Res Market Anal and Highest and Best Use Ch 4 Quiz

Question 1

__________ is defined as “A use that is lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located.”

Answer 1

Legally nonconforming use

Question 2

“A use that is lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located” is the definition of what term?

Answer 2

Legally nonconforming use

Question 3

A commercial building which is a legal nonconforming use in a residential neighborhood would be considered:

Answer 3

over-improvement

Question 4

A commercial use was established in 1975. The local municipality rezoned the property in 1990 to permit only residential uses. The commercial use is permitted to continue its operations. What is this?

Answer 4

Legally nonconforming use

Question 5

A duplex is located in a commercially-zoned area. Residential sale prices in the area range from $75-85 per square foot. The residence could be converted to professional offices at a cost of $15 per square foot. Office space in this area is selling at $110-120 per square foot. What is the highest and best use of this property?

Answer 5

convert the residence into offices

Question 6

A home is situated on a two-acre site, in an area where one-acre sites are common. The home is directly in the center of the property, and it is not possible to subdivide off and develop a one-acre site from the subject site. This situation is best described as _______ situation

Answer 6

a surplus land. Chapter 4, “Excess and Surplus Land”: Surplus land is land that: is not large enough to satisfy zoning requirements if viewed as a stand-alone site; may not have adequate access; cannot be separated and used effectively; and is not capable of a separate use.

Question 7

A parcel of vacant land is located in a blighted area where there is no demand for land. Which statement is TRUE?

Answer 7

The highest and best use may be to remain vacant. Chapter 4, “Special Situations”: The development of a vacant land area is not always the highest and best use of the land. Sometimes the highest and best use of a property is to remain vacant.

Question 8

A property has one acre, in an area where half-acre lots are common. There is a single-family home located at one end of the property, and is situated in such a way that a half-acre site could be sold off and developed without affecting the existing homesite. Which statement best describes this situation?

Answer 8

This is an excess land situation.Chapter 4, “Excess and Surplus Land”: Excess land can be defined as: land area that is larger than what is typical for the market area; capable of a separate or alternative use; larger than what is required for the subject’s highest and best use; accessible; and capable of being sold for a separate use. Because this additional half-acre meets all of the above requirements, it is considered excess land.

Question 9

A property has two acres, in an area where one-acre lots are common. There is a home built on the property at one corner. The property is situated in such a way that one acre could be sold off and developed without affecting the existing homesite. This would be considered ___________ situation.

Answer 9

an excess land. Chapter 4, “Excess and Surplus Land”: Excess land can be defined as: land area that is larger than what is typical for the market area; capable of a separate or alternative use; larger than what is required for the subject’s highest and best use; accessible; and capable of being sold for a separate use. Because this additional one acre meets all of the above requirements, it is considered excess land.

Question 10

A property is currently zoned for agricultural use, but its highest and best use is expected to change to commercial use within the next 3-5 years. The subject property’s current use is considered:

Answer 10

interim use. Chapter 4, “Special Situations”: Today, the temporary use of the land area is the continued use as an agricultural property. Today’s use can be termed to be an interim use for the land area – interim in that the highest and best use of the land is expected to change in the not too distant future.

Question 11

A residential dwelling which is a legal nonconforming use in a commercial area would be considered:

Answer 11

under-improvement. Chapter 4, “Legally Nonconforming Uses”: Legal, nonconforming uses can take the form of under-or over-improvements. A single family residential dwelling situated in an area that has been rezoned for commercial use typically represents an under-improvement.

Question 12

A single family residential dwelling situated in an area that has been rezoned for commercial use typically represents a(n) _________.

Answer 12

under-improvement

Question 13

A single-family home is situated on a commercially-zoned lot. It would not be financially feasible to convert the home to commercial use, because there is not enough demand for commercial properties at this time. Demand for industrial property is very strong; however, a zoning change is unlikely. Demand for commercial properties is expected to increase as the community grows. What is the ultimate highest and best use for this property?

Answer 13

Commercial use

Question 14

A single-family home is situated on a commercially-zoned lot. It would not be financially feasible to convert the home to commercial use, because there is not enough demand for commercial properties at this time. However, demand is expected to increase as the community grows. Which statement is TRUE regarding this situation?

Answer 14

Single-family use is an interim use.Chapter 4, “Special Situations”: Today, the temporary use of the land area is the continued use as a single-family home. Today’s use can be termed to be an interim use for the land area – interim in that the highest and best use of the land is expected to change in the not too distant future.

Question 15

A single-family homesite is worth $40,000. The owner plans to build a 4,000 square foot home on it, at a cost of $600,000. When it is completed, the property will be worth $620,000. Which statement is TRUE regarding the proposed 4,000 square foot home?

Answer 15

It is not financially feasible

Question 16

A single-family residence is located in a commercially-zoned area. Residential sale prices in the area range from $100-110 per square foot. The residence could be converted to offices at a cost of $20 per square foot. Office space in this area is selling at $135-150 per square foot. What is the highest and best use of this property?

Answer 16

convert the residence into offices

Question 17

A single-family residence is located in a commercially-zoned area. Residential sale prices in the area range from $80-90 per square foot. The residence could be converted to offices at a cost of $25 per square foot. Office space in this area is selling at $90-100 per square foot. What is the highest and best use of this property?

