Mid-Term Flashcards
Appraisal is
a) The act or process of telling the client the market value of the
real estate
b) The act or process of developing an opinion of value
c) The report conveyed to the client
d) A lucrative profession
b) The act or process of developing an opinion of value
Page 1
Real estate is
a) The rights in realty
b) The physical land and appurtenances affixed to the land
c) What transfers on the day of closing
d) The “bundle of rights”
b) The physical land and appurtenances affixed to the land
Page 3
Real property includes
a) Any and all buildings on the subject site
b) The interests, benefits, and rights inherent in the ownership of
real estate
c) The physical land and appurtenances affixed to the land
d) Property that is not artificial
b) The interests, benefits, and rights inherent in the ownership
of real estate
Pages 3-4
The manner in which a client employs the information contained in the appraisal report is called
a) The intended use
b) The purpose of an appraisal
c) The base of an appraisal
d) The appraisal premise
a) The intended use
Real property consists of
a) Rights in realty
b) Land and all improvements thereon
c) The right to use or occupy real estate
d) One-unit residences
a) Rights in realty
Pages 3-4
Appraisals are always used
a) To make residential mortgages
b) To settle divorces
c) To settle lawsuits
d) To solve problems that involve real estate valuation
d) To solve problems that involve real estate valuation
Page 6
An appraiser is appraising a small residential property and observes that it has a clothes washer and dryer. Should these items be included in the appraisal?
a) The appraiser should not include these items because they are personal property.
b) The appraiser should include these items, but they should be identified as such and their contributory value should be estimated.
c) The appraiser should not include these items because they could be taken out when the current owners leave.
d) The appraiser should include these items because they were intended to be left with the property.
b) The appraiser should include these items, but they should be identified as such and their contributory value should be estimated.
Page 5
Items that are built to be permanent and intended to be included with real property are
a) Trade fixtures
b) Real estate
c) Personal property
d) Chattel fixtures
b) Real estate
Pages 5-6
An appraiser
a) Determines value
b) Determines price
c) Measures and develops an opinion of value
d) Measures price
c) Measures and develops an opinion of value
Pages 1-2
Easements are another division of property rights. They usually give a party the right
a) To cross over another person’s property without permission
b) To access the property to perform a specific service
c) To use the property during the term of the lease to a tenant
d) To reenter the property if the payments are not made to the lender on time
b) To access the property to perform a specific service
The Fifth Amendment to the US Constitution
a) Requires the government to pay just compensation for land taken for the common good
b) Prohibits the consumption of alcoholic beverages
c) Limits the terms of the President
d) Is called the “Bill of Rights”
a) Requires the government to pay just compensation for land taken for the common good
Page 5
Suppose that you have owned a 40-acre parcel of land for the last 25 years. You paid the taxes on the real estate for the first 20 years but have not paid them for the last five. Which of the following statements is true?
a) The state will get the taxes when the property is sold, since real property cannot be sold unless the property taxes are fully paid.
b) The state has the right to sell the real estate to pay the back taxes.
c) The state is powerless to collect these taxes.
d) The state will sue you, and the courts will garnish your wages to get paid.
b) The state has the right to sell the real estate to pay the back taxes.
Pages 4-5
Suppose that you own a house and five acres just outside the town of Monticello. This home is adjacent to Route 23, which has been a small two-lane highway for many years. Last year, the state decided to widen this road to six lanes to accommodate all the future traffic that will be created by a new riverboat casino. To facilitate this expansion, the state will need about 50 feet off the front of your homestead. The state will
a) Just take the property and use it
b) Pay whatever you ask to keep you from suing them
c) Pay you a fair and equitable amount based on the estimated property value before the taking and another valuation after the taking
d) Take this property from you and replace it with some land in another area of the same county
c) Pay you a fair and equitable amount based on the estimated property value before the taking and another valuation after the taking
Pages 4-5
A fee simple interest in real property is limited only by
a) Taxation, eminent domain, police power, and easements
b) Taxation, eminent domain, police power, and escheat
c) Eminent domain, police power, leases, and escheat
d) Eminent domain, police power, zoning, and escheat
b) Taxation, eminent domain, police power, and escheat
A deed should be recorded because
a) Recording gives public notice of the transaction and sets the priority
b) It is required by law
c) The title does not pass until the deed is recorded
d) Recording makes the deed a legal document
a) Recording gives public notice of the transaction and sets the priority
Zoning and environmental protection regulations are examples of
a) Clouds on title
b) Public use
c) Escheat
d) Police power
d) Police power
Pages 4-5
What is escheat?
The right of government that gives the state titular ownership of a property when its owner dies without a will or any ascertainable heirs.
