Final Exam

Question 1

A fee appraiser seeks to get on the approved list for a local mortgage company. In order to be
considered for approval, the lender requires appraisers to provide sample appraisal reports
performed within the past year. Can the appraiser provide the reports without violating USPAP?

A. No; unless the appraiser secures a release from the client of each sample appraisal report
B. No; the ETHICS RULE prohibits appraisers from soliciting appraisal work
C. Yes; if all essential elements of confidential information are removed through redaction or
the process of aggregation
D. Yes; an exception to the Confidentiality section of the ETHICS RULE permits an appraiser to
provide appraisal reports to a lender for this purpose

Answer 1

C. Yes; if all essential elements of confidential information are removed through redaction or
the process of aggregation

Question 2

The owner of a self-service car wash has a $900,000 self-amortizing, 25-year mortgage at a 9.25%
interest rate, payable monthly. The loan must be paid off after 10 years. What is the amount of
the balloon payment due at that time, rounded to the nearest $1,000?
A. $540,000
B. $833,000
C. $808,000
D. $749,000

Answer 2

D. $749,000

Question 3

A shopping center has direct costs of $2,500,000. Indirect and soft costs are equal to 10% of direct
cost. Entrepreneurial profit is estimated to be 15% of hard and soft costs. What is the
replacement cost of the shopping center?
A. $3,125,000
B. $3,162,500
C. $2,875,000
D. $2,750,000

Answer 3

B. $3,162,500

Question 4

What interdependent economic factors create value?
A. Amenities, assemblage, scarcity and effective purchasing power
B. Utility, scarcity, desire, and plottage
C. Amenities, plottage, desire, and supply/demand
D. Utility, scarcity, desire, and effective purchasing power

Answer 4

D. Utility, scarcity, desire, and effective purchasing power

Question 5

A 50-unit apartment complex is being appraised. The appraiser is calculating the appropriate
annual replacement reserve allowance. Several items are new, but were determined to have useful
lives shorter than the physical structure: the appliances are $750 per unit, the roofs are $200,000,
and, the clubhouse furniture is $11,000. The appraiser believes management can earn a safe rate
of 4.5% on their reserve funds. What average annual reserve per unit must be allocated in order
to take care of the short-lived items, assuming they must be replaced every seven years and have
no salvage value?
A. $620
B. $560
C. $770
D. $710

Answer 5

A. $620

Question 6

What type of lease is most advantageous to a lessor in a rising expense market?
A. Base year stop
B. Triple net
C. Modified gross
D. Gross

Answer 6

B. Triple net

Question 7

The local zoning ordinance requires that any property with impervious coverage that discharges
more than 100,000 gallons of water in a 4-inch rainstorm must have a retention pond to handle the
water. The proposed subject property will have 260,000 s.f. of impervious surface. A cubic foot of
water contains 7.48 gallons and retention ponds can hold no more than 500,000 gallons for safety
reasons. There is no retention pond on the plan. How should the appraiser describe the building
and its compliance or noncompliance?
A. The building will discharge 86,667 gallons in a 4-inch rainstorm and will need a retention pond
B. The building will discharge 21,645 gallons in a 4-inch rainstorm and will not need a retention
pond
C. The building will discharge 648,580 gallons in a 4-inch rainstorm and therefore needs a
retention pond
D. The building will discharge 1,944,800 gallons in a 4-inch rainstorm and will need a retention
pond

Answer 7

C. The building will discharge 648,580 gallons in a 4-inch rainstorm and therefore needs a
retention pond

Question 8

A new building representing the highest and best use of its site can be constructed at a total cost,
including entrepreneurial incentive, of $12,000,000. The building capitalization rate is 11% and
the land capitalization rate is 7%. The property will generate a net operating income of
$1,500,000. What is the indicated value of the site, rounded to the nearest $1,000?
A. $6,750,000
B. $1,636,000
C. $2,571,000
D. $4,667,000

Answer 8

C. $2,571,000

Question 9

The subject property is 80 years old, and has a remaining economic life of 45 years, an observed
age of 15 years, and, a total life of 60 years, using the straight line or age-life method. What is the
total amount of accrued depreciation?
A. 25%
B. 33%
C. 18%
D. 56%

Answer 9

A. 25%

Question 10

An appraiser has developed an appraisal of a single-unit dwelling that is currently occupied by
tenants. Although the subject’s zoning is currently residential, the appraiser estimates that due to
the rising price of commercial land along this street, the subject will be purchased for commercial
development within two to three years. What term describes the current use of the property?
A. Nonconforming use
B. Speculative use
C. Interim use
D. Special purpose use

Answer 10

C. Interim use

Question 11

A four-unit residential property recently sold for $320,000. At the time of the sale it was fully
occupied with each tenant paying $900 per month rent. The average vacancy rate is 5%. What is
the indicated monthly gross rent multiplier derived from this sale?
A. 84.7
B. 84.4
C. 93.6
D. 88.9

Answer 11

D. 88.9

Question 12

A subject property is described as “the southeast 1/4 of the southwest 1/4 of the west 1/2 of Section
1, Township 32 South, Range 33 East.” What type of legal description is exemplified in this
situation?
A. Recorded plat
B. Rectangular survey
C. Public records
D. Metes and bounds

