Quiz Income Approach Ch 15-16

Question 1

“A measure of central tendency identified as the middle value in an ordered array of numerical values” is the definition of

Answer 1

Median

Question 2

“A measure of central tendency; the value of the middle item in an uneven number of items arranged or arrayed according to size or the arithmetic average of the two central items in an even number of items similarly arranged” is the definition of

Answer 2

Median

Question 3

“The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted “ is the definition of

Answer 3

Net operating income

Question 4

“The anticipated income from all operations of the real estate after an allowance is made for vacancy and collection losses and an addition is made for any other income” is the definition of

Answer 4

Effective gross income

Question 5

“The region or area over which something is found, is distributed, or occurs” is the definition of

Answer 5

Range

Question 6

“The sum of a series of values divided by the number of values in the group” is the definition of

Answer 6

Mean

Question 7

“The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted” is the definition of

Answer 7

Potential gross income

Question 8

“Total income from a property before deducting any expenses, customarily stated on an annual basis” is the definition of

Answer 8

Gross income

Question 9

A 4-unit property has two units rented at $900 per month, and two units rented at $1,200 per month. The vacancy and collection loss rate is 6%. Total operating expenses are $21,525. What is the EGI?

Answer 9

47376. 2 X $900 = $1,800. 2 X $1,200 = $2,400. $1,800 + $2,400 = $4,200. $4,200 X 12 = $50,400. $50,400 X .06 = $3,024. $50,400 - $3,024 = $47,376.

Question 10

A 4-unit property has two units rented at $900 per month, and two units rented at $1,200 per month. The vacancy and collection loss rate is 6%. Total operating expenses are $21,525. What is the NOI?

Answer 10

25851. 2 X $900 = $1,800. 2 X $1,200 = $2,400. $1,800 + $2,400 = $4,200. $4,200 X 12 = $50,400. $50,400 X .06 = $3,024. $50,400 - $3,024 = $47,376. $47,376 - $21,525 = $25,851.

Question 11

A motel has a gross annual income of $246,000 and its total operating expenses are $103,300. What is its expense ratio?

Answer 11

42%. $103,300 ÷ $246,000 = .42

Question 12

A motel has a gross annual income of $458,000 and its total operating expenses are $201,500. What is its expense ratio?

Answer 12

0.44

Question 13

An apartment complex has a gross annual income of $418,000 and the expense ratio is 38%. How much are the total operating expenses?

Answer 13

158840

Question 14

Effective Gross Income - __________________ = Net Operating Income.

Answer 14

Operating expenses. You subtract operating expenses from EGI to arrive at NOI.

Question 15

Fannie Mae form 1007 is titled

Answer 15

Single Family Comparable Rent Schedule

Question 16

Fannie Mae Form 216 should be used when appraising

Answer 16

2-4 unit residential properties plus one-unit investment properties

Question 17

How many comparable sales are needed to derive a reliable GRM?

Answer 17

At least five or six

Question 18

If you are in a market area in which there are rent controls:

Answer 18

Don’t use the GRM approach

Question 19

In actual appraisal practice, Form 216 is most commonly prepared by the:

Answer 19

Appraiser

Question 20

In actual practice, the Operating Income Statement (Form 216) is typically prepared by:

Answer 20

The appraiser

Question 21

In every statistical distribution there is always a _________ but there may not be a ____________.

Answer 21

Median, mode

Question 22

In Form 216, the income and expenses have to be projected for the next ____ months.

Answer 22

12

Question 23

In order to entice a prospective tenant to sign a lease, an apartment building owner offers one month of free rent. This would be considered

Answer 23

a rent concession

Question 24

Lenders use _____________ income when underwriting loans for 2 to 4 unit residential properties.

Answer 24

Operating

Question 25

Potential Gross Income - _________________ = Effective Gross Income.

Answer 25

Vacancy and credit loss

Question 26

Potential Gross Income – Vacancies and Credit Loss = ____________________.

Answer 26

Effective gross income

Question 27

Potential gross income plus other income minus ___________ equals ______________.

Answer 27

allowance for vacancies, effective gross income

Question 28

Replacement reserves might be established for all of the following items

Answer 28

Water heaters, Boilers, Roof covering

Question 29

Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the median rent?

Answer 29

950. To find the median, first array the rents in order: 900, 900, 950, 950, 1,000, and 1,100. There are 6 rents; the median lies midway between the third and fourth from either end. The third and 4th GRMs are 950 and 950. The number that is midway between them is 950.

Question 30

Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the GRM median?

Answer 30

132.6. If you divide each sale by each rent at the time of sale, the GRMs are 131.6, 133.3, 134.5, 131.8, 134.7, and 128.9. To find the median, first array the GRMs in order: 128.9, 131.6, 131.8, 133.3, 134.5, and 134.7. There are 6 GRMs; the median lies midway between the third and fourth from either end. The third and 4th GRMs are 131.8 and 133.3. The number that is midway between them is 132.6.

Question 31

Sale prices and rent at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the mode of the rents?

Answer 31

$900 and $950

Question 32

Sale prices and rents at time of sale: $125,000 - $950; $120,000 - $900; $134,500 - $1000; $145,000 - $1100; $128,000 - $950; $116,000 - $900. What is the mean of the GRMs?

Answer 32

132.5

Question 33

The comparable sales utilized in a GRM approach should be ____________, in all aspects, as the comparable sales utilized in the sales comparison approach.

Answer 33

At least as good

Question 34

The Fannie Mae 1007 form is used to

Answer 34

estimate the market rent of the subject property

Question 35

The GRM approach is most appropriate when appraising ______________ residential properties.

Answer 35

One to four units

Question 36

The main difference between gross and net income is

Answer 36

Operating expenses

Question 37

What is the range of following GRMs? 105.0, 104.0, 103.2, 106.0, 110.4, 107.2, 104.0, 106.0, 105.5, 102.0

Answer 37

8.4. The high is 110.4 and the low is 102.0. The range is the difference between the two numbers, or 8.4.

Question 38

When using Form 216 where at least one of the units is owner occupied

Answer 38

Do not use any rent for the owner-occupied space

Question 39

When using the Fannie Mae 1007 form, an appraiser is expected to ________ any utilities that may be included in the comparable property rental amounts.

Answer 39

subtract

Question 40

Which measure of central tendency is least affected by extreme values?

Answer 40

Median

Question 41

Which of the following would be a typical lease terms?

Answer 41

Apportionment of expenses, Ability to sub-let, Penalties for late payments

Question 42

Which type of income considers vacancies?

Answer 42

Effective gross income

Question 43

Which would be classified as “other income”?

Answer 43

Parking space rental, Vending machine income, Coin-operated washers and dryers

Question 44

Which would be considered a management expense?

Answer 44

Collecting rent, Advertising, Preparing leases

Question 45

With regard to the income approach, the major difference between the old 1993 URAR form and the current 2005 URAR form is that

Answer 45

The current form provides more space for the appraiser to support the Market Rent and GRM figures