Land is unique because
a) No two parcels have the same soil composition
b) No two parcels have the same owners
c) No two parcels have the same tax levies
d) No two parcels can occupy the same space on the face of the earth
d) No two parcels can occupy the same space on the face of the earth
Pages 9-10
The supply of land is
a) Increasing all the time
b) Established by the surveyors
c) Infinite
d) Finite
d) Finite
Page 9
The concepts of land are
a) Immobile, durable, finite, and useful
b) Geographic and environmental, legal, economic, and social
c) Land, labor, capital, and entrepreneurialism
d) Leasehold, leased fee, and fee simple
b) Geographic and environmental, legal, economic, and social
Pages 10-12
An example of a governmental force that affects real estate value would be
a) Market demand for mortgage loans
b) Population changes in the market
c) Changes in decorating styles
d) Changes in local building codes
d) Changes in local building codes
Page 11
Zoning and environmental protection regulations are examples of
a) Clouds on title
b) Public use
c) Escheat
d) Police power
d) Police power
Page 13
When real property is sold by one person to another, the amount of money used to compensate the seller is called
a) The cost of the real property
b) The value of the real property
c) The price of the real property
d) The income of the real property
c) The price of the real property
Page 21
A cash-equivalent price
a) Reflects what a seller would accept as if he or she received cash at the closing
b) Includes the seller paying no more than 5 points (5%)
c) Indicates that the rights in realty can only be fee simple
d) Assumes that the buyer did not have to get a mortgage
a) Reflects what a seller would accept as if he or she received
cash at the closing
A good’s capacity to satisfy human desires or needs is known as
a) Creative demand
b) Utility
c) Functional obsolescence
d) Effective demand
b) Utility
Page 19
The city planning department has indicated that a vacant residential lot located in a flood zone cannot be given a building permit. This site
a) Has lost nearly all utility
b) Has become scarce
c) Has lost all desirability
d) Has lost any effective purchasing power
a) Has lost nearly all utility
Pages 19-20
Demand for real estate may be affected by
a) Increasing population and employment
b) The availability of mortgage financing
c) Increases in purchasing power
d) All of the above
d) All of the above
Pages 23-24
The four agents of production are
a) Land, labor, capital, and improvements
b) Land, labor, capital, and entrepreneurship
c) Land, labor, capital, and money
d) Land, improvements, labor, and materials
b) Land, labor, capital, and entrepreneurship
Page 18
Real property has value because it
a) Is nearby
b) Is popular
c) Is desirable
d) Provides future benefits
d) Provides future benefits
Page 21
The supply of one-unit residential properties is most affected by
a) An increase in employment in the area
b) A decrease in mortgage interest rates
c) An increase in the number of apartments built
d) An increase in the number of homes built
d) An increase in the number of homes built
Page 21
Two homes in the same addition have the same size, location, amenities, and features. One is priced at $200,000, and the
other is priced at $210,000. Which of the following statements is the most accurate?
a) The lower-priced home will require a longer marketing time.
b) The lower-priced home will attract more demand.
c) The lower-priced home will get fewer showings.
d) The lower-priced home will always sell for more than the full list price.
b) The lower-priced home will attract more demand.
Page 21
When a property is put up for sale, the seller is forced to reduce the price when
a) The buyers tell him or her to do so
b) The broker tells him or her to do so
c) The listing expires and a new broker insists on a lower price
d) The seller decides that a price reduction is needed to facilitate a sale
d) The seller decides that a price reduction is needed to facilitate a sale
Page 21
In a high-demand market, the cost of building a new property will increase substantially until
a) It becomes impossible for prices to go higher
b) The supply increases because new builders get into the market
c) The charges from suppliers and subcontractors go down
d) The Federal Reserve System increases interest rates
b) The supply increases because new builders get into the market
Page 21
A one-unit homeowner who builds a new and unique structure will commonly find that
a) The structure’s uniqueness will cause the market to like it and pay more for it
b) Properties that do not conform to popular designs will sell for more
c) Generally, fewer people desire unique structures
d) The market will pay as much for this property as any other because of its unique nature
c) Generally, fewer people desire unique structures
Externalities are
a) Factors outside the property that can affect the property value
b) Losses in value due to design and changes in building standards
c) Increases in value due to changes in land value
d) Losses in value due to changes in buyer preferences
a) Factors outside the property that can affect the property value
Page 28
When demand for housing increases, the supply
a) Increases immediately
b) Increases slowly
c) Is unaffected
d) Will diminish
b) Increases slowly
Pages 23-24
The overproduction of new homes
a) Causes oversupply and lower prices
b) Causes increases in demand
c) Causes prices to increase
d) Causes the market to move toward a state of equilibrium
a) Causes oversupply and lower prices
Pages 23-24
A buyer invests in a small strip mall because she believes the property will net $25,000 per year. This is an example of
a) Anticipation
b) Change
c) Competition
d) Substitution
a) Anticipation
Page 22
As an agent of production, capital is
a) The necessary equipment, buildings, and infrastructure for development
b) The location of the center of government
c) The work required to build a structure on land
d) The building in which a legislative body meets
a) The necessary equipment, buildings, and infrastructure for development
Page 19
The statement “property values are created and sustained when the characteristics of a property conform to the demand of its market” refers to
a) Use value
b) Contribution
c) Conformity
d) Supply and demand analysis
c) Conformity
Page 27
A builder finds that the most demand for homes in town is for homes with 2,200 to 2,300 square feet above grade. The market
seems to like homes as large as 3,000-sq.-ft. above grade. If homes are any larger than this, however, the price seems to increase at an increasingly lower rate. This is an example of
a) The law of diminishing returns
b) An oversupplied market
c) An undersupplied market
d) The principle of substitution
a) The law of diminishing returns
Page 26
The three approaches to value are
a) Market analysis, market consensus of opinion, and market research
b) Sales extraction, cost replication, and income multiplication
c) Sales comparison, cost, and income capitalization
d) Graphic analysis, linear regression, and statistical analysis
c) Sales comparison, cost, and income capitalization
Page 36
Highest and best use
a) Is specified by the client
b) Must be considered in all appraisals
c) Includes two parts when the property is improved: the highest and best use as though vacant and the highest and best use as improved
d) Assumes demand for the property within the existing or proposed use
c) Includes two parts when the property is improved: the highest and best use as though vacant and the highest and best use as improved
Pages 34-35
Land valuation techniques include
a) Subdivision development, depreciated cost, and consensus
b) Sales comparison approach, consensus, and extraction
c) Sales comparison approach, allocation, and extraction
d) Assessment multipliers, assessor’s opinions, and multiple regression multipliers
c) Sales comparison approach, allocation, and extraction
Page 35
The valuation technique in which land and building are valued separately is
a) The income capitalization approach
b) The sales comparison approach
c) Linear regression
d) The cost approach
d) The cost approach
Page 36
The valuation technique in which the income a property earns is considered is
a) The income capitalization approach
b) The sales comparison approach
c) The cost approach
d) None of the above
a) The income capitalization approach
Page 36
In the parts of the valuation process, defining the value to be estimated is part of the
a) Identification of the appraisal problem
b) Preliminary analysis and data selection and collection
c) Highest and best use analysis
d) Land value opinion
a) Identification of the appraisal problem
Page 30
One reason to estimate the highest and best use of a property “as though vacant” and “as improved” is
a) To increase the size of the report, which increases the fee
b) Because it necessitates a land value estimate for analytical purposes
c) To allow for estimating physical depreciation
d) To recognize when the improvements should be razed
d) To recognize when the improvements should be razed
Pages 34-35
Land value can be estimated using all of the following techniques except
a) The sales comparison method
b) The cost method
c) The income method
d) The allocation method
b) The cost method
Page 35
There are three approaches to estimating market value because
a) Purchasers have three alternative options available
b) USPAP indicates that all appraisals must use all three approaches to value
c) There are three ways to look at anything
d) It is required for good statistical significance
a) Purchasers have three alternative options available
Pages 29-30
One activity that is not part of defining the appraisal problem is
a) Identifying the fee with the client
b) Identifying the property rights to be appraised
c) Identifying the type of value to be estimated
d) Identifying the valuation date
a) Identifying the fee with the client
Page 30
What is usually the final step of the valuation process?
