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RECA > UNIT 9 - Theory of Property Valuation > Flashcards

UNIT 9 - Theory of Property Valuation Flashcards

1
Q

The statement “The ground and that which is beneath it and above it” best describes which of the following terms?
Choose only ONE best answer.

A) Land
B) Real Estate
C) Property
D) Real Property

A

A) Land

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2
Q

Which of the following statements best describes the term Property?

Choose only ONE best answer.

A) Property refers to the physical attributes affixed to the land that are tangible, immovable, and permanent
B) Property is the movable, non-permanent items that may be associated with real estate
C) Property refers to the rights inherent in the ownership of a commodity
D) Property refers to the land in addition to anything growing on, attached to, or erected on it

A

B) Property is the movable, non-permanent items that may be associated with real estate
C) Property refers to the rights inherent in the ownership of a commodity

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3
Q

Which of the following statements best describes the term Real Estate?

Choose only ONE best answer.

A) Real Estate refers to the intangible attributes with the ownership of property
B) Real Estate refers to unimproved land, buildings, and other fixed improvements to the land
C) Real Estate refers to land and, any permanent (fixed) improvements to the land, and the property rights that go with the ownership of the land
D) Real Estate refers to the items that can be removed without causing damage to the property

A

B) Real Estate refers to unimproved land, buildings, and other fixed improvements to the land

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4
Q

The statement “The land, any permanent or fixed improvements to the land, and the property rights that go with the ownership of the land” best describes which of the following terms?

Choose only ONE best answer.

A) Land
B) Real Estate
C) Property
D) Real Property

A

D) Real Property

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5
Q

Which of the following statements is true for Fee Simple ownership?

Choose ALL that apply

A) Owner is the absolute owner of land and any fixed improvements
B) Property is owned in perpetuity until sold or the owner dies
C) Owner can will the property to anyone
D) Owner has complete bundle of rights

A

All of the above are true

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6
Q

Sam Lee is a real estate professional with Creative Realty. He is helping his client Amy buy her first home. Amy asks him about her rights that come with real property ownership. What should Sam tell Amy she has the right to?

Choose ALL that apply

A) The right to rent her place
B) The right to possession, enjoyment and use of the property
C) The right to sell the property
D) The right to enter the property

A

All of the above

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7
Q

Which of the following are included in the bundle of rights that comes with Fee Simple ownership?

Choose ALL that apply

A) The right to possess the land
B) The right to control the land
C) The right to enjoy the land
D) The right to dispose the land

A

All of the above

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8
Q

In Fee Simple ownership, who is the ultimate owner of the land?

Choose only ONE best answer.

A) Fee Simple Owner
B) The Crown
C) The Federal Government
D) The Heirs

A

B) The Crown

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9
Q

The rights of the real property ownership are subject to which of the following government limitations?

The right of government to tax real property.
The right of government to expropriate it for the public benefit.
The right of government to establish regulations and codes regarding its use
The right of government to take the land

A

The right of government to tax real property.
The right of government to expropriate it for the public benefit.
The right of government to establish regulations and codes regarding its use

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10
Q

Which of the following are the real estate appraisal associations recognized in the Real Estate Act?

The Assessors Association
The Appraisal Institute of Canada
The Canadian Appraisal Institute
The Canadian National Association of Real Estate appraisers

A

The Appraisal Institute of Canada
The Canadian Appraisal Institute
The Canadian National Association of Real Estate appraisers

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11
Q

Real estate professionals can provide which of the following valuations?

Choose only ONE best answer.

A) Appraisals for current value of the property
B) Appraisals for the past value of the property
C) Appraisals for future value of the property
D) All of the above

A

A) Appraisals for current value of the property

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12
Q

Which of the following property evaluations would a real estate professional not be allowed to do?

Choose two:

Property evaluation on a property for a relocation company
Property evaluation on a property for a buyer client
Property evaluation on a property for a divorce settlement
Providing evaluation for real estate financing

A

Property evaluation on a property for a divorce settlement
Providing evaluation for real estate financing

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13
Q

Which of the following individuals estimate the value of properties for the purpose of taxation?

Choose only ONE best answer.

