Income Approach Definitions

Question 1

A projected income and expense statement for proposed development. See also reconstructed operating statement.

Answer 1

Pro Forma

Question 2

An element of comparison in the sales comparison approach; comparable properties can be adjusted for the effects of differences in the real property rights (fee simple, leased fee, leasehold, easements, or other encumbrances, involved in the transactions being compared.

Answer 2

Real property rights Conveyed

Question 3

An architectural style typified by a single-story, low roof construction.

Answer 3

Ranch

Question 4

The interests, benefits, and rights inherent in the ownership of real estate. Also called realty.

Answer 4

Real Property (the rights)

Question 5

Buyers and sellers of particular real estate and the transactions that occur among them.

Answer 5

Real Estate Market

Question 6

An identified parcel or tract of land, including improvements, if any.

Answer 6

Real Estate

Question 7

A remainder that has negligible economic utility or value due to its size, shape, or other detrimental characteristics; also called on economic remainder or uneconomic remnant. See also remainder.

Answer 7

Remnant. A small piece of land left over from assemblage or division that is not worth anything.

Question 8

Briefly details the unit information, such as lease terms, contact rent, as well as the effective date of the leases that are in place for the property.

Answer 8

Rent Roll

Question 9

Prepared by the appraiser, a reconstructed operating income statement reflects anticipated net operating income.

Answer 9

Reconstructed Operating Statement

Question 10

The official responsible for maintaining records or deeds, mortgages and other recorded documents.

Answer 10

Recorder

Question 11

In an urban area, the development or improvement of land that is undeveloped or has been cleared; technically includes the erection of buildings and other development and improvement of the land by private or public redevelopers to whom the land has been made available.

Answer 11

redevelopment

Question 12

A lump sum benefit that an investor receives or expects to receive upon the termination of an investment; also called reversionary benefit.

Answer 12

Reversion

Question 13

Money paid to an owner of real estate or the owner of mineral rights if different than the owner of the real estate, for the right to deplete natural resource (oil, gas, minerals, ect)

Answer 13

Royalty

Question 14

A dwelling that is designed for human habitation.

Answer 14

Residence

Question 15

An appropriation from surplus funds trhat is allocated to deferred or anticipated contingencies. In business, a credit account created to accumulated funds to retire debt or cover losses that are payable or expected to accrue in the future.

Answer 15

Reserve

Question 16

An overall capitalization rate used to estimate the resale price of the property; usually applied to the anticipated stabilized income for the year beyond the holding period; also called terminal capitalization rate.

Answer 16

Residual Capitalization rate
think of the residual capitalization rate as a tool that investors use to predict the property’s value after they’ve owned it for some time and it’s fully stabilized, meaning it’s generating a consistent and predictable income.

Question 17

The annual rate of return on capital that is commensurate with the risk assumed by the investor; the rate of interest or yield necessary to attract capital.

Answer 17

Risk Rate

Question 18

The price expected for a whole property or a part of a property that is removed from the premises usually for use elsewhere.

Answer 18

Salvage Value

Question 19

According to the Uniform Relocation Assistance and Real Property Acquisition Policy Act, a rule used in the establishment of just compensation. Any decrease or increase in the fair market value of real property, prior to the date of valuation, caused by the public improvement for which the property is to be acquired, or by the likelihood that the property would be acquired for improvement, other than that due to physical deterioration within the reasonable control of the owner, will be disregarded in determining the compensation for the property. (Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970 (P.L. 91-646) 42 USC. §4651 (3))

Answer 19

Scope of the Project Rule
In simple terms, the “scope of the project rule” is a guideline used when determining the fair compensation for real property that is being acquired by the government for public improvements like building roads, schools, or other infrastructure projects.

According to this rule, any changes in the property’s value that happened before the official valuation date, and are directly related to the government’s public improvement project or the likelihood of the property being acquired for that project, should not be considered when calculating the compensation for the property owner.

In other words, if the property’s value increased or decreased because of the upcoming public improvement project, that change in value should not be taken into account when determining how much the property owner should be compensated. This rule ensures that property owners are fairly compensated based on the property’s value as of the valuation date, regardless of any changes caused by the government’s project before that date. It helps to prevent property owners from being unfairly disadvantaged or overcompensated due to the public improvement plans.

Question 20

A transaction in which real estate is sold by its owner-user, who simultaneously leases the property from the buyer for continued use. Under this arrangement, the seller receives cash from the transaction and the buyer is assured a tenant.

Answer 20

Sale-Leaseback

Question 21

The minimum required rate of return on invested capital. Theoretically, the difference between the total rate of return and the safe rate is considered a premium to compensate the investor for risk, the burden of management, and the illiquidity of the capital invested; also called riskless rate or relatively riskless rate.

Answer 21

Safe Rate

Question 22

A physical characteristic of real property that says there is a limited supply of real estate; the perceived supply of a good or service relative to the demand for the item.

Answer 22

Scarcity

Question 23

The measure of the efficiency of insulation in a structure. R-values measure thermal resistance, which indicates whether or not the inside temperature is flowing to the outside. The higher the R value, the better the insulating properties.

Answer 23

R-value

Question 24

Data that is compiled by other parties and used by the appraiser.

Answer 24

Secondary Data

Question 25

A tax levied only against properties that benefit from a public improvement (e.g., a sewer or streetlight), to cover the cost of the improvement; this creates a special assessment lien, an involuntary lien.

Answer 25

Special Assessment

Question 26

Permission granted by a local zoning agency that authorizes a use as a special exception to the applicable zoning. A special use permit in a residentially zoned area might allow for construction of a church or hospital. Such uses are considered conditional uses, only permitted upon the approval of the zoning authority. Sometimes referred to as a conditional use permit.

Answer 26

Special Use Permit

Question 27

A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts.

Answer 27

Servicer

Question 28

Similar to rezoning but typically has small or individual land parcels as its subject rather than an entire zone or area. In some jurisdictions spot zoning is not permitted.

Answer 28

Spot Zoning

Question 29

Personalized evidence indicating authentication of the work performed by the appraiser and the acceptance of the responsibility for contents, analyses, and the conclusions in the report. USPAP

Answer 29

Signature

Question 30

1. The act of removing anything attached or affixed to land, or a part of the land itself, that causes a change of its character from real estate to personal property. 2. The separation of mineral ownership from land ownership; a conveyance of land in which mineral rights are excepted or reserved. 3. The termination of a joint tenancy or a tenancy in common. 4. Sometimes used as a synonym for severance damages.

Answer 30

Severance

Question 31

In condemnation, the benefits that arise from the peculiar relation of the land in question to the public improvement, usually resulting from a change in its highest and best use. Special benefits may accrue to multiple parcels (such as all four quadrants of a newly constructed freeway interchange) because the parcels are directly benefitted in a similar manner, if not to the same degree

Answer 31

Special Benefits In simple terms, "special benefits" refer to the advantages or positive changes in value that certain properties may experience due to a public improvement project, such as the construction of a new road or highway. Here's a straightforward explanation using an example: Imagine that the government is building a new freeway, and one of the exits of this freeway will be a large interchange connecting four different roads. Each road represents a separate parcel of land owned by different people or entities. When the interchange is completed, these four parcels will experience specific benefits that arise because of their close proximity and easy access to the new interchange.

Question 32

A method for determining the cost of a building that estimates the cost of reproducing it, by determining the unit cost of each of the component parts of the structure and adding them together based on actual need and usage.

Answer 32

Unit-In-Place Method

Question 33

The interval when space (office, retail, etc.) is unoccupied after one tenant has left and before another has moved in; used in consideration of the gross income estimate in discounted cash floe (DCF) analysis.

Answer 33

Vacancy Window

Question 34

The total amount of money that can be made from an investment.

Answer 34

Yield

Question 35

The monetary relationship between properties and those who buy, sell, or use those properties, expressed as an opinion of the worth of a property at a given time. USPAP

Answer 35

Value

Question 36

A unit or area of a building that is not rented

Answer 36

Vacancy

Question 37

Data, information, and documentation necessary to support the appraiser's opinions and conclusions and show compliances with USPAP. (USPAP)

Answer 37

Workfile

Question 38

In condemnation, the process of determining just compensation by estimating the value of the portion to be acquired as part of the whole property plus the net damages; maybe referred to as a taking plus damages rule. See also before and after rule.

Answer 38

State Rule "the before and after rule" or "the taking plus damages rule."

Question 39

The act of process of developing an opinion of value; an opinion of value. Of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Answer 39

Appraisal

Question 40

A nonprofit private organization which is recognized by Congress as the authority for professional appraisal standards and appraiser qualifications.

Answer 40

Appraisal Foundation

Question 41

An income approach to appraisal, with the overall rate of return, including discounted cash flow, considered.

Answer 41

Yield Capitalization

Question 42

An independent board of the APPRAISAL FOUNDATION, which writes, amends, and interprets USPAP. The ASB is composed of up to seven appraisers appointed by the Foundation's Board of Trustees. The ASB holds public meetings throughout the year to interpret and amend USPAP.

Answer 42

Appraisal Standards Board (ASB)

Question 43

A building separate from the main structure on a property. Often used for a specific purpose, such as a workshop, storage shed or garage.

Answer 43

Accessory Building

Question 44

A government's valuation of property for tax purposes. 2. A special tax, usually used to pay for community improvements.

Answer 44

Assessment

Question 45

An income capitalization technique that proportionally weights the interest charges and yields with respect to each segment of the financing.