a) Final reconciliation and estimation of the single value estimate
b) Final reconciliation and determination of the range or single estimate
c) Completion of a report with the defined value
d) Application of the three approaches to value
c) Completion of a report with the defined value
Page 37
The value of a property to a particular user is known as
a) Market value
b) Value in exchange
c) Use value
d) Leasehold value
c) Use value
Pages 52-53
Market value is
a) Always equal to cost
b) Always equal to sale price
c) The amount of money a property should sell for on the open market
d) A fact that can be reported by the appraiser
c) The amount of money a property should sell for on the open
market
Pages 48-50
The mayor of a small town recently hired you to estimate the value of a new one-story, three-bay fire station. The fire station was built last year at a cost of $2.5 million (land and buildings). Similar-sized, one-year-old commercial buildings in comparable locations are selling for $2 million. If you appraise this building for approximately $2.5 million, you probably have conveyed an opinion of
a) Market value
b) Investment value
c) Use value
d) Value in transition
c) Use value
Pages 52-53
Investment value is
a) The value of a specific property to anyone
b) The value of a property within a specific use
c) The value of a property to a specific buyer with specific investment criteria
d) The value on which lenders will base loans
c) The value of a property to a specific buyer with specific investment criteria
Page 54
Market value can be described as
a) The price a person paid for real property
b) The cost of the land plus the cost of the building
c) The present worth of future benefits
d) Whatever someone will pay for something
c) The present worth of future benefits
Pages 48-50
Which of the following is not a part of the definition of market value used by federal financial institutions?
a) Buyer and seller are typically motivated
b) The property sells in 90 to 120 days
c) Payment is made in cash or cash-equivalent terms
d) Both parties are well informed
b) The property sells in 90 to 120 days
Pages 48-50
Investment value is best measured by
a) Market price to a specific investor
b) Market value to a specific investor
c) The cost of acquiring a competitive substitute property with the same utility to a typical purchaser
d) The present worth of anticipated future benefits to a specific investor
d) The present worth of anticipated future benefits to a specific investor
Page 54
Estimating market value for federal financial institutions requires identification of the desires and priorities of
a) Well-informed buyers and sellers
b) A fully informed seller
c) A typically informed purchaser
d) A typically informed seller
a) Well-informed buyers and sellers
Pages 48-50
Market value is
a) Equal to market price
b) An estimate of a price that would have been negotiated for a sale
c) A measure of value in use
d) Equal to replacement cost
b) An estimate of a price that would have been negotiated for a sale
Pages 48-50
Dennis hired an appraiser for an assignment involving a commercial property. Dennis asked the appraiser to provide an opinion of value for him using his investment criteria, which included an overall capitalization rate of 12%. The market capitalization rate for this type of investment would normally be 10%. The opinion of value that the appraiser provides would be the
a) Investment value
b) Exchange value
c) Market value
d) Use value
a) Investment value
Page 54
A client asked an appraiser to value the ABC industrial property based on the assumptions that
• The consummation of the sale occurred within a short time period
• The seller was under extreme compulsion to sell
• The exposure time was short
• There was no special financing
This value is best described as
a) Market value
b) Liquidation value
c) Sheriff’s value
d) Value in use
b) Liquidation value
Pages 55-57
The local government levies taxes based on a defined value of the real estate. A local government official develops an opinion of the value according to state regulations. The local government official is developing the
a) Market value
b) Value in use
c) Assessed value
d) Insurable value
c) Assessed value
Page 55
Life estates
a) Are not salable and therefore are never appraised
b) Represent the full bundle of rights limited by the life of a person
c) Are not legal in most states
d) Cannot be used for income property
b) Represent the full bundle of rights limited by the life of a person
Page 64
Suppose that you are a man who owns a small rental house with two acres, and you marry a woman who has a son from a previous marriage. To provide for your new stepson, you give him a life estate in the small house. When your stepson turns 18, he can
a) Mortgage his interest
b) Rent the property out
c) Sell the life estate to someone else who will rent the property
d) All of the above
d) All of the above
Page 64
A lease
a) Must be for at least one year
b) Conveys the right of occupancy to another
c) Must include the landlord paying the taxes
d) Does not affect the appraisal because it does not affect the salable interest
b) Conveys the right of occupancy to another
Pages 61-62
Air rights are
a) The rights to adequate ventilation of leased property
b) The rights to use and control space above a specific parcel of land (as defined on the surface)
c) The right to have air above the subject property
d) Similar to a cooperative
b) The rights to use and control space above a specific parcel of land (as defined on the surface)
Page 66
Suppose that you buy a single-story home that is attached on two sides and has the following characteristics:
- A slab floor
- A common maintenance agreement for exterior repairs
- Common snow plowing and street maintenance
- A common swimming pool, clubhouse, and tennis courts
You have to pay a $100-per-month fee for maintenance, and you were told by the broker that the property is a “condo.” The assessor says that you have a 4,000-sq.-ft. lot, and the legal description is “Lot 12 in the Calgary Addition.” You probably own
a) An attached home on a small lot with a mandatory fee
b) A condominium
c) A townhouse
d) A zero lot line
a) An attached home on a small lot with a mandatory fee
Suppose that you own a one-acre parcel in downtown Cleveland. This parcel was vacant when you leased it three years ago to the Cleveland Development Company for 99 years. The 99-year lease specified a rent of $30,000 per year net to the owner. The Cleveland Development Company built a 15-story office building on this parcel and leased the building space to 31 different tenants, including two whole floors to Amalgamated Products.
