System (option b). This term does not refer to long-term debt (option d).

Question 43

A monthly amortized mortgage loan has a 7% interest rate and a current balance of $100,000. The payment amount is
- Less than $583.33
- Equal to $583.33
- More than $583.33
- $861.11

Answer 43

You don’t need the term of the loan to answer this. The interest alone on the first payment is $583.33, which does not provide for amortization. Amortization of a mortgage requires a payment that covers the interest plus an amount that allows the mortgage balance to go to $0 over the term (option a). The interest only is $583.33, which is not enough to amortize the loan. Assuming a 30-year loan, the interest on the first month plus 1/360th of the amount of the loan is $861.11. If the balance of the mortgage is divided by the term, assuming 360 months, this ignores the time value of money (option d). The mortgage payment must cover the interest ($583.33) plus something to amortize the loan.

Question 44

Leslie borrowed money at 6% to buy an investment that should yield 12%. This situation refers to positive leverage, which is:
- The use of borrowed funds to increase equity return
- The use of a lease to increase yield to the owner
- The use of an easement to limit land use
- An architectural tool to build improvements with doors and windows

Answer 44

The use of borrowed funds to increase equity return

Question 46

Martin owned a 40-acre parcel of land for the last 25 years. He has paid the taxes on the real estate for the first 20 years but has not paid them for the last five years. Which of the following statements is true?

• The government will get the taxes when the property is sold because real estate cannot be sold unless the back taxes are paid.
• The government has the right to force a sale of the real estate to pay the back taxes.
• The government is powerless to collect these taxes.
• The government will sue Martin, and the courts will garnish his wages to get paid.

Answer 46

The government has the right to force a sale of the real estate to pay the back taxes.

Question 47

The mayor of Smallburg asked an appraiser to prepare an appraisal of Fire Station 3 for the purposes of asset value reporting. The appraiser said that there was no market for the property as a fire station, so she prepared a cost approach to value with the market value of the land plus the current cost of construction less only the physical depreciation deductions. The appraiser is probably providing the client with

Market value
Investment value
Insurable value
Value in use

Answer 47

Value in use

Question 48

A property productivity analysis is

• The research of supply and demand for competitive properties
• An analysis of the capacity of a property to house economic activities, supply services, and provide amenities to meet human needs
• The analysis of how changes in population will affect the market for nearby properties
• The forecasting of excess supply and the subject’s capture of this excess supply

Answer 48

An analysis of the capacity of a property to house economic activities, supply services, and provide amenities to meet human needs

Question 49

The subject is a three-acre site that is improved with a multitenant office building. The site was fairly low cost when the building was built, and the adjacent road was two lanes with modest traffic. The highest and best use was office use. Now the adjacent road is six lanes, the highest and best use is retail, and the land value has doubled. The land value (VL) is now $900,000, and the improved property value (VO) is $1,500,000. Most offices in this market have a land value of about 25% rather than 60% like the subject. The extra traffic has not increased the rental rates. This high land-to-property value ratio
- Must be adjusted for in the income capitalization approach
- Must be adjusted for in the sales comparison approach
- Must be adjusted for in the cost approach
- Is irrelevant in all appraisal analyses

Answer 49

Must be adjusted for in the cost approach

The high land value does not change income or expenses, so it will not affect the outcome (option a). The high land value will not be realized until the building is removed and it does not raise the net operation income (IO), so it will not change the market value (VO) (option b). This issue is quite relevant in the cost approach (option d). Note that the cost approach separates the land and buildings, and the land is always valued as though vacant, so the higher land value will come through in this analysis. However, it will not add to the value overall until the land value is more than the improved property value, so there will be functional obsolescence for the wrong improvement on the retail site.

Question 50

A property sold, and the seller agreed to finance the sale. The buyer paid 10% up front and agreed to a 90% mortgage at a 7.75% interest rate with a 20-year amortization and a five-year balloon (premature payoff). The seller withheld the deed until the mortgage loan balance was paid off. The sale price is $500,000, and the contract had monthly payments in arrears. Which of the following statements is correct?
- This is an example of a purchase money mortgage.
- This is an example of a conditional sales contract.
- The monthly payment amount is $4,104.74
- The monthly payment amount is $8,062.78

Answer 50

This is an example of a conditional sales contract.

Question 51

Personal property that is installed in a permanent way for use in the tenant’s business on leased property is classified as
A fixture
A trade fixture
Personal property
Intangible property

Answer 51

A trade fixture

Question 52

A deed should be recorded because
- Recording gives public notice of the transaction and sets the priority of the claims
- It is required by law
- The title does not pass until the deed is recorded
- Recording makes the deed a legal document

Answer 52

Recording gives public notice of the transaction and sets the priority of the claims

Question 53

The term littoral rights refers to
- The rights of property owners to access a river or other navigable body of water
- The access rights for property owners whose property abuts a public street
- The rights of adjacent property owners to pass across a parcel
- The rights of property owners to access a lake or ocean

Answer 53

The rights of property owners to access a lake or ocean

Question 54

A property owner who fails to pay the real estate taxes levied by the government can

Not sell the real estate without clearing the tax lien
Not live on the property
Not take out a mortgage against the property
Lose his or her interest in the property

Answer 54

Lose his or her interest in the property

Question 55

A process whereby the owner gives title to the lender voluntarily because he or she is unable to meet its obligations is called

A voluntary foreclosure
A deed in lieu of foreclosure
A sheriff’s sale
A friendly adversarial foreclosure

Answer 55

A deed in lieu of foreclosure

Question 56

Lance bought a new ceiling fan and light at the hardware store and installed it in his home. It is now screwed into the wall and wired into a junction box with wire nuts. In most cases, this would be considered as

Personal property
A fixture
A trade fixture
Intangible

Answer 56

A fixture

Question 57

In the measurement of the gross living area (GLA) in single-unit residences, the appraiser should include
All finished areas above and below grade
Finished areas above grade that are heated and/or cooled
All finished areas above and below grade that are heated and/or cooled
All finished areas above grade regardless of whether they are heated or cooled

Answer 57

Finished areas above grade that are heated and/or cooled

Question 58

Gunite is
Pneumatically placed concrete that is usually associated with in-ground pools
A type of insulating material
A type of roof shingle
A part of a staircase

Answer 58

Pneumatically placed concrete that is usually associated with in-ground pools

Question 59

Romex is a type of

Material used for window blinds
Material used for electrical wiring
Asphalt paving
Material used for tile flooring

Answer 59

Material used for electrical wiring

Question 60

A jalousie is a type of

Window with several panes
Furnace
Wood framing
Earthen dam

Answer 60

Window with several panes

A jalousie is a type of window with several panes that are much wider than they are tall.