Answer 45

Band of Investment Technique In simple terms, the "band of investment" technique is an income capitalization method used in real estate to determine the overall rate of return on an investment property. This technique takes into account both the equity invested by the owner and the debt borrowed to finance the property. Proportional Weights: The technique proportionally weights the interest charges (the cost of borrowing money) and the yields (the expected returns on the investment) based on the amounts of equity and debt used to finance the property. By considering both the cost of borrowing and the expected returns, the band of investment technique helps determine the appropriate rate of return required by investors to justify investing in the property. This rate of return is also known as the "capitalization rate" or "cap rate," and it's a crucial factor in evaluating the profitability and attractiveness of the investment opportunity.

Question 46

Housing where each unit shares a common wall, ceiling or floor with at least one other unit.

Answer 46

Attached Housing

Question 47

The ratio of a property's tax assessed value to market value.

Answer 47

Assessment Ratio

Question 48

An appraiser's opinions or conclusions, not limited to value, that were developed while performing an appraisal assignment, an appraisal review assignment, or a valuation service other than an appraisal or appraisal review.

Answer 48

Assignment Results

Question 49

A means of setting construction standards, requiring builders to use particular methods and materials; regulations establishing minimum standards for construction and materials. (There are different building codes for different systems: Electric, plumbing, etc.)

Answer 49

Building Code

Question 50

Two story houses with windows divided into small panes, usually with shutters. The main façade is detailed and symmetrical, generally with a center entrance. Architecture following the style of New England colonial houses. What type of architectural style is noted by a house in which the second floor living area is 100% of the first floor living area and is very symmetrical with a centered door with windows equally spaced on both sides? (this means the second floor living room is just as big as the first floor.)

Answer 50

Colonial Architecture

Question 51

A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, either by dividing the net income estimate by an appropriate capitalization rate or by multiplying the income estimate by an appropriate factor. Direct capitalization employs capitalization rates and multipliers extracted or developed from market data. Only in year's income is used. Yield and value changes are implied, but not explicitly identified.

Answer 51

Direct capitalization

Question 52

A one-story, home-style dating from the early twentieth century. Often characterized by a low-pitched roof.

Answer 52

Bungalow

Question 53

Specific items of personal property which are installed in a real estate improvement such that they become part of the building. Built-in microwave ovens and dishwashers are common examples.

Answer 53

Built-Ins

Question 54

An opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.

Answer 54

Exposure Time

Question 55

The overall capitalization rate obtained by dividing a property's net operating income for the first year after purchase by the present value of the property.

Answer 55

Going-In Capitalization Rate

Question 56

The use(s) of an appraiser's reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client at the time of the assignment. (USPAP)

Answer 56

Intended Use

Question 57

The annualized yield or rate of return on capital that is generated within an investment or portfolio over a period of ownership. Alternatively, the indicated return on capital associated with a projected or pro forma income stream.

Answer 57

Internal Rate of Return In easy-to-understand terms, the "internal rate of return" (IRR) is a measure used to calculate the overall rate of return on an investment over a period of time. It tells you how much your investment has grown or earned annually, on average, during the time you held it. Here's a simple explanation of how IRR works: Imagine you invested some money in a project or property, and over several years, you received various cash flows from that investment, such as rental income or profits. The IRR is the rate at which the total value of all those cash flows grows each year. For example, let's say you invested $10,000 in a real estate project, and over five years, you received annual cash flows as follows: Year 1: $1,000 Year 2: $1,200 Year 3: $1,500 Year 4: $1,800 Year 5: $2,200 To calculate the IRR, you find the interest rate that, when applied to these cash flows, makes the initial $10,000 investment grow into the sum of all the cash flows received over those five years. The IRR is expressed as a percentage. The IRR represents the average annual return on your investment. A higher IRR indicates a better-performing investment because it means your money is growing at a faster rate. Investors use the IRR to compare different investment opportunities and assess their potential profitability.

Question 58

Harriet is trying to establish an economic life for her subject property. She has found a comparable sale that is quite similar to her subject, and is located in the same market. It sold for $500,000 one month ago, and the sale price is reflective of market value. The building is 20 years old, and Harriet assumes the actual age is reflective of the effective age. The cost new of the building is $569,500. Harriet contacted the listing agent of the comparable and discovered that, prior to the sale, the comparable's site had a ground lease with an NOI of $10,000 and a land cap rate of 10%. Given these data, what is the estimated economic life of the improvements of the comparable sale property?

Answer 58

The comparable site has an NOI of $10,000 and land cap rate of 10%. Therefore, $10,000/.10 = $100,000 land value. The sales price was $500,000 and is reflective of market value (i.e. it is a market price). The market price - $100,000 (site value) = $400,000 (value of the building). The RCN is $569,500; subtract the value of the building $400,000 to arrive at the accrued depreciation of $169,500. The total depreciation divided by the total RCN = $169,500/$569,500 = 30%. The percent depreciation divided by the effective age = the annual depreciation rate: 30%/20 = 1.5%. The age-life method states that the effective age divided by depreciation rate is equal to the economic life. By the same token, looking at the formula one-year-at-a-time gives us the total economic life of the comparable: 1/1.5% = 67 years (rounded). This problem illustrates how principles from all three approaches can be used synergistically to solve an appraisal problem.

Question 59

If the market rent exceeds contract rent the difference is called

Answer 59

Deficit Rent If the market rent (what the property should rent for) exceeds contract rent (what the property is rented for), from the owner's perspective, the property is operating at a deficit.

Question 60

If the contract rent exceeds market rent the difference is called

Answer 60

Excess Rent If the contract rent (what the property is rented for) exceeds market rent (what the property should rent for), from the owner's perspective, the property is operating at a surplus, or excess.

Question 61

Property owner Bob is concerned about his roof cover. He wants to start saving to replace the roof cover, which has a useful life of 20 years. The estimated cost of the roof cover will be $40,000. Using a straight-line method, what is the estimated replacement reserve for the roof?

Answer 61

The replacement reserve is the non-cash set-aside to save for items that will have to be replaced. Examples include roof covers, water heaters, ect.The straight-line method ignores the fact that these reserves could be in interest-bearing accounts with principal and interest accruing over the term. According to the straight-line method the replacement reserve is: $40,000 replacement in 20 years = $40,000/20 years = $2,000/year.

Question 62

Operating expenses include

Answer 62

Operating expenses are deducted from effective gross income to derive net operating income and include fixed expenses, variable expenses, and reserves for replacement.

Question 63

Janet is appraising a 3-unit building. Her discussions reveal the following data: Unit 1 has experienced 3 months' vacancy over the last year. Unit 2 has had 1 month. And Unit 3 has had 2 months. Assuming the vacancy rate remains stable for the upcoming year, what is the forecasted vacancy rate?

Answer 63

Unit 1 has been vacant 3 months out of 12. Unit 2 has been vacant 1 month out of 12. Unit 3 has been vacant 2 months out of 12. That is 6 vacant months out of a total of 3 x 12 = 36 months. 6/36 = 16.7%

Question 64

Pre-tax cash flow (PTCF) is

Answer 64

NOI minus accumulated tax reserves The pre-tax cash flow (PTCFAA) is the MOI minus annual debt service. It is also known as the equity dividend.

Question 65

The operating expense ratio (OER) can be expressed as

Answer 65

1 - NIR (where NIR is the net income ration) The OER is operating expenses (OE) divided by the effective gross income (EGI), or OE/EGI. OER and NIR are complementary; that is, they add up to 100%. Therefore, 1.00 - OER = NIR and 1.00 - NIR = OER.

Question 66

The debt coverage ratio (DCR) is

Answer 66

NOI/Debt service The DCR is NOI/debt service. The DCR measures the adequacy of NOI to cover the debt service. Lenders often look to this performance measure to see if the investment is efficacious. Now, to remember the order of division, think about the "top" and "bottom" parts of the fraction:

Question 67

The capitalization rate (Ro) is the

Answer 67

Rate of return of and on investment The capitalization rate reflects the rate of return of investment (getting your original investment back) and the rate of return on investment (receiving interest on your investment). In simpler terms, the cap rate helps you understand both how soon you might get your initial investment back and how much extra money you could make from the property every year. It's a way to compare different investment opportunities and decide which one might be a better choice based on how quickly you can recover your money and how much "interest" you'll earn. Remember, a higher cap rate doesn't always mean a better investment because it might come with higher risks or other factors to consider. And a lower cap rate doesn't necessarily mean a bad investment if there are other advantages, like lower risks or potential for property value appreciation. It's just one tool to help you make informed decisions about your investments.

Question 68

The Net Income Ratio is the ________________ of the Operating Expense Ratio.

Answer 68

Complement The net income ratio (NIR) is NOI/EGI. The operating expense ratio (OER) is operating expenses/EGI. If the NIR is .30, then the OER must be .70; in other words they add up to 100%, which means they are complementary.

Question 69

The break-even ratio measures

Answer 69

The occupancy level at which the property can cover operating expense and debt service. The break-even ratio is (operating expenses plus debt service)/PGI. Say the expenses are $40,000 and debt service is $50,000. If PGI = $100,000 then: ($40,000 + $50,000)/$100,000 = .90. The subject breaks even at 90% occupancy.

Question 70

The loss of income due to non-payment of scheduled rent is called

Answer 70

Collection Loss The loss of income due to non-payment of scheduled rent is called collection loss. This is usually a more insidious problem than mere vacancies, because a collection loss infers the presence of tenants who are not paying rent and who are, therefore, undergoing eviction proceedings.

