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CA Real Estate Principles > Real Estate Appraising > Flashcards

Real Estate Appraising Flashcards

1
Q

The licensing of real estate appraisers in California is handled by the

(a) California Department of Real Estate.
(b) Bureau of Real Estate Appraisers.
(c) California Association of REALTORS®.
(d) Appraisal Institute.

A

(b) Bureau of Real Estate Appraisers.

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2
Q

The most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market is called

(a) use value
(b) market value
(c) exchange value
(d) asking price

A

(b) market value

Market value is the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market.

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3
Q

appraiser’s opinion oof what a typical buyer would pay

A

market value

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4
Q

value in exchange is (subjective/objective), while value in use is (subjective/objective)

A

value in exchange is (objective), while value in use is (subjective).

value in use is subjective because it depends on needs of unique user

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5
Q

The four elements of market value are

(a) location, interest, demand, financing,
(b) time, title, interest, possession.
(c) possession, encumber, will, sell.
(d) demand, utility, scarcity, transferability.

A

(d) demand, utility, scarcity, transferability.

DUST!

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6
Q

A house with a construction cost of $650,000 in an area in which construction cost typically is no higher than $450,000 will have a market value that is somewhat less than the cost of construction. This influence on value is an example of the principle of

(a) supply and demand.
(b) social obsolescence.
(c) deterioration.
(d) regression.

A

(d) regression.

Principle of Regression: Between dissimilar properties, the worth of the better property is adversely affected by the presence of the lesser-quality property.

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7
Q

Which of the following is NOT one of the general forces affecting value?

(a) Social ideals and standards
(b) Economic adjustments
(c) Governmental regulations
(d) Manner of taking title

A

(d) Manner of taking title

Real estate undergoes constant change from physical, economic, social, and political forces.

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8
Q

What is the first step in the appraisal process?

(a) Identify the problem
(b) Make an appraisal plan
(c) Classify the data
(d) Organize the data program

A

(a) Identify the problem

by writing a concise statement of the appraisal assignment.

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9
Q

The most important part of the sales comparison approach to appraising is

(a) adjusting for differences between the comparable and the subject property.
(b) analyzing the volume of sales data.
(c) collecting a sufficient volume of sales data.
(d) establishing the unit of comparison.

A

(a) adjusting for differences between the comparable and the subject property.

The most difficult and also the most important part of the sales comparison approach is adjusting for differences in the properties.

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10
Q

Which of the following circumstances would indicate that a transaction is not a good comparable?

(a) The property was not on the same street.
(b) The second bathroom was an add-on.
(c) It was a forced sale.
(d) The buyer obtained a loan from a credit union.

A

(c) It was a forced sale.

A forced sale usually places the seller at a disadvantage and the transaction would not be considered an arm’s length transaction.

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11
Q

A tool used by real estate agents to assist the seller or buyer in determining the property’s fair market value is called a(n)

(a) competitive market analysis.
(b) informal appraisal.
(c) comparative sales analysis.
(d) comparable market analysis.

A

(a) competitive market analysis.

Many real estate agents who are not appraisers will supply the information necessary for a competitive market analysis (CMA), also called a broker’s price opinion (BPO). The agent’s purpose is to assist the seller or buyer in determining the property’s fair market value. A CMA ordinarily is more limited in scope than an appraisal and does not include an opinion of value by the agent.

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12
Q

When using the cost approach, the appraiser calculates the cost of construction of property improvements based on “reproduction” cost or “replacement” cost. “Reproduction” cost is

(a) The cost to replace the current improvements with another structure.
(b) An estimate of the actual cost of the building when originally constructed.
(c) The cost to build an exact replica using the actual materials and design of the present building.
(d) The cost to remodel the existing structure so it meets current building codes.

A

(c) The cost to build an exact replica using the actual materials and design of the present building.

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13
Q

T or F? The cost approach method for estimating the value of a property is best for museums, schools, churches, or other properties that have no comparables in area and/or don’t produce income

A

T

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14
Q

In which of the following methods does the appraiser determine a value for all of the material and labor used in the construction?

(a) Quantity survey
(b) Unit-in-place
(c) Capitalization
(d) Comparison

A

(a) Quantity survey

The quantity survey method involves a detailed estimate of the quantities of raw materials (lumber, plaster, brick, cement) used, as well as the current price of the material and installation costs. It also includes indirect costs, such as building permit, land survey and overhead.

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15
Q

A four-bedroom house with a one-car garage would be an example of:

(a) physical deterioration.
(b) functional obsolescence.
(c) economic obsolescence.
(d) environmental obsolescence.

A

(b) functional obsolescence.