Question 61

Superstructure refers to

The area of a building that is not needed to meet minimum standards
A well-built building
An overimprovement
The area of a building that is above grade

Answer 61

The area of a building that is above grade

Superstructure refers to the area of a building that is above the ground.

Question 62

Footings are usually
The layout of a building’s ground floor
Below the freeze line in most buildings
The foundation walls of a structure
The same thickness as the framing walls

Answer 62

Below the freeze line in most buildings

The layout of the buildings’ ground floor is a floor plan, not a footing (option a). The foundation walls of the structure are above the footings (option c). The footings hold up the foundation and the superstructure. The footings are set in the soil. Therefore, the footings need to be wider than the foundation in order to hold up the weight (option d).

Question 63

Eaves are the

Portion of a roof projecting beyond the vertical wall of the building
Part of the floor system that is under the framing
Lowest part of the foundation
Top of the roof at its highest point

Answer 63

Portion of a roof projecting beyond the vertical wall of the building

Question 64

Functional inutility is
A weak market segment
An impairment of the functional capacity of a building due to design or construction
The lack of a utility room in a house
A weak market due to the oversupply of homes

Answer 64

An impairment of the functional capacity of a building due to design or construction

Question 65

A baluster is

• A person who inflates certain construction vessels
• One of the closely spaced vertical members in a stairway or balcony
• The fabric top in a curtain that is usually located on kitchen windows
• A weak or insignificant performance by an appraiser or other real estate professional

Answer 65

One of the closely spaced vertical members in a stairway or balcony

Question 66

Ceiling joists are the

Structural members that the ceiling is attached to
Structural members that the roof shingles and underlayment are attached to
Boards that the gutters are attached to
Steel supports that are under the first floor that run between the basement walls

Answer 66

Structural members that the ceiling is attached to

The structural boards that the underlayment is attached to are called rafters (option b). The boards that the gutters are attached to are usually called the gutter boards or belt boards (option c). The steel supports under the first floor that run between the basement walls are often called center supports (option d).

Question 67

Clapboard is

A type of wood siding
A place to put dishes and other kitchen utensils
A place in a house where the ironing board is usually stored
A type of roofing material

Answer 67

A type of wood siding

Clapboard siding is a type of overlapping wood siding.

Question 68

A coping is

A type of power saw used to crosscut logs
A small run of caulk around the front door
The space between bricks that is filled with mortar
The masonry cap put on a wall to provide for watershed

Answer 68

The masonry cap put on a wall to provide for watershed

A coping is not a tool; it is a cap on a masonry wall.

Question 69

The subject is a one-acre site that is currently zoned for commercial use. The maximum building size according to the floor area ratio (FAR) rule is 2:1, which means that the building area cannot exceed two times the land size. The subject is improved with a 100,000-sq.-ft. commercial building. It was built when the building code allowed an FAR of 3:1. This would best be called a(n)

Legal use that does not conform to development standards
Illegal use
Legal but nonconforming use
Illegal but conforming use

Answer 69

Legal use that does not conform to development standards

The use is not illegal since it was established prior to the change in building standards (options b and d). In this case, the use is not the problem because the property is zoned for commercial use and used for commercial purposes. The property’s use is fine, but its adherence to development standards is not (option c). While this may be poorly labeled as a “legal nonconforming use” in many communities, the development standards are the problem rather than the use.

Question 70

Balloon framing is

A type of window in a residence
A type of roofing structure in office building construction
A type of framing in which the studs extend from the sill to the roof in residential construction; the second floor is supported by a horizontal ribbon or ledger board and joists that are nailed to the studs
The interior walls in a finished basement in which the supporting walls are concrete but the finished walls are constructed of wood studs

Answer 70

A type of framing in which the studs extend from the sill to the roof in residential construction; the second floor is supported by a horizontal ribbon or ledger board and joists that are nailed to the studs

Question 71

The wall that separates one tenant from another in a multitenant office building is called a

Structural support wall
Curtain wall
Demising partition
Load-bearing wall

Answer 71

Demising partition

A structural support may or may not be a demising wall, and demising walls are often not support walls (option a). A curtain wall is an exterior wall that encloses but does not support the structural frame of a building (option b). The wall that separates one tenant from another in a multitenant of office building is called a demising partition (option d). 


Question 72

The difference between a left-handed and right-handed door is the direction in which the door swings open:

Answer 72

Face the side of the door that swings away from you. If the hinges are on the left, the door is left-handed, and if they are on the right, the door is right-handed.

Question 73

Effective age is the

Actual age of properties with better-than-normal maintenance
Total economic life minus the remaining economic life
Total utility plus the diminished utility
Total economic life minus the actual age

Answer 73

Total economic life minus the remaining economic life

Question 74

Jennifer is the owner of a condominium property in Green Acres. She probably owns

• An undivided fee simple interest in her unit and a share in the corporation that has the fee simple interest to the land
• The right to use and occupy her unit and an undivided interest in the common areas
• An undivided interest in the land under her building but no interest in any other property
• The unrestricted right to use her unit and exclusive control of the land under and immediately around the unit

Answer 74

The right to use and occupy her unit and an undivided interest in the common areas

Question 75

An appraiser is asked to appraise a single-unit residential property and observes that there is a clothes washer and dryer on the property. Which of the following statements is true?

• These items must not be included in the appraisal because they are personal property.
• These items can be included in the appraisal, but the appraiser needs to analyze their impact on the property’s value.
• The appraiser cannot include these items in the appraisal because they could be removed when the current owners leave.
• The appraiser must include these items in the appraisal because they were intended to be left with the property.

Answer 75

These items can be included in the appraisal, but the appraiser needs to analyze their impact on the property’s value.

Question 76

The Western Washington Township Wastewater Utility owns many miles of easements for pipelines in the service area. These easements would be best classified as

Conservation easements
Easements by necessity
Easements in gross
Preservation easements

Answer 76

Easements in gross

An easement by necessity is an implied easement commonly in favor of a buyer that has no access to his or her land except over other lands owned by the seller (option b). An easement by necessity may be implied when a landowner splits a property and the sold parcel is landlocked.

An easement in gross is similar to most easements used by utilities; it has no dominant estate since no single property is benefited by the easement. The term easement in gross describes an easement that does not favor a particular property owner. This type of easement is used by utility companies for the maintenance of pipes, cables, etc.

