Progress Exam Flashcards
1
Q
___________ value covers a range of non-market-value concepts relating highest-and-best-use of a property to public benefit, including non-economic uses, such as land preservation and conservation.
A
Public Interest
2
Q
A condo project has 300 units. The first three years are expected to sell as follows: 40% in the first year; 10% in the second year; 10% in the third year. If the same volume of sales happen each of the following three years, how many must sell each year during years four, five, and six?
A
40
3
Q
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?
A
$281,250
4
Q
A feasibility study is used to determine:
A
economic viability
5
Q
A new apartment building contains 260 vacant units, which are rented at a rate of 12 per month. How many years will this supply of apartments last?
A
1.81 year
260
/12
/12
6
Q
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?
A
46.15%
260=100%
10=x
x=3.85%x12
7
Q
A property’s value to a specific user is called:
A
value-in-use.
8
Q
A real estate investor plans to purchase some wooded acreage with gently rolling hills in order to develop a single-family subdivision with homes priced from $500,000 to $650,000. After completing his market analysis he discovers that the typical purchaser in the area has a gross income level in the $60,000 to $70,000 per year range and cannot afford to purchase homes of this type. Based on this information, the investor decides not to buy the land. Which of the four forces affecting real property values does this represent?
A
Economic
9
Q
A single-family residence exists in an area currently zoned for small retail and professional offices. Of the following, what must appraiser Sam determine before deciding if this subject property could be redesigned or reconfigured for a similar use as a small retail and/or professional office?
A
Whether it is physically possible
10
Q
A specific market area has an estimated demand for 500 new homes per year. A developer expects his new subdivision to capture 10% of the market once completed. What is the new subdivision’s expected absorption rate?
A
50 houses per year
11
Q
Accessibility to major travel corridors influences the demand for a particular property. This connection is called
A
linkage
12
Q
All of the following are characteristics of an efficient market
A
Prices
* Prices are relatively low
* Prices are stable
Products
* Homogeneous products
* Products are easily transportable
Market
* Organized market mechanism
* Little regulation or government intervention
* Supply and demand operate freely
Buyers & Sellers
* A large number of buyers and sellers
* Buyers and sellers are knowledgeable
* Buyers and sellers act rationally
13
Q
Which elements create value and which influence value?
A
Create Value = Elements of Value
Demand Factors: Desire & Effective Purchase Power
Supply Factors: Utility & Scarcity
Influence Value = External Market Forces
Governmental, Economic, Social, Environmental
14
Q
An absorption analysis indicates that the residents of a community are capable of purchasing 10 properties per year that cost $150,000 or more. There are currently 40 homes in the area that are available and valued at $250,000. How many years will it take for all these homes to be purchased?
A
4 years
15
Q
An example of an economic force affecting real property values would be:
A
a new bio-tech company locating in the city.
National Economic
Consumer Price Index
Wages
Interest Rates
Rental Rates
Availability of Financing
Unemployment
16
Q
An old, run-down house with a limited economic life stands on a site that is zoned for commercial use. This is an example of:
A
Interim Use
17
Q
Data that the appraiser personally gathers is called:
A
primary data.
18
Q
Dawn is an appraiser in a college town where zoning in a student neighborhood was just changed by the city from low density (R1) to high density (R3). Terri, a landlord, currently rents out a three-bedroom house. She has the option of demolishing the house to build a triplex, which would create more rental income. Terri estimates that in about five years, the subject’s rents will rise dramatically. What should Dawn consider in determining what are the current and interim highest and best uses of the property?
A
The costs of demolition and construction
19
Q
Disregarding the city zoning ordinance, which would not permit such a use, Kelly converted her garage to living space and configured it with a complete bathroom and kitchen. By doing so, she increased her rent from $1200/month to $1700/month. Why is this not the highest and best use of the property?
A
It is not legally permissible
20
Q
For an appraiser, the exact definition of market value depends on
A
the intended use.
21
Q
How does the principle of balance relate to the cost approach to value?
