Module 1

Question 1

The approach used as the best indicator of value for existing properties

Answer 1

Sales comparison

Question 2

Refers to the loss in desirability of the style, layout, or function of an element of a property over time

Answer 2

functional obsolescnence

Question 3

The price a willing seller will sell for, and the price a willing buyer will pay

Answer 3

market value

Question 4

The legal use for property that gives the greatest return in money and/or amenities

Answer 4

highest and best use

Question 5

The loss in value of a property caused by factors outside of the property itself

Answer 5

external obsolescence

Question 6

The percentage of value or sales price that a lender is willing to finance.

Answer 6

Loan-to-Value Ratio (LTV)

Question 7

Also known as a drive-by appraisal, used for low LTV and low-risk loans.

Answer 7

limited appraisal

Question 8

An Appraiser’s opinion of value.

Answer 8

appraisal

Question 9

A review of the appraisal verifying the accuracy of the data, elements and procedures used by the original appraiser.

Answer 9

field reveiw

Question 10

The percentage of value or sales price that a lender is willing to finance.

Answer 10

loan to value ratio

Question 11

A checklist of items an appraiser uses to analyze the appraisal report for completeness and acceptable conclusions.

Answer 11

desk review

Question 12

A commodity’s value is influenced by the cost of acquiring a substitute or comparable item

Answer 12

Principle of Substitution

Question 13

The value of a subject property is increased by the value of surrounding properties.

Answer 13

Principle of Progression

Question 14

The presence of lower valued properties in the area will cause a decline in the value of the subject property.

Answer 14

Principle of regression

Question 15

The value of a commodity is influenced by the cost of acquiring a substitute or comparable item.

Answer 15

principle of substitution

Question 16

The forces acting on a parcel of land are always affecting the value of the land.

Answer 16

principle of change

Question 17

An economic principle stating that when demand is great and supply is short, prices in the marketplace increase.

Answer 17

principle of supply and demand

Question 18

The value of a property is equal to the value of the sum of the contributory value of each of its components, not their price.

Answer 18

principle of contribution

Question 19

The legal use that gives the greatest return in money and or amenities.

Answer 19

highest and best use

Question 20

Value is maximized when there is a reasonable degree of homogeneity in a neighborhood.

Answer 20

principle of conformity

Question 21

The purchase price is affected by the expectation of future appeal and benefits.

Answer 21

principle of conformity

Question 22

The absence of competition in the marketplace will cause prices to increase.

Answer 22

principle of competition

Question 23

The value of a subject property is increased by the value of surrounding properties.

Answer 23

principle of progression

Question 24

Improve a property when the value added by the improvement exceeds the cost of the improvement.

Answer 24

principle of increasing and decreasing returns

Question 25

DUST =

Answer 25

Demand, Utility, Scarcity, and Transferability DUST is an acronym used to help remember the characteristics of value

Question 26

There must be sufficient demand for the property for it to have value. Without demand, it is of little or no value.

Answer 26

Demand

Question 27

The property must be able to fulfill a need. If for some reason, the property has no use, it is of little or no value. Utility does not necessarily mean development. The property may have utility to an investor who holds it for future gain or development.

Answer 27

Utility

Question 28

If a type of property in a market area is too abundant, it has reduced value. If a market is flooded with property for sale, values will remain flat

Answer 28

Scarcity

Question 29

If, for some reason, the property cannot be transferred, it is of little value. The inability to transfer may be due to a title flaw that cannot be cured like government regulations or restrictions that make transfer impossible.

Answer 29

Transferability

Question 30

Which characteristic of value states that the property must fulfill a need?

Answer 30

Utility means the property must fulfill a need.

Question 31

_______ is the most probable price a property should bring.

Answer 31

Market value is the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale.

Question 32

_______ refers to the assessed value of the property.

Answer 32

Ad valorem (according to value) taxes are assessed based upon the assessed value of the property and the current tax rate.

Question 33

_______ is when ownership cannot be transferred from one person to another, it has no to little value.

Answer 33

If, for some reason, the property cannot be transferred, it is of little value. This is called transferability.

Question 34

Which characteristic of value states that limited supply in the marketplace creates value?

Answer 34

Limited supply in the marketplace creates value refers to scarcity.

Question 35

_____________________must be aware of market cycles, economic forces, and political actions that could affect the value of property.

Answer 35

Appraisers

Question 36

In this approach, the appraiser focuses on recent sales in determining the value of the subject. The appraiser will gather at least three comparison sales.