A) Property Assessor
B) Property Appraiser
C) Property Tax Appraiser
D) Real Estate Associate

A

A) Property Assessor

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14
Q

Real estate appraisers perform which of the following services?

Providing appraisals for lenders related to their real estate financing
Providing appraisals for accounting, insurance, or taxation purposes
Providing appraisals for assessment disputes or appeals by property owners
Providing appraisals for settlement of estates or division of family property
Serving as an expert appraisal witness in legal proceedings

A

All of the above

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15
Q

Which legislation governs the valuation of properties for the purpose of taxation?

Choose only ONE best answer.

A) The Municipal Government Act
B) Municipal Assessor Regulation
C) The Law of Property Act
D) Real Property Act

A

A) The Municipal Government Act

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16
Q

Which of the following are types of property analysis that real estate professionals use to provide property valuation?

  1. Comparative Market Analysis
  2. Income Analysis
  3. Cost Analysis
  4. Profit Analysis

Choose only ONE best answer.

A) Statements 1, 2, and 3
B) Statements 2, 3 and 4
C) Statements 1, 2 and 4
D) All of the above

A

A) Statements 1, 2, and 3

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17
Q

Which of the following types of property analysis is best defined by the statement “compares the recent sales price of similar properties in the same area as the subject property”?

Choose only ONE best answer.

A) Comparative Market Analysis
B) Income Analysis
C) Cost Analysis
D) Investment Analysis

A

A) Comparative Market Analysis

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18
Q

The statement “This type of analysis examines the revenues and expenses associated with the subject property to arrive at a calculation related to its estimates market value” best describes which of the following types of property analysis?

Choose only ONE best answer.

A) Comparative Market Analysis
B) Income Analysis
C) Cost Analysis
D) Investment Analysis

A

B) Income Analysis

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19
Q

What is the type of analysis that relies on “a solid and in-depth knowledge of the cost of construction and the ability to calculate depreciation related to the use of the building over time” called?

Choose only ONE best answer.

A) Comparative Market Analysis
B) Income Analysis
C) Cost Analysis
D) Investment Analysis

A

C) Cost Analysis

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20
Q

Which of the following are written disclosures that real estate professionals must include in any property valuation report?

Choose all that apply

A) The property valuation is based on the current market conditions and the real estate market is dynamic and subject to change
B) The property valuation is not to be used for financing (or re-financing) purposes, in civil proceedings, or to facilitate the creation of financial reports.
C) The property valuation is only for entering into a real estate trade
D) The property valuation is not prepared by an individual authorized as a real estate appraiser

A

All of the above

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21
Q

What are the Two types of professionals that can provide property valuations?

A) General Public & Real Estate Professionals
B) Real Estate Appraisers & Real Estate Property Assessors
C) Real Estate Appraisers & Real Estate Professionals

A

B) Real Estate Appraisers & Real Estate Property Assessors

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22
Q

Which of the following is NOT a real estate appraisal association recognized in the Real Estate Act?

  1. The Assessors Association
  2. The Alberta Appraisal Institute of Canada (AIC)
  3. The Canadian National Association of Real Estate Appraisers (CNAREA)
  4. The appraisers association
A
  1. The appraisers association is NOT
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23
Q

Which two are focused on FEE APPRAISALS

  1. The Assessors Association
  2. The Alberta Appraisal Institute of Canada (AIC)
  3. The Canadian National Association of Real Estate Appraisers (CNAREA)
A
  1. The Alberta Appraisal Institute of Canada (AIC)
  2. The Canadian National Association of Real Estate Appraisers (CNAREA)
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24
Q

_______ estimate the value of properties for the purposes of taxation - and are usually employed by the municipal government

A) Property Assessors
B) Property Appraisers

A

A) Property Assessors

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25
Q

Which of the following statements best describes what is meant by the term land?

A) It is the ground and what is above and beneath it
B) It is the soil, and the qualities associated with the soil
C) It is the unimproved ground, the buildings, and other fixed improvements
D) All statements describe what is meant by the term land

A

A) It is the ground and what is above and beneath it

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26
Q

Which of the following statements best describes the term real estate?

A) It is the attached and unattached structures on the land
B) It is that which is the object of a transaction
C) It is the land, the buildings, and other fixed improvements
D) It is the land, buildings, fixed improvements, and associated legal rights

A

C) It is the land, the buildings, and other fixed improvements

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27
Q

Which of the following statements best describes the term real property?

