Module 12 Quiz Flashcards
A young builder bought 20 acres outside of the city limits of LaSalle. He planned to construct a manmade
lake and to sell the lots off. After researching subdivision prices in the local community (none of which contained lakes), he listed his lots for 10% more than the average lot price of the other subdivisions and set the lots with views of the lake at an additional $5,000 above this increase. Is there evidence to support his price increase?
A) As the availability of vacant lots increase, the value of the lots should decrease based on the current supply and demand curve. Externalities can have a positive influence on properties; the lake view would be an
improvement over a view of a residential dwelling. List the lots at the same price as in other subdivisions. The lake view properties can be listed for more.
B) The buyer’s response to the lake view cannot be estimated in terms of value. As the availability of vacant lots decreases, the value of the remaining lots should increase based on the current demand. All the properties in the subdivision should be listed for a consistent amount.
C)The value of the lots should remain consistent with the values in other subdivisions. The manmade lake is not the same as a natural lake, so no adjustment should be applied. The values of all the area subdivisions should
remain consistent.
D) As the availability of vacant lots decreases, the value of the remaining lots should increase based on the current demand. Externalities can have a positive influence on properties. The lake view would be an improvement over a view of a residential dwelling.
D) As the availability of vacant lots decreases, the value of the remaining lots should increase based on the current demand. Externalities can have a positive influence on properties. The lake view would be an improvement over a view of a residential dwelling.
A recent auction in downtown DePue has left Jake the owner of a four-unit apartment building. The zoning is C3/Central Business District. The building needs extensive updating. The commercial zoning would allow
commercial units. The dwelling formerly consisted of two-bedroom, one-bathroom apartments. The property has been vacant over three years. Jake has requested advice in his decision on how to get the most money
out of his building. What steps should the appraiser take to best advise this client?
A) Commercial properties always have a higher return than properties used for multifamily use. If commercial rentals are not available, she should base the value on the sales comparison approach. If apartment buildings are used, adjust them for the cost of conversion.
B) He should look at recent commercial sales in the neighborhood, research commercial rental units in similar dwellings, and examine apartment rentals
and sales as well. Highest and best use of the property will be based primarily on the highest value indicated by the income approaches.
C) He should research recent apartment sales and rental rates in the neighborhood for similar dwellings. Based on the number of apartment sales and rentals, the commercial market will not need to be reviewed.
D) Residential properties always have a higher return than properties used for commercial use. Almost all commercial properties are occupied by the owner. Commercial rentals will not be able to support a higher value. She should explore apartment rentals and sales to arrive at a value indicated by the income approach.
B) He should look at recent commercial sales in the neighborhood, research commercial rental units in similar dwellings, and examine apartment rentals
and sales as well. Highest and best use of the property will be based primarily on the highest value indicated by the income approaches.
In Highest and Best Use, the legally permissible investigation must consider:
A) easements and encroachments.
B) all of these answers.
C) zoning.
D) covenants.
B) all of these answers.
If the income approach shows a positive cash flow (profit) it is said to support
A) the conclusion of the ideal improvement.
B) financial feasibility.
C) surplus productivity.
D) legal feasibility
B) financial feasibility.
An appraiser is analyzing a retail property in a rural municipality. Recently one of the major employers in the area closed. What appraisal principle must the appraiser give additional consideration to in this assignment?
A) the principle of highest and best use
B) the principle of substitution
C) the principle of anticipation
D) the balance principle of surplus productivity
C) the principle of anticipation
When a property owner volunteers information that could influence the appraisal, the appraiser should:
A) tell the owner the direction of value influence it will have and allow the owner to take back the information if he wishes.
B) tell the owner that he cannot accept information that is not in print.
C) tell the owner that he will consider the information, then ignore it as hearsay.
D) consider the information provided and give it the weight it deserves.
D) consider the information provided and give it the weight it deserves.
When appraising a residence in a commercially zoned neighborhood, the home, and the site could have different highest and best uses.
