Real estate appraisal

Question 1

Which property would be best appraised by the cost approach

Land

Apartment building

A non-for profit hospital

Single-family home

Answer 1

A not-for-profit hospital

Note
Because the hospital does not have an active market for comparison and generally would not generate income in the traditional real estate investment seen the cost approach would be the most applicable

Question 2

There is a tremendous shortage of housing in the area but interest rates are 16%. Despite the many prospective buyers very few can qualify at these rates. The problem in the market is a lack of

Utility

Demand

Transfer ability

Scarcity

Answer 2

Demand

Question 3

If a property is being cleaned by a local government for location of a new freeway the relevant value is

Book value

Insurance value

Assessed value

Condemnation value

Answer 3

Condemnation value

Question 4

Although an appraisal and a competitive market analysis CMA employs many similar principles they are different. One of the major differences is

A CMA does not examine sold properties and appraisal does

An appraisal is required for loans funded by or insured by the government but a CMA is not

A CMA is a special type of appraisal on income property only

Performing a CMA requires an appraisal license and appraisal does not

Answer 4

An appraisal is required for loans funded by or insured by the government but a CMA is not

Question 5

Which of the following is a correct application of the capitalization formula

Value X capitalization rate equals effective gross income

Gross rent X gross rent multiplier Equals value

Gross income divided by capitalization rate equals value

Annual net income divided by capitalization rate equals value

Answer 5

Annual net income divided by capitalization rate equals value