A) It is the land, the buildings, and any other fixed improvements
B) It is any property that is not considered to be chattel property
C) It is the land, any fixed improvements, and the ownership rights to the land
D) It is any property that has been included in a real estate transaction

A

C) It is the land, any fixed improvements, and the ownership rights to the land

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28
Q

The Bundle of Rights associated with the ownership of property includes which of the following?

A) The right to sell/give away the property
B) The right to rent/lease the property
C) The right to enter/use/do nothing with the property
D) All of these rights are included

A

D) All of these rights are included

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29
Q

In matters of property, the Crown typically refers to which of the following?

A) The federal government
B) The provincial government
C) The Real Estate Council
D) The British monarchy

A

B) The provincial government

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30
Q

Which of the following statements describe the rights of the Crown regarding real property?

A) The right to tax real property and seize it for non-payment
B) The right to expropriate it for public benefit
C) The right to establish regulations and codes regarding its use
D) All statements describe the rights of the Crown

A

D) All statements describe the rights of the Crown

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31
Q

Which of the following statements is correct regarding real estate appraisers?

A) They require an authorization from RECA to provide fee-based services
B) They must be members of a professional appraisal association
C) They must hold, or be earning, an appraisal designation
D) All statements are correct regarding real estate appraisers

A

D) All statements are correct regarding real estate appraisers

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32
Q

Which of the following statements is correct regarding property assessors?

A) They are not typically required to be authorized by RECA
B) They may be referred to as municipal assessors
C) They estimate the value of real property for taxation purposes
D) All statements are correct regarding property assessors

A

D) All statements are correct regarding property assessors

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33
Q

Which of the following statements is NOT correct regarding the provision of property valuations by real estate professionals?

A) They may be provided to landlords as part of a property management agreement
B) They may be provided to relocation companies that plan to take ownership of a property
C) They may be provided to buyers or owners to finance or refinance their property
D) They may be provided when they relate to a trade or potential trade in real estate

A

C) They may be provided to buyers or owners to finance or refinance their property

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34
Q

Which of the following statements is correct regarding real estate professionals and property valuations?

  1. They must include a written disclaimer as part of their property valuations
  2. They can only provide property valuations that relate to the current market
  3. They must not perform appraisals unless authorized as a real estate appraiser by RECA

1V. They can only provide property valuations that relate to real estate trades/potential trades

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

D) All statements apply

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35
Q

Determining assessed property valued by collecting relevant sales data over a specific period of time for the same type of property in a municipal area is known as?

A) Mass appraisal
B) General appraisal

A

A) Mass appraisal

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36
Q

Which of the following is NOT a property valuation?

A) Comparative Market Analysis (CMA)
B) Comparative data analysis
C) Income Analysis
D) Cost Analysis

A

B) Comparative data analysis

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37
Q

Which of the following property valuation activities are not covered under the REIX insurance policy?

  1. Property valuation to provide a management report to a landlord under a property management agreement that enables the landlord to know the value of the property based in the building rents
  2. Property valuation that are not related to a trade or potential trade in real estate
  3. Property valuation performed for a fee
  4. Property valuations where the real estate professional knows that it is not for the purpose of a trade or potential trade in real estate

Choose only ONE best answer.

A) Statements 1, 2, and 3
B) Statements 2, 3 and 4
C) Statements 1, 2 and 4
D) All of the above

A

B) Statements 2, 3 and 4

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38
Q

TRUE OR FLASE

Real estate appraisers are excluded from coverage under the REIX (Real Estate Insurance Exchange) Policy

A

True

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39
Q

What area the different characteristics of value?

Choose only ONE best answer.

A) Utility, scarcity, desire, marketability, purchasing power
B) Utility, scarcity, effective demand, transferability
C) Durability, utility, scarcity, marketability
D) Transferability, desire, purchasing power, scarcity

A

A) Utility, scarcity, desire, marketability, purchasing power

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40
Q

Which of the following are forces that influence the value of real estate?

Choose only ONE best answer.

