H&BU Flashcards
The value of a good quality home will suffer if it is located in a neighborhood of average or fair quality homes. What economic principle does this demonstrate?
Regression
Which of these is an example of the principle of progression?
Fair quality home in a neighborhood of good quality homes
Which stage of the life cycle does not happen in every neighborhood or property?
Renewal
If there are not enough homes available in a market to satisfy demand, what will happen to home prices?
they will increase
When appraising a property for market value, an appraiser must determine:
the highest and best use
When analyzing the life cycle for a neighborhood, which stage is characterized by equilibrium of supply and demand?
Stability
When analyzing the life cycle for a neighborhood, which stage is characterized by a strong demand and rising values?
Growth
The principle of surplus productivity is associated with which approach to value?
Income Approach
An informed buyer is considering two properties, but will only purchase one of them. They are substantially equivalent, and each has an annual net operating income of $18,000. Property A has a listing price of $199,000, while Property B is listed at $189,000. Which property is the investor MOST likely to purchase?
Property B
The value of a fair quality home will be enhanced if it is located in a neighborhood of all good quality homes. What economic principle does this demonstrate?
Progression
Perceived benefits from the ownership of income-producing property would include all of the following EXCEPT:
physical depreciation
Nothing ever remains stable or in balanced, as evidenced by the:
Principle of Change
When supply and demand are in balance in a market, this produces:
Equlibrium
The principle of contribution is most closely associated with:
the Sales Comparison Approach
Which of these would be an external factor that could affect the value of a single-family home?
an award-winning community library, a highly-rated school system and an auto wrecking yard located across the street
What are the four agents of production?
land, labor, capital, coordination
Which of these would NOT be an example of the principle of externalities?
an in-ground pool on the subject property
If a property is over-improved, or under-improved:
the four agents of production are out of balance
The fact that a property’s value may be different next week than it is today demonstrates what economic principle?
Change
Which of these can increase conformity in a neighborhood?
Covenants, Conditions and Restrictions, zoning ordinances and ordinances specifying minimum site sizes and setbacks
USPAP states that credible assignment results require _________.
support
A study of the market as a whole, as well as the investigation of conditions of a component of that market, for a particular type of property, is the definition of:
market analysis
Before the advent of the Internet, appraisers were frequently hampered by:
lack of reliable local market data
“A place where goods and services are exchanged” is the definition of a:
market
Today, if an appraiser has an “oddball” appraisal assignment and there is no local data, the appraiser can:
use the Internet to research data or contact other appraisers for data
What type of value is based on a specific investor’s needs and desires?
investment value
Typical marketing times for single-family homes in the subject’s area are 6-9 months. An appraiser is asked how much of a discount it would take in order to sell a particular property within 30 days. What type of value would this be?
liquidation value
The amount of money that a financial institution is willing to lend the borrower on a particular property is the:
loan value
Why does insurance value typically not include the value for the land?
land typically cannot be destroyed
The definition of market value included in USPAP Advisory Opinion 22:
is only an example
Most real property appraisal assignments are intended to develop an opinion of:
market value
What type of value includes an operating business with both tangible and intangible assets?
going concern value
When insuring a property, what is the cost of producing a functional equivalent of the insured improvement, using modern materials and techniques?
replacement cost
What does USPAP say about market value?
appraisers are cautioned to identify the exact definition of market value and its authority (Chapter 1, “Types of Value”: The Definitions section of USPAP cautions the appraiser to identify the exact definition of market value, and its authority, that is required for the specific assignment. Clients are not required to supply the definition. Remember that the requirements of USPAP apply to appraisers, not clients. )
Which statement is TRUE about property purchase loans and down payments?
The greater the down payment, the less chance the borrower will default.
If a property has significant liens or clouds on the title, and the owner is unable to sell it because of these issues, the property can be said to lack ___________.
transferability
One of the characteristics of land is heterogeneity. What does this mean?
each piece of land is unique
What is meant by “escheat”?
the government can claim a property upon the death of the owner if there is no will and no heirs
With regard to the four forces that create value, what is meant by effective purchasing power?
the ability of market participants to purchase a property
Three people own a property together. When one person dies, his undivided share of property ownership goes to the other two owners. What type of ownership is this?
joint tenants
Which statement is TRUE about real property value?
Market participants create value.
When valuing a piece of real property, the appraiser is really valuing:
the rights of ownership
A change in local employment and income levels would be considered a(n) ___________ force affecting values.
economic
If a party has all their ownership rights intact, what type of ownership is this?
Fee simple
In a typical subdivision with a Homeowners Association, who is responsible for enforcing the deed covenants?
the homeowners association
What type of value is generally considered equivalent to market value?
value in exchange
Governmental restrictions on use of land include:
eminent domain , taxation , escheat
When analyzing the life cycle for a neighborhood, which stage is characterized by a strong demand and rising values?