Answer 17

continue use as a single-family home

Question 18

A sports arena with restaurants and retail shops on the lower level would best be described as what type of property?

Answer 18

multiple use property

Question 19

A vacant site is zoned for use as a single-family homesite, and it is unlikely to be changed. As a single-family homesite, the site is worth $75,000. As a commercial site, it would be worth $150,000. What is the highest and best use of this property?

Answer 19

single-family homesite

Question 20

All appraisal assignments that require a market value opinion imply that:

Answer 20

the property will be valued at its highest and best use

Question 21

all of these statements concerning Fannie Mae’s position on highest and best use are true:

Answer 21

If the use of comparable sales demonstrates that the improvements are reasonably typical and compatible with market demand for the neighborhood, and the present improvements contribute to the value of the subject property so that its value is greater than the estimated vacant site value, the appraiser should consider the existing use as reasonable and report it as the highest and best use.Fannie Mae will only purchase or securitize a mortgage that represents the highest and best use of the site as improved. The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved.

Question 22

An appraiser is analyzing a parcel of vacant land, on a back road in a rural area. The owner tells the appraiser he plans to build a fast-food restaurant on the land. There is no zoning, and no other significant land use restrictions. The appraiser determines the highest and best use is NOT to build a fast food restaurant. What is the most likely reason for this conclusion?

Answer 22

it is not financially feasible

Question 23

An appraiser’s highest and best use conclusion is always:

Answer 23

an opinion

Question 24

Appraisal assignments that require a market value opinion imply that:

Answer 24

the property will be valued at its highest and best use

Question 25

How are existing improvements valued in a market value appraisal assignment?

Answer 25

based on their contributory value to the land. Chapter 4, “Highest and Best Use”: The improvements are normally valued for their contributory value relative to the highest and best use of the land. It is not always true that improvements are valued by sales comparison. Some assignments may only involve the cost or income approaches.

Question 26

If the improvements have a negative value, an appraiser must consider __________ in the feasibility analysis.

Answer 26

demolition cost

Question 27

In highest and best use analysis, how do we determine maximum productivity?

Answer 27

the use that results in the highest land value

Question 28

Is an opinion of highest and best use required in an appraisal that is NOT based on market value?

Answer 28

No, but it still may be necessary for credible assignment results

Question 29

It is a requirement to develop an opinion of the highest and best use of a property:

Answer 29

in market value appraisal assignments. Chapter 4, “Highest and Best Use”: Determination of the highest and best use of the property, as of an effective date, is a requirement for the appraiser’s development process when accepting a “market value” appraisal assignment. It is not necessary in all appraisal assignments.

Question 30

Land that is larger than typical for the area, but cannot be separated and used effectively and is not capable of a separate use, is:

Answer 30

surplus land

Question 31

Land that is larger than typical for the area, larger than what is required for the subject’s use, and is capable of being sold for a separate use is:

Answer 31

excess land

Question 32

Only those uses which produce a positive return are considered _________.

Answer 32

financially feasible

Question 33

The market value of the land is always determined based on:

Answer 33

its highest and best use

Question 34

The two types of highest and best use analysis are:

Answer 34

as vacant and as improved

Question 35

The use that produces the optimum value for the property is its:

Answer 35

highest and best use

Question 36

What is the reasonably probable and legal use of a property that is physically possible, appropriately supported, financially feasible, and results in the highest value?

Answer 36

highest and best use

Question 37

What often happens when a special purpose property, like a school, is abandoned?

Answer 37

it will be put to an alternative use. Chapter 4, “Special Purpose Properties”: The market will perceive an alternate use for these improved properties and they will begin a new life cycle.

Question 38

When testing for highest and best use, which criterion (or test) is applied last?

Answer 38

maximally productive. Chapter 4, “Testing Highest and Best Use”: The maximally productive use is the use which results in the highest land value, or income return to the land. It may or may not be the use that results in the greatest property value. With the data analyzed for the first three “tests”, the appraiser is in a position to determine the fourth factor – the maximum productivity – of the use or uses identified in the first three steps.

Question 39

When testing for highest and best use, which two criteria (or tests) are applied first?

Answer 39

legally permissible and physically possible

Question 40

Which highest and best use criterion would require an appraiser to consider minimum lot sizes and height restrictions imposed by a local municipality?

Answer 40

legally permissible

Question 41

Which highest and best use criterion would require an appraiser to consider private deed restrictions?

Answer 41

legally permissible

Question 42

Which highest and best use criterion would require an appraiser to consider the availability of public utilities to a site?

Answer 42

physically possible. Chapter 4, “Physical Possibility - as Vacant”:Considerations to be made in “physically possible” would include the availability of public utilities to the site. Other considerations would include the soil type and bearing capacity, and whether the property is situated in a flood-prone area.

Question 43

Which highest and best use criterion would require an appraiser to consider the need for the land use, or how many similarly-used land areas are in the market area?

Answer 43

financially feasible

Question 44

Which highest and best use criterion would require an appraiser to consider what improvements would fit on the site?

Answer 44

physically possible

Question 45

Which of these would be considered special purpose properties?

Answer 45

fire stations, school buildings, places of worship

Question 46

Who would be the most likely purchaser for a multi-use property?

Answer 46

an investor