Final Exam Flashcards
What are the four basic forces that interact to influence the value of real property? (GEES)
Governmental, Economic, Environmental, Social
A property is worth $125,000 as a single-unit residence. The site is worth
$50,000. Zoning allows up to four units. If converted to a duplex at a cost of
$50,000, the property would be worth $140,000. If converted to a four-unit
apartment with conversion costs of $75,000, the property would be worth
$225,000. What is the highest and best use of the property as improved?
convert to four units
A new improved residential property just sold for $235,000. Direct construction
costs were $126,000, and indirect costs were 15% of direct costs.
Entrepreneurial profit was 25% of total improvement costs. What is the site value
by extraction (rounded to the nearest $5,000)?
$55,000
The subject property is located adjacent to a tattoo parlor, which the city has tried
numerous times to close but has been unsuccessful. The property located on the
other side of the parlor recently sold for $110,000. A property similar to the sale
but located on a nearby quiet residential street sold recently for $118,000.
external obsolescence.
Reproduction Cost Actual Age Useful Life
Boiler $4,500 8 years 20 years
Roof cover $3,500 12 years 25 years
Floor cover $6,000 3 years 15 years
What is the percentage of incurable physical deterioration for the boiler?
What is the amount of incurable physical deterioration for the roof cover?
What is the total incurable physical deterioration in the short-lived building
components?
40%, $1,680, $4,680
A builder bought two 15,000-square-foot lots that were adjacent to one another
and placed a residence in the middle of the two lots. All other homes in the
area occupy single, 15,000-square-foot lots. Because of the placement of
the residence, as well as zoning, side yard, and density regulations, no other
improvements can be placed on what should otherwise be two legally buildable
sites. What is the highest and best use of the subject sites as though vacant?
Build two separate residences, one on each lot.
A property consists of a 5-acre parcel with 467 feet of frontage on each of two
roads. A single-unit residence is located on the southeast corner of the site.
The property was never platted and there are no deed restrictions. The following
conditions apply:
The house and site improvements have a market value of $100,000.
Zoning requires a minimum of 2 acres and 200 feet frontage.
The market value of a buildable site in this area is $30,000.
Surplus land has a contributory value of $3,000 per acre.
What is the highest and best use of the site as though vacant and of the property
as improved?
Site as though vacant = Split property into two sites and develop separately
Property as improved = Split property into two sites, keep existing dwelling,
and develop second site
An appraisal assignment results in the following value indications: cost approach,
$200,000; sales comparison approach, $196,000; and income capitalization
approach, $190,000. What is the most appropriate value opinion?
An amount based on the most reliable and relevant data used
The subject property is a triplex with three identical units. The first unit rents for
$400 per month, the owner occupies the second unit, and the third unit rents for
$450 per month. Analysis of the market indicates that the market rent is $480
per month. The gross rent multiplier based on market research is 120. Using the
income capitalization approach, what is the indicated market value in the fee
simple interest?
$172,800
What is the adjustment for a two-car garage versus a three-car garage if the
reproduction cost of the three-car garage is $7,500, the reproduction cost of the
two-car garage is $5,300, and depreciation from all causes is 14%?
$1,892
A property has an effective age of 10 years with a remaining economic life of 40
years. Current construction cost is $300,000, and the site value is $25,000.
What is the depreciated value of the improvements?
10 years / 50 years = 0.20 × $300,000 = $60,000 depreciation
$300,000 − $60,000 = $240,000
A new property sold for $200,000. The site and site improvements are $25,000. The
same model home built 5 years ago just sold for $185,000, with the site and site
improvements worth $27,000.
5. What is the percentage of depreciation by market extraction?
Current construction cost = $175,000 ($200,000 − $25,000)
Depreciated cost = $158,000 ($185,000 − $27,000)
Depreciation = $17,000 ($175,000 − $158,000)
$17,000 / $175,000 = 0.0971, or 9.71%
A new house with 2,000 square feet sold for $300,000. The site and site
improvement cost is $50,000. The seller paid $5,000 in closing costs. Direct
costs were 72% of cost new. What is the indicated current construction cost per
square foot?
$300,000 − $5,000 − $50,000 = $245,000 current construction cost
$245,000 / 2,000 square feet = $122.50
A 2,000-square-foot, average-quality house costs $119 per square foot based on
the national cost service. The time multiplier is 1.05 and the location multiplier is
0.95. What is the current construction cost?
$119/sq. ft. × 0.95 × 1.05 = $118.70
2,000 × $118.70/sq. ft. = $237,400 rounded
What is the expected economic life of a property based on the following
information?
Sale price $437,000
Seller financing $7,500
Estimated site value $85,000
Value of site improvements $12,000
Current cost $450,000
Actual and effective age 20 years
Useful life expectancy 100 years
Depreciation = 26% ($117,500 ($450,000 – $332,500))
Annual rate = 1.3% (26 / 20)
Indicated economic life = 77 years (100 / 1.3)