True
False
False
When an appraiser bases his or her opinion of the value of a property as of a certain date, which economic principle best reflects that necessity?
A) balance
B) substitution
C) competition
D) change
D) change
The owners of an older two-story farm home have decided to sell the property. They have hired you to direct them on the purchase price. The farmland is adjacent to a new subdivision. Lots in this subdivision have been selling for $12,000 an acre. The average lot size is .58 acre. The old farm home consists of 27 acres of tillable land.
A) The current agricultural zoning cannot be changed. The subject site should be divided into a small 2acre
parcel for the dwelling, and the rest tillable farm land. The farm land should be compared to similar use parcels in the surrounding communities.
B) Perform a subdivision analysis to explore the site being subdivided into a new subdivision. The lots in the adjacent development are increasing in value, as fewer lots remain. Include the demolition cost of the dwelling and out buildings.
C) The existing property cannot be demolished. Highest and best use is always the present use. Explore sales in other communities, trying to find comparable sales on acreage.
D) Perform an income approach on the outbuildings with the possibility they can be rented with the farm land. The present use is always the highest and best use. If the owners no longer wish to till the land, they can sell it as farm land or rent it out. The demolition of the out buildings to expand the tillable area
should be considered.
B) Perform a subdivision analysis to explore the site being subdivided into a new subdivision. The lots in the adjacent development are increasing in value, as fewer lots remain. Include the demolition cost of the dwelling and out buildings.
A new subdivision on the east side of town is selling out quickly. Out of 50 lots, 40 sold within six months. The last area for development is located on the northwest side of town. This area consists of single family detached and attached zoned lots. In anticipation that the northwest lots will sell out, some local residents decided to pool together and purchase several of the lots in this subdivision. To construct a new dwelling in the community, they would have to purchase one of the investment lots. One of the investors has become nervous and hired an appraiser. What is this investor most likely to hear from the appraiser?
A) If there are lots currently available, the availability of buildable lots is stable. This would not justify a shift in the demand curve causing an increase in value.
B) The amount of available, buildable sites in the community is currently decreasing. The principle of supply and demand supports that when the supply is limited, the demand will decrease. The shift in demand causes the value that buyers are willing to pay decrease.
C) The amount of available, buildable lots in the community is currently decreasing at a rapid rate. The principle of supply and demand supports the fact that when the situation of supply is limited, the demand will increase. This shift in demand also increases the value that buyers are willing to pay.
D) The future of the site value cannot be anticipated. Fortune telling is not included in an appraiser’s job description.
C) The amount of available, buildable lots in the community is currently decreasing at a rapid rate. The principle of supply and demand supports the fact that when the situation of supply is limited, the demand will increase. This shift in demand also increases the value that buyers are willing to pay.
Jack’s parents recently moved into an assisted living community. Jack and his wife are debating moving into his parents now vacant home. The dwelling is dated and would require updating and remodeling to reach a level of maintenance comparable to the rest of the neighborhood. Jack and his wife, who are expecting their second child, live in a smaller home situated in the center of a neighborhood that has not changed in over 30 years. Some of the dwellings need exterior updating and repairs. Jack is concerned the deferred maintenance in the area will affect his value. Acting as a consultant, what advice is appropriate?
A) The principle of regression supports Jack’s thoughts. The predominant value of Jack’s current neighborhood will decrease as the quality of the homes increase. The pullup effect will have a negative impact on Jack’s property value. Investing energy in updating and remodeling his parents home will most likely have more impact on the value.
B) The principle of progression supports Jack’s thoughts. The predominant value of Jack’s current neighborhood will increase as the quality of the homes increase. The pulldown effect will have a positive impact on Jack’s
property value. Adding an addition to the current, smaller dwelling will most likely have more impact on the value.
C) The principal of regression supports Jack’s thoughts. The predominant value of Jack’s current neighborhood may decrease as the quality of the homes decrease. The pulldown effect will have a negative impact on Jack’s
property value. Investing energy in updating and remodeling his parent’s home will most likely have more of an impact on value than updating his own.