Question 77

Easements are another division of property rights. They usually give the right

To cross over or access another person’s property without obtaining the current owner’s permission
To access the property to perform any task, service, or action
To use the property for any purpose regardless of other land use regulations
To reenter the property if the payments are not made to the lender on time

Answer 77

To cross over or access another person’s property without obtaining the current owner’s permission

Question 78

The subject real estate is a parcel improved with a single-story home that is attached on two sides and has a slab floor. It includes a common maintenance agreement for the exterior repairs, common snow plowing and street maintenance, and a common pool, clubhouse, and tennis courts. There is a $100 per month fee for maintenance, and the broker said this property is a “condo.” The assessor’s records show that the property is a 4,000-sq.-ft. lot, and its legal description is “Lot 12 in the Calgary Addition.” This form of ownership is a

Fee simple interest in the attached home on a small lot with a mandatory fee
Condominium
Townhouse
Zero lot line

Answer 78

Fee simple interest in the attached home on a small lot with a mandatory fee

Question 79

A large piece of medical equipment was installed in a medical office building. The equipment is very large, and a section of the building had to be removed for the installation. The equipment was bolted to the floor to prevent movement, and it was wired and plumbed into the building. This equipment is a trade fixture if it

Is owned by the doctor who operates it
Is located on a leased property
Is owned by the same person who owns the building
Must be removed when the building is sold

Answer 79

Is located on a leased property

This equipment was installed in a permanent manner. It would be considered real estate in most legal classifications but is clearly a trade fixture if it is on leased premises (option a). The third option (“the equipment is owned by the same person who owns the building”) implies that the owner of the building owns the medical equipment, but the equipment would not be considered a trade fixture if the unit was leased or if there was a lease for the machinery in place (option c). The machinery could be included with the sale of the real estate if it were not a trade fixture (option d). It could also be considered as leased equipment in an owner-occupied property.

Question 80

Hilda and Henry bought a real estate property and asked that the deed specify ownership via joint tenancy. Which of the following statements is true?

Hilda and Henry own an undivided interest. If Hilda dies, her heirs receive the property. Her heirs may or may not include Henry.

Hilda and Henry each own a specific potion of the property and may exclude the other owner from it.

Hilda and Henry own an undivided interest. If Hilda dies, Henry receives the property.

Hilda and Henry own a specific portion of the property. If Hilda dies, the property goes to Hilda’s heirs, which may or may not include Henry.

Answer 80

Hilda and Henry own an undivided interest. If Hilda dies, Henry receives the property.

Under joint tenancy rules, the surviving partner receives the deceased partner’s interest upon the death of one of the owners (option a). Under joint tenancy rules, the property is owned as an undivided interest (option b), and the property goes to the surviving partner (option d).

Question 81

If the tax rate in an area is 125 mills and the assessment ratio is 1/3, what percentage of the property values would the taxes account for?

Answer 81

The correct calculation is:
0.125 x 0.3333 = 0.04166 = 4.166%

Question 82

Value in exchange is

The value that is the basis of an IRS 1031 exchange

The value of personal property associated with the sale of a business

The value of an asset as stated on the books at the brokerage agency

The value, in terms of cash, of a property that is bartered for another asset or assets, cash being the “yardstick” by which the comparative value of each can be assessed (used synonymously with market value in some markets)

Answer 82

The value, in terms of cash, of a property that is bartered for another asset or assets, cash being the “yardstick” by which the comparative value of each can be assessed (used synonymously with market value in some markets)

Value in exchange is used in some markets as a synonym for market value; it is the amount a seller will exchange for cash in a sale.

Question 83

In an economic base analysis, a basic industry is

An industry that services the community and does not generate more income than is consumed in the community

An industry that generates more income than is consumed in the community

Any industry that produces anything

An industry that represents the two highest employers in the community

Answer 83

An industry that generates more income than is consumed in the community

A basic industry is one that generates more income than is consumed in the community. For example, education would be a service industry in most communities but a basic industry in a college town. Manufacturing automobiles is nearly always a basic industry in any community (options a and c). A basic industry can represent the two highest employers in the community, but it doesn’t have to (option d).

Question 84

A full section of land usually

Measures 4,356 feet by 4,356 feet
Measures 2,640 feet by 2,640 feet
Includes 27,878,400 square feet
Measures 600 acres

Answer 84

A full section of land is one square mile, or:
5,280 × 5,280 = 27,878,400 square feet = 640 acres

Question 85

A heat pump is

• A heating system that is fueled by oil or natural gas that pumps warm air into the structure
• A cooling system that relies on evaporative cooling
• A heating system that relies on the heat generated by electricity passing through a poor conductor
• A heating or cooling system that relies on a refrigerant (such as Freon) for cooling and a reversed cooling system for heating

Answer 85

A heating or cooling system that relies on a refrigerant (such as Freon) for cooling and a reversed cooling system for heating

A heat pump is fueled by electricity, not oil or natural gas. It may have a gas auxiliary furnace, but the heat pump only needs electricity (option a). Evaporative cooling is a cooling system that relies on the cooling caused by water evaporation (option b). Heat is created by running electricity through poor conductive material; this is known as an electric resistance heater or furnace (option c).

Question 85

In building construction terms, the veneer on a structure is the

Outside covering that protects the structure from the elements

Wood or steel that holds the upper floors or roof in place

Part of the construction on which the floors are placed

Part of the structure on which the roof underlayment and shingles are placed

Answer 85

Outside covering that protects the structure from the elements

Option b describes the structural framing. Option c describes the foundation system, and option d describes the roof system—e.g., trusses.

Question 86

A manufactured home is
Any home with any parts made in factories
Any home for which the majority of the parts are made in a factory
A home that has a permanent chassis to provide for transportability initially and thereafter
A home with walls that were built in a factory but have no chassis, axles, or wheels

Answer 86

A home that has a permanent chassis to provide for transportability initially and thereafter

Question 87

A gravity heating system relies on

A blower fan to move heated air throughout the building

Natural gas to heat the air and a blower fan to move it within the building

Air density and weight to move the warm air throughout the building

The temperature of the earth to extract heat for a building

Answer 87

Air density and weight to move the warm air throughout the building

Question 88

Lath and plaster walls
Are made of gypsum board that comes in large sheets
Are found in almost all new houses today
Can only be used on curved surfaces
Include small strips of wood (lath) covered with a wet plaster that provide a surface for the walls when dried

Answer 88

Include small strips of wood (lath) covered with a wet plaster that provide a surface for the walls when dried

Question 89

A 1.5-story home typically has

Mostly vertical interior and exterior walls on the second floor
Interior walls that are built into the roof line of the second floor
Three floor levels that are above grade
Roof pitches of less than 5/12

Answer 89

Interior walls that are built into the roof line of the second floor

A 1.5-story home uses the attic area for the second floor living area (options a and c). The roof pitch must be steep enough to allow for living area below it. The roof pitch usually needs to be more than 5/12 (option d).