A
The principle of balance suggests that the factors of production can be assembled in an optimal combination to result in highest value and utility for a given location
22
Q
If a borrower takes out a loan that has an annual interest rate of 9%, an original amortization period of 30 years, and monthly payments of $901.17, what was the original loan balance?
A
$112,000
23
Q
If a swimming pool cost $25,000 to install, but the increase in market value to the property is only $8,000, which principle of value is illustrated?
A
Contribution
24
Q
If the sales price of the subject property is $280,000, and the buyer takes out a 30-year loan with an interest rate of 8% and a loan-to-value ratio of 75%, what would the monthly payments be?
A
$1,540.91
25
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?
$319,149
26
In a college town, zoning in a neighborhood was just changed by the city from low density (R1) to high density (R3). Tim, who rents out a 3-bedroom house for $1,500 per month and pays no management expenses, could demolish the house and build a triplex, which would rent for $550 per unit per month or he could build a duplex, which would earn rents of $800 per unit per month. The management expenses would be $175 for the triplex. Which scenario would generate the highest gross rent?
$1,500 monthly for House
$1,650 monthly for Triplex
$1,600 monthly for Duplex
GROSS rent does not consider management fees!!!
Highest rent is Triplex
27
In an economic sense, ____________ creates the highest and best use of a property.
market demand
28
In analyzing a specific market's complementary properties, the appraiser can evaluate
nearby property uses that support the subject's needs.
29
In most cases, in the appraisal of real property, the property is assumed to
be unencumbered.
30
In statistical analysis, the ________ measures the dispersion of numbers in a data set.
standard deviation
31
In the language of statistics, a 'population' is:
a complete data set.
32
Jeff is appraising a property that has a total property value of $250,000 including the land and house. If the lot as though vacant, based on a determination of its highest and best use as commercial, has a market value of $200,000, the contributory improvement value is $50,000 ($250,000 - $200,000). Assuming the total property value is still $250,000, if the residential improvement were located on a $50,000 residential lot, its contributory value would be $200,000 ($250,000 - $50,000). It would be incorrect to value the residential improvement on the commercial lot at $200,000. The improvement should be valued on a basis consistent with the site's highest and best use as though vacant. Thus, the improvement should be valued at $50,000. What principle is this based on?
Consistent Use
33
Local government agencies adopt zoning ordinances that can regulate noise levels allowed, hours that stores can operate, and size of business signs. What right forms the basis for the controls that directly restrict the use of all property?
Police Power
(not Zoning Ordinances)
34
Michael is going to appraise an apartment complex with 16 units. Apartment buildings in the subject's market sell for about $110,000 to $120,000 per unit. The city is in the process of changing the zoning specifications to allow condo conversions. Condominiums in the subject's market sell for about $140,000 per unit. In evaluating the highest and best use, what should Michael's next question be?
What is the cost to execute the conversion?
35
Of the following, which is the best example of some of the governmental forces that an appraiser should consider as factors that influence value?
Police powers of eminent domain and escheat
36
One outcome of disaggregation is the appraiser's ability to ascertain
available and similar properties in the area.
37
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
Area preference or
Situs
38
Rick, a speculation developer, is considering taking action on one of two projects and is considering the principle of increasing and decreasing returns. A large project calls for a $1.1 million investment and is expected to produce a return on investment in the area of 17%. The small project calls for an investment of $280,000 and will yield returns of about $67,000. Which investment will produce the greatest amount and will produce the best return on investment?
The large project produces the greatest amount and the small project produces the best ROI
39
Sam is appraising an apartment complex with 16 units. Apartment buildings in the subject's market sell for about $115,000 per unit. The city is in the process of changing the zoning specifications to allow condo conversions. Condominiums in the subject's market sell for about $140,000 per unit. If the cost to do the conversion were $110,000 in construction costs and $50,000 in legal and professional fees, what would be the value in excess of cost on a per-condo basis?
About $15,000
Remember to divide by 116 at the end.
40
Surplus productivity refers to the income:
that remains after costs for labor, capital, and coordination have been deducted.