Amalgamated Products holds
a) The fee simple interest
b) The leased fee
c) The leasehold
d) A subleasehold
d) A subleasehold
Page 63
Suppose that you own a one-acre parcel in downtown Cleveland. This parcel was vacant when you leased it three years ago to the Cleveland Development Company for 99 years. The 99-year lease specified a rent of $30,000 per year net to the owner. The Cleveland Development Company built a 15-story office building on this parcel and leased the building space to 31 different tenants, including two whole floors to Amalgamated Products.
You hold
a) The leased fee
b) The leasehold
c) A subleasehold
d) A subleased fee
a) The leased fee
Pages 62-63
Suppose that you own a one-acre parcel in downtown Cleveland. This parcel was vacant when you leased it three years ago to the Cleveland Development Company for 99 years. The 99-year lease specified a rent of $30,000 per year net to the owner. The Cleveland Development Company built a 15-story office building on this parcel and leased the building space to 31 different tenants, including two whole floors to Amalgamated Products.
What happens to the building at the end of the 99-year lease?
a) Any buildings on this land belong to you and/or your successors.
b) The Cleveland Development Company can remove the building before the lease ends.
c) The building still belongs to the Cleveland Development Company because that company built it.
d) You will probably have to sell this property long before the 99 years is up, which will void the lease.
a) Any buildings on this land belong to you and/or your successors.
Page 62
A project with units that are limited both vertically and horizontally and have a percentage ownership in the common elements is a
a) Condominium
b) PUD
c) Cooperative
d) Timeshare
a) Condominium
Pages 71-72
A real property interest held by a lessee and conveying the right of use and occupancy for a stated term under certain conditions is called the
a) Leasehold
b) Fee simple estate
c) Leased fee
d) Determinable fee estate
a) Leasehold
Page 62
Which of the following is not a way to hold title to realty?
a) Joint tenancy
b) Tenancy at will
c) Tenancy in common
d) Tenancy by the entirety
b) Tenancy at will
Page 68
The highest and fullest estate in land is the
a) Fee for service
b) Fee simple
c) Fee simple determinable
d) Life estate
b) Fee simple
Page 60
Ownership of real property by two or more parties with an undivided interest is called
a) Joint tenancy
b) Tenancy by the entirety
c) Sole proprietorship
d) Tenancy in common
d) Tenancy in common
Page 68
TDRs are
a) Topical development restrictions
b) Transferable development rights
c) Temporary development rights
d) Tailored developments—residential
b) Transferable development rights
Page 65
Suppose that you bought the fee simple interest in a parcel of real estate last year. Six months later, you leased the vacant land to John for 50 years, and he built a four-story office building on it.
The salable rights are as follows:
a) You have the fee simple, and John has a leased fee.
b) You have a leased fee, and John has a leasehold.
c) You have a leasehold, and John has a leased fee.
d) You have a leased fee, and John has the fee simple.
b) You have a leased fee, and John has a leasehold.
Pages 62-63
A leased fee is
a) An ownership interest of the tenant when a lease is in effect
b) An ownership interest of the landlord when a lease is in effect
c) An ownership interest of the mortgage holder when a lease is in effect
d) An ownership interest of the sublessor when a lease is in effect
b) An ownership interest of the landlord when a lease is in effect
Page 62
Bob owned a 100-acre farm in Hamilton County. When he died, he had no heirs, no friends, and no will. Which of the following statements is true?
a) The land will be in Bob’s name forever because he died without heirs.
b) The land will pass to the adjacent owners equally.
c) The land will pass to the first person to occupy the land for seven years (i.e., squatter’s rights).
d) The state will take the property and sell it.
d) The state will take the property and sell it.
Page 5
Improvement cost data can be obtained from
a) Builders
b) Marshall & Swift and other cost services
c) Sales of new homes
d) All of the above
d) All of the above
Page 92
Demand for housing is affected when
a) Builders cannot find enough building materials to complete the job
b) A new factory opens and several hundred new employees are hired
c) Zoning laws restrict new construction to the point that not enough homes are built
d) The builders do not recognize a downturn in the market
b) A new factory opens and several hundred new employees are hired
Pages 23-24
Competitive supply sources for housing include
a) Rental units
b) Houses for sale
c) Houses that will be for sale
d) All of the above
d) All of the above
Page 104
If the subject property is 10% superior to Comparable Sale 1 and the comparable sold for $100,000, what is the indicated value of the subject?
a) $100,000 × 1.10 = $110,000
b) $100,000/0.90 = $111,111
c) $100,000 × 0.90 = $90,000
d) $100,000/1.10 = $90,909
a) $100,000 × 1.10 = $110,000
Comparable sale $100,000
Factor × 1.10
Value of the subject $110,000
If a comparable property is 10% superior to the subject property and the comparable sold for $100,000, what is the indicated value of the subject?
a) $100,000 × 1.10 = $110,000
b) $100,000/0.90 = $111,111
c) $100,000 × 0.90 = $90,000
d) $100,000/1.10 = $90,909
d) $100,000/1.10 = $90,909
Subject value $90,909
Factor × 1.10
Sale price of comparable $100,000
The assessment ratio is
a) The ratio of assessed value to market value
b) The ratio of assessed value to the average value for properties in the same district
c) The ratio of the assessor’s salary to the total property value in that jurisdiction
d) Used in nonresidential appraisals because it is simple and easy to understand
a) The ratio of assessed value to market value
Page 93
Ten mills equals
a) 0.1000
b) 0.0100
c) 0.0010
d) 0.0001
b) 0.0100
In the appraisal of a one-unit residence, a significant attribute is
a) The availability of rail siding access
b) The amount of road frontage
c) The size and age of the house
d) The depth of the crawl space area
c) The size and age of the house
If a comparable sold for $100,000 and is identical to the subject property except that the subject has more living area,
a) The comparable is worth less than $100,000.
b) The subject is worth more than $100,000.
c) The subject is worth the same as the comparable.
d) The subject should be worth more than $100,000 if the extra area is recognized in the market as adding more value.
d) The subject should be worth more than $100,000 if the extra area is recognized in the market as adding more value.