Growth
What does ownership in severalty mean?
one person owns the property
A study of the market as a whole, as well as the investigation of conditions of a subsection of that market, for a particular type of property, is the definition of:
market analysis
A change in a community’s zoning ordinance would be considered a(n) ___________ force affecting values.
governmental
Which economic principle holds that value is affected by the price of acquiring a property or good of similar utility?
Substitution
Which form of ownership allows for unequal ownership shares?
tenants in common
If a property is over-improved, or under-improved:
the four agents of production are out of balance
A property owner constructs a six-car garage at a cost of $80,000. It only adds $40,000 in value to the property. What economic principle does this best demonstrate?
Contribution, Chapter 1, “Contribution”: The principle of contribution states that market participants will ultimately determine what a given amenity will contribute to the overall property value. That is not the cost of the amenity, but what the public perceives as its worth relative to the property as a whole in a particular location.
The definition of market value included in USPAP Advisory Opinion 22:
is only an example
With regard to the four forces that create value, what is meant by utility?
a property must have usefulness in order to have value
When insuring a property, what is the cost of producing a functional equivalent of the insured improvement, using modern materials and techniques?
replacement cost
Which of these is an example of the principle of progression?
a fair quality home in a neighborhood of good quality homes
When a property is leased, what is the owner’s interest called?
leased fee: Chapter 1, “Forms of Ownership”: If the units are rented, some of the owner’s property rights have been transferred to the tenants. The owner’s interest is called the leased fee interest. The owner has, by agreeing to the lease, transferred some of his or her property rights to the tenants. The tenant’s interest in the property is called a leasehold interest.
When a property is leased, what is the tenant’s interest called?
leasehold
A change in typical family size in a market would be considered a(n) ___________ force affecting values.
social
Data that has already been compiled and is deemed to be reliable is:
secondary data source
Which of these would NOT be an example of general data?
site size
The subject property’s assessment record would be considered ________ data.
specific data
The dimensions of the subject property’s site would be considered what type of data?
specific data
The comparable sales used in an appraisal assignment are considered ______ data.
specific data
Market analysis in appraisals can be divided into ___ distinct categories.
two
In most markets:
demand changes faster than supply
When writing an appraisal report, charts and graphs may be used to replace parts of the narrative explanation.
True
Once the appraiser has gathered all the data, the next step in the process is:
isolating the information that is relevant to the assignment
In the purchase of a residential property, how does the principle of anticipation apply to the buyer’s actions?
buyer typically anticipates the value of the property will increase
When the market becomes saturated with a certain type of housing, what happens in the market?
marketing times lengthen
When appraising in a “seller’s market”, an appraiser is most likely to make adjustments for:
market conditions (“time”)
What is the likely result of an announcement of the closing of an industrial plant that is a region’s major employer?
decreasing property values
When supply catches up to demand, what happens in the market?
the market achieves balance
When we refer to “purchasing power”, which question are we asking?
Are prospective purchasers able to purchase this property?
Conclusions derived in the market analysis phase of the appraisal assignment can be used in which approach to value?
Income Approach , Cost Approach , Sales Comparison Approach
If the market achieves balance, or equilibrium, it is considered to be:
stable
What is the preferred method of estimating site value for residential properties?
Sales Comparison method
How would an appraiser estimate the estimated length of time it will take to sell the existing available inventory in a market?
absorption rate
What is another name for “average”?
mean
In a market area, there were 327 single-family sales last year, and there were 29 expired listings that did not sell. What is the expiration ratio for this area?
8%
A neighborhood in the decline phase of its life cycle may reach a point where the most likely buyer for properties will be:
investors
How might a local community entice a buyer to purchase a blighted property and revitalize it?
reduced tax assessment
During which period in a neighborhood’s life cycle will there be a strong demand for additional community infrastructure?
growth
A neighborhood in the decline phase of its life cycle will usually be characterized by a decline in:
both of these
The revitalization period of a neighborhood’s life cycle is also called:
renewal period
Examples of general data include all of the following EXCEPT:
square footage
Discussions of supply and demand in the housing market always return to the principle of:
balance
There were 24 sales in a subdivision in the last year, and there are currently 10 properties on the market. How long will it take the market to absorb this existing inventory?
5 months
In the purchase of a residential property, how does the principle of anticipation apply to the buyer’s actions?
buyer typically anticipates the value of the property will increase
What type of data would pertain to trends in the local market area?
general data
In a market area, there were 168 single-family sales last year, and there are currently 98 properties on the market. How long will it take to sell this existing inventory?