Answer 12

B. Rectangular survey

Question 13

The subject property has a two-car garage. The cost to add a third bay at the time of construction
was $5,000. The cost to install a third bay on an existing property is $8,000. The market will pay
$10,000 more for a house with a three-car garage. What is the garage adjustment to the sale price
of the comparable sale with a three-car garage?
A. -$5,000
B. -$10,000
C. +$5,000
D. -$3,000

Answer 13

B. -$10,000

Question 14

The subject is a 20-year-old residence with a replacement cost of $500,000. The costs to replace
short-lived items along with physical life expectancy are: HVAC - $10,000, 25 years; and, roof
cover - $12,000, 25 years. The roof was replaced five years ago. The water heater is
malfunctioning and will cost $1,000 to replace. What is the incurable physical deterioration due to
the HVAC?
A. $7,200
B. $8,000
C. $4,800
D. $2,400

Answer 14

B. $8,000

Question 15

A house in a commercial zone has a total property value of $300,000 and a commercial site value
of $350,000. Which of the following house demolition cost estimates obtained by the homeowner
will result in a highest and best use conclusion as a vacant commercial site?
A. $55,000
B. $45,000
C. $65,000
D. $60,000

Answer 15

B. $45,000

Question 16

An appraiser is asked to value the “E 1/2 of the SE 1/4 of the NE 1/4 of Section 35, T 4S, R 2E.”
What is the value of the parcel if the appraiser determines that land value is $1,500 per acre?
A. $60,000
B. $30,000
C. $7,500
D. $15,000

Answer 16

B. $30,000

Question 17

The subject property includes a two-story attached dwelling on a site subject to ground rent. The
annual ground rent for the subject property is $90. The owner of the property can obtain a fee
simple title to the land by paying the owner of the leased fee the capitalized value of the current
rent at the agreed rate of 6%. What is the value of the leased fee?
A. $9,000.00
B. $18,000.00
C. $1,500.00
D. $5.40

Answer 17

C. $1,500.00

Question 18

In the appraisal of a cooperative ownership, what property rights are valued?
A. Leased fee
B. Fee simple
C. Partial interest
D. Life estate

Answer 18

C. Partial interest

Question 19

The subject property is a 10,000-sf office building encumbered by a full-service lease with a contract base rent of $1.25 per square foot monthly. Stabilized vacancy/credit loss allowance for similar properties within the market area is 7% of PGI. The operating expense ratio for similar properties is 30% of EGI, plus reserves for replacement of $0.15 per square foot. What is the projected net operating income?
A. $93,000 
B. $94,500
C. $96,150 
D. $97,650

Answer 19

C

Question 20

2. The subject assignment is to appraise a vintage house built in 1880 using the cost approach. The house has metal stamped ceilings, lath, and plaster walls, which are items not easily available in today's construction. The estimated replacement cost using modern materials is $120 per square foot. Contractors charge $15 more per square foot to work on older houses. The estimated reproduction cost is $185 per square foot. What is the estimated loss in utility?
A. $15 per square foot 
B. $33 per square foot 
C. $65 per square foot 
D. $80 per square foot

Answer 20

C

Question 21

The occupants of a dwelling have been granted a life estate by their daughter. What interest does the daughter hold in the property?
A. Life tenant 
B. Remainder 
C. Trustee 
D. Trustor

Answer 21

B

Question 22

A client requires the cost approach be completed for a warehouse located in an industrial park. There are no vacant land comparables in the market area. There are three sales of commercial buildings in the industrial park with similar lots that the appraiser has researched extensively. The appraiser found the following information:
Sale 1 sold for $1,750,000. The buyer allocated 20% of the value to the site and 80% to the value of the structure.
Sale 2 sold for $1,000,000. The buyer was not available for verification, but the seller was available. The seller had just built the structure after holding the lot for 10 years as an investment property. The seller paid $100,000 for the lot and had earned 25% straight line annual return on his investment over the cost of the structure and its entrepreneurial profit.
Sale 3 sold for $3,500,000. The buyer estimated that 90% of what he paid was for the structure.
What is the indicated value of the lot using the allocation approach?
A. $125,000
B. $135,000
C. $350,000
D. $500,000

Answer 22

C

Question 23

A homeowner purchased two adjacent lots in a tract subdivision 20 years ago and built a single-unit dwelling entirely on one lot, utilizing the second lot as a side yard. The homeowner has decided to build a smaller home on the vacant side lot and retain the existing home as a rental. What term applies to the second yard?
A. Excess land 
B. Surplus land 
C. Underutilized site 
D. Vacant site

Answer 23

A

Question 24

While working on an appraisal of a residential property in a new home subdivision, the appraiser finds that the builders have a total of 100 home sites currently offered for sale. In measuring market demand, the appraiser notes that all of the builders combined are currently averaging two new sales contracts per month, and are expecting to sell 24 dwellings within the next year. What conclusion can be drawn with regard to the 100 available home sites and a market period of the next 12 months?
A. The market is in a condition of supply and demand
B. The market is in a condition of balance
C. The market is in a condition of undersupply
D. The market is in a condition of oversupply

Answer 24

D