41
Terry is an appraiser in a college town where zoning in a student neighborhood was just changed by the city from low density (R1) to high density (R3). Sarah, a landlord, rents out a three-bedroom house for $1,200 per month and could demolish the house and build a triplex, which would rent for about $650 per unit per month or she could build a duplex, which would earn rents of $800 per unit per month. The costs for demolition and construction are so high that Sarah will suffer an $800 per month negative cash flow if she proceeds with the project now. Sarah estimates that in about 5 years, the project will become feasible as the demand for student housing is expected to increase dramatically. How should Terry describe the current situation regarding Sarah's property?
Interim highest and best use
42
The economic principle of ________ states that land and improvements should not be valued on the basis of different uses.
consistent use
43
The excess value created by assemblage is called
plottage value.
44
The government may only enact eminent domain if
the project is for public use and the owners are compensated.
45
The pattern of land use within a neighborhood helps an appraiser to
estimate the stage in the life cycle of that neighborhood.
46
The study of population trends and statistics is referred to as
demographics.
47
The theory that each incremental item becomes less expensive as the volume is increased is called:
economies of scale.
48
Vicky is appraising a house in a college town where there is a dynamic rental market for student housing. She just inspected a house in an R1 single family residential zone that has had the former detached garage converted into an accessory dwelling unit. Why might this not be highest and best use?
The use is apparently illegal.
49
What does interim use refer to?
A temporary use until the property transitions to its highest and best use
50
What is the best example of an economic influence on real estate value?
A major military base is slated to see reduced funding or federal spending, loss of expansive aerospace, and lost defense contractor accounts
51
What is the first step in the appraisal process?
Define the problem
52
What is the name of the document issued by the municipality or county which officially clears a property for occupation and use, once a new structure complies with the building codes?
Certificate of occupancy
53
What was the original purchase price of a property if the buyer took out an 80% loan-to-value loan with monthly payments of $1,000, an interest rate of 9%, and the loan amortized over 30 years?
$155,352
1,000 CHS PMT
9 gi
30 gn
PV
= 124,281.87 = 80%
100% = x
54
When ___________, then market value, price, and cost are more likely to be equal.
supply and demand are in equilibrium
55
When would a highest and best use analysis result in a different conclusion for the "as if vacant" analysis than the conclusion in the "as improved" analysis?
When the land "as if vacant" is more valuable than the total with the improvements.
56
When would a property have two or more highest and best uses?
When two different uses return the same net income to a property
57
Whether rehabilitation, modernization or remodeling is involved, the justification for any renovation program depends on what?
What constitutes the highest and best use of the property
58
Which appraisal principle suggests that the appraiser should analyze the cost of new structures as well as the market values of existing structures?
Substitution
59
Which of the following is a likely result if construction costs fall faster than the values of existing properties?
New properties will be developed and the prices of existing properties will fall
60
Which of the following is a likely result if development costs rise faster than the prices of existing competitive properties?
The lack of opportunity for adequate profit will reduce new housing starts, thus limiting supply while demand remains the same
61
Which of the following is an application of market analysis in real property appraisal?
Determining a property's highest and best use
62
Which of the following is defined as the study of the supply and demand conditions for a specific type of property in a specific area?
Market analysis
63
Which are the four essential elements of value?
Desire
Effective Purchase Power
Utility
Scarcity
64
Which of the four agents of production is the last agent to be satisfied?
Land
65
Which one of the following types of value refers to the nominal value of a property that has reached the end of its economic life?
Salvage
66
Which phase of the economic cycle does a buyer's market occur?
Decline
67
Which principle of value best describes the affect an industrial plant would have on residential property values in a surrounding neighborhood?
Externalities
68
Which study examines the profitability of a proposed property?
Feasibility study
69
Appraiser Bertha is appraising a parcel of vacant land with an area of one acre. She collects sales data for site sales in the subject neighborhood. She finds two sales that appear to be identical to each other in every way.
