Test Prep Flashcards
The appraisal process of USPAP defines two separate and definite actions by an appraiser…
development and reporting
_________ data is used to form conclusions regarding the status of market elements and any change that is or has occured, as well as any change anticipated.
General
______________ is the legally permissible, physically possible, financially feasible, and most profitable use of a property.
Highest and best use
Highest and best use is defined by what four factors?
P - Physically Possible
L - Legally Permissible
E - Economically Feasible
M - Most profitable use
The opinion of highest and best use is critical to the selection of __________ ______ ______ and comparable data used in the _____ ________ approach.
appropriate valuation methods / sales comparison
An important decision made in forming opinions regarding highest and best use of improved properties is whether the improvements should _______, be _________ to another use, or _______.
remain / converted / razed
The primary problem identification elements considered when making the scope of work decisions are :
I - Intended Use
I - Intended User
T - Type and definition of value
R - Relevant property characteristics
Conclusions derived from the valuation approaches are reconciled to arrive at the final _______ __ _____ .
opinion of value
________ data covers all relevant information unique to the subject property and the comparable data.
Specific
A _________ condition assumes something is present that is known to be false.
hypothetical
_________ data includes demographics, economic data, and interest rates.
General
A ______ __ _____ decision is formed by the conclusions formed in defining the problem.
scope of work
The final analysis in the valuation process is _________ .
reconciliation
Joan is performing an exterior inspection for an appraisal. She will probably use an ____________ in the final opinion of value.
extraordinary assumption
The ________ _____ of the appraisal is a key determinant of the research and analysis performed during the appraisal’s development.
intended use
The purpose of an appraisal is always to develop a value opinion for a _______ _____ __ _____ .
Defined type of value .
The _______ _____ of the value opinion must be identified during problem identification and clearly stated in the appraisal report.
effective date
An example of a ________ interest might be a life estate, a lease, or subsurface rights.
partial
The appraisal report must be ________, _________, and not __________ .
clear, accurate, and not misleading
The report must contain __________ ___________ to be understood properly by the intended user.
sufficient information
The appraisal report must disclose any _________ assupmtions, __________ conditions, or other assignment _________ that directly affect the appraisal.
extraordinary / hypothetical / conditions
The purpose of an appraisal should always be to develop an ________ __ ______ appropriate to the intended use of the appraisal.
opinion of value
An appraisal report can be ________ or ______ .
written or oral
The primary problem identification elements considered when making the scope of work decision are:
- Extent to which the property is identified
- Extent to which the property is inspected
- Type and extent of data researched
- Type and extent of data applied
The scope of work determined by the appraiser is considered appropriate when it _______ ___ ______ the expectations of those who are regularaly intended users, and what the appraiser’s ______ actions would be in the same or similar situations.
meets or exceeds / peers
Broad forces that affect value (_PEGS)_
P - Physical
E - Economic
G - Governmental
S - Soicial
All written real property appraisal reports must contain a ________ and _______ _________ .
signed and dated certification.
The ___________ section of the ETHICS RULE requires that fees, commissions, or things of value relating to the procurement of an assignment must be _________ .
Management / disclosed
A _______ is an area consisting of one particular land use, such as a multi-family residential, commercial, and industrial, etc.
District
A ________ is a compilation or a group of complimentary uses. The complimentary uses could be a mix of residential, commercial, service, as well as other ammenities.
Neighborhood
A _________ _____ is the broadest of all terms identifying the boundaries of a particular area.
Market Area
When jurisdictional excemption is an assignment condition, the report must include a…
citation of the law or regulation requiring the exception.
The decision of which approaches to use in an assignment is primarily driven by
scope of work
Building inspections differ from home inspections in the building inspectors do not inform _________ _______ of _______ ________ .
prospective buyers /future problems
(they only check and ensure that current building standards are complied with)
The lot and block system is a type of legal description used for _________ _______ . Platted property is any property that has been _________ from a large tract into smaller lots.
platted property / subdivided
CC&Rs
Covenants, Conditions, and Restrictions
(Today, subdivision or condo developers impose most private restrictions by recording a declaration of CC&Rs)
The purpose of CC&Rs is to keep the subdivision _________ and to protect the ________ ______ of the properties.
attractive / market value
__________ is the dimension across the access side of a parcel of land (usually along the road)
Frontage
When a lot size is stated, the first number is the ____ ________ .
lot frontage.