Question 71

The relationship between the capitalization rate and the value is

Answer 71

Inverse If the NOI is constant and the rate increases, the indicated value drops. Conversely, if the rate declines, the indicated value rises. Capitalization rates and values therefore have an inverse relationship.

Question 72

Pre-tax cash flow is also known as the

Answer 72

Equity dividend

Question 73

The relationship between the net income multiplier (NIM) and the capitalization rate (Ro) is

Answer 73

Reciprocal If the net income multiplier (NIM) is value / net income (NOI), and the capitalization rate (Ro) is NOI/Value, then Ro = 1/NIM (and the opposite is also true: NIM = 1/Ro). Therefore NIM and Ro are reciprocal.

Question 74

The loan constant is:

Answer 74

the capitalization rate of the loan Debt service/(loan amount). value of the loan The loan constant is higher than the interest rate because the loan constant represents the return on (interest) and the return of (principal) investment to the lender.

Question 75

What is the relationship between the level of risk and the capitalization rate?

Answer 75

A high level of risk equals a high capitalization rate. A high level of risk implies a high possibility of loss on the investment, a high-risk property will have a lower selling price or value.

Question 76

Ad valorem taxs, hazard insurance premiums, and utilities are all

Answer 76

operating expenses. Deb service is the principal and interest payment made to the lender, and is not an operating expense.

Question 77

An investment property has an NOI of $24,000 per annum and an OER of 40%. The EGIM is 15. What is the indicated value of the property?

Answer 77

The OER is 40%, therefore the NIR is 60% $24,000/.60 = $40,000 EGI x 15 = $600,000. Absolutely, in really easy terms: When you take $24,000 and divide it by 0.60 (which is the same as 60%), you're figuring out how much the original income (before expenses) would be if only 40% is spent on expenses. This gives you an effective gross income. So, $24,000 divided by 0.60 equals $40,000. This $40,000 is the effective gross income, which means it's the income after subtracting only the expenses (in this case, 40% of the original income). This helps us understand how much money the property is making after accounting for its expenses.

Question 78

What is the process to determine land residual?

Answer 78

Determining land residual value involves estimating the value of a piece of land based on the potential income it can generate when a development is built on it. This method is often used in real estate to evaluate the value of land for development purposes. Here's a step-by-step process to determine land residual value: Understand the Basics: The land residual method takes into account the potential income from a future development on the land and subtracts the costs associated with that development. The result is an estimated value of the land itself. Estimate Future Income: Determine the potential income that the development (like an office building, apartments, etc.) on the land could generate. This includes factors like rent, lease payments, or any other revenue sources. Calculate Future Expenses: Estimate all the costs associated with operating the development. This includes operating expenses, maintenance costs, property management fees, and any other relevant expenses. Determine Net Operating Income (NOI): Subtract the estimated expenses from the potential income to get the net operating income (NOI). This is the income generated by the development after expenses. Research Capitalization Rates: Look for market data on capitalization rates for similar developments in your area. The capitalization rate (cap rate) is the rate of return an investor expects to receive based on the income from the property. It's used to convert the income into an estimated property value. Calculate Property Value: Divide the NOI by the chosen cap rate to estimate the value of the developed property. This gives you the total property value if the development were already in place. Subtract Development Costs: Deduct the estimated costs of constructing the development from the calculated property value. This includes construction costs, permits, design fees, and any other expenses related to building the development. Land Residual Value: The remaining value after subtracting the development costs is the land residual value. This represents an estimate of the value of the land itself, considering its potential to generate income through the development. Compare to Market Data: It's essential to compare your land residual value with recent sales of similar vacant lands in the area. This helps ensure that your estimation is in line with the market trends. Consider Risk and Market Trends: Take into account any risks associated with the development, as well as the current market conditions. If the market is volatile or demand for the specific type of development is uncertain, adjust your calculations accordingly.

Question 79

The cost to construct the subject residence is $150.25/SF. The effective date is March 10. The effective age is 10 years; the actual age is 25 years. The subject residence has experienced recent remodeling. The gross living area of the house is 2,125 SF. The remaining economic life is 65 years. The land to building value ratio in the subject neighborhood is 25%. Given the above data, which of the following ranges best represents the subject's land value?

Answer 79

90,000 - $95,000 ( The land to value is figured on the value of the building new)?? The cost approach formula is: C - D + V(L) = V(O). Therefore: the cost is 2,125 SF @ $150.25/SF or $319,281.25. The age-life method of calculating depreciation uses effective age rather than actual age: effective age/economic life = % depreciation. Therefore, depreciation is 10/75 = .133. $319,281.25 x .133 = $42,570.83 (total depreciation). The value of the building = $319,281.25 - $42,570.83 = $276, 710.42. The L:B Value Ratio is 25%. Therefore, land is 25% of the total value, and the building is 75% of the total value. The value of the building is $276,710.42, which is 75% of the overall value. 276,710.42/.75 = $368,947.22. Subtracting the building value yields $92,236.80, which falls into the range $90,000 - $95,000.

Question 80

If a lot contains 1,500 square yards and has a width of 50 feet, the depth is:

Answer 80

270 feet 1,500 square yards is 13,500 square feet. (1,500 x 9). 13,500 divided by 50 (frontage) equals a depth of 270 feet.

Question 81

All of the following methods are acceptable methods of valuing an individual single family lot which is not generating any rental income EXCEPT:

Answer 81

Capitalizing ground rent The value of residential property may be estimated using the sales comparison method, the allocation method, or extraction method. Capitalization of ground rent and land residual technique require the property to be income-producing. The subdivision development method is not used in valuing single lots like the subject.

Question 82

Which technique for determining land value requires an appraiser to deduct the net income applicable to the building from the total net income, and then capitalize the remainder and attribute the result to the land?

Answer 82

Land Residual When using the land residual technique, the appraiser first deducts the NOI that is earned by the building from the total NOI. The remainder NOI is attibutable to the land. This remainder NOI is capitalized at the land capitalization rate to produce an indication of land value.

Question 83

Which method of site valuation would be used to appraise a surface parking lot in a downtown area leased to a parking lot operator?

Answer 83

Ground rent capitalization QUESTION RATIONALE This procedure is used when land rental and capitalization rates are readily available. The ground rent paid for the right to use and occupy the land is divided by a land capitalization rate.

Question 84

Which method of valuing the land component of a property subtracts the depreciated cost of improvements from the total sale price of an improved property?

Answer 84

Extraction The extraction method of valuing land is subtracting the depreciated cost of improvements from the total sale price.

Question 85

The original cost of the improvements on a property was $350,000. The depreciated cost of the improvements is $250,000. The sale price of the property is $400,000. What is the value of the land by the extraction technique?

Answer 85

$150,000 Sales price $400,000 minus depreciated cost of improvements $250,000 equals $150,000.

Question 86

The landlord's ownership interest in leased property. Defined by the amount of contract rent over and above market rent. Also, called Leased Fee Estate.

Answer 86

Leased Fee Interest

Question 87

Statement by the appraiser explaining the framework used to reach the appraisal value and establishing the report's limitations.

Answer 87

Limiting Conditions

Question 88

The price expected for a whole property (e.g., a house) or a part of a property (e.g., a plumbing fixture) that is removed from the premises usually for use elsewhere.

Answer 88

Salvage value

Question 89

A use of land available to the owner under current laws and zoning regulations.

Answer 89

Legal Permissibility In the context of "legal permissibility" related to the use of land, it refers to whether a particular use or activity on a piece of land is allowed and authorized by the applicable laws and regulations. It addresses whether the proposed use aligns with the zoning rules, land use regulations, and any other legal requirements in the specific jurisdiction.

Question 90

Appropriate or fair value for private land taken by the government for public use. See: Eminent Domain.

Answer 90

Just Compensation

Question 91

A tax term used in exchanges. Property may be exchanged for like in kind property and the tax postponed. The term does not refer to the physical similarity of the properties but the purpose and intent 9investment) of the tax payer.

Answer 91

Like In Kind Property

Question 92

A form of co-ownership in which the co-owners have equal undivided interests and the right of survivorship. Joint tenancy must have the four unities present.

Answer 92

Joint Tenancy

Question 93

A non-possessory interest in property, giving a lienholder the right to foreclose if the owner does not pay a debt owed to lienholder. 2. A financial encumbrance on the owner's title.

Answer 93

Lien

Question 94

One who conveys the rights of occupancy and use to others under lease agreement.

Answer 94

Lessor

Question 95

One who has the right to occupancy and use of the property of another for a period of time according to a lease agreement.

Answer 95

Lessee

Question 96

Larger Parcel

Answer 96

In simple terms, a "larger parcel" is a bunch of neighboring pieces of land that are owned or controlled by one person or group. These pieces of land should be used together in a smart way to get the most value from them. To think of it simply, imagine you have a few plots of land next to each other. If these plots are owned by one person or group and can be used in a similar way to make the most money or be the most useful, then you can call them a "larger parcel." When people want to take a part of this land for things like building roads or other projects, they look at how it affects the whole group of land. They make sure that the taken part still makes sense as part of the bigger group. This is important because it helps figure out how much money the owner should get for the part that was taken. Sometimes, even if the pieces of land are not right next to each other, they can still be considered a larger parcel if they are used together in a special way that makes sense. This helps in cases where the parts of the land are not all connected, but they still have a common purpose or use that's really important.

Question 97

A description of land that identifies the real estate according to a system established or approved by law; an exact description that enables the real estate to be located and identified.

