Final Exam Flashcards
Which of the following suggests a market transaction, rather than a legal transaction, that may require an appraisal?
Exercise of a purchase option
USPAP requires that prior sales of the subject property be considered when they have occurred
Within 3 years
One statistical technique looks for a “central tendency” among the sales. Which of the following would describe the most commonly found sales price in a neighborhood study?
Mode or modal sales price
The purpose of verifying a sale with a party to the transaction is to
Improve the reliability of your data
You are deriving a gross income multiplier in the appraisal of a 14 unit apartment building. Market data is as follows:
16 units sold for $1,200,000 with a gross income of $150,000.
12 units sold for $ 960,000 with a gross income of $120,000.
4 units sold for $ 480,000 with a gross income of $ 48,000.
What GRM is suggested for the property under appraisal?
8
Which of the following requires using a Hypothetical Condition, as defined in USPAP?
A prospective appraisal
The appraiser’s opinion of the highest and best use in a written appraisal is required
In all market value appraisals
Which of the following is not a characteristic of a perfect market?
Government plays a large role
An appraisal is being made of a good quality, 25-year old, three bedroom home. The appraiser locates three comparables that have similar square footage, numbers of rooms, and construction quality. After viewing and rating the comparables, a summary is made as follows:
Data Comparable #1 Comparable #2 Comparable #3
Price paid $295,000 $300,000 $350,000
Location Inferior Equal Superior
Lot size Larger than Smaller than Equal to
subject subject subject
Amenities & Equal to Superior to Superior to
Condition subject subject subject
Dollar Adjustments Indicated by Market Study
Location difference = $40,000
Lot size difference = $20,000
Amenities and condition difference = $15,000
Problem:
Relying upon the comparables and the adjustments indicated, which of the following would be the best value conclusion for the subject property?
$300,000
As used in appraisal, all cost estimates relate to
Typical costs on the date of value
Which of the value approaches is considered to be the most direct?
Sales comparison
Income levels, growth rate, value trends, demand/supply factors and employment stability describe some of the
Economic factors affecting neighborhood quality
An environmental study shows that nearby toxic wastes have affected the neighborhood market. What kind of loss in value might be experienced by the improved properties?
Economic or external obsolescence
Neighborhood information assists the appraiser in
All of the above
A 10-unit property has a gross income of $8,000 per month. What is its probable value if the appropriate annual GIM is 8.0, based on analysis of comparable sales?
$ 768,000
Which of the four agents of production is said to be entitled to the “surplus” of productivity?
Land
The Uniform Standards of Professional Appraisal Practice (USPAP)
All of the above
Legal and physical problems should be noted in the site inspection. Which of the following is most likely to constitute a physical problem?
Soil instability
Which of the following best describes a condominium?
A land or air space unit, plus an undivided interest in the common areas
Whether a Self-Contained, Summary, or Restricted Use appraisal report is used should depend upon all of the following except:
Which value approaches were used
The “ASA” designation offered by the American Society of Appraisers is associated with
Accredited Senior Appraiser
In adjusting a comparable sale, the appraiser should always
Adjust the sale to the subject
Of the four elements of value, which one needs purchasing power?
Transferability
Of the four methods of estimating cost, which is the one most often used by appraisers?
Comparative square foot method
Older housing units built without side yards or common areas are called
Row houses
The age-life method of estimating accrued depreciation suggests that
Annual value loss is proportional to the total life expectancy
Which of the following is true?
Zoning is one example of a government restriction
To adjust the sales price of a comparable sale with a 10% inferior location, you should
Add 10% to the price
An appraisal can be simply described as
An estimate of value
People turn to professionals for appraisals in order to
All of the above
An apartment building has a potential gross income of $100,000 per year, vacancy and collection losses of 5%, and operating expenses of $35,000. What is the indicated value, if the net operating income is capitalized at 8%?