P.O.B.
Point of beginning
(used in metes and bounds system)
The ________ and _______ ________ is a type of legal description that starts at an easily identifiable point of beginning (P.O.B), then describes the property’s boundaries in terms of compass directions and distances ultimately returning to the P.O.B.
Metes and Bounds System
A pre-existing condition allowed to continue under old laws, even though laws have since changed in referred to as ___________ .
“Grandfathered”
The Government Survey System is also known as the ___________ _______ _______ .
Rectangular Survey System
__________ ________ _______ is a legal description for land referencing principal meridians and base lines designated throughout the country.
Government Survey System
_________ ___ is property that does not conform to current zoning laws, but it is allowed because the property was being used that way before the new zoning law was passed.
Nonconforming Use
____ - _____ zoning refers to a hierarchal organization of zoning. It travels in only one direction. Those zone classifications above the current one are permitted.
Pass-through zoning
______ ________ _____ is residential space that is finished, livable, and above grade.
Gross Living Area
(Garages, finished basements, and storage areas usually do not count as GLA)
Temporary use of a property while it awaits conversion to its highest and best use (e.g. waiting for a zoning change, accumulation of invesmtne dollars, etc.).
Interim Use
ANSI standards define “________ _____ “ as an enclosed area in a house suitable for year-round use, embodying walls, floors, and ceilings that are similar to the rest of the house.
finished area
Areas below grade are not included as finished floor area, according to ____ standards.
ANSI
American National Standards Institute
_______ ___ refers to the year the improvements were constructed.
Actual Age
_________ ____ is the difference between the total economic life and the remaining economic life, and reflects all forms of deterioration and obselescence
Effective Age
What are the 3 forms of obsolescence?
Physical, functional, and external.
With vacant land in an area that is changing, growing, or expanding, ________ ____ _____ ____ can be a significant point that needs to be addressed.
highest-and-best use
The _________ __ _________ ___ implies that the land cannot be valued for one use while the improvements are valued for another use.
Principle of Consistent Use
The first step when building a new house is
doing research and planning.
Which type of roof allows for vaulted ceilings?
Sloped joist
A roof’s pitch is the vertical rise of the roof in ______ per horizontal _____ .
inch / foot
The highest and best use test of “legally permissible” includes which consideration?
a - allowable to zoning
b - hazard insurance could be obtained
c - police protection is available
d - title is free of encumbrances
Allowable to zoning
A ranch-style home is typically ____ floor level.
one
A Cape Cod style home is typically _______ stories
one-and-a-half
The type of construction for which Fannie Mae has specific guidelines is
manufactured
Which type of construction framing is assembled one story at a time with each story serving as the base for the next story?
Platform
__________ is a process in which an appraiser identifies a probable value range, most often by identifying values of properties that are inferior and those that are superior.
Bracketing
Properties that possess many of the same appeal factors, but the buyer for one property may not necessarily be interested in
Comparable Properties
Properties that compete head-to-head. A potential buyer for one property would also be interested in this property.
Competitive Properties
A variable often observed through multiple regression; for example, as the size increases, the unit cost decreases.
Economies of Scale
Standards Rule 1-4(a) of USPAP simply requires the appraiser to…
“Analyze such comparable sales data as are available”.
A minimum of ___ comparables are most usually gathered, analyzed, and presented in keeping with the regulations and requirements of many clients and intended users.
3
Standards Rule 1-5(a) of USPAP requires the appraiser to…
“Analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal.”