Macro-level data is
a) Data about the subject property
b) The sale prices of the comparables
c) Items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised
d) The comparable rentals
c) Items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised
Page 87
In the sale of residential properties, the amount of property taxes is
a) Irrelevant because buyers don’t care about taxes; they only care about the payment amount
b) Important because the ability to qualify for a mortgage loan includes principal, interest, taxes, and insurance (PITI); lenders compare the buyers’ income amounts with the required payment, including taxes and insurance
c) Significant but only if it is above the market standard
d) Not included in any calculation or consideration in the mortgage approval process
b) Important because the ability to qualify for a mortgage loan includes principal, interest, taxes, and insurance (PITI); lenders compare the buyers’ income amounts with the required payment, including taxes and insurance
Pages 92-93
For appraisal purposes, a household is best described as
a) All persons who live in one multi-unit apartment building
b) All persons related to each other who occupy one housing unit
c) A married couple and their dependent children
d) All persons, related or unrelated, who occupy one housing unit
d) All persons, related or unrelated, who occupy one housing unit
Page 90
A contract for deed, also known as an installment sales contract or land contract, is
a) A sale of real property with the seller financing the sale and transferring the rights in realty
b) A sale of real estate with the seller financing the sale but retaining the deed until the loan is paid off
c) A purchase agreement with many conditions
d) A sales contract with a mortgage loan
b) A sale of real estate with the seller financing the sale but retaining the deed until the loan is paid off
Page 120
The secondary mortgage market
a) Is where second mortgages are bought and sold
b) Has historically been dominated by investors like Fannie Mae and Freddie Mac who buy and sell mortgage loans
c) Is located in Chicago
d) Is where inferior credit (B paper) loans are bought and sold
b) Has historically been dominated by investors like Fannie
Mae and Freddie Mac who buy and sell mortgage loans
Page 129
A mortgage is a
a) Document that makes a borrower promise to repay money
b) Document that indicates the interest rate and terms of a loan
c) Pledge of collateral for a real estate loan
d) Share of stock in a company
c) Pledge of collateral for a real estate loan
Pages 117-118
A deed of trust is
a) A document that makes a third party responsible for the money
b) A document that gives a third party the deed until the mortgage loan is paid off
c) The same as a contract for deed
d) Used as a tool to make foreclosure more efficient
b) A document that gives a third party the deed until the mortgage loan is paid off
Page 118
A neighborhood is
a) A residential subdivision
b) An area with similar zoning and density
c) A group of complementary land uses
d) An area with homes of the same price
c) A group of complementary land uses
Page 138
A district is
a) An area within a neighborhood where all the properties are vacant
b) A type of neighborhood that is characterized by one predominant land use
c) The delineation of zoning classifications
d) An area where city attorneys reside
b) A type of neighborhood that is characterized by one predominant land use
Page 139
Neighborhood social influences include all of the following except
a) Population density
b) Occupant skill levels
c) Occupant age levels
d) Vacancy rates
d) Vacancy rates
Page 143
Economic influences include all of the following except
a) Occupant income levels
b) Crime levels
c) Property rent levels
d) Property value levels
b) Crime levels
Pages 143-144
Governmental influences include all of the following except
a) Tax burdens
b) Special assessments
c) Zoning, building, and housing codes
d) Changes in property use
d) Changes in property use
Pages 144-145
Linkages are
a) The devices used to change a property from one use to another
b) The relationships between a buyer and seller in a real estate deal
c) Time-distance relationships between a property use and the supporting facilities
d) The tools necessary to market real estate
c) Time-distance relationships between a property use and the supporting facilities
Page 146
A trade area is
a) An area where property owners trade rather than sell the properties
b) A geographic area from which a retail center draws its customers
c) An area where the owners-inhabitants are generally employed
d) An area where an office building owner trades tenants with other office building owners
b) A geographic area from which a retail center draws its customers
Page 149
The value of improved residential real estate is most influenced by
a) The passage of time
b) The brokers’ opinions of the property values
c) Changes in shopping patterns for consumers of goods and services
d) Construction cost increases
d) Construction cost increases
Pages 147-150
The four forces that influence real estate values are
a) Social, economic, governmental, and environmental
b) Land, labor, capital, and green space
c) Eminent domain, police power, escheat, and taxation
d) Governmental, social, taxation, and economic conditions
a) Social, economic, governmental, and environmental
Page 142
Market area life cycles include
a) Growth, stability, decline, and gentrification
b) Growth, stability, appreciation, and decline
c) Growth, stability, decline, and revitalization
d) Growth, level off, appreciation, and decline
c) Growth, stability, decline, and revitalization
Page 140
Which of the following can serve as evidence that a neighborhood is in the growth cycle?