7 months
The comparable sales used in an appraisal assignment are considered ______ data.
specific data
Which period in a neighborhood’s life cycle will mean a demand for more social services to be supplied by the community?
growth
Once the appraiser has gathered all the data, the next step in the process is:
isolating the information that is relevant to the assignment
Questions about balance must be answered by the appraiser in order to:
measure the trends of the market area
Market identification involves:
subdividing the larger market into a workable study area
Which statement is TRUE regarding market identification?
The market may be subdivided more than once in order to arrive at an appropriate segmentation.
When analyzing a market for a high-value home, what is the MOST important consideration?
the number of acceptable and qualified buyers in the market for this type of property, “Analysis Restrictions”: The number of potential buyers in the market place is not as important as the number of acceptable and qualified buyers in the market for this type of property.
In analyzing the segmented market area, an appraiser might utilize:
list-to-sale ratios, absorption rates, and expiration ratios
A custom-built high-quality home is currently listed for sale, and is the only high-value home on the market in its area. The current owner/builder was a single man who disliked his family; consequently he built a one-bedroom home to discourage any of his grown children from moving back in with him. Which statement is true?
Even though it is the only home for sale, if it does not meet utility requirements of buyers, it has a lower value.
What does a real estate investor expect in return for tying his or her money up in an investment property?
an acceptable rate of return
Which statement is TRUE regarding the scope of work decision in an appraisal assignment?
It is the sole responsibility of the appraiser.
What type of analysis consists of primary economic research by an analyst?
fundamental analysis, Levels of Analysis”: Fundamental Analysis: This type of analysis usually consists of primary economic research by an analyst or consultant.
Who determines the appropriate level of analysis for appraisal assignment?
the appraiser
What type of analysis is developed by an appraiser using secondary data about current and past market trends?
inferred analysis, “Levels of Analysis”: According to Market Analysis for Valuation Appraisals, inferred analysis is principally performed using the studies and surveys of others (secondary data), while fundamental analysis relies primarily on the appraiser’s own data searches and surveys (primary data).
A community’s total employment is 52,220. The number of total core industry employees is 37,300. For every 10 jobs added in the core industry, how many additional jobs will be generated in the community?
four
When analyzing a market, an appraiser notes that there is a projected increase in production by major employers, which will result in an increase in employment. Which of the following conclusions is MOST TRUE?
An increase in the supply of housing is necessary.
A community’s total employment is 52,220. The number of total core industry employees is 37,300. If the core industry adds 920 more jobs, how many additional jobs will be generated in the community?
368
A community’s total employment is 29,120. The number of total core industry employees is 18,200. If the core industry adds 450 more jobs, how many additional jobs will be generated in the community?
270
What is the most common type of market study that appraisers are asked to complete?
feasibility analysis
What zones are designated as Special Flood Hazard Areas (SFHAs)?
A and V only
What is typically used to prevent back flow of sewer gasses into homes?
“p-traps”
Another term for platform framing is:
western framing
A property suffers from functional obsolescence because it has outdated single-pane windows. Installation of new multipane windows would cost $24,000 and would increase the value of the property by $20,000. This functional obsolescence is:
incurable
The length of time a given structure will contribute value to the property is its:
total economic life
An appraiser’s exterior measurement of a single story residential property indicates a GLA of 1,300 square feet. An interior inspection reveals an entry foyer of 370 square feet and an eight foot by ten foot unfinished storage area not accessible from the interior of the house. The GLA of the home is:
1,220 square feet
What entity produces flood hazard maps and assigns flood area designations?
FEMA
If a home has central air conditioning, what would be the minimum electrical amperage an appraiser would expect to see in the home?
150-200
Generally, a heating system should be able to maintain an interior temperature of ______ degrees Fahrenheit.
70
Generally, an air conditioning system should be able to maintain an interior temperature of ______ degrees Fahrenheit.
78
A property suffers from functional obsolescence because it has four bedrooms and only one bathroom. Installation of a second bathroom would cost $10,000 and would increase the value of the property by $12,000. This functional obsolescence is:
curable
What type of new home is MOST likely to have a pier and beam foundation?
a manufactured home
There is a significant oversupply of high-value homes on the market in Community A, and demand for these homes has not increased. Which statement is FALSE?
The value of all homes in the area will decline.
When a client asks for a feasibility analysis, what do they want to know?
whether a proposed project is feasible for the market place at this time
What type of analysis consists of primary economic research by an analyst?
fundamental analysis
When there is an open two-story foyer area, the ANSI standard for measuring residential square footage requires that this open second floor area:
be subtracted from the square footage totals
What is the reasonably probable and legal use of a property that is physically possible, appropriately supported, financially feasible, and results in the highest value?
highest and best use
The two types of highest and best use analysis are:
as vacant and as improved
How are existing improvements valued in a market value appraisal assignment?
based on their contributory value to the land
Is an opinion of highest and best use required in an appraisal that is NOT based on market value?