Question 90

Which of the following is the best technique for valuing transferable development rights?

The cost approach
The sales comparison approach
The income capitalization approach
A residual technique comparing the beneficial and diminished estates

Answer 90

The sales comparison approach

Question 91

A parcel of land was improved with 50 residential units. The units are all attached on one or both sides. There is a large sign on the property that reads “Zero Lot Line Homes for Sale.” Each owner was deeded a property that included the land and the foundation area for that unit. The owners of the units, including the homeowners association (HOA) president, tell all their friends that they live in Greentree Condominiums. This project is

Probably attached homes on small lots that are equal to the foundation; each person has sole ownership of his or her unit as well as membership in the HOA, which is responsible for maintenance

A standard condominium, with each person holding a tenancy-in-common interest

A standard condominium, with each person owning an undivided interest in the real estate

A new concept because attached buildings are a relatively new idea

Answer 91

Probably attached homes on small lots that are equal to the foundation; each person has sole ownership of his or her unit as well as membership in the HOA, which is responsible for maintenance

Question 92

A property abuts a river that runs from city to city. The river has barge traffic and small recreational traffic. This property probably has

No rights to access this river
Unlimited access to the river, including the right to build a dock, modify the shoreline, and even build a structure over the high-water mark
Riparian rights
Littoral rights

Answer 92

Littoral rights

A property that abuts a navigable body of water has littoral rights to access the water but does not normally include the right to modify the shoreline or build over the body of water (options a and b). Riparian rights refer to properties next to navigable bodies of water that lead from property to property—e.g., streams and rivers (option c).

Question 93

Charlie owns a parcel of land that is next to a river. The river is used every day for recreation, transport of cargo, and a gambling riverboat. Charlie’s real estate property rights probably

-Extend to the center of the river
- Extend to the high watermark of the riverbank nearest the property
- Extend to the high watermark of the opposite riverbank, thereby including all of the river
- Stop 30 feet short of the riverbank, thereby providing for a maintenance strip

Answer 93

Extend to the high watermark of the riverbank nearest the property

Question 94

Emblements are

The rights of a franchisee to income from that enterprise

Crops produced annually by the labor of a tenant; this property belongs to the tenant and upon his or her demise will pass to the tenant’s heirs

The signage on a plumbing fixture that indicates who produced that fixture

The right of a tenant to pick wild berries off the land of another
.

Answer 94

Crops produced annually by the labor of a tenant; this property belongs to the tenant and upon his or her demise will pass to the tenant’s heirs

Emblements are the crops produced by a tenant. They are considered the property of the tenant until harvest is possible.

Question 95

The subject is a five-acre parcel. Party A has owned it and has paid taxes on all five acres for 32 years. The owner to the north of the subject, Party B, obtained a staked survey of her property (adjacent parcel); the surveyor indicated that based on the legal description provided, this parcel extended about 20 feet into the subject parcel (as defined by the owner) to the south. In other words, the owner to the north and the owner to the south are both claiming ownership of a 20-ft. strip between them. The owner to the south (Party A) says that he doesn’t care about the survey; he owns the strip because he fenced it off 30 years ago.
His contention is based on

Eminent domain
Easement by prescription
Flawed thinking
Adverse possession

Answer 95

Adverse possession

Eminent domain is used by governments to acquire property but not to settle disputes between property lines (option a). Easement by prescription is defined in The Dictionary of Real Estate Appraisal (5th ed.) as “The right to use another’s land, which is established by exercising this right openly, hostilely, and continuously over a statutory period of time.” This does not involve ownership but rather the right to use. Easement by prescription is possible, but the owner is claiming the property rather than a right to cross over it (option b). The claim of the owner to the south is not based on flawed thinking due to adverse possession rules (option c). Note that appraisers should not make assertions about the ownership of real estate in scenarios such as this. This scenario would probably be decided in a courtroom or by a private settlement agreement.

Question 96

The subject real estate is a 2.55-acre site zoned for residential use improved with a 12,000-sq.-ft. retail building. The commercial use was established before the zoning was established and is not permitted within the residential zoning. A similar site with commercial zoning is worth $650,000. A similar site with residential zoning is worth $50,000. The cost of demolition of the improvements is estimated at $25,000. There is no possibility of a zoning change to commercial. The site value is

Answer 96

$50,000

The site is always valued as though vacant. There is probably also an increment of value in the legal nonconforming use, but that is not land value.

Question 97

A conditions of sale adjustment reflects

The differences in the market on the effective date of the appraisal and the dates of sale of the comparable sales

The differences between the motivations of the seller and buyer on the date of sale of a comparable and the motivations of buyers and sellers as described in the definition of value

The differences in sale prices of properties that sold for cash and the ones that sold with market rate financing

The differences in sale prices of properties that sold from non-related parties

Answer 97

The differences between the motivations of the seller and buyer on the date of sale of a comparable and the motivations of buyers and sellers as described in the definition of value

Question 98

Graphic analysis is an example of

Quantitative analysis
Qualitative analysis
Computer valuation using a graphics card
A technique used in land valuation only

Answer 98

Quantitative analysis

Question 99

Which of the following is not a part of the allocation method?

Find comparable sales of improved properties in the same market as the subject.

Divide the site value of each comparable sale by the cash-equivalent sale price of the same comparable sale to get a percentage of site-to-overall value for each comparable.

Divide the reconciled land-to-property value ratio by the improved property value range in the subject market to get a land (site) value opinion.

Make transactional adjustments—e.g., financing, conditions of sale, etc.

Answer 99

Divide the reconciled land-to-property value ratio by the improved property value range in the subject market to get a land (site) value opinion.

Option a describes part of the first step of allocation. Option b describes part of the fourth step of allocation. Option d describes part of the second step of allocation.

Option c is not part of the allocation method; it is incorrect because it involves division when multiplication should be involved.