D)The principal of progression supports Jack’s thoughts. The predominant value of Jack’s current neighborhood will increase as the quality of the homes decrease. The pullup effect will have a positive impact on Jack’s property value. Adding an addition to the current, smaller dwelling will most likely have more impact on the value.
C) The principal of regression supports Jack’s thoughts. The predominant value of Jack’s current neighborhood may decrease as the quality of the homes decrease. The pulldown effect will have a negative impact on Jack’s
property value. Investing energy in updating and remodeling his parent’s home will most likely have more of an impact on value than updating his own.
It has been a week since Donald and Marianne’s report was completed and mailed. After receiving their report, the homeowners questioned why the sale across the street was not considered as a comparable. Jack, their appraiser, recalled examining the listing sheet to look for the neighbor’s dwelling. Donald stated he saw people moving in a few days before their property was inspected. Jack should:
A) obtain the information from the sale, apologize for not recording it, and adjust and resend the report.
B) explain to Donald and Marianne that there is a period of delay in the recording of sales data. The Assessor’s Office and local listing service had not yet recorded the sale as of the effective date of the report.
C) explain to Donald and Marianne that there is a period of delay in the recording of sales data and change the effective date of the report and the comparable sales for a fee.
D) ask the homeowners to obtain a record of this sale from the courthouse and provide him with a copy in order to have the value altered.
B) explain to Donald and Marianne that there is a period of delay in the recording of sales data. The Assessor’s Office and local listing service had not yet recorded the sale as of the effective date of the report.
A few new homes were recently constructed in Sam’s neighborhood. Worried about the impending chances of having close neighbors, Sam purchased the parcel to the west and the parcel to the east of his property. With a recent drop in the interest rates, Sam wants to refinance. How should the appraiser treat the site?
A) He should consider the excess land as sites that can be sold off separately and explore the average lot size in the neighborhood to consider if both lots should be treated separately.
B) Appraise each of the three lots as vacant lots. Add the cost of the construction for the dwelling to the occupied parcel. The land value is the focus of this appraisal. The structure values can be estimated.
C) Appraise the subject as it sits on the oversized lot. The site could not possibly be subdivided. Make adjustments for lot size differences in the sales
comparison approach.
D) He should consider the surplus land as sites that can be sold off separately and explore the average home value in the neighborhood as well as the cost of constructing a new dwelling and subtract this from the predominate value to arrive at the values for the lots.
A) He should consider the excess land as sites that can be sold off separately and explore the average lot size in the neighborhood to consider if both lots should be treated separately.
Note: These combined parcels are considered excess land, as each one could be sold off separately. Checking the sales history of the subject’s parcel would show that the sites were purchased separately this is a good indicator if the sites can be handled separately. However, an appraiser should always check with the recent zoning and setbacks
An appraiser is analyzing a development site that has several Indian burial mounds. There are federal laws that protect Native American burial sites and how close improvements of any kind are to the mounds. What test of highest and best use must the appraiser first consider in this assignment?
A) financial feasibility
B) legal permissibility
C) maximum productivity
D) physically possible
B) legal permissibility
Note: All the tests come into play with this type of restriction to the development of the site, but the first one (legal permissibility) is critical because the existence of the burial mounds may not allow any improvements to be located on the site.
A landowner called an appraiser and inquired about whether her land was suitable for subdividing. As part of the conversation, what might the appraiser tell the owner to quickly summarize the difference between excess land and surplus land?
A) Excess land and surplus land are synonymous.
B) Neither excess land nor surplus land can be divided and sold as separately.
C) Excess land has the potential to be divided and sold separately, whereas surplus land cannot.
D) Excess land cannot be divided and sold separately, whereas surplus land may be divided and sold separately
C) Excess land has the potential to be divided and sold separately, whereas surplus land cannot.
Note: Surplus land is basically an oversized site that cannot be subdivided