Sale A $60,000
Sale B $70,000
Bertha discovers a difference in the zoning of the two lots. The zoning for Sale A is R-1 (single family residential), with a minimum buildable lot size of .75 acres. The zoning for Sale B is R-2 (single family residential), with a minimum buildable lot size of .50 acres. Bertha concludes the difference in sales prices is due to
Sale B can be subdivided and each resultant lot can accommodate one house
70
A 2,100 sf parcel sold for $104/sf; a 1,500 sf parcel sold for $112/sf; and a 1,800 sf parcel sold for $108/sf. Using extrapolation, the anticipated unit of comparison for a 1,200 sf parcel is
$116/sf
71
A $400,000 sale had the following adjustments: fireplace (-$5,000); 4th bedroom (+$25,000); 2nd bathroom (-$10,000). The net adjustment percentage is
2.5%
(be careful to calculate what they asked for)
72
A $400,000 sale had the following adjustments: fireplace (-$5,000); 4th bedroom (+$25,000); 2nd bathroom (-$10,000). The net adjustment percentage is
2.5%
(be careful to calculate what they asked for)
73
A comparable property sold two days ago for $175,000. The same property previously sold for $165,000 six months ago. What is the indicated annual appreciation rate indicated by this sale and re-sale?
12.12%
(times 2, not divide by 2)
74
A comparable property was sold subject to a special assessment. The subject property is not subject to such an assessment. What should the appraiser do?
Make an adjustment to the comparable property
75
A comparable sold 1 year ago for $400,000. Since then, values have declined 8%. The comparable had creative financing that is recognized in the market and in favor of the buyer by 5%.
Market conditions Adjustment: -8%
Financing Adjustment: -5%
What is the adjusted sales price of this comparable?
$349,600
(Financ adj first at 95%
then Market adj at 92%)
76
A parcel in a lakefront community with no lake view sells for $100,000, while a parcel in the same community with a lake view sells for 25% more. If you appraised a square lot in this community that measures 10,000 square feet and has a view of the lake, what would be the price of the lot on a front foot basis?
$1,250
$125,000 = 10,000 SF
x = 100 SF
77
A residential subdivision has 400 units for sale. The developer and appraiser estimate an absorption rate of 6 units per month. Interest rates, employment, and other economic indicators are predicted to be stable for the next year. The appraiser is concerned about the impact of absorption on factors that might affect the sales and income approaches for individual units. She analyzes the absorption rate and absorption period. What is the anticipated absorption period?
22.2 quarters
78
A residential subdivision has 400 units for sale. The developer and appraiser estimate an absorption rate of 6 units per month. Interest rates, employment, and other economic indicators are predicted to be stable for the next year. The appraiser is concerned about the impact of absorption on factors that might affect the sales and income approaches for individual units. She analyzes the absorption rate and absorption period. What is the anticipated absorption period?
22.2 quarters
79
An appraiser is extracting adjustments in a neighborhood where houses are relatively similar except for the following features: a 2-bedroom house sold for $280,000, a 3-bedroom house sold for $310,000, and a 4-bedroom house sold for $330,000. What is the contributory value of a fourth bedroom?
$20,000
80
An appraiser is using the sales comparison approach and must eliminate sales that do not meet the minimum criteria for being a legitimate comparable. What is usually the most important consideration during this process?
Conditions of sale
81
An appraiser should consider and perhaps make downward adjustments for what type of sale term?
Seller-paid points
82
Appraiser Bob is appraising a single-unit residence for mortgage lending purposes. After conducting his market research, he compiles the following data:
Given the data above, what is the contributory value of personal property?
$40,000
83
Appraiser John has received an assignment in a residential subdivision where one entity owns all the land. Homeowners rent the land their houses sit on, that is, the homeowners are tenants of the landowner. John is appraising one of the houses in this subdivision. John is appraising the
leasehold estate
84
Appraiser Simpson has plotted the results of research for land sales in the subject market. His subject site size lies outside the range of the known data. The process of drawing conclusions that extend outside the given range of data (either higher or lower) is known as
extrapolation
85
Appraiser Ted is analyzing the local market as part of his research in conducting a sales comparison approach. He is interested in the range of sales (low to high) and the mean, median, and mode of his sample. The mean, median, and mode are collectively known as
measures of central tendency
86
Appraiser Tom notes that one of his comparable sales had a seller pay 2 discount points for the buyer. If the sale price was $130,000 one year ago, and the market has appreciated 5% per year, what is the adjusted sale price of the comparable property? The LTV reported for the sale was 80%. Assume that seller-paid points have full contributory value in the subject market. Round to the nearest hundred.
