Residential Sales Comparison and Income Approach Flashcards
How many comparables are typically used by appraisers in the Sales Comparison Approach?
No less than three
When choosing comparables, the appraiser analyzes:
Location, amenities, market conditions, Sales or financing concessions, Motivations of sellers and buyers, property rights
The Sales Comparison Approach was previously known as the:
Market Approach, Market Data Approach, Direct Sales Comparison Approach
“The perception that value is created by the expectation of benefits to be derived in the future” is the definition of the principle of
Anticipation
“The result of the cause and effect relationship among the forces that influence real property value” is the definition of the principle of
Change
Of the three appraisal approaches, the Sales Comparison Approach relies most heavily on the economic principle of:
Substitution
“The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium” is the definition of the principle of
Balance
“In appraisal, off-site conditions that affect a property’s value” is part of the definition of the principle of
Externalities
“The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties” is the definition of the principle of
Progression
Which of the following is the sales comparison formula?
Price of comparable ± adjustments = value of subject
The first step in the Sales Comparison Approach procedure is
Research the market
Adjustments made in the sales comparison process always start with:
The comparable
An outdated name for the Sales Comparison Approach is
Market approach
The final step in the Sales Comparison Approach procedure is
Reconcile the value indications
The COMPETENCY RULE of USPAP says an appraiser must have “the _______________________ to complete the assignment competently.”
Knowledge and experience
How many comparables are typically used by appraisers in the Sales Comparison Approach?
No less than three
Which of the following is NOT a common unit of comparison when appraising 2-4 unit properties?
Price per SF of GLA
A transaction could be verified with all of the following parties EXCEPT
Another appraiser, A verification should be made with a party to the transaction; such as the buyer or seller - but not an appraiser
“A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises” is the definition of
Neighborhood
“Data that relates to the four forces that affect real property values—social, economic, governmental, and environmental forces” is the definition of
General data
“The geographic region from which a majority of demand comes and in which the majority of competition is located” is the definition of
Market area
Specific data must be gathered concerning
Both the property being appraised and the comparable sale properties
When collecting comparable sales information, you can collect data concerning all of the following EXCEPT:
The purchaser’s ethnic background
A web site that is a portal to over 200 federal agencies is
usa.gov
The “normal course of business” in an area is determined by:
Both actions of appraiser’s peers and expectations of intended users, The “normal course of business” in an area is determined by the actions of both appraiser’s peers and the expectations of parties who are regularly intended users for similar assignments.
There are ______ basic elements of comparison in the Sales Comparison Approach.
10
MLS information is compiled for the convenience and use of
Sales agents
Which can be the largest?
Market area
Age of residents and average family size would be categorized as ___________ factors.
Social
“A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises” is the definition of
Neighborhood
“Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics” is the definition of
Specific data
“Data that relates to the four forces that affect real property values—social, economic, governmental, and environmental forces” is the definition of
General data
When discussing verification, HUD says that __________ by itself, is not considered a verification source.
MLS
Lenders might be sources of information in all of the following areas EXCEPT
Lease terms
Attorneys may need appraisals for all the following reasons EXCEPT
Mortgage loans
“A type of market area characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural” is the definition of
District
Which of the following would likely NOT be a source of comparable sales?
Title report
Qualitative analysis is used for elements that
Cannot be given a numerical value
The process by which a value indication is derived in the Sales Comparison Approach is called
Comparative Analysis
Comparative analysis may employ quantitative analysis and qualitative analysis
Separately or together
An analysis technique in which nearly identical properties are analyzed to isolate a single characteristic’s effect on value or rent is called
Paired data analysis
“A quantitative technique used to identify and measure trends in the sale prices of comparable properties; useful when sales data on highly comparable properties is lacking, but a broad database on properties with less similar characteristics is available. Market sensitivity is investigated by testing various factors that influence sale prices” is the definition of ___________ analysis.
Trend
A property sold for $250,000 and then sold later in the same year for $237,000. What was its percentage of decline?
5.2%, 237,000 ÷ 250,000 = .948 or 94.8%. 1.00 - .948 = .052 or 5.2%
The procedure in which we employ just plusses and minuses in sales comparison is called ______________ analysis.
Relative Comparison
Which of the following is NOT a form of qualitative analysis?