Question 100

In the process of extracting capitalization rates for land (RL), comparables that are leased but have no building are not generally comparable to a property that was leased as vacant land and has a significant building because

After the building is built, the lease rate on the land must change

The building construction voids the land lease

The construction of the building makes fee simple more salable

The construction of the building lowers the risk to the owner of the leased fee

Answer 100

The construction of the building lowers the risk to the owner of the leased fee

Question 101

The subject property is located in a market where properties usually sell in 90 days. The subject has been listed for 180 days beginning at $459,000 for 90 days. It was then listed at $449,000 for 45 days and has most recently been listed at $429,900 for 45 days. What conclusion can be drawn from this information?

Answer 101

The subject is probably worth less than $429,900.

If the owner of the property has tried without success to sell it for a reasonable period of time for $429,900 and higher, it is logical to conclude that the market has rejected this price.

Question 102

A short sale is

Answer 102

A sale in which the lender’s loan balance is more than the net proceeds from a sale

A short sale describes a sale in which the proceeds are not sufficient to pay off the loan balance and the lender agrees to accept less than the balance to release the lien.

Question 103

A market with only one seller is a

Answer 103

monopoly

Question 104

A market in which there is only one buyer and one seller is a

Answer 104

bilateral monopoly

Question 105

a market in which there is only one buyer is

Answer 105

monopsony

Question 106

A client asked an appraiser for an opinion of the market value of a 1.5-acre site improved with an old one-story commercial building. The appraiser found sales of commercial buildings in better condition than the subject for about $250,000. The appraiser thinks the subject needs $100,000 of updating and repairs to equal the condition of those $250,000 sale properties. The appraiser found three sales of similar land that showed the market value of the site to be $200,000. What is the value of the subject property?

Answer 106

$200,000 less the cost of removal of the building if it can be removed for less than $50,000; otherwise, it is $150,000

Question 107

A common element of comparison used in residential appraisal is
Price per acre
Price per square foot of GLA
Price per cubic foot
Age of the improvements

Answer 107

Age of the improvements

Elements of comparison are reasons why the prices of real estate vary. The incorrect answer options are all units of comparison rather than elements of comparison.

Question 108

The subject real estate is a commercial parcel improved with a 10-year-old commercial building located in a small town. It contains 4,000 square feet of gross building area and has an unfinished basement. This property is selling for $350,000, and the seller has agreed to provide a special financing package worth $4,000. Examination of the market has revealed several sales of competitive properties:

Comparable 1 is a commercial property with a 2,800-sq.-ft. building with a basement. It was sold approximately one year ago for $275,000 with market rate financing terms. The seller did not participate in the cost of buyer financing.
Comparable 2 is a commercial property with a 3,000-sq.-ft. building without a basement. It sold one year ago for $280,000 with no seller participation in the buyer’s financing.
Comparable 3 is a commercial property with a 3,000-sq.-ft. building with a basement. It sold one week ago for $300,000 for cash and no seller participation.
What should be the respective magnitude and sign of the adjustments to Comparables 1, 2, and 3 for financing?
Correct Answer

0, 0, 0
+4,000, +4,000, +4,000
-4,000, -4,000, -4,000
+2,000, +2,000, +2,000

Answer 108

0, 0, 0

The subject’s financing does not affect the value. The concessions included in the subject’s price do not make the subject’s value higher. If the subject’s financing did affect the value, the value would depend on the seller’s agreement to pay the buyer’s financing and add it to the comparable’s price. The subject’s value could be 10% higher just based on the seller’s willingness to pay.

Question 109

In a market value appraisal, when should an appraiser make adjustments for seller contributions to the financing expenses of the sale?

Each and every time they exist
Any time the seller is paying part of the financing cost
When the seller-paid expenses exceed 4% of the sale price
When the seller contributions affect the sale price of the property; if the seller pays some expense but this does not affect the price, no adjustment is needed

Answer 109

When the seller contributions affect the sale price of the property; if the seller pays some expense but this does not affect the price, no adjustment is needed

If the seller-paid expense for financing does not affect the price, no adjustment is necessary.

Question 110

A comparable sale recently sold for $335,000 with the seller paying $15,000 in financing costs on behalf of the buyer. An appraiser used this comparable in an appraisal analysis and stated that the sale price was not affected by the seller-paid financing expense because the seller was highly motivated to sell and was willing to accept less money. Which of the following statements is correct?

If the seller was motivated and paid financing costs for the buyer, there should be two adjustments: one for the financing concessions and another one for conditions of sale (seller motivations).

This logic is correct; no adjustment is needed.

No financing adjustment is needed, but a conditions of sale adjustment is.

A financing adjustment is needed, but a conditions of sale adjustment is not.

Answer 110

If the seller was motivated and paid financing costs for the buyer, there should be two adjustments: one for the financing concessions and another one for conditions of sale (seller motivations).

Question 111

An appraiser found a comparable sale in which the seller accepted payment of the sale with a 5% down payment and the remainder to be paid in monthly payments. The buyer stated that he bought this property because he did not qualify to buy with market/bank financing and this was the only seller that would accept a contract sale. The interest rate on the contract was 1.5% higher than bank loans. The appraiser should

Make a financing concessions adjustment for this favorable financing

Make a financing concessions adjustment for this financing if it affected the sale price

Ignore this issue because it is too complicated

Ignore this comparable since the financing is not at the market price

Answer 111

Make a financing concessions adjustment for this financing if it affected the sale price

A financing concessions adjustment is needed if the sale price was affected by the financial arrangement.

Question 112

If a comparable property is 10% superior to the subject property and the comparable sold for $100,000, what is the indicated value of the subject?

$100,000 x 1.1 = $110,000
$100,000 / 0.9 = $111,111
$100,000 x 0.9 = $90,000
$100,000 / 1.1 = $90,909

Answer 112

$100,000 / 1.1 = $90,909

Question 113

An appraiser was working on an appraisal and found three comparable sales. For each comparable sale, the seller paid closing costs and other concessions on behalf of the buyer. The amounts that the sellers paid were $7,500, $5,500, and $6,000. If the appraiser does not adjust for these concessions, USPAP requires the appraiser to

Do nothing and report the market value opinion as indicated by the sales

Adjust these concessions but only for the amount above $5,000—which is the limit for concessions in any market value appraisal—and report the value after these adjustments as market value

State that the opinion of value is based on non-market financing or financing with unusual conditions or incentives, describe the assumed concessions for the property being appraised, and report the impact on value of the concessions

Adjust each sale up by the amount of the concession

Answer 113

State that the opinion of value is based on non-market financing or financing with unusual conditions or incentives, describe the assumed concessions for the property being appraised, and report the impact on value of the concessions

USPAP states that if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, the terms of such financing must be clearly identified and the appraiser’s opinion of their contributions to or negative influence on value must be developed through the analysis of relevant market data. There is no circumstance in which an upward adjustment would be made.