a) Abandoned automobiles on site
b) Several newspapers on front porches
c) Older structures being remodeled
d) New construction of buildings
d) New construction of buildings
Page 140
A site is
a) A platted subdivision lot
b) The same as raw land
c) Land underneath buildings
d) Land that is improved so that it is ready to be used for a specific purpose
d) Land that is improved so that it is ready to be used for a specific purpose
Page 165
Plottage value is
a) The process by which large parcels of land are divided into lots and recorded in county offices
b) The assemblage of two or more parcels of land
c) The name of the discount given when larger parcels sell for more per acre than smaller ones
d) An incremental increase in value that results when two or more sites are combined to produce greater utility
d) An incremental increase in value that results when two or more sites are combined to produce greater utility
Page 173
Excess land is
a) Land that is not needed to support the subject’s primary highest and best use or not needed to support existing improvements
b) Land that is not needed according to zoning requirements
c) Land included with the subject that is above the lender’s limits
d) Land value that is above the assessor’s estimate of value
a) Land that is not needed to support the subject’s primary highest and best use or not needed to support existing improvements
Pages 174-175
Gross leasable area is
a) Commonly used in retail centers
b) Commonly used in residential properties
c) Commonly used in industrial properties
d) Commonly used in apartments
a) Commonly used in retail centers
Page 199
Gross living area is
a) Commonly used in retail centers
b) Commonly used in residential properties
c) Commonly used in industrial properties
d) Commonly used in apartments
b) Commonly used in residential properties
Page 199
Functional inutility is
a) A weak market segment
b) An impairment of the functional capacity of a property or building
c) The lack of a utility room in a house
d) A weak market due to the oversupply of homes
b) An impairment of the functional capacity of a property or building
Page 232
To analyze the market for a one-unit home and get an easy and reliable result, an appraiser can investigate
a) The number of listings and recent sales of homes that would appeal to the same buyer as the subject property
b) The number of expired listings in the same geographic area as the subject property
c) The number of listings and recent sales within the subject property’s platted subdivision
d) The number of vacant apartments in the same geographic area as the subject property
a) The number of listings and recent sales of homes that would appeal to the same buyer as the subject property
Pages 102-103
Highest and best use analysis is required in
a) All appraisals
b) Value-in-use appraisals
c) Investment value appraisals
d) Market value appraisals
d) Market value appraisals
Highest and best use analysis requires an opinion of the use as though vacant and as improved to
a) Provide an opinion of the value of the improvements
b) Ensure that appraisers recognize that the property could be worth more without the buildings than with them
c) Provide an opinion of any functional obsolescence caused by inappropriate improvements
d) All of the above
d) All of the above
Pages 307-313
Highest and best use of the site as though vacant
a) Is required in all market value appraisals of real property
b) May require a change in zoning classification, if possible
c) Assumes the site is vacant or could be made vacant by demolishing the improvements
d) All of the above
d) All of the above
Pages 307-313
Which of the following is not a criterion for highest and best use?
a) Legally permissible
b) Physically possible
c) Financially feasible
d) The maximum size improvement
d) The maximum size improvement
Page 307
A property use meets the criteria of legal permissibility if it complies with all of the following except
a) Deed and plat restrictions
b) Zoning requirements, building codes, and historic district controls
c) Lease provisions
d) Supply and demand criteria
d) Supply and demand criteria
Pages 306-310
The concept of consistent use requires an improvement to be valued based on a use that is consistent with the site’s highest and best use. In other words,
a) The highest and best use of the site as though vacant must always consider the improvements thereon
b) The highest and best use as improved would always be consistent with the “as vacant” analysis
c) The improvement value must be adjusted down if the land’s highest and best use is different than the improved highest and best use
d) The vacant land value can never exceed the improved value
c) The improvement value must be adjusted down if the land’s highest and best use is different than the improved highest and best use
Page 315
Land values are never penalized due to the functional problems in existing buildings because
a) Buildings can be removed or altered
b) Buildings do not contribute value
c) Land can change
d) All of the above
a) Buildings can be removed or altered
To be considered the highest and best use, a use must be
a) Physically possible, legally permissible, financially feasible, and maximally productive
b) Physically correct and legally possible
c) Already in existence and legal
d) Physically possible and appropriate
a) Physically possible, legally permissible, financially feasible, and maximally productive
Page 307
When a property’s highest and best use is likely to change in the near future, the prevailing highest and best use is called a(n)
a) Pending use
b) Temporary use
c) Interim use
d) Alternative use
c) Interim use
Page 333
A common interim use for a property is use as a
a) Surface parking lot
b) High-rise parking lot
c) Small office building with short leases
d) New car automobile dealership
a) Surface parking lot
A legally nonconforming use is
a) A use that was legally established and maintained but no longer conforms to existing zoning
b) A use that was illegally established and maintained
c) A use that was not legally established and maintained and still does not conform to existing zoning
d) A use that was not legally established and maintained but for which the government is not enforcing the law
a) A use that was legally established and maintained but no
longer conforms to existing zoning
Page 330
The land value of a five-acre parcel in a prestigious residential area is estimated at $50,000 per acre based on comparable sales in the area. Improved comparable sales with homes like the subject property show that this property should be worth $225,000 if sold as a house. The demolition cost is $5,000.
The value of the land is
a) $240,000
b) $245,000
c) $250,000
d) $255,000
c) $250,000
The land value of a five-acre parcel in a prestigious residential area is estimated at $50,000 per acre based on comparable sales in the area. Improved comparable sales with homes like the subject property show that this property should be worth $225,000 if sold as a house. The demolition cost is $5,000.
The market value of the fee simple rights for this parcel is
a) $250,000
b) $245,000
c) $230,000
d) $225,000
b) $245,000
The land value of a five-acre parcel in a prestigious residential area is estimated at $50,000 per acre based on comparable sales in the area. Improved comparable sales with homes like the subject property show that this property should be worth $225,000 if sold as a house. The demolition cost is $5,000.
The market value of the improvement is
a) $225,000
b) $175,000
c) -$25,000
d) -$5,000
d) -$5,000
A site is different than land because
a) Land represents an improved site.
b) A site is improved land that is ready to be built upon.
c) The land development method is used to value a site.
d) No difference exists.
b) A site is improved land that is ready to be built upon.