Graphic Analysis
“The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative analysis” is the definition of ____________ techniques.
Qualitative
“In the Sales Comparison Approach, the process of accounting for differences between comparables that are not quantified” is the definition of _________ analysis.
Qualitative
“A quantitative technique used to identify and measure adjustments to the sale prices of comparable properties; useful when sales data on highly comparable properties are lacking, but a broad database on properties with less similar characteristics is available” is the definition of ___________ analysis.
Trend
Which of the following is NOT a form of qualitative analysis?
Graphic Analysis
What is the name of the process by which a value indication is derived in the Sales Comparison Approach?
Comparative Analysis
Which is NOT a form of quantitative analysis?
Ranking Analysis
The procedure in the Sales Comparison Approach in which we employ just pluses and minuses is called ______________ analysis.
Relative comparison
A property sold for $225,000 and then sold 6 months later for $245,000. What was its average percentage of increase per month?
1.5%, $245,000 ÷ $225,000 = 1.09 or 9%. 9% ÷ 6 = 1.5% per month.
Which of the following is FALSE, concerning quantitative analysis?
It cannot be given a numerical value
“Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest” is the definition of
Partial interest
“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat” is the definition of
Fee simple estate
In traditional appraisal theory, the first step in the adjustment sequence is an adjustment for
Real property rights appraised
“An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and not a particular tract of land; an easement having a servient estate but no dominant estate” is the definition of a(an)
Easement in Gross
A leasehold interest may have value when
The Contract Rent is less than Market Rent
When appraising a 4-unit property and at least one unit is leased, the property rights would be
Leased fee estate, When appraising a 4 unit property and at least one unit is leased, the property rights would be leased fee estate.
“The right to perform a specific act on a property owned by another” is the definition of
Affirmative Easement
“Trespassing on the domain of another” is the definition of
Encroachment
“A multi-unit structure, or a unit within such a structure, with a condominium form of ownership” is the definition of a
Condominium
The most desirable form of timesharing is called ___________ timesharing.
Fee
Which statement is TRUE about syndications?
They can be either a private or public partnership.
Which ownerships include a right of survivorship?
Joint Tenancy and Tenancy by the Entirety
A limited partnership has
Both general and limited partners
When appraising a 4-unit property and at least one unit is leased, the property rights would be
Leased fee estate
“Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest” is the definition of
Partial Interest
“An estate held by two or more persons, each of whom has an undivided interest” is the definition of
Tenancy in common, An ownership with undivided interest by two or more people is called Tenancy in Common.
Which is NOT a form of partial interest?
Fee simple estate
A remainderman is found in a _________ interest.
Life
___________ interest is defined as the ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires.
Leased fee
In traditional appraisal theory, the first item in the adjustment sequence is
Real property rights appraised
Which of the following adjustment elements typically applies only to income-producing properties?
Economic characteristics
“An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and not a particular tract of land; an easement having a servient estate but no dominant estate” is the definition of an
Easement in Gross
The sequence of adjustments is determined by the _______ and through analysis of the _______.
Market, data
A property has a first mortgage of $120,000, a second mortgage of $30,000, and a third mortgage of $15,000. It is foreclosed and sold for $145,000. The holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.
0, $25,000
“A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions” is the definition of a
Mortgage
Which of the following is a guaranteed loan?
VA
An ARM is
An adjustable rate mortgage
The primary participants in the secondary mortgage market are
Fannie Mae, Freddie Mac, and Ginnie Mae
A purchaser bought a property for $215,000, put 15% down and borrowed the rest at 6.75% interest for 25 years. The lender charged 2.5 points at the closing. How much was paid for the points?
$4,568.75
Mortgage assumptions are:
Attractive when rates are rising
Cash equivalency adjustments are typically made when
A transaction involved non-market financing
Mortgages that are either insured by the FHA or guaranteed by the VA:
Tend to offer favorable terms
The term ARM means
Adjustable rate mortgage
Liens placed on a property after a previous lien has been made and recorded; a lien made subordinate to another by agreement” are called __________ liens.
Junior
Mortgages with payments that start out low and gradually increase are called _____________ loans.
Graduated payment
The primary participants in the secondary mortgage market are
Fannie Mae, Freddie Mac, and Ginnie Mae
A property has a first mortgage of $125,000, a second mortgage of $30,000, and a third mortgage of $10,000. It is foreclosed and sold for $140,000. In this situation, the holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.