Answer 97

Legal Description

Question 98

Any type of written letter, memorandum, or statement that serves as a notice of delivery from the valuer to the client of a report containing an opinion or conclusion concerning real estate; often a brief document in the introduction to a report that formally presents the report to the person for whom the appraisal was prepared.

Answer 98

Letter of Transmittal Think of a "letter of transmittal" as a special note or message that an appraiser writes to someone who hired them to evaluate a property (like a house or land). This note is like a formal way of saying, "Hey, I'm giving you the report with my thoughts and conclusions about the property."

Question 99

An estate that gives the holder (tenant) a temporary right to possession, without title. Also called Less-than-Freehold Estate.

Answer 99

Leasehold Estate

Question 100

An income method of site valuation that attributes a certain part of the income produced by a property to the building or other improvement, then attributes the remaining income to the land.

Answer 100

Land Residual Method

Question 101

The amount of money a lender is willing to loan to someone to finance a property.

Answer 101

Loan Value

Question 102

The characteristics or attributes of properties and transactions that cause the prices of real property to vary; include real property rights conveyed, financing terms, conditions of sale, expenditures made immediately after purchase, market conditions, location, physical characteristics, and other characteristics such as economic characteristics, use, and non-realty components of value.

Answer 102

Elements of Comparison

Question 103

An element of depreciation; curable defect caused by a flaw involving the structure, materials, or design, which can be practically and economically corrected.

Answer 103

Curable Functional Obsolescence

Question 104

A set of procedures through which the value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised.

Answer 104

Cost Approach

Question 105

A cost approach appraisal method which has the appraiser count the number and type of each part and material that were used to construct the building, plus adding a cost for labor, profit, permits, etc.

Answer 105

Quantity Survey Method

Question 106

An qualitative technique for analyzing comparable sales; a variant of relative comparison analysis in which comparable sales are ranked in descending or ascending order of desirability and each is analyzed to determine its position relative to the subject.

Answer 106

Ranking Analysis

Question 107

A property title that title insurance company agrees to insure against defects and disputes.

Answer 107

Insurable Title

Question 108

An element of depreciation; a defect caused by a deficiency or superadequacy involving the structure, materials, or design that cannot be practically or economically corrected as of the effective date of the appraisal.

Answer 108

Incurable Functional Obsolescence

Question 109

A method that requires the recognition of the differences between the comparable data and the subject property and assigning either a market derived dollar or percentage amount as an adjustment.

Answer 109

Quantitative Adjustments

Question 110

A site valuation method takes an estimated value of improvements and subtracts that from the total sales price to derive a figure for the land value.

Answer 110

Extraction Method

Question 111

A site valuation method that separates the value of the land from the structures that sit on it by taking a ratio of the land or site value to the total property value, based on a typical property in the area.

Answer 111

Allocation Method

Question 112

A method used after any quantitative adjustments have been applied that employs the appraiser's judgment in forming opinions relying on such methods as relative comparison analysis (bracketing), ranking analysis, and/or personal interviews. The method requires good judgment and reasoning skills of the appraiser.

Answer 112

Qualitative Analysis

Question 113

An element of comparison in the sales comparison approach; comparable properties can be adjusted for differences in the points in the real estate cycle at which the transactions occur. Sometimes called a "time adjustment" because the difference in dates of sale are often compared, although that usage can be misleading because property values di nit change merely as the result of the passage of time.

Answer 113

Market Conditions

Question 114

A quantitative technique used to identify and measure adjustments to the sale prices or rents of comparable properties. To apply this technique, sales or rental data on nearly identical properties, or adjusted data, is compared to isolate an estimate a single characteristic's effect on value or rent. Often referred to as paired sales analysis.

Answer 114

Paired Data Analysis

Question 115

The cost (including entrepreneurial incentive) to restore an item to new or reasonably new condition.

Answer 115

Cost to Cure

Question 116

The value of a property if sold under duress or in a must-sell situation with less than typical market exposure.

Answer 116

Liquidation Value

Question 117

Impairment of condition; a cause of depreciation that reflects the loss in value due to wear and tear, disintegration, use in service, abuse and the action of the elements. See also curable physical deterioration; depreciation; incurable physical deterioration.

Answer 117

Deterioration

Question 118

The value of property for accounting purposes, based on cost, less accrued depreciation.

Answer 118

Book Value

Question 119

The value of property based on specific investment criteria.

Answer 119

Asset Value

Question 120

Method for determining the cost of a building that uses the cost of recently built comparable buildings as a basis for estimating the cost of replacing the subject property.

Answer 120

Comparative Unit Method

Question 121

Statistical measure that attempts to ascertain the source of change in variables.

Answer 121

Regression Analysis

Question 122

1. Characteristics that affect a property's income. 2. An element of comparison in the sales comparison approach. Comparable sales can be adjusted for differences in the attributes that affect a property's income, such as operating expenses, quality of management, tenant mix, rent concessions, lease terms, lease expiration dates, renewal, options, and lease options such as recovery clauses.

Answer 122

Economic Characteristics

Question 123

The decline in property value caused by external forces, such as neighborhood blight or adverse development. See external obsolescence.

Answer 123

Economic Depreciation

Question 124

A sale of property when the seller is under extreme pressure to sell. Generally the property is sold for less than market value.

Answer 124

Distress Sale

Question 125

The subject site is 25' x 125', rectangular, flat topography, zoned residential. The site is currently unimproved. Similar lots in the neighborhood sell for $50,000. The site is adjacent to a landfill that is capped. The poor location reduces site value by 25%. What is the external obsolescence indicated for the subject site?

Answer 125

$ 0 (just remember land cannot depreciate) The definition of depreciation is a "loss of value from any cause to the improvements." The subject property is an unimproved site which, by definition, cannot depreciate. Since external obsolescence is a form of depreciation, and the site cannot depreciate, the answer is zero dollars. If the question was "How much did the subject site lose due to its poor location?" then the answer would be: $50,000 x 25% = $12,500

Question 126

An office building is valued at $100,000 and has a net income of $10,000. If the net income remains the same, but the capitalization rate increases by one full percentage point, what would the estimate of value be?

Answer 126

Net income/value = capitalization rate. $10,000/$100,000 = 0.10 or 10%. If the capitalization rate increases by 1%, then $10,000/0.11 = $90,909.

Question 127

When developing an opinion of site value of an improved property, an appraiser must value the site as if it is:

Answer 127

Vacant and available for development to its highest and best use The cost approach to value requires the appraiser to estimate the value of the site as if vacant and available for use under the land's highest and best use. The use may or may not be the land's current use.

Question 128

When land value is estimated by deducting the depreciated cost of improvements on a property from the total sale price of the property, this is known as

Answer 128

When land value is estimated by deducting the depreciated cost of improvements from the sales price, it is called extraction.

Question 129

In a site appraisal the conditions of subsoil, specifically its suitability for a foundation and its bearing quality, are usually defined by a(an) _______________study.

Answer 129

Engineering An engineering study would reflect the conditions of the subsoil and determine its suitability for a construction site.

Question 130

A fee simple defeasible form of ownership is

Answer 130

subject to conditions.

Question 131

__________________ is the decorative manner or plan of placing doors or windows in aq structure.

Answer 131

Fenestration

Question 132

An appraiser asks a title company to confirm a sale. The title company confirms the sale as a full value transaction using documentary transfer stamps. The stamps were issued at a rate of $.55 per $500 in value, and they total $308.55. The loan-to-value ratio is 80%, and the buyer didn't assume any pre-existing loans. What was the sales price?

Answer 132

280,500 ***(tax stamps were on the entire Value of the transaction not just loan amount)**** The stamps are calculated as $0.55 per $500 of new money. This means that the entire transaction amount would be included (not just the loan amount), but assumed loans would not be included. $308.55 divided by .55 = 561 stamps. 561 x $500 = $280,500. It represents the entire transaction amount-there were no loans assumed.

Question 132

An appraiser would not consider littoral rights when valuing a/an:

Answer 132

house whose lot borders a river. Littoral rights apply to land that borders large bodies of water such as a lake or a sea, and allows the owners to use and enjoy the body of water. Riparian rights apply to property bordering flowing bodies of water such as rivers and streams, such as the house on the river.

Question 133

An owner's right to recover the use of his property at the end of a lease is called:

Answer 133

Reversionary right. An owner who leases real estate relinquishes their right to occupy the property. However, he retains the title, subject to the lease, and the right to recover use at the end of the lease. This is known as reversionary right.

Question 134

North 60 degrees East is an example of which legal description?

Answer 134

Metes and bounds Metes and bounds land description uses compass readings to mark the boundaries of a property, starting at a point of beginning.

Question 135

In the rectangular survey method of legal land description, what is the name for an area of land measuring one mile by one mile?

Answer 135

Section The rectangular survey system of legal land description divides land into townships, which contain 36 sections. Each section measures one square mile.

Question 136

Kim is appraising a house and needs to indicate the architectural term for the house's roof. The house is rectangular and the rain runs off one side of sloping roof. What type of roof does the house most likely have?

Answer 136

Shed

Question 137

Government National Mortgage Association (GNMA) - A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.

Answer 137

Ginnie Mae

Question 138

A transaction that occurred under typical conditions in the marketplace, with each of the parties acting in their own interests.

Answer 138

Arm's Length Transaction

Question 139

An instrument held by a third party as security for the payment of a note. Like a mortgage, it creates a voluntary lien on real property to secure repayment of a debt. The parties to a deed of trust are the grantor or trustor (borrower), beneficiary (lender), and trustee (neutral third party). Unlike a mortgage, a deed of trust includes a power of sale, allowing the trustee to foreclose non-judicially. Used In some states.