Question 114

A comparable sale is 20% inferior to the subject. The comparable sold for $500,000. What is the value of the subject?
$600,000 ($500,000*1.2)
$625,000 ($500,000/0.80)

Answer 114

$625,000

Question 115

An appraiser found two comparable sales that were identical except that one had 100 more square feet of GLA than the other one. The sale with the extra square feet sold for the same price as the one with less GLA. The sale with less GLA sold with $5,000 in seller-paid concessions. What is the adjustment for the extra GLA?

Answer 115

The correct calculation is:
$5,000 / 100 = $50

Question 116

An appraiser was researching a comparable sale and found a sale with a price of $450,000 for which the seller paid $25,000 to the buyer for the cost of getting a mortgage. The subject was listed for sale for 90 days at a price of $429,900 at the time of sale. What is the cash-equivalents sale price?

Answer 116

The cash-equivalent sale price is $425,000.

Question 117

In a tabular sales comparison approach grid, some appraisers use percentages, some use dollars, some add together the adjustment dollars, and others make adjustments and then subtotal after each adjustment. If an appraiser makes dollar adjustments and then sums those dollar adjustments to apply it to the gross price,

The appraiser is adjusting the adjusted price and therefore one adjustment affects the next

The appraiser is making each adjustment independent of the others; an adjustment or lack of adjustment for one element of comparison does not affect the next adjustment

The adjusted price is never the same as the gross price

The prior adjustments lower the impact on the subsequent adjustments

Answer 117

The appraiser is making each adjustment independent of the others; an adjustment or lack of adjustment for one element of comparison does not affect the next adjustment

Question 118

Units of comparison
Allow appraisers to not adjust for some differences in the property
Allow for meaningful comparisons of seemingly poor data
Usually assimilate the market thinking and behavior of typical buyers
All of the above

Answer 118

All of the above

Question 119

If an appraiser makes percentage adjustments as well as dollar-based addition and subtraction adjustments and subtotals after each adjustment in a sales comparison tabular grid analysis,

The order of these adjustments will affect the final answer because prior adjustments raise or lower the subsequent adjustment amounts

The final answer is incorrect because this technique adds or subtracts inflated amounts to the price

The first adjustment must be the market conditions adjustment, since all subsequent adjustments need to have been adjusted to the current market

The order of the adjustments will not affect the final value because multiplication is commutative, which means that 2 × 4 × 6 nets the same answer as 2 × 6 × 4

Answer 119

The order of these adjustments will affect the final answer because prior adjustments raise or lower the subsequent adjustment amounts

Answer 120

Nn

Question 121

The subject site is 3.45 acres and improved with a residence located at the center of the site. The minimum lot size is 1.0 acre with at least 100 feet of frontage. If vacant, this parcel would be two building sites. However, the house cannot be partitioned without a significant loss of privacy, which greatly inhibits both sales. Because of the placement of the house on the parcel, the appraiser thinks this can only serve as one site. This diminished utility and value is known as

External obsolescence
Functional obsolescence
Physical obsolescence
Physical depreciation

Answer 121

Functional obsolescence

The loss in value in this case is due to the placement of the improvements on the site and is functional obsolescence, not external obsolescence (option a). Physical depreciation is an appraisal term, but physical obsolescence is not (option c). The term obsolescence indicates that something is wrong, but physical depreciation is normal (option d).

Question 122

Reproduction cost is defined as the cost of

Building the improvements exactly as they were on the effective date of appraisal

Building the improvements exactly as they were on the date of the appraisal report

Building the improvements exactly as they would appear if they were new on the effective date of appraisal

Building the improvements with a similar quality and utility as of the date of construction

Answer 122

Building the improvements exactly as they would appear if they were new on the effective date of appraisal

Question 123

Indirect construction costs include

Architect’s fees
Builder’s overhead
Plumbing and electrical subcontractors’ bids or invoices
The builder’s insurance policy (liability insurance to protect the builder)

Answer 123

Architect’s fees

All of the incorrect answer options (b, c, and d) describe items that would be included in the builder’s contract and would be considered direct or “hard” costs.

Question 124

Replacement cost is best used

To eliminate some functional obsolescence from the cost approach

To eliminate all functional obsolescence from the cost approach

For nonresidential properties only

For residential properties

Answer 124

To eliminate some functional obsolescence from the cost approach

Question 125

The unit-in-place cost estimating method is

Based on historical cost

Based on the market-extracted costs per square foot of the building

The cost of a component of the building, including all labor and materials— e.g., linear feet of a wall, sections of the roofing, etc.

Always based on a computerized printout of all labor, materials, and extras

Answer 125

The cost of a component of the building, including all labor and materials— e.g., linear feet of a wall, sections of the roofing, etc.

Question 126

The subject property is adjacent to active railroad tracks. Comparable sales located next to the railroad tracks appear to be selling for substantially less. If the measured loss via paired sales analysis was $20,000, the adjustment in the cost approach would be

$20,000
More than $20,000
Discounted because some of the measured loss would likely be attributable to a lower land value due to proximity to the railroad tracks
Considered functional obsolescence

Answer 126

Discounted because some of the measured loss would likely be attributable to a lower land value due to proximity to the railroad tracks

Question 127

Many appraisers develop estimates of construction costs from cost services. Using the price per square foot of building area as a baseline for construction costs is called

Cost index trending
The comparative-unit method
The unit-in-place method
The quantity survey method

Answer 127

The comparative-unit method involves using a cost per square foot estimate from a cost service.

Cost index trending is a technique by which the appraiser bases a more contemporary cost of construction estimate on the actual cost of construction at a prior date.

The unit-in-place method is a modification of the quantity survey method. Cost of labor, materials, overhead, and profit are combined into a unit cost for each portion of the building. Cost per square foot for roofs and walls, and linear foot costs of foundation walls are examples of the unit-in-place method

The quantity survey method requires that the appraiser create a detailed inventory of every item of material, equipment, labor, overhead, and fees involved in the construction of a property. This method is not routinely used by appraisers because it is extremely time consuming

Question 128

What special problem does a legal nonconforming use create in the cost approach?