0, $15,000
A cash equivalency adjustment is required when the loan is:
Seller financed, A seller financing a buyer may charge an interest rate that is different from market rates and terms, either more or less favorable that market rates. If the rate and terms are significantly different, it may have affected the purchase price and an adjustment would be justified. FHA and VA loans are generally considered at market rates and would not need a cash equivalency adjustment, though they may need a seller concessions adjustment if that was present.
A purchaser bought a property for $215,000, put 15% down and borrowed the rest at 6.75% interest for 25 years. The lender charged 2.5 points at the closing. How much was paid for the points?
$4,568.75
Mortgage assumptions are
Attractive when rates are rising
Market condition adjustments are also commonly known as:
Time adjustments
Your research of a comparable sale reveals that the purchase price was $200,000, but the purchaser realized the property needed extensive repairs to the mechanical systems. The estimated cost to cure the problems was $15,000 but the actual costs turned out to be $20,000. What should you do?
Adjust the property sale price by $15,000
The definition of arms-length is a transaction between ___________ parties acting in their own _______ interests.
Unrelated, best
Changes in a market cycle may be cyclical, one-time-only, ___________ and ____________.
Seasonal, exponential
The life cycle of a market area typically includes the stages of growth, _____________, decline and _______________.
stability, revitalization
Long-term market cycles are:
Caused by national or international conditions
You are in a very hot real estate market with values going up monthly by 2%, and lenders are taking months to process transactions, creating extended closing times. As an appraiser, you should:
Adjust the comparables from their contract date of sale to the effective date of the appraisal
A property sold in November for $312,500. It sold again 9 months later for $354,800. What was its average monthly rate of appreciation?
1.50%, $354,800 - $312,500 = $42,300. $42,300 ÷ 312,500 = .135. .135 ÷ 9 = 0.015 or 1.5%
You live in a summer resort town. Real estate prices typically drop 15% during autumn and winter. A house sold for $200,000 in July. What would it sell for in December?
$170,000
You are in a very hot real estate market with values going up monthly by 2%, and lenders are taking months to process transactions, creating extended closing times. As an appraiser, you should
Adjust the comparables from their contract date of sale to the effective date of the appraisal
A home sold five months ago for $232,000. Since then, property values have appreciated by 1% per month. (Use simple interest.) The appraiser estimates that its inferior location depreciates the total value by 10%. What is its estimated value?
$219,240
The real estate market tends to be
An early responder to short-term economic cycles
Which would NOT typically be a cause of duress that could result in a transaction that would not be considered arms-length?
Sale to a corporation
The life cycle of a market area typically includes the stages of growth, _____________, decline and _______________.
Stability, revitalization
You live in a winter resort town. Real estate prices typically rise 20% during autumn and winter. A house sold for $200,000 in July. What would it sell for in January?
$240,000, With your 12C enter: 200,000 ENTER 120% Answer is $240,000.
Your subject is located in an area where property values have been rising consistently at 1.5% a month for the past twelve months. You have located a comparable that is practically identical to your subject. It sold seven months ago for $200,000. How much should you adjust the price?
$21,000
Changes in a market cycle may be cyclical, one-time-only, ___________ and ____________.
Seasonal, exponential
If a sale is not arms-length, the appraiser
May either discard it or use it with adjustments
The concept of real estate value being linked to location comes to us from the economist
Alfred Marshall
A district is an area characterized by ____________ land use.
Homogeneous
“A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises” is the definition of
Neighborhood
“The geographic region from which a majority of demand comes and in which the majority of competition is located……..” is the definition of
Market area
The definition of neighborhood has changed from a grouping of __________ to a grouping of ____________ people, buildings and uses.
Homogeneous, congruous
What is one of the best ways to determine neighborhood boundaries?
Driving around the area
For residential properties, location on a(n) _____________ is generally the most preferable.
Cul-de-sac
Site factors might include all of the following EXCEPT
Construction quality
Whenever possible, your comparables should be in
The same market area as your subject
Which would not normally constitute a market area boundary?
A public bus line
Whenever possible, your comparables should be in
The same market area as your subject
What is one of the best ways to determine neighborhood boundaries?
Driving around the area
Which would NOT be a factor when analyzing utilities at a site?
