Res Market Anal and Highest and Best Use Ch 1 Quiz

Question 1

“A place where goods and services are exchanged” is the definition of a:

Answer 1

market

Question 2

“The separation and identification of the parts of the whole” is part of the process of:

Answer 2

analysis

Question 3

A change in a community’s zoning ordinance would be considered a(n) ___________ force affecting values.

Answer 3

governmental

Question 4

A change in local employment and income levels would be considered a(n) ___________ force affecting values.

Answer 4

economic

Question 5

A change in typical family size in a market would be considered a(n) ___________ force affecting values.

Answer 5

social

Question 6

A person purchases a four-plex because it has a strong income stream. This is an example of the principle of:

Answer 6

anticipation

Question 7

A property owner constructs a six-car garage at a cost of $80,000. It only adds $40,000 in value to the property. What economic principle does this best demonstrate?

Answer 7

Contribution

Question 8

A single-family home is situated in a growing commercial area. The highest and best use is to raze the home and construct a commercial building. A client asks an appraiser to value the property as a single-family home, and not under its highest and best use as a commercial site. What type of value is this client asking for?

Answer 8

value in use

Question 9

A study of the market as a whole, as well as the investigation of conditions of a component of that market, for a particular type of property, is the definition of:

Answer 9

market analysis

Question 10

An appraiser must value the land and the improvements based on the same use. Which economic principle or theory does this demonstrate?

Answer 10

Consistent Use. Chapter 1, “Consistent-Use Theory”: The Consistent Use Theory holds that the land and the buildings must all be valued considering the same highest and best use of the property. The appraiser cannot value the land under one use and the improvements under another use.

Question 11

An informed buyer is considering two properties, but will only purchase one of them. They are substantially equivalent, and each has an annual net operating income of $18,000. Property A has a listing price of $199,000, while Property B is listed at $189,000. Which property is the investor MOST likely to purchase?

Answer 11

Property B

Question 12

An investor is looking at two properties, but will only purchase one of them. Each is similar in utility and location, and has an annual net operating income of $20,000. One has a listing price of $220,000, while the other is listed at $200,000. The investor purchases the $200,000 property. Which economic principle is demonstrated in this example?

Answer 12

Substitution

Question 13

Appraiser Anne wants to convert a property’s anticipated income into an indication of value. Which approach to value is best suited for this purpose?

Answer 13

Income Approach

Question 14

Assessed value is also known as:

Answer 14

ad valorem value

Question 15

Before the advent of the Internet, appraisers were frequently hampered by:

Answer 15

lack of reliable local market data

Question 16

Factors outside the subject property can have an effect on its value. What economic principle is this?

Answer 16

Externalities

Question 17

Finish the sentence: Profit encourages ___________.

Answer 17

competition

Question 18

Generally, which changes more rapidly in a real estate market?

Answer 18

Demand

Question 19

Governmental restrictions on use of land include:

Answer 19

eminent domain, taxation, escheat

Question 20

How is the type of value used in an appraisal assignment determined?

Answer 20

the appraiser identifies the type of value, based on the intended use of the appraisal

Question 21

If a party has all their ownership rights intact, what type of ownership is this?

Answer 21

Fee simple

Question 22

If a property has significant liens or clouds on the title, and the owner is unable to sell it because of these issues, the property can be said to lack ___________.

Answer 22

transferability. Chapter 1, “Forces That Create Value”: Transferability is the ability to sell or transfer the property freely in the marketplace. If there are liens or clouds on the title, zoning prohibitions, private restrictions, etc, the property will tend to have less value in the market due to the impediments which may affect its future use.

Question 23

If a property is over-improved, or under-improved:

Answer 23

the four agents of production are out of balance

Question 24

If there are not enough homes available in a market to satisfy demand, this is known as __________.

Answer 24

seller’s market

Question 25

If there are not enough homes available in a market to satisfy demand, what will happen to home prices? 

Answer 25

they will increase 

Question 26

If two substantially similar homes are offered for sale in a neighborhood at the same time, which one will sell first? 

Answer 26

the one with the lower price 

Question 27

In a typical subdivision with a Homeowners Association, who is responsible for enforcing the deed covenants? 

Answer 27

the homeowners association 

Question 28

In relation to real property, the term SLUGER refers to: 

Answer 28

bundle of rights 

Question 29

Most appraisal assignments require an opinion of:

Answer 29

Market value 

Question 30

Most real property appraisal assignments are intended to develop an opinion of: 

Answer 30

market value 

Question 31

Nothing ever remains stable or in balanced, as evidenced by the: 

Answer 31

Principle of Change 

Question 32

One of the characteristics of land is heterogeneity. What does this mean? 