Answer 36

Sales Comparison Approach

Question 37

____________________________ is the loss in the desirability of the style, layout, or function of an element of a property over time.

Answer 37

Functional Obsolescence

Question 38

____________________________ is the loss in value of a property caused by factors outside of the property itself.

Answer 38

External Obsolescence

Question 39

Gross Rent Multiplier =

Answer 39

Sales Price ÷ Monthly Rent

Question 40

Sale 1 was found to be an exact match to the subject property. Sale 2 has an extra 1/2 bath that the subject property lacks. The appraiser has determined by other analysis that the contributory value of the 1/2 bath is $2,000. Additionally, while the subject property has a fireplace, Sale 3 does not. The appraiser has determined that the contributory value of the fireplace is $1,800. What is the adjusted sale price of Sale 1?

Answer 40

The adjusted sales price is $157,000 because there are no adjustments.

Question 41

An appraisal is being performed on a home that has 2 bathrooms and a fireplace. The appraiser has located three comparable sales as follows: [*On Mobile* - Please turn device sideways to view full table] Sale 1 was found to be an exact match to the subject property. Sale 2 has an extra 1/2 bath that the subject property lacks. The appraiser has determined by other analysis that the contributory value of the 1/2 bath is $2,000. Additionally, while the subject property has a fireplace, Sale 3 does not. The appraiser has determined that the contributory value of the fireplace is $1,800. What is the adjusted sale price of Sale 2?

Answer 41

The adjusted sales price for Sale 2 is $157,500 because the additional half bath gives the sales price a negative adjustment of $2,000.

Question 42

An appraisal is being performed on a home that has 2 bathrooms and a fireplace. The appraiser has located three comparable sales as follows: [*On Mobile* - Please turn device sideways to view full table] Sale 1 was found to be an exact match to the subject property. Sale 2 has an extra 1/2 bath that the subject property lacks. The appraiser has determined by other analysis that the contributory value of the 1/2 bath is $2,000. Additionally, while the subject property has a fireplace, Sale 3 does not. The appraiser has determined that the contributory value of the fireplace is $1,800. What is the adjusted sale price of Sale 3?

Answer 42

The adjusted sales price for Sale 2 is $157,800 because the appraiser determined the fireplace was worth $1,800.

Question 43

True or False: External obsolescence is the loss in desirability of the style, layout, or function of an element of a property over time.

Answer 43

F

Question 44

True or False: Deterioration is the reduction in value of property from causes such as deterioration or obsolescence.

Answer 44

F

Question 45

True or False: TReconciliation is the final step in the appraisal process.

Question 46

True or False: Functional obsolescence refers to the loss in value of a property caused by factors outside of the property itself.

Answer 46

F

Question 47

True or False: GRM = Sales Price ÷ Monthly Rent

Answer 47

T

Question 48

True or False: The appraiser will gather at least three comparison sales known as “comparables”.

Answer 48

T

Question 49

True or False: The three approaches to value are the sales comparison approach, the cost approach, and capitalization.

Answer 49

F

Question 50

True or False: The comparable sale can differ from the subject property in two ways. It can have features that are superior or inferior.

Answer 50

T

Question 51

True or False: The value of a property may be affected by social, economic, governmental, and environmental influences.

Answer 51

T

Question 52

True or False: The principle of conformity suggests that the value of a property is equal to the sum of the contributory value of each of its component parts.

Answer 52

F

Question 53

True or False: Chronological age is the actual age of the property in years.

Answer 53

T

Question 54

True or False: A field review, which has an exterior only, or drive-by, inspection is deemed acceptable for low LTV or low-risk loans.

Answer 54

F

Question 55

True or False: The principle of anticipation states that the purchase price is affected by the expectation of future appeal and benefits.

Answer 55

T

Question 56

True or False: The loan-to-value ratio (LTV) is the percentage of value or sales price that a lender is willing to finance.

Answer 56

T

Question 57

True or False: Most lenders, especially for conforming loan programs, do not normally conduct simple desk reviews at their desks.

Answer 57

F

Question 58

True or False: Fannie Mae and Freddie Mac have been instrumental in standardizing residential appraisal reporting through the widespread adoption of the Uniform Residential Appraisal Report.

Answer 58

T

Question 59

True or False: Market value is not one of the concepts that are typically misunderstood in an appraisal.

Answer 59

F

Question 60

True or False: Appraisals are a critical part of any transaction where financing is involved because lenders use them to determine the market value of the property being used to secure the loan.

Answer 60

T