Access roads
Which term concentrates more on where people live and work?
Market area
“The geographic region from which a majority of demand comes and in which the majority of competition is located. Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market areas” is the definition of
Market area
7 of 9 A market area is usually
No set size
Site factors might include all of the following EXCEPT
Construction quality
Which would NOT be considered market area factors?
Encroachments
Senior developments or historic areas could be examples of
Sub-districts, hose are called sub-districts. They are a segment of another district.
Business, medical, or theater areas could be types of
Districts
“A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises” is the definition of
Neighborhood
Fannie Mae requires the appraiser to _______________ the factors in the neighborhood that may affect the market value or marketability of the properties in the market area.
Research, analyze, and report on
A market area is usually
No set size
A district is an area characterized by ____________ land use.
Homogeneous
Quality is determined by
The materials and construction practices used during the building process
An appraiser can reasonably assume that
Most homes in a subdivision are of the same general quality
When describing the area of a small lot, we usually use
Square Feet
Condition is determined by
The maintenance and care the house has received
“The age of property that is based on the amount of observed deterioration and obsolescence it has sustained” is the definition of _________ age.
Effective
“The period of time over which a structure may reasonably be expected to perform the function for which it was designed” is the definition of ______________ life.
Useful
In the appraisal of a single-family residence, a finished basement should
Be calculated separately from the GLA
A broken windowpane an example of
Deferred maintenance
“Items of wear and tear on a property that should be fixed now to protect the value or income- producing ability of the property, such as a broken window, a dead tree, a leak in the roof, or a faulty roof that must be completely replaced. These items are almost always curable” is the definition of
Deferred maintenance
“The period of time over which a structure may reasonably be expected to perform the function for which it was designed” is the definition of _________ life.
Useful
Historical age is another name for _____________ age.
Chronological
A property sells for $295,000 and the site value is $50,000. The reproduction cost of the improvements is $312,000. The house is 12 years old. What is the average annual percent of depreciation?
1.8%, $295,000 - $50,000 = $245,000. $245,000 ÷ $312,000 = .785. 1.00 - .785 = .215 or 21.5% depreciated. 21.5 ÷ 12 = 1.8% per year
When describing the area of a small lot (less than 1 acre), we usually use
Square feet
Quality is determined by
The materials and construction practices used during the building process
Fannie Mae says for units in condominiums, the appraiser should use ____________ dimensions to calculate the Gross Living Area.
Interior
“The period of time over which a structure may reasonably be expected to perform the function for which it was designed” is the definition of __________ life.
Useful
Comparable 2 sold for $340,000 and Comparable 3 sold for $318,000. They were very similar except that Comparable 2 had a three-car garage and three acres of land whereas Comparable 3 had a two-car garage and two acres of land. Through a paired data analysis we are able to ascertain that the contributory value of a three-car garage versus a two-car garage is $6,000. How much is the contributory value of the additional acre of land?
$16,000
Standard terminology for describing the style of a residence would not include
One story
Which of these is one of the written real property appraisal report options identified in USPAP?
Appraisal Report, USPAP requires an appraisal report to be identified as an Appraisal Report or a Restricted Appraisal Report.
Which of the following is NOT a required exhibit for Fannie Mae appraisal reports?
Interior floor plan showing doors and closets
Which of the following property types should NOT be reported on the URAR?
Unit in a condominium
In a comparable sale, the adjustments were +$5,000, -$3,000, +$2,500, -$4,500, and -$3,000. How much is the gross adjustment?
$18,000
In a comparable sale, the adjustments were +$5,000, -$3,000, +$2,500, -$4,500, and -$3,000. How much is the net adjustment?
-$3,000
“The sum of the positive and negative adjustments made to a comparable sale price ” is the definition of
Net adjustment, “The sum of the positive and negative adjustments made to a comparable sale price is the definition of net adjustment.
Fannie Mae expects an explanation when the net adjustments exceed ____% and the gross adjustments exceed _____%.
There is no set number
Fannie Mae requires a sales history of the subject property for ____ years and the comparable properties for ____ years.