Functional obsolescence is a loss in the value of a property resulting from a deficiency in the floor plan of a house. A one-car garage would be inadequate for the four bedroom house.

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16
Q

The period over which a property may be profitably utilized is called its

(a) economic life.
(b) amortized life.
(c) income life.
(d) net life.

A

(a) economic life.

17
Q

Capitalization is a process whereby an appraiser

(a) finds gross income of equity capital.
(b) converts income into capital value.
(c) establishes cost of capital investment.
(d) All of the above

A

(b) converts income into capital value.

Capitalization is a mathematical process used in estimating the value of income producing property by applying a certain capitalization rate to the net operating income.

18
Q

Which of the following is true regarding the use of a Gross Income Multiplier (GIM) to determine a property’s value?

(a) The appraiser establishes a single GIM to apply to gross income.
(b) The appraiser compares the GIM of at least four comparable properties to determine the multiplier most applicable to the subject property.
(c) Gross Income Multipliers are derived with a calculation and have nothing to do with comparables.
(d) Gross Income Multipliers are used to value land not buildings.

A

(b) The appraiser compares the GIM of at least four comparable properties to determine the multiplier most applicable to the subject property.

19
Q

The process in which an appraiser considers values derived from more than one appraisal technique is known as

(a) averaging
(b) reconciliation.
(c) weighing.
(d) comparing.

A

(b) reconciliation.

In appraisal, reconciliation is the process of interpreting the data gathered by bringing the various value estimates into mutual relationship with one another to determine a final estimate of value. With this process, the comparables are always adjusted to the subject property.

20
Q

A real estate appraiser’s opinion of property value is usually valid only for:

	(a) the date given.
	(b) a lender.
	(c) six months.
	(d) the tax assessor.
A

(a) the date given.

21
Q

A property’s most probable price on the open market under normal circumstances in an arm’s-length sale is knows as its:

	(a) selling price.
	(b) book value.
	(c) market value.
	(d) actual price.
A

(c) market value.

22
Q

The MOST profitable, physically possible, and legally permissible use of real property is referred to by appraisers as its:

	(a) capitalization.
	(b) highest and best use.
	(c) inherent value.
	(d) subjective value.
A

(b) highest and best use.

23
Q

By which principle will the value of a nonconforming building be enhanced if surrounding buildings are of a higher value?

	(a) Progression
	(b) Contribution
	(c) REgression
	(d) Competition
A

(a) Progression

24
Q

An important step at the beginning of the appraisal process is to:

	(a) identify the scope of work.
	(b) estimate land value.
	(c) determine highest and best use.
	(d) gather the data.
A

(a) identify the scope of work.

25
Q

The BEST method for valuing residential property is usually the:

	(a) cost approach.
	(b) capitalization approach.
	(c) income approach.
	(d) sales comparison approach.
A

(d) sales comparison approach.

26
Q

An exact replica of a structure being appraised determines:

	(a) replacement cost.
	(b) reproduction cost.
	(c) objective review.
	(d) subjective review.
A

(b) reproduction cost.

27
Q

The unit-in-place method is used:

	(a) by lenders only.
	(b) as an appraisal method.
	(c) to calculate reproduction cost.
	(d) to find highest and best use.
A

(c) to calculate reproduction cost.

28
Q

A loss in value from any cause is known as:

	(a) equity loss.
	(b) capitalization.
	(c) depreciation.
	(d) inherent loss.
A

(c) depreciation.

29
Q

A real estate appraiser reduced his opinion of the value of a home because the local sewer system was in poor condition and in need of repair. This loss in value would be classified as:

a) Physical obsolescence
b) Functional obsolescence
c) Physical deterioration
d) Economic obsolescence

A

d) Economic obsolescence

The loss in value due to the poor sewer system is an external cause and is considered economic obsolescence.

30
Q

When determining the value of a property, which of the following dates is the most important to an appraiser?

a) The date the contract was signed
b) The date the loan was funded
c) The date the transaction was recorded
d) The date the escrow closed

A

a) The date the contract was signed

31
Q

Which of the following is NOT one of the three major appraisal techniques?

(a) Sales comparison approach
(b) Allocation approach
(c) Cost approach
(d) Income capitalization approach

A

(b)Allocation approach

You can remember them by the three Cs - comparison, cost, and capitalization:

  1. The sales comparison approach requires descriptions of comparable properties that have sold recently.
  2. The cost approach requires building cost data.
  3. The income capitalization approach requires income and expense data on the subject and/or comparable properties.
32
Q

the basis of MOST residential real estate appraisals is the principle of:

	(a) conformity.
	(b) change.
	(c) contribution.
	(d) substitution.
A

(d) substitution.

CA Real Estate Principles (15 decks)

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