The basic elements of comparison that are examined in most transactions are:
- Property rights conveyed
- Financing terms
- Conditions of sale
- Market conditions
- Location
- Physical characteristics
Highest and best use implies the right mix of ________ ___________ and ______ .
capital improvements and land
What are the 4 agents of production (CELL)?
C - Capital
E - Entrepreneurship
L - Labor
L - Land
There must be ________ ______ of a property at it’s highest and best use if the highest and best use is truly a reflection of the market.
potential buyers
There is only ____ highest and best use at a given point in time.
one
Land not devoted to highest and best use results in a _____ of ________ .
loss of income.
Highest and best use gives the owner _________ ________ ________ .
maximum economic advantage
Highest and best use gives _________ _______ to surrounding land (through the principle of conformity.
economic benefits
________ __ __________ are characteristics of a property that can be used to explain differences in the price paid in a transaction.
Elements of comparison
The ______ __ _________ is the context in which the sale price is stated for the purpose of comparison.
unit of comparison
A ________ ________ is any interst in real estate that one may have, other than the full bundle of rights.
partial interest
Sequence of adjustments:
(PFCMLP)
P - Property rights conveyed
F - Finanacing terms
C - Conditions of sale
M - Market conditions
L - Location
P - Physical characteristics
______ ________ are the overall total of all adjustments applied regardless of whether the adjustment is applies as a positive of negative.
Gross adjustments
____ ________ are the sum of the adjustments, taking into account whether the adjustment was a positive of negative.
Net adjustments
______ is the mathematical average of a series of numbers.
Mean
______ is the number that appears in the middle of a series of numbers.
Median
______ is the number that appears the most in a series of numbers.
Mode
Using the Sequence of Adjustments allows the appraiser to adjust for _____ ________ , bring the comparable to the conditions found in an arm’s-length transaction, and otherwise mirror the comparable property to the location and physical characteristics of the subject.
Cash equivalency
________ _____ is what tenants are actually paying in rent as stated in the terms of the lease.
Contract Rent
The amount of funds required to make periodic payments of principal and interest to the lender
Debt Service
An income method that converts a property’s single-year net operating income (NOI) into a value indication by applying an overall capitalization rate:
NOI/Overall Capitalization Rate = Value
Direct Capitalization
Potential gross income, less vacancy and collection losses.
Effective Gross Income (EGI)
Ongoing operating expenses that do not vary based on occupancy levels of the property
Fixed Expenses
A factor that takes into account income derived from all sources of a property (e.g. vending, storage units, etc)
Gross Income Multiplier (GIM)
A factor derived from comparable rental data, which is then used to develop an opinion of value of the subject property.
Gross Rent Multiplier (GRM)
What the property could rent for in the open market if currently vacant and available.
Market Rent
Income after expenses, but before debt service
(also EBITDA)
Net Operating Income (NOI)
_________ _______ are day-to-day costs of operating a property, like repairs and maintenance, but not including debt service (amortization) or depreciation
Operating Expenses
Used to interpret a property’s single year net operating income to the property’s value using direct capitalization.
Overall Capitalization Rate
The difference between the current value of an improvement and the cost of replacing the improvement.
Accrued Depreciation
The appraisal method used to develop opinions regarding the value of real estate by estimating the cost new of replacing the structure on the land minus depreciation and plus the value of the site.
The Cost Approach
The estimated cost of building the functional equivalent (substitute) of the original structure using modern materials and workmanship and current day standards of size, layout, quality, and utility.
Replacement Cost
The estimated cost of replicating the original building, using identical materials, workmanship, construction standards, size, layout, quality, and present in the current structure.
Reproduction Cost
Repairable or able to be fixed; something that can be fixed at a reasonable cost with the value added to the property being more than the cost of the repair.
Curable
The ________ ____ considers a structures’s physical condition, how acceptably functional a structure is, and the external factors that influence a structure.
Effective Age
__________ is a monetary loss in value of property for any reason.
Depreciation
_________ life is the period of time, during the life of an improvement, over which the improvement contributes to the total property value, and is a reflection of all three of the forces of depreciation.