$134,300
(careful to subtract the amount for points from the sale price and not from the loan amount!)
87
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
competes head-to-head with the subject property
88
Given the following sales prices: $75,000; $92,000; $81,000; and $84,000. The median is
$82,500
89
Janet is appraising a house in an equestrian area. In order for a property to have a horse, it must be at least 20,000 square feet. Each additional 10,000 square feet allows the owner to have one more additional horse. Buyers typically pay a premium to board a horse on a residential property of about $75,000. In a neighborhood were most of the lots are between 20,000 and 25,000 square feet and sell for about $300,000, how should Janet handle the adjustment for a subject property with a 19,400 square foot lot if there are no other properties that closely resemble the subject?
Adjust for the horse premium based on a market derived $75,000
90
Jared, an appraiser, is reviewing the following data: The subject property has air-conditioning and a two-car garage. Sale X, a comparable property, sold recently for $250,000 and has a garage, but not air-conditioning (worth $5,000). Sale Y, another comparable property, recently sold for $220,000 and has air-conditioning, but not a two-car garage (valued at $8,000). Sale Z, another comparable property, recently sold for $275,000 and has the identical features of the subject except that it is located in a better neighborhood. What would be the best adjustment Jared could make to Comparable Y?
An adjustment for the garage, $8,000
91
"Mary watches various fixer-upper shows on television. Convinced that “I can do that, too!” she buys a single-family home for $92,000. The house requires substantial repairs to the foundation, roof, and frame. Mary spends $75,000 on the repairs, but is confident she will get back “…more than I spend.” Mary has the house appraised for mortgage lending purposes and is shocked when the value is rendered: $125,000. Mary then protests the appraisal to the lender, and threatens to report the appraiser to the state licensing agency. The appraiser explains that the market value of the subject property is based on market sales which average around $145,000 in the subject market. Although Mary repaired quite a bit, there was still much left to be done. Which appraisal principle best illustrates what happened to Mary?"
declining return on investment
92
Patrick is appraising a duplex for estate planning purposes. Patrick has collected sales data for the subject neighborhood. He has ordered his data in an array for analysis. He notes a straight-line, inverse relationship between sales price and living area: the larger the building, the lower the price per square foot. If Patrick’s conclusion of value for the subject property is within the range of data, his analysis is called
interpolation
93
Qualitative analyses, such as relative comparison analysis, can be used in the sales comparison approach after quantitative analysis is concluded. The purpose of such qualitative analyses is to
allow for imprecisions in the subject market
94
The comparable land sale is described as the NW1/4 of the SE1/4 and the S1/2 of the NE1/4 of Section 7, Township 4 North, Range 3 East of the Third Principal Meridian, all located in Hannah County, Illinois. The subject property is 100 acres. Land is valued at $10,000/acre. The indicated size adjustment is
-$200,000
40 ac plus 80 ac = 120 ac
20 ac x $10,000
95
Sale A has 2,400 square feet. If the size adjustment is $40 per square foot, what is the adjustment to Sale A?
A: 50 x 40 = 2,000
B: 20 x 20 = 400
C: 10 x 10 = 100
2,500
Diff = 100
100 x 40
= 4,000 Minus adjustment
96
The mean sales price in a suburban subdivision 12 months ago was $150,000. The mean sales price in the same subdivision is now $125,000. The subject property is being appraised with a current effective date. Sale A sold for $130,000 four months ago. The market conditions adjustment made to Sale A is
-$7,280
97
The subject property is a 2,400 square foot, 5-year-old, single-family tract home with a typical view, stucco exterior, 10 rooms, 4 bedrooms, 3 baths, and 3-car garage. The property is in good condition and house prices have been increasing at a compounded rate of 1% a month. What is the market conditions adjustment that should be made to a comparable property that sold 4 months ago for $380,000?