A) Utility, scarcity, effective demand, transferability
B) Scarcity, economic, social, effective demand
C) Physical, economic, government/political, social, property value forces
D) Utility, economic, social, effective demand

A

C) Physical, economic, government/political, social, property value forces

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41
Q

Amanda is a new real estate professional with Crystal Cove Realty. She is preparing to meet with her new buyer clients to show them some properties. What are the various concepts of property value that Amanda should keep in mind to help her clients find the right property?

Choose all that apply

A) Subjective value
B) Objective value
C) Value in Exchange
D) Value in Use

A

All of the above

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42
Q

Is a property sells for a higher price if the seller was a celebrity is know as

A) Subject value
B) Objective value
C) Value in exchange
D) Value in use

A

A) Subject value

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43
Q

Refers to the cost of creating a commodity. The cost of the land plus the cost of creating any buildings

A) Subject value
B) Objective value
C) Value in exchange
D) Value in use

A

B) Objective value

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44
Q

Refers to the worth of a commodity as expressed in monetary terms

A) Subject value
B) Objective value
C) Value in exchange
D) Value in use

A

C) Value in exchange

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45
Q

Refers to the value of a commodity due to its utility to a particular individual

A) Subject value
B) Objective value
C) Value in exchange
D) Value in use

A

D) Value in use

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46
Q

Which of the following statements is an assumption underlying the concept of market value?

I. The buyer and the seller are informed and prudent
II. There is no undue pressure on the buyer or the seller
III. The seller had a valuation done before marketing the property
IV. The property has had reasonable time to sell on the open market

A) Statements I,II, and III
B) Statements I,II, and IV
C) Statements II,III, and IV
D) All statements apply

A

B) Statements I,II, and IV

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47
Q

Which of the following is NOT a characteristic that creates value for a commodity?

A) Scarcity
B) Utility
C) Price
D) Marketability

A

C) Price

48
Q

Which of the following characteristics relates to the value of a commodity from the buyer’s perspective?

The buyer has a desire to own it
The buyer knows where to find it
The buyer has the ability to purchase it
The buyer may find it in different locations

A) Statements I and II
B) Statements I and III
C) Statements II and III
D) Statements III and IV

A

B) Statements I and III

49
Q

Which of the following statements best describes the term ‘market price?’

A) It is the amount the seller is asking for their property
B) It is the amount the property is listed for by the brokerage
C) It is the amount the property sold for because of a transaction
D) It is the amount the property has been assessed by the municipality

A

C) It is the amount the property sold for because of a transaction

50
Q

Which of the following are forces that influence real estate values?
Social forces
Political forces
Physical forces
Economic forces

A) Statements I, II, and II
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

D) All statements apply

51
Q

The value of a commodity to an investor based on their financial goals

A) Investment Value
B) Operational Value
C) Insurable Value
D) Market Value

A

A) Investment Value

52
Q

The value of a commodity in conjunction with an ongoing business operation.

A) Investment Value
B) Operational Value
C) Insurable Value
D) Market Value

A

B) Operational Value

53
Q

The expected value of a property that has been exposed to an open real estate market for a reasonable period of time and that involves informed and willing buyers and sellers and which results in a real estate trade

A) Investment Value
B) Operational Value
C) Insurable Value
D) Market Value

A

D) Market Value

54
Q

Which of the following are the key assumptions that are foundational to the concept of market value?

  1. The property is exposed to the open market for reasonable time
  2. There is no undue pressure on either the buyer or the seller
  3. Real estate trade involves informed and willing buyers and sellers
  4. Both the buyer and the seller are rational and prudent

Choose only ONE best answer.

A) Statements 1, 2, and 3
B) Statements 2, 3 and 4
C) Statements 1, 2 and 4
D) All of the above

A

D) All of the above

55
Q

This principle states that market value is determined by the interaction of market forces such as the quantity of available properties and the interest of buyers able to purchase them.

A) Highest and Best Use
B) Supply and Demand
C) Substitution
D) Contribution

A

B) Supply and Demand

56
Q

This principle considers legal permissibility, physical possibility, financial feasibility, and maximum productivity

A) Highest and Best Use
B) Supply and Demand
C) Substitution
D) Contribution

A

A) Highest and Best Use

57
Q

This principle states that a buyer will pay no more for a property than the cost of acquiring a similar and equally desirable property on the market.

