Progress Exam Flashcards
___________ 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.
Public Interest
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?
40
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?
$281,250
A feasibility study is used to determine:
economic viability
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?
1.81 year
260
/12
/12
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?
46.15%
260=100%
10=x
x=3.85%x12
A property’s value to a specific user is called:
value-in-use.
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?
Economic
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?
Whether it is physically possible
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?
50 houses per year
Accessibility to major travel corridors influences the demand for a particular property. This connection is called
linkage
All of the following are characteristics of an efficient market
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
Which elements create value and which influence value?
Create Value = Elements of Value
Demand Factors: Desire & Effective Purchase Power
Supply Factors: Utility & Scarcity
Influence Value = External Market Forces
Governmental, Economic, Social, Environmental
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?
4 years
An example of an economic force affecting real property values would be:
a new bio-tech company locating in the city.
National Economic
Consumer Price Index
Wages
Interest Rates
Rental Rates
Availability of Financing
Unemployment
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:
Interim Use
Data that the appraiser personally gathers is called:
primary data.
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?
The costs of demolition and construction
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?
It is not legally permissible
For an appraiser, the exact definition of market value depends on
the intended use.
How does the principle of balance relate to the cost approach to value?
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
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?
$112,000
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?
Contribution
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?
$1,540.91
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
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
In an economic sense, ____________ creates the highest and best use of a property.
market demand
In analyzing a specific market’s complementary properties, the appraiser can evaluate
nearby property uses that support the subject’s needs.
In most cases, in the appraisal of real property, the property is assumed to
be unencumbered.
In statistical analysis, the ________ measures the dispersion of numbers in a data set.
standard deviation
In the language of statistics, a ‘population’ is:
a complete data set.
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
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)
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?
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
One outcome of disaggregation is the appraiser’s ability to ascertain
available and similar properties in the area.
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
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
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.
Surplus productivity refers to the income:
that remains after costs for labor, capital, and coordination have been deducted.
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
The economic principle of ________ states that land and improvements should not be valued on the basis of different uses.
consistent use
The excess value created by assemblage is called
plottage value.
The government may only enact eminent domain if
the project is for public use and the owners are compensated.