$15,430
98
The subject property is a 20-year-old Georgian style residence that is being refinanced. Sale A is also a residence. While it is a different style, Sale A is very similar to the subject property in many features. Sale B is exactly identical to the subject property physically, but is located in a different neighborhood that is rather different from the subject property. Which sale should be used in the sales comparison grid?
Sale A should be used because it is next door to the subject, and is similar in physical features
99
Theresa is appraising a parcel of land under contract for $470,000. She finds a similar parcel that sold for $500,000. However, her research shows the buyer of the sale allocated $25,000 for site preparation, to be spent after the closing, for grading and elevation work. Theresa’s subject does not require such modification. If Theresa uses the site sale as a comparable, she should
adjust the sale upward $25,000
100
Use the following information to answer the question.
Property A sold six months ago for $80,000, which is 10% above market value.
Property B sold 3 months ago for $83,000. The buyer paid cash, and the sale price included a $5,000 tax lien absorbed by the buyer.
Property C sold 1 year ago for $72,000, which is 10% under market value due to foreclosure on the property.
Residential property is currently increasing 8% per year
The current market value for Property B is:
$79,560
$83,000
Minus $5,000
= $78,000
$78,000=100%
x = 102%
101
Use the following information to answer the question:
Property A sold six months ago for $80,000, which is 10% above market value.
Property B sold 3 months ago for $83,000. The buyer paid cash and absorbed a $5,000 tax lien.
Property C sold 1 year ago for $72,000, which is 10% under market value due to foreclosure on the property.
Residential property is currently increasing 8% per year.
What is the current market value for Property A?
$75,636
$80,000 = 110%
x = 100%
$72,727 = 100%
x = 104%
102
Use the following sales prices of 11 houses to answer the question.
$67,300
$73,000
$102,000
$102,000
$102,000
$104,000
$104,000
$110,000
$112,500
$116,000
$220,600
The mode of all the sales is:
$102,000
103
Using the chart above, derive the range of indicated values for Sales A and B. Assume that seller-paid points have partial (50%) contributory value in the subject market. Round indicated values to the nearest thousand.
$423,000 - $445,000
104
Using the chart above, derive the range of adjusted sale prices for Sales A, B, and C. Assume that the seller paid the buyer's loan points as a seller concession and that seller-paid points have full contributory value in the subject market. Round indicated values to the nearest thousand.
$195,000 - $206,000
105
Warren is appraising a tract house. The subject is 3-bedroom 2-bath, with a 3-car garage, and 1,671 square feet. Most houses in the subject's market have 2-car garages. Warren determines that a garage bay is worth $6,000. In this particular development, there are no association dues, but there is a private clubhouse with tennis courts and a pool. Membership is optional and is open only to residents of the subdivision. Adjustments for gross living area for houses between 1,200 square feet and 2,000 square feet are based on a $40 factor. For increments of living area greater than 2,000 square feet, the value per square foot is $30. Warren has a comparable to analyze: Comparable 2, which sold for $300,000, is 1,496 square feet, 3 bed 2 bath, 2-car garage, and the sale included a $2,500 seller concession towards the buyer's closing costs that affected the sale price by the full amount of $2,500. What should Warren calculate as an appropriate adjusted sale price for Comparable 2?
$310,500
Plus $6,000
Minus $2,500
Plus $7,000
106
When ascertaining the value of an adjustment, the appraisal principle being applied is ______________. When making the adjustment, the appraisal principle being applied is ______________.
107
When ascertaining the value of an adjustment, the appraisal principle being applied is ______________. When making the adjustment, the appraisal principle being applied is ______________.
contribution; substitution
108
Which adjustment converts the transaction price of a comparable into a cash equivalent?
Financing terms
109
Paired Sales Analysis: Adjustments should be made by dollar amounts or percentages, depending on xxx
how the adjustment is derived from the market
110
Why do appraisers use bracketing in the sales comparison approach?
To estimate the upper and lower limits of the value range
111
You determine that houses in the subject property's neighborhood have appreciated 5% per year for the last five years. An identical comparable property in the neighborhood sold 4 years ago for $100,000. What would be the current indicated value for the subject, based on this comparable?
$121,550
Use compound interest