Answer 139

Deed of Trust

Question 140

An instrument held by a third party as security for the payment of a note. Like a mortgage, it creates a voluntary lien on real property to secure repayment of a debt. The parties to a deed of trust are the grantor or trustor (borrower), beneficiary (lender), and trustee (neutral third party). Unlike a mortgage, a deed of trust includes a power of sale, allowing the trustee to foreclose non-judicially. Used In some states.

Answer 140

Deed of Trust

Question 141

The greatest estate (ownership) one can have in real property; it is freely transferable and inheritable, and of indefinite duration, with no conditions on the title. Also called Fee Simple Absolute or Fee Title.

Answer 141

Fee Simple

Question 142

Person receiving title to real property (buyer).

Answer 142

Grantee

Question 143

Any type of interior work to a house or building that is not part of the finish work.

Answer 143

Rough-Ins

Question 144

Specialized form of county road that is part of the state aid system. County State Aid routes are eligible for funding from the County State Aid Highway Fund.

Answer 144

County State Aid Highway (CSAH) A County State Aid Highway (CSAH) is a type of road or highway in the United States that is typically maintained and funded by a county government but also receives financial assistance from the state government. These roads are an important part of the transportation infrastructure, as they connect rural and urban areas within a county and often serve as major routes for local traffic and commerce.

Question 145

A segment of land between two disparate municipal zones which acts as a shield to keep one zone from encroaching upon the other. Often used to separate residential districts from commercial areas.

Answer 145

Buffer Zone

Question 146

The theory that says a particular property achieves its maximum value when it is surrounded by properties that are similar in style, function, and utility. Also called Homogeneity.

Answer 146

Conformity

Question 147

A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally subsidized mortgage insurance for private lenders.

Answer 147

Federal Housing Administration (FHA)

Question 148

Atypical motivations of the parties of a transaction (usually make the sale non-arm's length).

Answer 148

Conditions of Sale

Question 149

One mill represents one-tenth of one percent (0.1%) of the assessed value of a property. For example, if the mill rate is 10, then the property owner would pay $10 in taxes for every $1,000 of assessed value.

Answer 149

To calculate the property tax owed, you would multiply the assessed value of the property by the mill rate and then divide by 1,000. This gives you the actual dollar amount of property tax owed. Property Tax = (Assessed Value * Mill Rate) / 1,000

Question 150

The owners of a vacant lot owe property taxes of $2.10/$100 of assessed value. What is the tax rate in mills?

Answer 150

2.1 mils One mil equals 1/10 of one cent. So $2.10/$100 = 0.021. To convert to mill rate simply move the decimal two places to the right. That results in 2.1 mils.

Question 151

Tim needs to indicate the architectural term for the house's roof. The house is rectangular and the rain runs off the four sloping sides of the pitched roof. What type of roof does the house most likely have?

Answer 151

Hip A hip roof is pitched with four sloping sides

Question 152

What contract termination method involves transferring contract rights to a third party?

Answer 152

Assignment Assignment is a contract termination method used to transfer contract rights to a third party. The contract termination method that involves transferring contract rights to a third party is known as "assignment." Assignment refers to the legal process of transferring one party's rights and obligations under a contract to another person or entity who is not originally a part of the contract. When an assignment occurs, the original party (the assignor) gives up their rights and responsibilities to the third party (the assignee). This can be done for various reasons, such as when the original party no longer wants to fulfill the terms of the contract or when they want to delegate certain contractual duties to someone else.

Question 153

Acquiring an Interest by Prescription: Imagine you've been using a part of someone else's land for a really long time, like walking across it or using it as if it's yours. Over time, the law might recognize your right to keep using that part of the land because you've been doing it for so long. This is called acquiring an interest by prescription. It's like earning a right to use the land even though you don't own it. You get a sort of "license" to continue using it. Acquiring Title through Adverse Possession: Now, let's say you've been using someone else's land for a really, really long time, and you've been using it openly and without permission. You might be able to claim ownership of that land through something called adverse possession. It's like saying, "I've been using this land for so long, and the owner hasn't stopped me, so maybe I should become the owner." You have to meet certain conditions, like using the land openly and consistently, and the owner not doing anything to stop you.

Answer 153

The main difference between these two is how much control you're trying to get. With acquiring an interest by prescription, you're mainly getting a right to use the land. With adverse possession, you're actually trying to become the owner of the land. The key requirement for adverse possession is that you use the land openly, continuously, and without permission for a long period of time, typically many years.

Question 154

Which is generally true regarding a trade fixture?

Answer 154

Trade fixtures are always personal property.

Question 155

What type of house would you be looking at if you were inspecting a house that had two levels of living area featuring a steep roof slope and dormers?

Answer 155

Cape cod A Cape cod residence is usually one with two levels of living area (1.5 to 1.75 stories) featuring steep roof slope and dormers. The design is generally symmetrical and does not feature much overhang or other ornamentation.

Question 156

What type of architectural style would you be looking at if a house you were inspecting had a low-pitched, red tile roof, arched windows, and columns?

Answer 156

Mediterranean Mediterranean style house plans are best known for their low-pitched, tile roof that is often red (the color of clay). Mediterranean style homes are often stucco and include arched windows and columns.

Question 157

What type of structure refers to a particular floor of the home with one side of the house is built into the grade?

Answer 157

Daylight basement A walkout or daylight basement is a modern architectural form in which the house is situated on a slope and part of the basement is above ground.

Question 158

freehold ownership is also known as

Answer 158

fee simple Leasehold involves owning the rights to a property for a specific period of time

Question 159

A life estate is considered what type of estate? Freehold or leasehold?

Answer 159

freehold estate also known as fee simple

Question 160

Which of the following roof types is double pitched on two sides?

Answer 160

Gambrel A gambrel roof is double pitched on two sides and is most often seen on barns.

Question 161

Which of the following is not true regarding joint tenancy?

Answer 161

All owners must have equal rights All owners must have possession All owners must have equal interest If there are only two owners, they must be married (Correct!)

Question 162

Which of the following components of value is not a contributing part of the going concern value?

Answer 162

Going concern value is generally the total value of an operating business enterprise including the value of tangible assets like real estate, fixtures, and equipment. Going concern value also includes intangible assets like customer good will. Assessed value concerns property taxation and is not part of the going concern value.

Question 163

Which of the following is not considered when determining whether an item is a fixture?

Answer 163

When determining whether an item is a fixture or not, an appraiser considers the method of attachment, relationship of the parties, the intent of the person who attached it, and the adaptability of the item for the land's ordinary use.

Question 164

Which of the following is a unique feature of an easement in gross?

Answer 164

There is no dominant tenement An easement in gross belongs to an individual person or business and does not run with any specific parcel of land. Therefore, there is no dominant tenant. Meaning there is not an estate or property that benefits from it rather its tied to a person or business. (There is a servient) An easement in gross is a legal right that allows a person or entity (known as the "easement holder") to use or access someone else's property for a specific purpose, without requiring the easement holder to own any adjoining property. In other words, the easement holder's right is not tied to their ownership of any specific land; it's a personal right that can be assigned, sold, or otherwise transferred. It's important to note that easements in gross are often associated with utility companies, railroad operators, and other entities that require access to specific properties to perform their services. However, they can also apply to personal uses like the fishing club example mentioned above. Easement Appurtenant: In this type of easement, there are two pieces of adjacent land: one that benefits from the easement (dominant estate) and another that is burdened by the easement (servient estate). The easement allows the owner of the dominant estate to use or access the servient estate for a specific purpose. Easement in Gross: As we discussed earlier, this type of easement doesn't involve a dominant estate. The easement holder, who may be an individual or an entity, has a personal right to use the servient estate for a specific purpose, but their right is not tied to ownership of any specific neighboring property.

Question 165

Which of the following is typically shown on a plat map?

Answer 165

A plat map is a map representing a parcel of land subdivided into lots, showing streets and other details or a single site.

Question 166

Which of the following roof types slopes on two sides?

Answer 166

A gable roof slopes evenly on two sides.

Question 167

Which room in the house requires the most heat and ventilation?

Answer 167

The Bathroom Bathrooms need the most heat and ventilation.

Question 168

Who are the three parties involved in a deed of trust?

Answer 168

Trustee, trustor, and beneficiary

Question 169

Which of the following roof types slopes on four sides?

Answer 169

Hip A hip roof slopes evenly on all four sides.

Question 170

Which of the following terms refers to the 'mortgagor?

Answer 170

Borrower Mortgagee "lender"

Question 171

Which of the following terms refers to the 'mortgagee'?

Answer 171

Lender

Question 172

A land tract is designated as wetlands if:

Answer 172

Wetlands are generally protected from development, and land must be given the wetlands designation by the federal government. Land can be given that designation because of the hydraulic (water) influences, but both soil type and vegetation are important factors as well.

Question 173

What is the proper term for a structure that provides cover for a drive-through entrance allowing passengers to enter and exit in front of the main entry while the vehicle can be parked elsewhere?

Answer 173

Porte cochere Porte cocheres are often seen attached to homes with turnaround or circular driveways and are integrated into the architectural design and roofline of the house. Some have decorative columns.

Question 174

Atypical motivations of the parties of a transaction (usually make the sale non-arm's length).

Answer 174

Conditions of Sale

Question 175

A window style that projects in a curve out from a wall, giving a bay-like effect to the interior.