$ 750,000
A comparable property sold six months ago for $250,000 in a market that is seeing a 6% per year increase in value from appreciation. If you are making a current appraisal on a property that is judged to be 10% inferior in quality to the comparable sale cited, what is the indicated value of the subject (rounded to the nearest $1,000)?
$232,000
Which of the following can be considered political forces that affect value?
Federal loan regulations
“Effective” age most nearly means
Relative condition and marketability for age
Which of the following is considered an indirect cost?
Interest on construction financing
If 60% financing is available on a certain income property at a loan constant of 11%, what equity cash-on-cash return is available where the overall rate is 10.6%?
10.0%
The criteria for estimating the highest and best use of land include all the following except
The typical use
Which of the following is not a typical reason for using the cost approach?
To appraise older tract homes
The reconciliation process considers all but one of the following
The loan commitment
A competitive property means one that
A prospective buyer would consider as an alternative purchase
A lower density zoning code in a high rent apartment neighborhood has changed the usual comparison units and rules of thumb for land value. If vacant apartment-zoned lots could formerly be developed to 12 units each, but now can be developed to only 6 units, what value change is likely?
Both a and b are likely
Which type of value loss is attributed to causes lying within the property?
Functional obsolescence
Each adjusted sale may suggest a different value for the subject property. What should precede the value conclusion within the sales comparison approach?
All of the above
The first step in the appraisal process is to
Define the appraisal problem
A metes and bounds description identifies a parcel of land with
Perimeter lines, each described by direction and distance
All of the following represent unique problems in appraising planned unit developments except
Verifying the zoning
Which of the following do not represent private restrictions?
Zoning laws
Under one kind of lease, the tenant pays a minimum rent or a percentage of the gross sales, which ever is the larger amount. In such a lease, any amount over the minimum is often described as
Overage rent
Required data about a comparable sale should include
All of the above
Reconciliation of the value indications produced in an appraisal helps the appraiser
Arrive at a single conclusion of value
The applicability of any approach depends upon all the following except
How many approaches have been applied
Also referred to as diminished utility, accrued depreciation is defined for appraisal purposes as
Total loss in value from cost as if new
Which of the following is not true?
Fixtures are always personal property even when attached to real estate
The value of the lessee’s interest in real property can be defined or calculated as
The difference between the contract and market rent, capitalized over the life of the lease
If the site is typically found to represent 60% of the total value in a particular neighborhood, how much land value would be allocated from a $400,000 sale of a single family home?
$240,000
Construction classification refers to the
Type of basic frame, wall, floor and roof construction
Which type of appraisal report is the most formal?
The narrative report
A unique structure being appraised is known to have cost $70,000 in 1976. Your construction cost index indicates that costs on the date of value are 95% higher. What is the indicated reproduction cost on the date of value?
$136,500
The elements of a sale that need to be identified and compared include which of the following?
All of the above
A rectangle is
A closed four sided figure with four right angles, and opposite sides equal and parallel
Which of the following statements about the government survey system is false?
All sections are the same exact size
Investment properties are most often appraised by placing the emphasis on
Income approach
There are several types of rates used in income capitalization. Which of the following is composed of interest and recapture in separately determined amounts?
Composite rate
Advanced preparation for the site inspection should include
All of the above
These monthly average single family home prices were recently published by the local real estate board in the subject neighborhood:
April $170,000 August $176,000
May 171,700 September 178,750
June 173,500 October 180,500
July 174,000
If your date of value is November, how much total time adjustment would be indicated for a June sale in this neighborhood? (Hint: Project the April to October time trend to your date of value.)
4%
The price per square foot (or other unit of comparison) in the sales comparison approach usually
Declines as the number of units increase
Of the following alternative projects, one represents the highest and best use of a particular site being analyzed. Select the use that returns the greatest annual net income to the land after deducting a 10% return to the building cost.