3, 1
Fannie Mae’s Market Conditions Addendum is also known as Form
1004MC
Fannie Mae stipulates that a prior sales history for the comparable sales is required as measured from the
Date of the closing of the comparable sale
“The illegal purchase and resale of property at an artificially inflated price; usually requires collusion among the borrower, loan officer, and appraiser, with the victim being the lender or investor” is the definition of
Flipping
Fannie Mae requires an interior floor drawing
Only if the floor plan is a atypical or functionally obsolete
Which of these is one of the written report options identified by USPAP?
Appraisal Report
Fannie Mae expects an explanation when the net adjustments exceed ____% and the gross adjustments exceed _____%.
There is no set number
The Appraisal Standards Board has expressed the opinion that the level of information in a URAR report is consistent with:
an Appraisal Report
USPAP requires an appraisal report to be identified as one of the following types:
Restricted Appraisal Report
Which of these is one of the written report options identified by USPAP?
Appraisal Report
An appraisal for which of the following property types should NOT be reported on the URAR?
Manufactured home
“The sum of the positive and negative adjustments made to a comparable sale price” is the definition of
Net adjustment
The most common methodology used to value residential investment properties is the
Gross Rent Multiplier
The Principle of Anticipation is the basis for which valuation methodology?
Income Capitalization Approach
Residential investment properties are typically considered to be ____________ properties.
One- to four-unit
Historically, which investment has typically produced the highest overall rate of return?
Real estate
Historically, which investment typically produces the lowest overall rate of return?
Savings account
“A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user, but is not essential to its use” is the definition of
Amenity
In addition to estimating the Market Value of the fee simple interest in an income producing property, an appraiser can also estimate its
Investment Value, Leasehold Value and Leased Fee Value
Which investment typically incurs the highest burden of management?
Real estate
__________ is often referred to as the “bundle of rights”.
Real property
“The value created by a proven property operation; considered as a separate entity to be valued with a specific business establishment” is the definition of __________ Value.
Going Concern
“The amount a component of a property adds to the total value of the property. Contribution may or may not be equivalent to the cost to add the component” is the definition of the principle of
Contribution
Which investment has historically entailed the most risk?
Stocks
The primary principle upon which the Cost and Sales Comparison approaches are based is the principle of
Substitution
If you are appraising a specialized industrial property you might estimate ________ Value.
Use, An industrial property would result in Use Value. The owners would be using the property for production of income.
The most common methodology used to value residential investment properties is the
Gross Rent Multiplier
The Principle of Anticipation is most closely associated with which valuation methodology?
Income Capitalization Approach
The HP 12C works to an internal accuracy of ____ decimal places.
12
The HP 12C calculator includes the following functions:
Financial, statistical and programming
The “shift” keys on the HP 12C are _____________ colored.
Blue and gold
You buy a new SUV for $41,550. You get a 10% rebate applied to the purchase price but pay 5% state sales tax and 1.25% county sales tax. What is the net amount you have to pay?
$39,732.19
Your stock went from $95 to $148.25 in 5 years. What is the average change per year?
11.21%, 11.21% Solution 95 ENTER 148.25 Delta % 5 ÷
A property was listed on June 14, 2011 and sold on February 14, 2012. How many days was it on the market?
245
You started with $8,652.91 in your bank account. You made the following withdrawals: $123.65, $1,420.00, and $3,250.75. You made the following deposits: $1,200.00, $250.00, and $149.75. What is your current bank balance?
$5,458.26
Your stock went from $88 to $127.25 in 5 years. What is the average change per year?
8.92%
The “shift” keys on the HP 12C are _____________ colored.
Blue and gold
A lot is 445.24 feet by 118.39 feet. How many acres is that?
1.21
In your office, for the first quarter, Sam appraised 45 houses, Sue appraised 52 and you appraised 41. What percent did you appraise?
30%
You buy a new SUV for $38,750. You get a 10% rebate but pay 6% state sales tax and 1.5% county sales tax. What is the net amount you have to pay?
$37,490.63, 38,750 ENTER 10% - 7.5% + Answer is $37,490.73
You bought a house for $285,000 and sold it for $248,500, minus a 5% commission. What percent did you lose?
17.2%, $248,500 X .95 = $236,075. Using your 12C, enter: $285,000 ENTER $236,075 Delta% Answer is 17.2%
The HP 12C works to an internal accuracy of ____ decimal places.
12
You take a 240 day note on September 14, 2012. When will it be due?