Answer 175

Bay Window

Question 176

1. In general, losses that do not flow directly and immediately from an injurious act but that result indirectly from the act. 2. In condemnation, damages to a property resulting from governmental actions (such as taking) or the actions of property owners (such as construction) on other lands. Consequential damages may be considered noncompensable in certain jurisdictions.

Answer 176

Consequential Damages

Question 177

Taking private property for public use through the government's power of eminent domain. Also called Appropriation. 2. A declaration that a structure is unfit for occupancy and must be closed or demolished.

Answer 177

Condemnation

Question 178

A process in which the total value of a property is broken down into its essential parts and the value of any single component may be determined by subtracting the remaining components from the total value.

Answer 178

Abstraction Method

Question 179

Commonly, the conversion of a rental property such as an apartment complex into a CONDOMINIUM-style complex where each unit is owned rather than leased.

Answer 179

Condominium Conversion

Question 180

A window which, being hinged at the top, forms an awning when open.

Answer 180

Awning Window

Question 181

The instrument used to reconvey title to a trustor under a deed of trust once the debt has been satisfied.

Answer 181

Deed of Reconveyance

Question 182

A mortgaged property which has been foreclosed on

Answer 182

Distressed Property

Question 183

Failure to make payments when they are due.

Answer 183

Delinquency

Question 184

An inducement to have the buyer's offer accepted and a means of showing the seller the buyer is serious and able to follow through with the financing necessary to buy the property.

Answer 184

Earnest Money Deposit

Question 185

A window style where both sashes move.

Answer 185

Double Hung

Question 186

Connected to or touching along an unbroken boundary.

Answer 186

Contiguous

Question 187

A nontechnical term used to describe a review of an appraisal for which the scope of work includes inspection of the exterior and sometimes interior of the property appraised and possibly inspection of the comparable properties to confirm data provided by the appraisal report.

Answer 187

Field Review

Question 188

An insurance policy taken out by appraisers to cover their liability for any mistakes made during the appraisal process.

Answer 188

Errors and Omissions Insurance

Question 189

An individual or other legal person designated in a will to settle the estate of the deceased person.

Answer 189

Executor (Personal Representative)

Question 190

The government's constitutional power to appropriate or condemn private property for public use, as long as the owner is paid just compensation. The government's taking of private land is called Condemnation.

Answer 190

Eminent Domain Condemnation is the action; eminent domain is the right.

Question 191

Any mortgage that is insured or guaranteed by a government agency, such as the FHA or VA.

Answer 191

Government Mortgage

Question 192

The entire taking of the full real property interest of a parcel for public use under the power of eminent domain; requires the payment of compensation. See also partial taking.

Answer 192

Full Taking

Question 193

The process by which all roads are grouped into classes or systems according to the character of service they are intended to provide. Functional class defines the part that any particular road or street should play in serving the flow of trips through a highway network.

Answer 193

Functional Classification 1. Freeways/Expressways: 2. Arterials: Major roads that serve as primary routes within urban or suburban areas 3. Collectors: connect local streets to arterial roads

Question 194

A type of door constructed with stiles and rails that divide each side of the door into four, usually equal, parts.

Answer 194

Four Panel Door

Question 195

A system or process that electronically captures, stores, analyzes, manages, and presents data linked to location, primarily in map form. Layers of the illustrative information can be selected and displayed such as aerial photography, topographic maps, flood maps, streets and roads, earthquake information, zoning overlays, political boundaries, and other forms of geographically referenced data.

Answer 195

Geographic Information Systems (GIS)

Question 196

The market value in use of all property, including real property, trade fixtures, inventory (tangible assets), and the intangible assets of an established and operating business with an indefinite life.

Answer 196

Going-Concern Value

Question 197

The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.

Answer 197

Forfeiture

Question 198

A type of door usually constructed from one piece of wood so it is smooth, without any divisions like a panel door.

Answer 198

Flush Door

Question 199

Combining two or more parcels into one, with an increase in value over the value of the two parcels individually.

Answer 199

Plottage

Question 200

Land that has limited usefulness because the costs of labor, coordination, and capital required to work or use it are approximately equal to the land's gross income.

Answer 200

Marginal Land In such cases, the expenses associated with preparing the land, planting crops, and maintaining them might outweigh the potential income generated from the harvested produce.

Question 201

640 acres

Answer 201

Number of Acres in a Section

Question 202

A type of framing with the floor for higher stories (and the roof) supported by beams that sit on top of posts and the outside wall perimeter.

Answer 202

Post and Beam (Framing)

Question 203

Part of a paneled door between the stiles and rails (the vertical and horizontal).

Answer 203

Panel

Question 204

Newly constructed housing units; includes both single-family and multifamily domiciles.

Answer 204

Housing Starts

Question 205

Sloped support beams that follow the pitch of the roof, and serve to hold the outer roof covering.

Answer 205

Rafters

Question 206

A type of framing used to build a house or building one story at a time, with each story serving as a platform for next story to be built.

Answer 206

Platform (Framing)

Question 207

Any constant, contiguous area that may be identified by similar characteristics of physical boundaries.

Answer 207

Neighborhood

Question 208

A window style that incorporates a half-circle.

Answer 208

Palladian Window

Question 209

An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Answer 209

Homeowner's Insurance

Question 210

The right to use water in or from a river, stream, or lake.

Answer 210

Water Rights

Question 211

Also called Mock Tudor in the twentieth century, first appeared as an architectural style in England in the mid- to late-nineteenth century based on the characteristics of the earlier Tudor style.

Answer 211

Tudorbethan Style

Question 212

A right to pass over land in some particular path; a strip of land used for transportation such as streets and roads, railways, utility lines, and for other private or public transportation uses.

Answer 212

Right of Way

Question 213

A method of valuing land that could be developed, by taking the total projected market value of the finished project and subtracting all costs of development and entrepreneurial profit and incentive.

Answer 213

Subdivision Analysis Method

Question 214

An asphalt paper of fiber material. Which is used in rolls, being unrolled and fastened to the roof surface, under the shingles.

Answer 214

Roll Roofing

Question 215

Actual lawful ownership of real property. Title is not a document. Title is a concept.

Answer 215

Title

Question 216

Owner's right to obtain return of the property rights granted to a tenant upon termination of a lease. The term can also apply to termination of a temporary easement, abandonment of a right of way, extinguishment of a life estate or estate for year, violation of a condition in a deed, or the end of life or, or abandonment of, improvements.

Answer 216

Reversionary Right

Question 217

When the improvements do not conform to the highest and best use of the site, thus the property does not achieve maximum value.

Answer 217

Underimprovement

Question 218

A piece of land divided into two or more parcels. 2. A residential development.

Answer 218

Subdivision

Question 219

The additional value a property enjoys based on subjective criteria such as look or appeal.

Answer 219

Aesthetic Value

Question 220

The basic building blocks of the property valuation process, including property inspection, market analysis and basic economics.

Answer 220

Appraisal Principles

Question 221

A gradual addition to dry land by the forces of nature, mostly used for property abutting a body of water where such addition is made by the deposits of waterborne sediment carried by rivers, winds, tides, etc. to the shoreline property.

Answer 221

Accretion

Question 222

An organization of appraisal professionals and others interested in the appraisal profession.

Answer 222

American Society of Appraisers

Question 222

One who represents or has the power to act for another person (called the principal). The authorization may be expressed, implied, or apparent. A fiduciary relationship is created under the law or agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.

Answer 222

Agent

Question 223

A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment.

Answer 223

1031 Exchange

Question 224

The value of an asset (property or otherwise) that includes the original price plus the value of any improvement, and less any applicable depreciation.

Answer 224

Adjusted Basis Adjusted Basis = Original Purchase Price + Cost of Improvements - Accumulated Depreciation The adjusted basis is a critical factor in determining the gain or loss when the property is eventually sold. When you sell a property, the gain or loss is calculated by subtracting the adjusted basis from the sale price. If the sale price is higher than the adjusted basis, you have a capital gain. If the sale price is lower, you have a capital loss.

Question 225

The property's classification determines the recovery period over which you can depreciate it. For a residential rental property, the recovery period is typically

Answer 225

27.5 years.

Question 226

When you sell a property, the IRS requires you to "recapture" the depreciation you claimed over the years. This recaptured depreciation is taxed

Answer 226

at a higher rate (25%) than the standard capital gains tax rate (which can be as low as 0% for certain taxpayers).

Question 227

The relationship between the cost of borrowing money and the total amount financed, represented as a percentage.

Answer 227

Annual Percentage Rate (APR) the APR is a way to show you the total cost of a mortgage loan, including both the interest rate and certain fees associated with the loan. The Annual Percentage Rate combines the interest rate and the fees. It gives you a more complete picture of what you'll actually be paying each year for the loan. It's like a total cost percentage.

Question 228

When ___________, then market value, price, and cost are more likely to be equal.

Answer 228

Supply and demand are in equilibrium. ((((This scenario is often used in theoretical or analytical discussions to simplify calculations and explanations))

Question 229

Which of the following is a likely result if construction costs fall faster than the values of existing properties?

Answer 229

New properties will be developed and the prices of existing properties will fall. New properties will be developed because it is cheaper and more profitable to do so. Also the new development will offset supply and demand, causing values of existing properties to fall.

Question 230

In order for a use to be considered highest and best, it must:

Answer 230

Highest and best use is defined as the physically possible, legally permissible, economically feasible, and maximally productive use.

Question 231

Which of the following is general data that an appraiser should consider when performing an appraisal?

Answer 231

QUESTION RATIONALE General data includes the social, economic, governmental, and environmental influences that affect property values in the region.