Use Building Cost Annual Net Income
Office Building $500,000 $ 76,000
Shopping Center 700,000 98,000
Apartment 800,000 104,000
Shopping center
The boundary of a neighborhood is influenced by
All of the above
Real estate supply factors include all of the following except
Availability of vacant land
The income remaining after vacancy and credit losses are deducted from gross rent is known as the
Effective gross rent
Assume that a property has $130,000 gross effective income and operating expenses of $30,000. There is a 30 year loan commitment on the property with level payments of $68,000 payable annually. How much is the equity cash flow on this property?
$ 32,000
Construction quality is usually rated as either
Good, average, fair, or poor
The cost of a new roof should be considered a
A replacement reserve item
Which capitalization technique analyzes the cash flow after debt service, rather than the total net income?
Equity residual
Value is said to be the present worth of future benefits. This defines the principle of
Anticipation
A site zoned R-3 was approved for 10 new apartment units. After the owner-developer acquired an identical adjacent site, the combined parcel was approved for 21 similar units. The advantage gained is referred to as:
Plottage value
A 20-year old property sells for $240,000. If the lot is worth $100,000 and the building would cost $200,000 to reproduce, what is the annual rate of depreciation as indicated by the market?
1.5%
A new income property is being appraised and you have very few improved sales, and no vacant sales to estimate land value. Assume the following, and solve for the land value, using the land residual capitalization method.
Net operating income $ 64,000
Building cost $400,000
Interest rate 8%
Recapture rate 2%
$300,000
The fiscal policy of government is concerned primarily with
Government spending and taxation
An opinion of highest and best use in a market value appraisal of a vacant parcel
Both of the above
The most reliable method for estimating the amount to adjust a sale of a three-bath home being compared with the subject two-bath home usually is to use
Matched pairs
Which of these methods would be used to appraise a single-residential site in a built-up neighborhood where no vacant land sales are found?
The abstraction method
Title to property generally reverts to the state when the owner leaves no will or heirs. This illustrates the government’s right of
Escheat
The statement of limiting conditions is intended to
All of the above
Which of the following is a likely disadvantage of a key lot?
Has poor side yard privacy
The data required to be collected during the building inspection depends upon
All of the above
An appraiser should have no undisclosed financial interest in the results of the appraisal. This standard is intended to ensure
Impartiality
When appraising a condominium unit, the appraiser most commonly emphasizes the
Sales comparison approach
The economic base of a town depends upon
Its export production
A developer sold his own home to an employee at the office. The price was somewhat below the typical price for the neighborhood. You discard the sale on the basis that it was not
An open market transaction
For a new residential structure being developed, the direct construction costs have been estimated at $140,000. If certain indirect costs of 15%, and a 25% builder’s overhead and profit are added, what is the total construction cost for this building? Assume that the profit applies to both direct and indirect costs given.
$201,250
The principle of increasing and decreasing returns says that maximum value results from adding to the agents of production
Until they are in balance
By the cost approach, estimate the value of a 40 year old, 2,000 square foot house, based on the following:
House replacement cost $ 80/SF
Garage cost (400 square feet) $ 30/SF
Patio and yard improvements cost $ 15,000
Physical deterioration $ 27,000
Functional obsolescence (poor floor plan) $ 20,000
Land value from comparable sales $100,000
As indicated by the cost approach, the value of the described property is
$240,000
The best test of functional utility in a structure is its
Marketability
Market value most nearly means
The most probable selling price
Certain lending agencies performing Federally related appraisals may be required to go beyond the scope of USPAP by
All of the above
The four components of real property include
Land, permanently affixed objects, appurtenant rights, and that which is immovable
by law
For any land sale to be considered a valid comparable, it should be
Both of the above
The typical appraisal assignment is to appraise
The “fee simple” ownership
What is the net income ratio of a property where the potential gross income is $110,000; the vacancy and collection loss is estimated at $10,000; and the operating expenses are estimated at $30,000?
70%