May 12, 2013
You buy a new SUV for $38,750. You get a 10% rebate but pay 6% state sales tax and 1.5% county sales tax. What is the net amount you have to pay?
$37,490.63
The HP 12C calculator includes the following functions:
Financial, statistical and programmable
In the Six Functions of a Dollar table, column ___ is also called the annuity column.
2
Compounding is used to solve for ___________ values, whereas discounting solves for ___________ values.
Future, present
What is the future value of $20,000 if you deposited it today in a savings account paying 9% interest per year, and left it, without making any other deposits, for 12 years?
$56,253.30
In the Six Functions of a Dollar table, column ___ is also called the Discount Factor column.
4
What is the annual mortgage payment necessary to amortize a $230,000 mortgage for 15 years at 9% interest?
$28,533.57
At a 9% annual “discount” rate, what is the present worth of a 20 year mortgage note that gives you annual payments of $3,500?
$31,949.91
“The continuous and systematic additions to a principal sum over a series of successive time periods so that previously earned interest earns interest” is the definition of
Compound interest
At a 9% annual “discount” rate, what is the present worth of a 20 year mortgage note that gives you annual payments of $7,500?
$68,464.10
“Conversion of benefits received in the future (e.g., periodic incomes, cash flows, reversion) to present value” is the definition of
Discounting
What is the annual mortgage payment necessary to amortize a $185,000 mortgage for 25 years at 9% interest?
$18,834.11, .101806 X $185,000 = $18,834.11
What is the sinking fund factor amount if you planned to replace the boiler of your investment property (at a cost of $30,000) in 12 years and you expected the funds to grow at the rate of 9% per year?
$1,489.53
What is the annual mortgage payment necessary to amortize a $250,000 mortgage for 20 years at 9% interest?
$27,386.50
In the Six Functions of a Dollar table, column ___ is the Sinking Fund Factor Column.
3
A value can be developed through the Income Cap. Approach by either
Dividing an income by a rate or multiplying it by a multiplier
The reciprocal of 4 is
.25
Total income from a property before deducting any expenses, customarily stated on an annual basis” is the definition of
Gross Income
A ratio of one year’s NOI provided by an asset to the value of the asset; used to convert income into value in the application of the Income Cap Approach” is the definition of
Capitalization Rate
A proprety sold for $132,000. Its Contract Rent was $775 and its Market Rent was $850. What was the GRM?
155.3
When calculating a GRM, appraisers should use Rent
Gross Monthly Unfurnished
“The actual rental income specified in a lease” is the definition of REnt
Contract
A 3-unit property sold for $155,000. Its contract Rent for each unit was $950 per month and its Market Rent was $900 per month. What is the GRM?
57.4, $900 x 3 = $2700. $155,000/2700 = 57.4
“the most probable rent that a property should bring in a competitive and open market reflecting the conditions and restrictions of a specified lease agreement, including the rental adjustment and revaluation, permitted uses, use restrictions, expense obligations. terms, concessions, renewal and purchase options, and tenant improvements (TIs)” is the definition of rent
Market
GIMs are employed with gross income stream
Effective or potential
“the relationship or ratio between the sale price or value of a property and its periodic gross rental income” is the definition of
Gross Rent Multiplier
A rate is the __________ of a multiplier
Reciprocal
In every statistical distribution there is always a _________ but there may not be a ____________.
Median, mode
A motel has a gross annual income of $458,000 and its total operating expenses are $201,500. What is its expense ratio?
44%
Which measure of central tendency is least affected by extreme values?
Median
When using the Fannie Mae 1007 form, an appraiser is expected to ________ any utilities that may be included in the comparable property rental amounts.
subtract
With regard to the Income Approach, the major difference between the old 1993 URAR form and the current 2005 URAR form is that
the current form provides more space for the appraiser to support the Market Rent and GRM figures
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
a rent concession
Fannie Mae form 1007 is titled
Single Family Comparable Rent Schedule
“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
Median
With regard to the Income Approach, the principal difference between the old 1993 URAR form and the current 2005 URAR form is that
the current form provides more space for the appraiser to support the Market Rent and GRM figures
“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
Net Operating Income
“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
Effective Gross Income
“The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted” is the definition of
Potential Gross Income
The main difference between gross and net income is
Operating expenses
Replacement reserves might be established for all of the following items EXCEPT
Foundations
Potential Gross Income plus other income minus ___________ equals ______________.
allowance for vacancies, Effective Gross Income
In Form 216, the income and expenses have to be projected for the next ____ months.