Question 232

The excess value created by assemblage is called

Answer 232

The excess value created by assemblage is called plottage value.

Question 233

A document, usually given to a home buyer with the deed, that states that the title to the property is believed to clear; usually prepared by an attorney or other qualified person who has examined the abstract of the title for the property.

Answer 233

Certificate of Title

Question 234

A method used by lenders and others to determine elements of value and marketability for a property.

Answer 234

Broker Price Opinion (BPO)

Question 235

Arms length means keeping at least an arms length apart. Non arms length would be hugging

Answer 235

The term "arms-length" in the context of transactions comes from the idea of keeping a physical distance between parties involved in a deal. The phrase suggests that the parties are not so closely connected that they could exert undue influence or pressure on each other.

Question 236

"Bona fide" is a Latin term that translates to

Answer 236

in good faith" or "genuine" in English. When referring to a real estate transaction, a "bona fide sale" essentially means a transaction that is conducted in an honest, genuine, and sincere manner, without any intent to deceive or defraud.

Question 237

Any region of a city or town that has fallen into disrepair or otherwise has become undesirable.

Answer 237

Blighted Area

Question 238

A Latin phrase meaning "let the buyer beware." The rule says a buyer is expected to examine property carefully, instead of relying on the seller to identify problems.

Answer 238

Caveat Emptor

Question 239

A written document that transfers title to personal property.

Answer 239

Bill of Sale ** Note ** Personal property

Question 240

All real property rights conferred with ownership including, but not limited to, right of use, right of enjoyment, and right of disposal.

Answer 240

Bundle of Rights

Question 241

The certificate of reasonable value (CRV) is a document issued by the ________ to endorse an appraised value of a property financed with a VA loan.

Answer 241

VA Certificate of Reasonable Value

Question 242

A statistical model based on multiple regression analysis along with geographical information systems (GIS) data to calculate the estimated value of the subject for underwriting purposes.

Answer 242

Automated Valuation Model (AVM)

Question 243

In eminent domain valuation, a procedure in which just compensation is measured as the difference between the value of the entire property before the taking and the value of the remainder after the taking.

Answer 243

Before and After Rule

Question 244

In real estate appraisal, "disaggregation" refers to

Answer 244

the process of breaking down the overall value of a property into its individual components or factors that contribute to its value. This analysis helps appraisers better understand how different aspects of the property contribute to its overall worth.

Question 245

What might be the cause of the less-than-anticipated value appreciation potential of a new development recently built in an old neighborhood experiencing a decline stage?

Answer 245

According to the principle of regression, the worth of a greater-valued object is reduced by association with lesser-valued objects of the same type (superadequacy or overimprovement).

Question 246

The process of compounding interest is the opposite of the process of:

Answer 246

discounting interest The process of compounding interest increases the amount of money. The process of discounting decreases the amount of money. Future value = principal + interest (compounding); present value = principal - discount (discounting).

Question 247

Personal preferences that reflect a shift away from or toward a certain locale can affect the demand for real estate. This type of buyer preference is known as

Answer 247

Personal preferences concerning location is known as area preference or situs.

Question 248

Which of the following terms means that the title reverts to the state when a person dies without a will and leaves no heirs?

Answer 248

Escheat is defined as the reversion of property to the state or county if the owner dies interstate (without a will) or without heirs.

Question 249

A buyer paid $4,500 in fees for a loan that is 80% loan-to-value and for which the lender charged 2 points. What is the original sales price?

Answer 249

QUESTION RATIONALE Fees divided by points equals the loan amount. The loan amount divided by 0.8 equals the sales price. $4,500 divided by .02 = $225,000 divided by .8 = $281,250.

Question 250

A critical indicator of residential housing demand is

Answer 250

employment

Question 251

A property's value to a specific user is called:

Answer 251

Value-in-use is the value of a good to a specific user, based on its productivity (in the form of income, utility or amenity).

Question 252

A new apartment building contains 260 vacant units, which are rented out at a rate of 10 per month. What is the annual absorption rate?

Answer 252

The annual absorption rate is the number of units absorbed divided by the total supply. 120 units per year (10 units x 12 months) divided by 260 units equals 46.15%.

Question 253

A public action in which the local government reduces the allowable density for subsequent development (e.g. few housing units, fewer stories, lower floor area ratios) or changes the allowable use from a high use to a low use (e.g. from multiunit residential to single-unit residential).

Answer 253

Downzoning

Question 254

Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property.

Answer 254

Chattel

Question 255

The main business or industry in an area which a community uses to support and sustain itself.

Answer 255

Economic Base

Question 256

An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity etc.) and not a particular tract of land; an easement having a servient estate but no dominant estate.

Answer 256

Easement in Gross

Question 257

A roof with four sloping side which rise to a ridge. Usually found on garages or church steeples. Also called a pyramid roof.

Answer 257

Hip Roof

Question 258

A ridged roof, each side having two slopes, the lower of which is more inclined.

Answer 258

Gambrel Roof

Question 259

A defect that is not visible or apparent; a hidden defect that would not be discovered in a reasonably thorough inspection of property.

Answer 259

Latent Defect

Question 260

An architectural style dating from early American history typified by a two-story building with clapboard siding.

Answer 260

New England Colonial

Question 261

A study of supply and demand, as well as other economic conditions in an area. Also called Market Study.

Answer 261

Market Analysis

Question 262

Expressed as a percentage; net operating income divided by effective gross income.

Answer 262

Net Income Ratio (NIR)

Question 263

(OER) Expressed as a percentage, it is the operating expenses divided by effective gross income.

Answer 263

Operating Expense Ratio (OER)

Question 264

A house constructed of manufactured components, assembled partly at the site, rather than totally on site. Also called a modular house.

Answer 264

Prefabricated House

Question 265

The borrower in a loan who gives a mortgage to the lender as security.

Answer 265

Mortgagor

Question 266

In statistical analysis, the ________ measures the dispersion of numbers in a data set.

Answer 266

Standard deviation

Question 266

In the language of statistics, a 'population' is:

Answer 266

A complete data set

Question 267

Offerings and listings provide important market data for an inventory of

Answer 267

Competitive supply

Question 268

When should a highest and best use analysis include analyses of both the land as vacant and as currently improved?

Answer 268

When the land is valued separately from the improvements

Question 269

If the seller of a property receives a net payment of $300,000 (assuming no other costs of sale) and the real estate agent receives a 6% commission, what was the selling price of the property?

Answer 269

$300,000 / 0.94 $319,148.94

Question 270

Which of the following is a combined supply and demand factor used in market analysis?

Answer 270

Financing conditions

Question 271

Mortgagor is Lessor is

Answer 271

Mortgagor The Borrower (the “R” stands for the borrower) Lessor is the landlord

Question 272

A single -family dwelling built as a pair that share one common wall.

Answer 272

Semi-Detached Housing

Question 273

A brief, chronological summary of the recorded documents affecting the title to a particular parcel of property.

Answer 273

Abstract of Title

Question 274

A method for determining the cost of a building, relying on cost manuals. Sometimes called the Cost Manuals Method.

Answer 274

Square Foot Method

Question 275

The value of property to the owner, or other specified party, as it is presently being utilized, or for a specific use, without necessarily considering highest and best use or present market value.

Answer 275

Value-In-Use.

Question 276

The process of rapid revitalization of properties in a neighborhood, which causes current residents to be displaced.

Answer 276

Gentrification

Question 277

The ability of a good or service to satisfy human wants, needs or desires.

Answer 277

Utility

Question 278

The ability to freely buy, sell, encumber or dispose of property in any way that the owner sees fit.

Answer 278

Transferability

Question 279

Combining two or more parcels into one, with an increase in value over the value of the two parcels individually.

Answer 279

Plottage

Question 280

The ratio of net operating income to annual debt service, which measures the relative ability of a property to meet its debt service out of net operatizing income; also call debt service coverage ratio.

Answer 280

Debt Coverage Ratio (DCR)

Question 281

A property made undesirable to most people by a past event, often a crime or environmental hazard.

Answer 281

Stigmatized Property

Question 282

A physical attachment of personal property to land.

Answer 282

Actual Annexation

Question 283

An adaption of the New England cottage. May be one or two stories with sloping roof, usually with dormer windows, cornices, and a lot of frame painted white.

Answer 283

Cape Cod House

Question 284

The theory that says a particular property achieves its maximum value when it is surrounded by properties that are similar in style, function, and utility. Also called Homogeneity.

Answer 284

Conformity

Question 285

An appraiser trainee has received an assignment to perform an appraisal for market value of a single-unit dwelling in a residential neighborhood with plentiful sales. The subject improvements are 10 years old, with minimal depreciation. There are 7 rental homes in the subject neighborhood, but the subject property has always been owner-occupied. None of the comparable sales were rentals. Upon finishing the appraisal, the appraiser trainee's supervisor critiques the trainee's work. All three approaches were utilized: the sales comparison approach: $350,000; the cost approach: $340,000; and the income approach: $365,000. They agreed that the sales comparison approach should receive the most weight, with the cost approach receiving slightly less weight, and the income approach least weight: 5x, 3x, and 1x respectively. Given the weights above, what is the indicated market value of the subject property to the nearest thousand?

Answer 285

The three values to be reconciled are: $340,000; $350,000; and $365,000. A weighted average process produces: 340,000 x 3 = 1,020,000. 350,000 x 5 = 1,750,000. And 365,000 x 1 = 365,000. The sum is: $3,135,000. The weighted average (i.e. reconciliation) is: 3,135,000/(5 + 3 + 1) = $348,333, or rounded to $348,000.