Answer 32

each piece of land is unique 

Question 33

People tend to purchase homes in areas with amenities and facilities, and where they feel insulated from adverse property conditions. This is an example of the principle of:

Answer 33

Conformity

Question 34

Perceived benefits from the ownership of income-producing property would include all of the following EXCEPT: 

Answer 34

physical depreciation. Chapter 1, "Anticipation": Perceived benefits derived from income-producing properties may include projected income to be received, tax shelter, probable appreciation, and use of the property for a personal business.

Question 35

The amount of money that a financial institution is willing to lend the borrower on a particular property is the: 

Answer 35

loan value 

Question 36

The appraisal profession has its own fundamental terminology, just like the medical and legal professions. 

Answer 36

TRUE

Question 37

The definition of market value included in USPAP Advisory Opinion 22: 

Answer 37

is only an example 

Question 38

The fact that a property's value may be different next week than it is today demonstrates what economic principle? 

Answer 38

Change 

Question 39

The four-stage life cycle applies to:

Answer 39

both individual properties and entire communities 

Question 40

The market value of a property is $200,000 and the loan-to-value ratio is 75%. What is the loan value for this property? 

Answer 40

$150,000 

Question 41

The market value of a property is $255,000 and the loan-to-value ratio is 70%. What is the loan value for this property? 

Answer 41

$178,500 

Question 42

The most probable price that a property should bring in an open and competitive market is part of the: 

Answer 42

definition of market value 

Question 43

The owner of a unit in a _________________ owns stock in a corporation that owns the real estate.

Answer 43

Cooperative

Question 44

The principle of contribution is most closely associated with: 

Answer 44

the Sales Comparison Approach. Chapter 1, "Contribution": The principle of contribution is most often associated with the Sales Comparison Approach to value. The contributory value of a given amenity is the public’s perception of its actual contribution to value when considering the overall value of the property as a whole.

Question 45

The principle of substitution is associated with which approach(es) to value? 

Answer 45

Both the Sales Comparison and Cost approaches. Chapter 1, "Substitution".

Question 46

The principle of substitution states: 

Answer 46

an informed buyer will not spend more for a property than the cost of acquiring an equivalent property 

Question 47

The principle of surplus productivity is associated with which approach to value? 

Answer 47

Income Approach. Chapter 1, "Surplus Productivity": The principle of Surplus Productivity works in conjunction with the Four Agents of Production and the amount of income a property can produce. This principle is associated with the Income Approach to value.

Question 48

The principle of surplus productivity states that after paying the costs of the first three agents of production, any residual income is attributed to ________. 

Answer 48

land

Question 49

The right of the government to take private property, for public good, with just compensation is: 

Answer 49

eminent domain 

Question 50

The value of a fair quality home will be enhanced if it is located in a neighborhood of all good quality homes. What economic principle does this demonstrate? 

Answer 50

Progression

Question 51

The value of a fireplace in a single-family home is determined by: 

Answer 51

what a buyer perceives as its worth, and how much he will pay for it 

Question 52

The value of a good quality home will suffer if it is located in a neighborhood of average or fair quality homes. What economic principle does this demonstrate? 

Answer 52

Regression

Question 53

The value of a single-family home is decreased when a large industrial plant is constructed directly across the street. What economic principle does this best demonstrate? 

Answer 53

Externalities

Question 54

Three people own a property together. When one person dies, his undivided share of property ownership goes to the other two owners. What type of ownership is this? 

Answer 54

joint tenants 

Question 55

Today, if an appraiser has an "oddball" appraisal assignment and there is no local data, the appraiser can: 

Answer 55

use the Internet to research data or contact other appraisers for data. Chapter 1, "The Market": In the case of that oddball assignment for which there is no local comparable data, we now have a viable source for the required data. Appraisers helping appraisers and sharing information, via the Internet, is assisting many of us to accomplish assignments that we previously would have had to turn down due to insufficient data for proper analysis and valuation.

Question 56

Typical marketing times for single-family homes in the subject's area are 6-9 months. An appraiser is asked how much of a discount it would take in order to sell a particular property within 30 days. What type of value would this be? 

Answer 56

liquidation value 

Question 57

USPAP states that credible assignment results require _________.

Answer 57

support

Question 58

What are the four agents of production? 

Answer 58

land, labor, capital, coordination 

Question 59

What are the four stages of a property's life cycle?

Answer 59

growth, stability, decline, renewal 

Question 60

What does ownership in severalty mean? 

Answer 60

one person owns the property 

Question 61

What does USPAP say about market value? 