12
Lenders use _____________ income when underwriting loans for 2 to 4 unit residential properties.
Operating
In actual practice, the Operating Income Statement (Form 216) is typically prepared by:
The appraiser
“The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted” is the definition of
Potential Gross Income
In Form 216, the income and expenses have to be projected for the next ____ months.
12
Which would NOT be considered a management expense?
Plumbing repairs
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?
$47,376, 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.
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 PGI?
$50,400, 2 X $900 = $1,800. 2 X $1,200 = $2,400. $1,800 + $2,400 = $4,200. $4,200 X 12 = $50,400.
“The sum of all fixed and variable operating expenses and the replacement allowance cited in the appraiser’s operating expense estimate” is the definition of
Total operating expenses
Which type of income considers vacancies?
Effective Gross
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?
$25,851, 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.
“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
Effective Gross Income
What is our starting point when calculating Net Operating Income?
Potential Gross Income
The main difference between gross and net income is
Operating expenses
Potential Gross Income – Vacancies and Credit Loss = ____________________.
Effective Gross Income, PGI - Vacancies and Credit Loss = Effective Gross Income.
Which would NOT be classified as “other income”?
Rental Income
“Total income from a property before deducting any expenses, customarily stated on an annual basis” is the definition of
Gross income
Which of these unit indicators was a new addition to the March 2005 version of the SRIPAR?
Sale price per bedroom, Sale price per bedroom was a new addition to the Mar 05 version of the SRIPAR.
2 of 3 What is the form number for the Fannie Mae SRIPAR form?
1025
What does SRIPAR stand for?
Small Residential Income Property Appraisal Report
In the current SRIPAR (Mar 05) unit indicators are developed from ___________ figures.
Both gross and adjusted, In the new SRIPAR (Mar 05) unit indicators are developed from both gross and adjusted figures.
In the current SRIPAR (Mar 05) you must reconcile a minimum of _______ value indicators.
7
Adjustments for quality, condition and energy efficiency can be made in the _________ of the SRIPAR.
Sales comparison grid, Adjustments for quality, condition and energy efficiency can be done in the sales comparison grid of the SRIPAR.
A property sold for $140,000. It had two 5 room apartments, two 4 room apartments and a 3 room studio apartment. What did it sell for per room?
$6,667
Income and value are _______ and move in the same direction.
Interdependent
The Income Approach is required by Fannie Mae for properties appraised on the ______________ form.
1025
Where do you address the strengths and weaknesses of each approach of the SRIPAR form?
In the reconciliation section, You address the strengths and weaknesses of each approach of the SRIPAR form in the reconciliation section.
In the current SRIPAR (Mar 05) you must reconcile a minimum of _______ value indicators.
7
Which technique is commonly used for estimating the value of small residential income properties?
Gross Rent Multiplier
The Income Approach is required by Fannie Mae when appraising properties on the ________form.
1025
What is the form number for the Fannie Mae SRIPAR form?
1025
Which of the following indicators was on the old SRIPAR form?
All of the above were on the old form
To obtain a higher net income you should choose a property that
Is energy efficient
Ranking of the comparable sales in order of _________ makes a logical and persuasive argument.
Desirability
All of these topics should be part of your reconciliation process, except for
Chain of title
In the sales comparison reconciliation, how many sales should we have before we consider using a statistical analysis?
6 or more
The most common definition of Market Value defines it as “the __________ price that a property __________ bring…”
Most probable, should
Standards Rule 1-1(c) of USPAP says an appraiser must “not render appraisal services in __________________ manner…”
A careless or negligent
“A phase of a valuation assignment in which two or more value indications are processed into a value opinion, which may be a range of value, a single point estimate, or a reference to a benchmark value “ is the definition of
Reconciliation
“Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics” is the definition of
Specific data
“The number of years elapsed since an original structure was built” is sometimes described by all of the following terms EXCEPT?
Effective age
A comparable property sold 3 months ago for $186,000. The market shows appropriate adjustments to be: Market conditions adjustment +$5,500 Location adjustment +$7,500 Quality adjustment -$12,000. What is the adjusted sales price of the comparable?
$187,000