Question 286

A person or company that makes mortgage loans with its own funds on its own behalf, usually in expectation of reselling the loans to lenders at a profit and then servicing the loans.

Answer 286

Mortgage Banker

Question 287

A condition that exists in the real estate market when there are slightly more homes available than buyers.

Answer 287

Balance

Question 288

Analysis of the likelihood that a particular product will sell.

Answer 288

Marketability Analysis

Question 289

A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by the insurance proceeds.

Answer 289

Mortgage Life Insurance

Question 290

When the value of inferior properties is affected positively by other properties around it.

Answer 290

Progression

Question 292

Income capitalization techniques include

Answer 292

Direct capitalization and Yield capitalization

Question 293

In direct capitalization In yield capitalization

Answer 293

Direct cap is a more simple method. Changes in future property value are implied and exhibited by market transactions Yield capitalization anticipates changes in income and future value and are reflected by specific inputs

Question 294

The principle inducing a plaintiff, after an injury or breach of contract, to make reasonable efforts to alleviate the effects of the injury or breach, If the defendant can show that the plaintiff failed to mitigate damages, the plaintiff's recovery may be reduced. (Blacks Dictionary)

Answer 294

Mitigation of Damages Doctrine

Question 295

Intentionally or unintentionally misrepresenting, misstating, or concealing relevant facts or conclusions.

Answer 295

Misleading

Question 296

In a multi phase condominium or planned unit development project there may be a homeowner's association that are concerned with specific areas of the project. The master association oversees these associations and handles matters affecting the entire project.

Answer 296

Master Association

Question 297

The prospective buyer having enough disposable income available to satisfy his or her needs, wants, and desires. Also called Effective Purchasing Power.

Answer 297

Effective Demand

Question 298

Depriving an abutting owner of the inherent rights of ingress and to egress from the highway or street.

Answer 298

Loss of Access

Question 299

An appraiser is trying to extract a GLA adjustment from market data. He has two sales: Monte Carlo Street has 2,146 square feet and sold for $330,000 while Porto Fino Lane sold for $365,000 and has 2,632 square feet. What is the market-extracted GLA adjustment per square foot?

Answer 299

The difference in square footage between the two properties is 483 square feet (2,632 - 2,146). The difference in price is $35,000 (365,000 - 330,000). The difference in price divided by the difference in square footage equals a $72.02 or $72 per square foot adjustment ($35,000/486).

Question 300

Appraiser Arnold is researching trends in his market. He notes that property values have been declining over the last 6 months because a major employer filed bankruptcy. The mean sales price 6 months ago was $150,000 for a 1,200-squaree-foot ranch. Currently the mean sales price is $140,000. What is the monthly percentage decline in value in Arnold's market?

Answer 300

The impact of a declining market is measured by where you were, versus where you are now. The average dollar loss is $10,000. Therefore $10,000/$150,000 = 6.67%/6 months = 1.1% loss per month.

Question 301

A colonial style of architecture dating back to the eighteenth century. Characterized by first floor windows extending to the ground, its exterior placements (windows, doors, etc.) are simple and well balanced.

Answer 301

Georgian

Question 302

Total area of a building measured from the exterior walls that include common areas (e.g., hallways, entryways, common laundry rooms).

Answer 302

Gross Building Area (GBA)

Question 303

Assets of a property which contribute to its value but are not readily apparent. Examples might include upgraded or premium building materials.

Answer 303

Hidden Amenities

Question 304

The process of valuing a universe of properties as of a given date using standard methodology, employing common data, and allowing for statistical testing. (USPAP)

Answer 304

Mass Appraisal

Question 305

A municipal restriction on the maximum height of any building or other structure.

Answer 305

Height Zoning

Question 306

Appraiser trainee Emilie is performing market research for her supervisory appraiser. The subject property is a mixed use property located in an urban area. Her instructions are to find sales that are both comparable and competitive with the subject property. A competitive property

Answer 306

Competes head-to-head with the subject property A competitive property competes head-to-head with the subject property. It probably has similar features, but need not be exactly the same as the subject property.

Question 307

USPAP specifically requires all of the following to be retained in an appraiser's workfile, except:

Answer 307

An appraiser's workfile must contain the name of the client and the identity of any intended users, true copies of written reports, summaries of oral reports or testimony, and any other information that supports the appraiser's opinions and compliance with USPAP. However, the workfile does not need to contain a legal description of the subject property.

Question 308

When the reviewer's scope of work includes developing his or her own opinion of value:

Answer 308

The reviewer is under no obligation to repeat the steps the original appraiser took. The reviewer can bring those pieces of the work that he or she judges to be accurate and credible into his or her own process through the use of an extraordinary assumption.

Question 309

A property owner asks an appraiser to represent the owner in appealing the ad valorem assessment of the property. The assignment would involve the appraiser developing a value for the property and advocating for a lower assessed value. May the appraiser perform this assignment under USPAP?

Answer 309

An appraiser is never permitted under USPAP to perform a service that involves advocacy.

Question 310

An appraiser prepares an appraisal report in December 2017 and provides and testimony concerning this report in May 2018. The court handed down a decision in September 2018, and the decision was appealed in October of 2018. In November 2019, the appellate court remanded the case to the lower court for reconsideration. Final disposition of the case occurred in May 2020. How long must the appraiser retain the workfile?

Answer 310

An appraiser must keep a workfile for at least 5 years after preparation, or at least 2 years after final disposition of any judicial proceeding in which testimony was given, whichever period expires last.

Question 311

An appraiser is engaged to appraise a residence that fronts a two-lane residential street. It is public knowledge that the City Council recently voted to widen the street to four lanes next year. However, the appraiser was not familiar with the City's proposal and therefore did not consider the effects of the street widening in the appraisal. Has the appraiser violated the COMPETENCY RULE?

Answer 311

Yes, the appraiser did not consider the relevant characteristic. The market will react today to this change in the future and the appraiser should consider this reaction and note its effect on value. Standards Rule 1-4(f) requires the appraiser to consider the affect of any potential private or public improvements may have on property value. This includes proposed improvements located on or off the subject property. Many relevant characteristics can affect property value. These include financing, legal, economic, on-site and off-site improvements, and physical characteristics. If an appraiser does not consider their affect on value, he or she is violating the COMPETENCY RULE. Failing to consider the future use of the property and the market's reaction to the future use is such a violation.

Question 312

An appraiser must retain a workfile for:

Answer 312

Any assignment that is covered by Standards Rules An appraiser must retain a workfile for each appraisal, appraisal review, or appraisal consulting assignment.

Question 313

An opinion of the highest and best use of a property is a/an:

Answer 313

Step that might be necessary in some appraisals, but not others. When an appraiser is developing an opinion of market value, he or she must develop an opinion of the highest and best use of the subject property.

Question 314

Appraiser Frank paid a fee to procure an appraisal assignment. According to USPAP

Answer 314

Frank can pay a fee in the procurement of an appraisal assignment as long as the fee is disclosed in the certification and any letter of transmittal, per the Management section of the ETHICS RULE of USPAP.

Question 315

An appraiser's peers are:

Answer 315

An appraiser's peers are other appraisers who have expertise and competency in a similar type of appraisal assignment. See USPAP's DEFINITIONS.

Question 316

How may an opinion of reasonable exposure time be derived?

Answer 316

From analysis of days on market statistics, information on sales and data obtained from market participants. Exposure time can be based on one or more of the following data collection resources: statistical data relating to days-on-market, sales verification records, and interview records collected from market participants

Question 317

How is the credibility of an appraisal measured?

Answer 317

Credibility is measured in the context of intended use.

Question 318

An assignment condition is

Answer 318

Any assumption, law, rule, or other condition that affects the scope of work.

Question 319

The subject property is a five-year-old house that contains 5,200 sq. ft. of livable area, located on 1.8 acres, with a two-car garage with 650 sq. ft., and a granite swimming pool that measures 85 perimeter feet. The costs are estimated to be as follows: House, $85 per sq. ft.; garage, $25 per sq. ft.; indicated land value is $0.35 per sq. ft.; and the swimming pool is estimated to cost $275 per perimeter foot. The cost multiplier for the area is 0.9678. The chronological age is 5 years, and the effective age is 2 years. The remaining economic life is 63 years. If the total cost of improvements is $466,117, what is the indicated value via the cost approach?

Answer 319

The effective age is 2 years and the remaining economic life is 63 years for a total life of 65 years. The total cost new of the improvements equals $466,117. Depreciation is 3%, calculated as (2 / 65 = 3%). Multiplying cost new of $466,117 x 3% (0.03) = $13,984 which is total depreciation. $466,117 - $13,984 = $452,133 depreciated cost of improvements. $452,133 + $27,443 (land value) = $479,576.

Question 320

You are asked to appraise a single-family residence currently valued at $58,000. The majority of properties within close proximity to the subject are duplexes with typical values around $79,000. If the cost of converting the subject's single-family residence into a duplex has been estimated at $20,000 and the interior demolition is estimated to be $1,000, what is the highest and best use?

Answer 320

The highest and best use of the property remains as a single-family residence, since there is no entrepreneurial reward for the owner upon completion of the renovation: $58,000 + $20,000 + $1,000 = $79,000.

Question 321

If a comparable condominium unit in the local market sold for $195,000 and an identical condominium unit sold for $182,000 in a market 40 miles away, what percent is the location adjustment for condominiums from the distant market?

Answer 321

The difference in sale price was $13,000: $13,000 / $182,000 = 7.14% location adjustment to the distant comparable data.