Page 165
Land is always valued at
a) Its current land use as though vacant
b) Its highest and best use as though vacant
c) The predominating land uses in the neighborhood
d) The preferred use of the appraiser’s client
b) Its highest and best use as though vacant
Page 338
Sites can be valued by
a) Sales comparison analysis only
b) Sales comparison and extraction only
c) Income capitalization analysis only
d) Extraction, allocation, and sales comparison
d) Extraction, allocation, and sales comparison
Page 339-343
In sales comparison analysis, comparable sales are adjusted
a) To the typical property in the market
b) To the other sales
c) To allow for matching up with the other sales
d) To the subject property
d) To the subject property
Page 339
When estimating the market value of a site, the appraisal should include
a) Three comparable site sales transactions
b) Five to six comparable site sales transactions
c) Seven to eight comparable site sales transactions
d) There is no set number of comparable site sales transactions
d) There is no set number of comparable site sales transactions
Pages 339-342
If market value is sought, the sales comparison approach to site valuation is based primarily on an analysis of the market behavior of
a) Buyers
b) Sellers
c) Brokers
d) Lenders
a) Buyers
Pages 339-342
Adjustments to the prices of comparable sites are measured by
a) Cost to cure any deficiency in the subject property
b) Front footage
c) Square footage
d) The amount a typical buyer would pay more or less for the item
d) The amount a typical buyer would pay more or less for the item
Pages 339-342
In the valuation of land by sales comparison, the order of adjustment should begin with
a) Property rights transferred
b) Access and topography
c) Terms of sale or financing
d) Location
a) Property rights transferred
Page 342
The valuation of land with a highest and best use as an industrial subdivision can be estimated using
a) The summation of the value of all sites
b) The subdivision development method
c) The allocation method
d) The extraction method
b) The subdivision development method
Page 346
An opinion of market value via the sales comparison approach reflects the perspective of a) Well-informed purchasers b) Well-informed sellers c) Well-informed brokers d) Uninformed buyers
a) Well-informed purchasers
Pages 351-353
A major requirement and limitation of the sales comparison approach is that it requires
a) Several new constructions
b) An active market of competitive properties
c) Accurate cost information
d) Accurate information on investor’s expectations
b) An active market of competitive properties
Pages 353-354
Property sale prices
a) Are negotiated by appraisers
b) Are negotiated between buyers and sellers
c) Are set by brokers
d) Are opinions
b) Are negotiated between buyers and sellers
Pages 355-356
If the appraisal assignment requires an opinion of market value,
a) The sales comparison approach is never applicable
b) The sales comparison approach is usually applicable
c) The sales comparison approach is not applicable because it represents value in use
d) The appraiser should always use the cost approach because it represents the most similar buyer’s actions
b) The sales comparison approach is usually applicable
Page 353
In the application of the sales comparison approach in a market value appraisal,
a) Only closed sales of real property interests can be used
b) Only current listings and closed sales of real property interests can be used
c) Only closed comparable sales, listings, and options can be used as indications of value
d) Closed sales, pending sales, current listings, options to purchase, and refusals can be used as indications of market value
d) Closed sales, pending sales, current listings, options to purchase, and refusals can be used as indications of market value
Pages 355-356
Current listings that have been exposed to the market for an extended period of time but have not sold
a) Tell the appraiser what the subject’s market value cannot exceed
b) Tell the appraiser what the subject’s market value is
c) Tell the appraiser what the subject’s value in use is
d) Tell the appraiser what the subject’s investment value is
a) Tell the appraiser what the subject’s market value cannot exceed
This student handbook
Which statement about units of comparison is the most accurate?
a) Rates of units of comparison are difficult to estimate.
b) Classifications of units of comparison are difficult to estimate.
c) Units of comparison represent a breakdown of the price based on a significant variable.
d) Units of comparison are the characteristics that cause the prices paid for real property to vary.
c) Units of comparison represent a breakdown of the price based on a significant variable.
Pages 359-369
Which approach is usually the most applicable for appraising residences?
a) Cost
b) Sales comparison
c) Income capitalization
d) Cost and income capitalization
b) Sales comparison
Pages 353-354
Elements of comparison are
a) A weatherman’s comparison report
b) The characteristics that cause the prices paid for real estate to vary
c) Items that represent the breakdown of the price based on a significant variable
d) Items that represent the bottom-line price after all of the adjustments
b) The characteristics that cause the prices paid for real estate to vary
Page 377
Adjustments are made
a) To the subject to make it like the comparables
b) To the comparables to make them like the subject
c) To the subject to make it like the market
d) To the comparables to make them like the market
b) To the comparables to make them like the subject
Page 361
A technique for extracting adjustments directly from the sale prices of comparables based on the contribution of a single feature is called
a) Grid analysis
b) Paired data analysis
c) Cost analysis
d) Income analysis
b) Paired data analysis
Page 372
Adjustments for real property rights conveyed reflect
a) Physical differences in the subject and the comparables
b) The differences in the rights in realty transferred between the subject and comparables
c) The differences in the market on the effective date and the comparables
d) The differences in the motivations of the sellers and buyers on the date of sale
b) The differences in the rights in realty transferred between the subject and comparables
Pages 378-389
Adjustments for financing terms reflect
a) The differences in the market on the effective date and the comparables
b) The differences in the motivations of the sellers and buyers on the date of sale
c) The differences in sale prices of properties that sold for cash and the ones that sold with financing
d) The differences in sale prices of properties that sold for cash or market rate financing and the ones that sold with special financing that favors the buyer
d) The differences in sale prices of properties that sold for cash or market rate financing and the ones that sold with special financing that favors the buyer
Pages 381-383
A conditions of sale adjustment reflects
a) The differences in the market on the effective date of the appraisal and the dates of sale of the comparables
b) The differences in sale prices of properties that sold for cash and the ones that sold with financing
c) The differences between the motivations of the seller and buyer on the date of sale of a comparable and the typical motivations of buyers and sellers as described in the definition of value
d) The differences in sale prices of properties that sold from non-related parties
c) The differences between the motivations of the seller and buyer on the date of sale of a comparable and the typical motivations of buyers and sellers as described in the definition of value
Pages 383-384
Graphic analysis is an example of
a) A quantitative adjustment technique
b) Qualitative analysis
c) Computer valuation using a graphics card
d) A technique used in land valuation only
a) A quantitative adjustment technique
Pages 371-372
Expenditures made immediately after purchase
a) Reflect anything paid by the buyer during the warranty period
b) Reflect anything that the buyers knew they would have to correct and probably factored the cost of into the price paid
c) Reflect the cost of replacing the decorating to bring the home up to the buyers’ standards
d) Reflect the cost to update the property to the new home market standards
b) Reflect anything that the buyers knew they would have to correct and probably factored the cost of into the price paid
Pages 385-386
Comparative analysis is
a) A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach
b) The tool used in the cost approach to estimate depreciation to the buildings
c) A tool used to convert income to value in the income approach
d) A term used to describe levels that support construction cost
a) A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach
Page 371
The principle of ________ is the basis of the income capitalization approach.