Economic
________ life relates to the period of time a structure or a component of the structure can be expected to function for the purpose it was designed for and relates only to physical deterioration.
Useful
Effective Age + Remaining Economic Life =
Total Economic Life
The actual wear and tear on something due to age, the elements, or other forces.
Physical Deterioration
A physical deterioration that has occured because of a failure to perform regular maintenance and upkeep.
Deferred Maintenance
_______ - lived items in a property are those that are expected to be replaced during the lifetime of the structure. (e.g. carpet, HVAC, paint, etc.)
Short
______ - lived items in a property are those that are expected to last for the life of the structure. (e.g. foundation, framing, etc.)
Long
When a building is less desireable because of something inherent in the design or nature of the structure.
Functional Obsolescence
An ___________ is when property improvements are not sufficient in relation to the highest-and-best use of the site, thus the property does not achieve maximum value.
underimprovement
An ____________ is a similar example of non-conformity where the improvements and, likewise the cost of the improvements, exceed the completed market value.
overimprovement
A ________ is when a feature or component of a property is not adequate in the marketplace and results in a loss of market value.
deficiency
A __________ is when a feature is too large, too expensive, or of too in the marketplace and results in a l
superadequacy
_________ _________ is when something outside the boundaries of a property and the control of the property owner and makes it less desireable
External Obsolescence
The ___ - ____ _______ estimates as a ratio of the effective age of improvements to the total economic life.
Age-life Method
The ___ - _____ method is the most commonly applied depreciation technique in residential appraisal.
Age-life
_________ __________ can be allocated as curable or incurable and can further be broken down as either a deficiency or a superadequacy.
Functional Obsolescence
________ _________ is always incurable, and can be further defined as external depreciation caused by deficiencies, or depreciation caused by superadequacies.
External Obsolescence
The _______ _________ method is a technique for determining depreciation based on comparable sales of similar properties.
market extraction
In a market value appraisal assignment, after the appraiser adjusts a comparable for financing terms, the sale price is said to be _____ _________ .
cash equivalent.
Paired data analysis is one example of a method to determine an adjustment using ________ techniques.
quantitative
In order for the correct application of percentage adjustments, what is the order in which adjustments are applied in the sales comparison approach?
P - property rights conveyed
F - financing terms
C - conditions of sale
M - market conditions
L - location
P - physical characteristics
When applied to income capitalization, a reserve for replacement is a(n)
amount of money set aside for future replacement of major items.
A variable expense is an operating expense necessary to the property, but dependent on the property’s ________ level.
occupancy
___________ ______ represents an economic reward received by the entrepreneur for his contributions and risk accepted in a project.
Entrepreneurial profit
____________ ________ is an anticipated economic reward for the entrepreneur’s or the developer’s contributions of coordination and expertise of a project.
Entrepreneurial incentive
When the as-is contribution of other site improvements is being estimated in development of the cost approach for an existing property…
depreciation is already considered in the estimate.
Whether the reconciled final opinion of value will be expressed as a single number, a range, or a relationship to a benchmark or previous value opinion, is determined by an appraiser…
as part of the scope of work decision.
Within the process of final reconciliation an appraiser’s value opinion should be based upon…
rationalized logic and reasoning.
An ___________ __________ is something supposed to be true but, if found to be false, could lead to different results.
extraordinary assumption
What primarily determines the date of the value opinion?
Intended use
Defining the problem primarily assists the appraiser with the _______ __ ______ decision.
scope of work
An example of an often permitted use with pass-through zoning is a _______ in a commercial district.
house
Which phase of a neighborhood is denoted by an area being refurbished with displacement of tenants?
Gentrification
The first step when building a new house is
research and planning
Which type of roof allows for vaulted ceilings?
Sloped Joists
Which type of construction framing is assembled one story at a time with each story serving as the base for the next story?
Platform
In terms of elements of comparison, a difference between the subject and comparable in favorability of zoning is addressed in the element of ________ .
location
What would NOT be a factor considered in the element of Conditions of Sale?