It overvalues the land and therefore the property

It undervalues the building and therefore the property

It is not reflected in the site value or improvement value, so it requires another increment of value to be added

It causes the sales comparison approach to undervalue the property

Answer 128

It is not reflected in the site value or improvement value, so it requires another increment of value to be added

A legal nonconforming use does not overvalue the land. The land value is always at the highest and best use as though vacant. Buyers will usually pay for a legal nonconforming use, which in the cost approach leaves out a portion of the property value (option a). A legal nonconforming use does not undervalue the building (option b) or affect the sales comparison analysis (option d). The land is always valued as though vacant, so legal nonconforming uses can mean that the value of the land as though vacant and at the highest and best use may be less than what the value of the land would be considering the legal nonconforming use. The value of the land assumes that a highest and best use is legally allowed. This means that the market value of the property will be the value of the land (with legal use), the value of the building and site improvements, and the value of the grandfathered zoning, which allows the owner to use the property for more than what the zoning allows.

Question 129

The subject site is improved with a one-story home with a four-bedroom configuration. There was a lot of demand for four-bedroom homes in this market when the subject was built, but two-bedroom configurations have become more popular over the years. After looking at paired sales, the appraiser thinks the loss in value from the lack of a popular configuration is $10,000. The cost to cure would be $25,000. The adjustment for functional obsolescence in the cost approach would be

Less than $10,000

$10,000

More than $10,000 but less than $25,000

$25,000

Answer 129

$10,000

It would be classified as functional incurable because it only costs $10,000 in value but costs $25,000 to remedy, so the prudent buyer would endure the loss rather than fix the problem

Question 130

A property has a poor floor plan because it has only 1.5 bathrooms in a market that clearly requires 2 or 2.5 bathrooms. This problem could be corrected for about $5,500 by moving some interior walls. The floor plan problem is fairly common in this market, and there is enough data to show that homes with this problem sell for $160,000 and homes without the problem (i.e., homes with two baths) sell for $170,000. This house is 30 years old. Adding the half bath during construction would have cost $1,000. This problem is best identified as

Physical curable depreciation
Functional curable obsolescence
External curable obsolescence
Functional incurable obsolescence

Answer 130

Functional curable obsolescence

The cost to cure is $5,500, and the value added is $10,000. Because it would be logical to cure the problem, this means it is curable.

Question 131

The equity dividend rate is measured against the

Market value

Purchase price

Mortgage amount

Initial equity investment

Answer 131

Initial equity investment

The equity dividend rate (also known as the cash-on-cash return) is a measure of the return on the equity invested in a property. It’s calculated by dividing the cash flow after debt service by the initial equity investment.

Question 132

Suppose that a lease contract called for a rent of $10 per square foot. However, similar space in the market rented for $15 per square foot. The amount specified in the lease is known as the ________ rent.

Contract
Market
Economic
Overage

Answer 132

Contract

Question 133

In real estate appraisal, what is meant by the term capitalization?

The conversion of income expectancy into a capital sum

The estimate of NOI before debt service

The use of upper case symbols for letters of the alphabet

The value developed by one of the methods or techniques commonly used in the income capitalization approach

Answer 133

The value developed by one of the methods or techniques commonly used in the income capitalization approach

Question 134

How does a projected decline in reversion value and periodic income affect capitalization rates (Ro)?

Answer 134

It raises them.

Capitalization rates are the ratio of the first year’s income to value. Therefore, if the future is better than the present, buyers will pay more, which is facilitated by a lower capitalization rate. If the value is decreasing, buyers will pay less, which shows a higher capitalization rate.

Question 135

How do you calculate equity dividend rate ( also known as the equity capitalization rate (Re)?

Answer 135

It is calculated by dividing the equity cash flow (Ie) by the down payment (the value of the equity).

Question 136

When calculating Pre-tax Cash Flow, which expenses do you deduct from Effective Gross Income (EGI)?

Fixed Expenses
Variable Expenses
Annual Debt Service

Answer 136

All

Question 137

What does “ annual rental payments (in arrears)” mean?

Answer 137

“in arrears” means that payments are made after the period to which they apply. So, if annual rental payments are made “in arrears,” the tenant pays the rent at the end of the rental period rather than at the beginning.

Question 138

When an investment has no change in value from the purchase to the resale, the capitalization and yield rates are _____

Answer 138

the same, because R = Y − Δn

Question 139

What is the best conclusion when market evidence shows overall capitalization rates below anticipated yield rates?

Investors expect future NOI and/or property values to __________

Answer 139

increase

Question 140

If the property value is declining, the yield would be _____ than the capitalization rate

Answer 140

lower

Question 141

You have net income multiplier (Example 16.55). How do you calculate overall capitalization rate (Ro)

Answer 141

The reciprocal of the net income multiplier is the capitalization rate:
1 / 16.55 = 0.0604 or 6.04%

Question 142

How do you calculate debt coverage ratio?

Answer 142

Debt Coverage Ratio = NOI / ADS

NOI - Net Operating Income
ADS - Annual Debt Service

Question 143

How Do you calculate Equity Dividend Rate (Re)

Answer 143

EquityDividendRate(RE)= AnnualCashFlowAfterDebtService /
InitialEquityInvestment

​

Question 144

How do you calculate Initial Equity Investment?

You know
- sale price
- mortgage amount

Answer 144

Determine the Initial Equity Investment
Purchase Price of the Property = $1,235,000
Mortgage Amount = 75% of the Purchase Price, aka 926,250

Initial Equity Investment = Purchase Price - Mortgage Amount

InitialEquityInvestment=1,235,000−926,250=308,750

Question 145

Determine the Annual Cash Flow After Debt Service

You know
- NOI
- Monthly Mortgage Payment

Answer 145

Annual Net Operating Income (NOI) = $96,000
Monthly Mortgage Payment = $6,546.54

Annual Debt Service = Monthly Payment × 12

AnnualDebtService=6,546.54×12=78,558.48

Annual Cash Flow After Debt Service = NOI - Annual Debt Service

AnnualCashFlowAfterDebtService=96,000−78,558.48=17,441.52

Question 146

What are primary uses of discounted cash flow (DCF) analysis?

To calculate the future value and payment

To calculate the present value and historical value

To calculate the rate of return and future value

To calculate the present value and rate of return

Answer 146

To calculate the present value and rate of return

Question 147

what is the difference between yield rate and internal rate of return

Answer 147

The yield rate generally represents the annual rate of return on an investment based on expected or required returns

the IRR is the discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero. It represents the actual rate of return based on the timing and magnitude of all future cash flows, including both positive (income) and negative (expenses) ones.