a) Change
b) Substitution
c) Modification
d) Anticipation
d) Anticipation
Page 414
Value can be estimated in the income capitalization approach by
a) Dividing the overall capitalization rate by the net operating income
b) Multiplying the net operating income by the overall capitalization rate
c) Dividing the net operating income by the overall capitalization rate
d) Dividing the base by the multiplier
c) Dividing the net operating income by the overall capitalization rate
Pages 431-432
Suppose a lease contract called for a rent of $10 per square foot. However, similar space in the market rented for $15 per square foot. The amount specified in the lease is known as the rent.
a) Contract
b) Market
c) Economic
d) Overage
a) Contract
Page 421
In a gross lease, who pays the utility costs?
a) The landlord
b) The tenant
c) A subtenant, if there is one
d) Either the tenant or the landlord
a) The landlord
Page 418
Market rent is
a) The amount of rental income a property would command in the open market
b) The amount of rental income stipulated in the lease
c) The amount of rental income that reflects the contract rent adjusted for concessions
d) The amount of rental income that is in excess of the market rate
a) The amount of rental income a property would command in the open market
Page 420
Reproduction cost is defined as the cost of
a) Building the improvements exactly as they are on the date of the appraisal
b) Building the improvements exactly as they are on the effective date of appraisal
c) Building the improvements exactly as they would appear if they were new on the effective date of appraisal
d) Building the improvements with similar quality and utility as of the date of construction
c) Building the improvements exactly as they would appear if they were new on the effective date of appraisal
Page 533
Replacement cost is defined as the cost of
a) Building the subject improvements with the same utility as of the date of the report
b) Building the subject improvements exactly as they stand on the effective date of appraisal
c) Building the improvements exactly as they would appear if they were new as of the date of the report
d) Building the improvements with a structure of like utility but new as of the effective date of valuation
d) Building the improvements with a structure of like utility but new as of the effective date of valuation
Page 533
Indirect construction costs do not include
a) Architect’s fees
b) Builder’s overhead
c) Selling and leasing fees
d) Financing fees
b) Builder’s overhead
Page 535
Site improvements may be valued at
a) Actual cost plus 10%
b) Historic cost
c) Depreciated historic cost
d) Depreciated reproduction cost
d) Depreciated reproduction cost
Page 532
Replacement cost is best used
a) To eliminate some functional obsolescence from the cost approach
b) To eliminate all functional obsolescence from the cost approach
c) For non-residential properties only
d) For residential properties
a) To eliminate some functional obsolescence from the cost approach
Page 533
The cost approach is based on the
a) Theory of substitution
b) Cost of acquisition
c) Cost of production
d) Assessed value
a) Theory of substitution
Page 528
The cost approach is
a) Never a relevant approach for estimating market value
b) Always a relevant approach for estimating market value
c) Most applicable when the subject improvements represent the highest and best use of the site as though vacant and are relatively new
d) Not required, regardless of the property
c) Most applicable when the subject improvements represent the highest and best use of the site as though vacant and are relatively new
Pages 530-532
List the 6 steps required to determine highest and best use.
Step 1 – Property productivity analysis. Competitive characteristics
Step 2 – Market delineation – identify demand sources & competitive area
Step 3 – Demand Analysis – Current demand & future demand
Step 4 – Supply Analysis – Survey existing supply & predict future
Step 5 – Residual demand analysis: analyze the intersection of Supply & Demand
Step 6 – Subject capture analysis – predict performance of subject property
The most detailed method of estimating the cost new of a structure is the
a) Quantity survey method
b) Unit-in-place method
c) Trade breakdown or builder’s method
d) Segregated cost method
a) Quantity survey method
Page 555
The unit-in-place cost-estimating method is
a) Based on historical cost
b) Based on the market-extracted costs per square foot of the building
c) Based on the cost of each component of the building, including all labor and materials
d) Based on a computerized printout of all labor, materials, and extras
c) Based on the cost of each component of the building, including all labor and materials
Pages 551-552
A cost-estimating method in which appraisers estimate the current cost of construction based on the amount paid for the building when it was built is called
a) Cost index trending
b) Segregated cost
c) Cost engineered services
d) Unit-in-place method
a) Cost index trending
Page 545
When appraising an improved property with substantial functional losses, you should
a) Be conservative in the cost new estimate to accommodate those losses
b) Accurately estimate the cost and deal with the obsolescence in the depreciation estimate
c) Not apply the cost approach because it is too hard
d) Apply the cost approach because it is the only method you have that will give an accurate indication of value
b) Accurately estimate the cost and deal with the obsolescence in the depreciation estimate
Page 543
An incurable functional problem is best defined as
a) An item that cannot be physically cured
b) An item that will not return as much in value as it costs to fix
c) An item that is already cured
d) An item that is scheduled to be cured but has not yet been cured
b) An item that will not return as much in value as it costs to fix
Page 561
If a window has an effective age of 10 years and a remaining economic life of 25 years, the percentage of depreciation
a) 20%
b) 30%
c) 40%
d) 50%
b) 30%
10/35
Effective age is
a) The actual age of properties with better-than-normal maintenance
b) Total economic life minus remaining economic life
c) Total utility minus diminished utility
d) Total economic life minus actual age
b) Total economic life minus remaining economic life
Page 562
An item of depreciation is curable if
a) The cost to cure is less than the expected increase in value
b) The cost to cure is no greater than the reproduction cost
c) The cost to cure is no greater than the replacement cost
d) It has any remaining economic life
a) The cost to cure is less than the expected increase in value
Page 561