Financing concessions being paid by seller.
A statistical measure that attempts to ascertain the source of change in variables is known as
regression analysis.
A home is found which physically mirrors the subject but is in a different market and would not appeal to the same buyer. The home is ___________ to the subject.
comparable
In a market value appraisal assignment, after the appraiser adjusts a comparable for financing terms, the sale price is said to be ______ __________ .
cash equivalent.
Paired data analysis is one example of a method to determine an adjustment using ________ techniques.
quantitative
The sum of the adjustments taking into account whether the adjustment was a positive or negative is called the _____ __________ .
net adjustment
Damaged drywall is an example of which cause of depreciation?
Physical deterioration
A client purchases two adjacent parcels of land for $20,000 each. The market indicates that the combined larger parcel now has a market value of $40,000. What has occurred?
Assemblage
An individual purchases two adjacent parcels of land for $20,000 each. The market indicates that the combined larger parcel is now worth $50,000. Which describes the resulting value increase?
Plottage
Regarding appraisal competency in a ________ ____ assignment, lenders may not engage an appraiser if the appraiser does not already have the necessary knowledge and experience for the assignment.
Fannie Mae
When working with property owners who are potential sellers, the process used by real estate brokers and agents for establishing a recommended listing price by comparing the subject property to other homes that have sold, are presently for sale, or did not sell in a given area is a _________ ________ ________ ,
competitive market analysis.
A wealthy philanthropist owns property zoned as residential. He wants to donate the property for the construction of a charity hospital. Can a hospital be built on this property?
Yes, if the zoning board or planning commission issues a conditional use permit for the project.
A section of the neighborhood has recently been re-zoned for only residential use. Chris’ store is located in this section, but she will be allowed to continue use of the property as a store. This is known as a(n)
grandfathered nonconforming use.
Due to the specialized nature of some commercial structures, they might experience _________ __________ ___________ faster than residential structures.
incurable functional obsolescence
In an appraisal of a commercial property for a going-concern value, what would be considered an intangible asset?
An established business
Regarding a building, the superstructure is
the above-grade area of a building.
If an appraiser has the competency to appraise all tangible assets, he has the knowledge and experience to perform appraisal services for all _____ and ________ ________ .
real and personal property.
A home was listed on September 1st for $159,900. It is sold on December 1st for $154,000. The opinion of value developed by the appraiser is $156,000. What amount is the market price?
$154,000
In addition to appraisals performed by appraisers, relocation companies often engage real estate agents to perform a BPO, which focuses more on the property’s marketability. BPO is the synonym for _________ __________ ________ .
Broker Price Opinion.
If an appraiser develops and communicates an opinion regarding the quality of another appraiser’s work, he is conducting a(n) _________ __________ .
appraisal review.
Which section of the URAR establishes the minimum diligence expected of the appraiser regarding inspection, research, verification, analysis, and reporting?
Scope of work
The existence of which section of the URAR makes it unacceptable to use the form for marketing, estates, or litigation?
Intended use
Appraiser Joe has completed Form 1025/72, Small Residential Income Property Appraisal Report. What form must he also submit with the report?
216/998 Operating Income Statement
- *True or False: Fannie Mae Form 1073/Freddie Mac Form 465, Individual Condominium Unit Appraisal Report form, contains provisions for the same approaches to value as the URAR
form. **
FALSE
An appraiser is completing Form 1004C/70B for a manufactured home. What is NOT a mandatory reporting requirement with which the appraiser must comply when using the form?
report data using UAD requirements
Project reporting fields for Form 1073/465, Individual Condominium Unit Appraisal Report, are specific to which two categories?
condition and ownership
An appraiser is reporting an appraisal using Form 2055. The appraiser must, at a minimum, do all the following during the development process EXCEPT
conduct an interior inspection.
A recertification of value is a confirmation that…
prior appraisal conditions have been satisfied.
In compliance with Fannie Mae reporting regulations, a(n) ________________ must accompany any appraisal reported on the URAR form.
Market Conditions report