Question 148

An investor requires an 11% yield on all investments in a particular market and property type. What could be said about the investor’s expectations if the overall capitalization rates (RO) are 12%-14%?

Answer 148

The investor thinks property values are declining.

Question 149

debt service coverage ratio formula

Answer 149

Market Value = NOI / (DSCR * Loan-To-Value-Ratio * Mortgage Constant)

DSCR - Debt service coverage ratio

Question 150

There are three approaches used to develop an opinion of market value because

Answer 150

Purchasers have three alternative options available

Purchasers have three alternative options available: they can choose to build a new property (cost approach), rent an existing property (income capitalization approach), or buy an existing property (sales comparison approach).

Question 151

What is the final step of the valuation process?

Final reconciliation and determining the single value estimate

Final reconciliation and determining the range of value or the single point value estimate

Preparing and delivering the report with the defined value

Applying the three approaches to value

Answer 151

Preparing and delivering the report with the defined value

Question 152

When reporting real property appraisal assignment results, the appraiser must report the effective date of the value opinion and what other date?

Answer 152

date the completed report was transmitted to the client

Question 153

Advisory Opinions in the USPAP publication

illustrate the applicability of USPAP in specific situations.

are an integral part of USPAP.

carry the same weight as a Rule or Standards Rule.

help interpret existing USPAP Rules and Standards.

Answer 153

illustrate the applicability of USPAP in specific situations.

Advisory Opinions (AOs) are a form of guidance issued by the ASB to illustrate the applicability of USPAP in specific situations. AOs are not are part of USPAP and therefore do not establish new standards or interpret existing standards.

Question 154

In an appraisal assignment an appraiser must take reasonable steps to safeguard access by unauthorized persons to confidential information and what else?

assignment results

the identity of the subject

the identity of the client

public data sources

Answer 154

assignment results

The appraiser must not share assignment results and confidential information with unauthorized persons as addressed in the Confidentiality section of the ETHICS RULE.

Question 155

What type of assignment requires a reasonable exposure time opinion to be developed by the appraiser?

when the value developed includes reasonable exposure time in its definition

only in assignments when the purpose is market value

in all assignments involving the valuation of real property

whenever the value developed is current rather than prospective or retrospective

Answer 155

when the value developed includes reasonable exposure time in its definition

Question 156

When necessary for credible assignment results in developing a market value opinion for real property, what component of the appraisal process must be analyzed?

highest and best use

scope of work

identification of the problem

reconciliation

Answer 156

highest and best use

Question 157

Which entity has a supervisory role over state appraiser regulatory agencies and real property appraisers?

Appraisal Subcommittee
Appraiser Qualifications Board
Federal Housing Finance Agency
Appraisal Foundation

Answer 157

The Appraisal Subcommittee (ASC) maintains a supervisory role over state appraiser regulatory agencies and real property appraisers, and this includes monitoring the activities of the Appraisal Foundation.

Question 158

In the same month, an appraiser prepared an appraisal report and testified in court as to the value opinion. How long must the appraiser, at a minimum, retain the workfile for the assignment after final disposition of the judicial proceeding?

Answer 158

five years after preparation and at least two years after the final disposition

Question 159

What provides the context for the depth of the analysis required in development, and the level of detail required in reporting?

intended use
scope of work
purpose of the assignment
intended users

Answer 159

intended use

AO-36 clearly states that, “the intended use provide[s] the context for the depth of the analysis required in development and the level of detail required in reporting.”

Question 160

In a personal property appraisal assignment, the appraiser must define and analyze the appropriate market consistent with the type and definition of value. What must the appraiser recognize in this analysis of the market?

There are distinct levels of trade and each may generate its own data.

An outside resource study must be used to identify the market for the subject.

The market analysis must directly connect to the highest and best use for the subject.

The market analysis must be modified to the definition of value used in the appraisal.

Answer 160

There are distinct levels of trade and each may generate its own data.

The Comment to Standard Rule 7-3(b) states that, “the appraiser must recognize that there are distinct levels of trade (measurable marketplaces), and each may generate its own data.”

Question 161

For assignments involving personal property based on a market value opinion, the appraiser must analyze prior sales of the subject property over what time period?

within a reasonable and applicable time period

within a three-year period only

within the time period identified by the client

at least two years after final disposition of the property

Answer 161

within a reasonable and applicable time period

For personal property, Standard Rule 7-5(b) states the appraiser must, “analyze all prior sales of the subject property that occurred within a reasonable and applicable time period if relevant given the intended use of the appraisal and property type.” Of course, this assumes such information is available to the appraiser in the normal course of business.

Question 162

When must a service performed by an appraiser comply with USPAP?

when required by law, regulation, or agreement with the client

when performing a valuation service

when the client is aware the individual is an appraiser

when the services include a written report transmitted to the client

Answer 162

when required by law, regulation, or agreement with the client

The PREAMBLE states that, “an appraiser must comply with USPAP when either the service or the appraiser is required by law, regulation, or agreement with the client.”

Question 163

An individual acting in the capacity of an appraiser has been asked to collect general market data for a client. Which Rule of USPAP does NOT apply in this assignment?

SCOPE OF WORK RULE
COMPETENCY RULE
ETHICS RULE
JURISDICTIONAL EXCEPTION RULE

Answer 163

SCOPE OF WORK RULE

The SCOPE OF WORK RULE applies only to appraisal and appraisal review. Since collecting general market data would not be identified as an appraisal or appraisal review, the SCOPE OF WORK RULE would not apply.

Question 164

Appraiser A specializes in the valuation of retail properties for tax appeals while Appraiser B specializes in the valuation of office buildings for financial institutions. What is true about the relationship between these two appraisers?

The two would not be defined as appraiser’s peers of each other.

The two cannot be considered to have the same level of competency.

The two must only take assignments within their specialization.

The two will have similar scopes of work for their assignments.

Answer 164

The two would not be defined as appraiser’s peers of each other.

The DEFINITIONS section defines an appraiser’s peers as, “other appraisers who have expertise and competency in a similar type of assignment.” Therefore, the two appraisers would not be defined as appraiser’s peers of each other given their specialization.

Question 165

What property type(s) are covered in USPAP for mass appraisal assignments?

real and personal property
tangible property and intangible assets
business enterprise
all property types

Answer 165

real and personal property