No, but it still may be necessary for credible assignment results
It is a requirement to develop an opinion of the highest and best use of a property:
in market value appraisal assignments
Which highest and best use criterion would require an appraiser to consider private deed restrictions?
legally permissible
Which highest and best use criterion would require an appraiser to consider the need for the land use, or how many similarly-used land areas are in the market area?
financially feasible
Which highest and best use criterion would require an appraiser to consider minimum lot sizes and height restrictions imposed by a local municipality?
legally permissible
When testing for highest and best use, which two criteria (or tests) are applied first?
legally permissible and physically possible
Which highest and best use criterion would require an appraiser to consider what improvements would fit on the site?
physically possible
When testing for highest and best use, which criterion (or test) is applied last?
maximally productive
If the improvements have a negative value, an appraiser must consider __________ in the feasibility analysis.
demolition cost
Only those uses which produce a positive return are considered _________.
financially feasible
A duplex is located in a commercially-zoned area. Residential sale prices in the area range from $75-85 per square foot. The residence could be converted to professional offices at a cost of $15 per square foot. Office space in this area is selling at $110-120 per square foot. What is the highest and best use of this property?
convert the residence into offices
“A use that is lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located” is the definition of what term?
Legally nonconforming use
A sports arena with restaurants and retail shops on the lower level would best be described as what type of property?
multiple use property
A single-family home is situated on a commercially-zoned lot. It would not be financially feasible to convert the home to commercial use, because there is not enough demand for commercial properties at this time. Demand for industrial property is very strong; however, a zoning change is unlikely. Demand for commercial properties is expected to increase as the community grows. What is the ultimate highest and best use for this property?
Commercial use
Land that is larger than typical for the area, but cannot be separated and used effectively and is not capable of a separate use, is:
surplus land
A property is currently zoned for agricultural use, but its highest and best use is expected to change to commercial use within the next 3-5 years. The subject property’s current use is considered:
interim use
A single-family residence is located in a commercially-zoned area. Residential sale prices in the area range from $80-90 per square foot. The residence could be converted to offices at a cost of $25 per square foot. Office space in this area is selling at $90-100 per square foot. What is the highest and best use of this property?
continue use as a single-family home
A property has two acres, in an area where one-acre lots are common. There is a home built on the property at one corner. The property is situated in such a way that one acre could be sold off and developed without affecting the existing homesite. This would be considered ___________ situation.
an excess land
Which of these would be considered special purpose properties?
fire stations , school buildings , places of worship
A parcel of vacant land is located in a blighted area where there is no demand for land. Which statement is TRUE?
The highest and best use may be to remain vacant.
Land that is larger than typical for the area, larger than what is required for the subject’s use, and is capable of being sold for a separate use is:
excess land
Which highest and best use criterion would require an appraiser to consider the shape of the site?
physically possible
Which highest and best use criterion would require an appraiser to consider excavation or filling that may be required in order for a site to accommodate an improvement?
physically possible
Land that is larger than typical for the area, but cannot be separated and used effectively and is not capable of a separate use, is:
surplus land
In highest and best use analysis, how do we determine maximum productivity?
the use that results in the highest land value
If the improvements have a negative value, an appraiser must consider __________ in the feasibility analysis.
demolition cost
_________ is defined in The Appraisal of Real Estate, 13th Edition, as “a use that was lawfully established and maintained, but no longer conforms to the use regulations of the current zoning in the zone where it is located.”
Legally nonconforming use
Which highest and best use criterion would require an appraiser to consider the availability of public utilities to a parcel of land?
physically possible
A home is situated on a two-acre site, in an area where one-acre sites are common. The home is directly in the center of the property, and it is not possible to subdivide off and develop a one-acre site from the subject site. This situation is best described as _______ situation
a surplus land
A single family residential dwelling situated in an area that has been rezoned for commercial use typically represents a(n) _________.
under-improvement; Chapter 4, “Legally nonconforming Uses”: Legal, nonconforming uses can take the form of under-or over-improvements. A single family residential dwelling situated in an area that has been rezoned for commercial use typically represents an under-improvement.
When testing for highest and best use, which two criteria (or tests) are applied first?
legally permissible and physically possible
Who would be the most likely purchaser for a multi-use property?
an investor
A single-family home is situated on a commercially-zoned lot. It would not be financially feasible to convert the home to commercial use, because there is not enough demand for commercial properties at this time. Demand for industrial property is very strong; however, a zoning change is unlikely. Demand for commercial properties is expected to increase as the community grows. What is the ultimate highest and best use for this property?
Commercial use
__________ is defined as “A use that is lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located.”
Legally nonconforming use
A single-family homesite is worth $40,000. The owner plans to build a 4,000 square foot home on it, at a cost of $600,000. When it is completed, the property will be worth $620,000. Which statement is TRUE regarding the proposed 4,000 square foot home?
It is not financially feasible