Answer 61

appraisers are cautioned to identify the exact definition of market value and its authority 

Question 62

What is another name for the principle of inclining and declining periods? 

Answer 62

Integration and Disintegration 

Question 63

What is meant by "escheat"? 

Answer 63

the government can claim a property upon the death of the owner if there is no will and no heirs 

Question 64

What type of value includes an operating business with both tangible and intangible assets? 

Answer 64

going concern value 

Question 65

What type of value is based on a specific investor's needs and desires? 

Answer 65

investment value 

Question 66

What type of value is based on the property's current use? 

Answer 66

value in use 

Question 67

What type of value is generally considered equivalent to market value? 

Answer 67

value in exchange 

Question 68

What type of value recognizes the cost to replace the improvements but does not include the land value? 

Answer 68

insurance value 

Question 69

When a property is leased, what is the owner's interest called? 

Answer 69

leased fee 

Question 70

When a property is leased, what is the tenant's interest called? 

Answer 70

leasehold

Question 71

When an appraiser is analyzing the subject property's market area, which questions are likely to be asked?

Answer 71

Where is the property located? What defines the boundaries of the property's neighborhood? What are the trends for this neighborhood?

Question 72

When an appraiser is analyzing the subject property's market area, which question is MOST likely to be asked?

Answer 72

What defines the boundaries of the subject property's neighborhood? 

Question 73

When analyzing the life cycle for a neighborhood, what problem is often faced by appraisers? 

Answer 73

the growth cycle may have passed before they realize it 

Question 74

When analyzing the life cycle for a neighborhood, which stage is characterized by a strong demand and rising values? 

Answer 74

Growth

Question 75

When analyzing the life cycle for a neighborhood, which stage is characterized by equilibrium of supply and demand? 

Answer 75

Stability

Question 76

When appraising a property for market value, an appraiser must determine: 

Answer 76

the highest and best use 

Question 77

When insuring a property, what is the cost of producing a functional equivalent of the insured improvement, using modern materials and techniques? 

Answer 77

replacement cost 

Question 78

When insuring a property, what is the cost of producing an exact replica of the insured improvement? 

Answer 78

reproduction cost 

Question 79

When supply and demand are in balance in a market, this produces: 

Answer 79

Equlibrium

Question 80

When supply is higher than demand, the value of a product: 

Answer 80

declines

Question 81

When valuing a piece of real property, the appraiser is really valuing: 

Answer 81

the rights of ownership 

Question 82

Which are the four forces that create value? 

Answer 82

Utility, Scarcity, Desire, Effective Purchasing Power 

Question 83

Which economic principle holds that value is affected by the price of acquiring a property of good or similar utility? 

Answer 83

Substitution

Question 84

Which economic principle relates to the advantages of an alternate investment? 

Answer 84

Opportunity Cost 

Question 85

Which form of ownership allows for unequal ownership shares?

Answer 85

tenants in common. Chapter 1, "Forms of Ownership": Unlike joint tenants, tenants in common can have unequal ownership shares. For example, if three people own a property as tenants in common, one person can own a 50% share, the second person can own a 40% share, and the third person can own a 10% share.

Question 86

Which is NOT an example of the principle of externalities? 

Answer 86

an in-ground pool on the subject property 

Question 87

Which of these are examples of the principle of externalities? 

Answer 87

environmental contamination in a nearby property, an auto salvage yard located next door, the poor condition of neighboring homes

Question 88

Which of these can increase conformity in a neighborhood?

Answer 88

Covenants, Conditions and Restrictions, zoning ordinances, ordinances specifying minimum site sizes and setbacks

Question 89

Which of these is an example of the principle of progression? 

Answer 89

Fair quality home in a neighborhood of good quality homes. The principle of progression states that when a property is inferior to those surrounding it, its value will be enhanced by the presence of the superior properties.

Question 90

Which of these would be an external factor that could affect the value of a single-family home?

Answer 90

an award-winning community library, a highly-rated school system, an auto wrecking yard located across the street

Question 91

Which stage of the life cycle does not happen in every neighborhood or property?

Answer 91

Renewal

Question 92

Which statement is TRUE about property purchase loans and down payments? 

Answer 92

The greater the down payment, the less chance the borrower will default. 

Question 93

Which statement is TRUE about real property value? 

Answer 93

Market participants create value. 

Question 94

Why does insurance value typically not include the value for the land? 

Answer 94

land typically cannot be destroyed 

Question 95

With regard to the four forces that create value, what is meant by effective purchasing power? 

Answer 95

the ability of market participants to purchase a property 

Question 96

With regard to the four forces that create value, what is meant by utility? 

Answer 96

a property must have usefulness in order to have value