A) Highest and Best Use
B) Supply and Demand
C) Substitution
D) Contribution

A

C) Substitution

58
Q

This principle states that the value of a property attribute relates to the value it adds to the overall value of the property. This principle is also the basis by which adjustments are made to the sale prices of comparable properties.

A) Highest and Best Use
B) Supply and Demand
C) Substitution
D) Contribution

A

D) Contribution

59
Q

This principle states that where properties in the same area are dissimilar, the property with the lesser value will be enhanced in value by its proximity to properties of greater value.

A) Regression
B) Progression
C) Anticipation
D) Contribution

A

B) Progression

60
Q

This principle states that where properties in the same area are dissimilar, the property with the greater value will be adversely affected in value by its proximity to properties of lesser value

A) Regression
B) Progression
C) Anticipation
D) Contribution

A

A) Regression

61
Q

This principle maintains that value is created for the buyer by the expectation of future benefits, whether based on money or other amenities.

A) Regression
B) Progression
C) Anticipation
D) Contribution

A

C) Anticipation

62
Q

This principle states that value is created and sustained where there is equilibrium

A) Balance
B) Change
C) Competition
D) Consent Use

A

A) Balance

63
Q

This principle states that economic, political, and social forces are constantly in play and contribute to the dynamic nature of property values.

A) Balance
B) Change
C) Competition
D) Consent Use

A

B) Change

64
Q

This principle states that excessive profits breed opportunities which then tend to destroy those profits.

A) Balance
B) Change
C) Competition
D) Consent Use

A

C) Competition

65
Q

This principle states that when improved land is in transition to another highest and best use, one use cannot be allocated to the land and another use allocated to the building or other improvements on the land.

A) Balance
B) Change
C) Competition
D) Consent Use

A

D) Consent Use

66
Q

This principle states that various factors beyond the property itself can impact its value and these factors may include economic, political, social, and physical issues.

A) Balance
B) External Factors
C) Surplus Productivity
D) Increasing/Decreasing Return

A

B) External Factors

67
Q

This principle states that capital improvements add value to a property to a certain point, and once that point is reached, further improvement does not add value commensurate with the additional investment

A) Balance
B) External Factors
C) Surplus Productivity
D) Increasing/Decreasing Return

A

D) Increasing/Decreasing Return

68
Q

This principle relates to the factors of production that generate net income, which is then attributed to the land and tends to set the value of the property.

A) Balance
B) External Factors
C) Surplus Productivity
D) Increasing/Decreasing Return

A

C) Surplus Productivity

69
Q

Which of the following are sources of market price data that the real estate professionals rely on to perform valuations?

Choose ALL that apply

A) Listing Service Database
B) Brokerage Database
C) Land Titles Database
D) Realtor database

A

A) Listing Service Database
B) Brokerage Database
C) Land Titles Database

70
Q

A buyers’ market occurs under which of the following conditions?

  1. market supply is strong
  2. Market supply is weak
  3. Buyer demand is weak
  4. Buyer demand is strong

Choose only ONE best answer.

A) Statements 1 and 3
B) Statements 3 and 4
C) Statements 2 and 4
D) Statements 1 and 2

A

A) Statements 1 and 3

71
Q

Antoine is a new real estate professional with Altitude Realty. Looking at the MLS database, he notices that there are a lot more listings coming on the market and the properties listed are taking a while to sell. He also notices price reductions on a number of properties. What type of a market is it?

Choose only ONE best answer.

A) Sellers’ market
B) Buyers’ market
C) Balanced market
D) Suppliers’ market

A

B) Buyers’ market

72
Q

Sanjay is a real estate professional helping his buyer clients find a suitable property. They view a number of properties over several months. Although other buyers are in the market, there is a sufficient supply of newly listed properties coming on the market to replace those that sell. They write an offer to purchase for a property, which is accepted by the seller. The sale occurs within in the typical days on the market that it takes this type of property. What type of a market is described in this scenario?

Choose only ONE best answer.

A) Sellers’ market
B) Buyers’ market
C) Balanced market
D) Suppliers’ market

A

C) Balanced market

73
Q

What is the key criteria to be considered when determining highest and best use of a property?

Choose only ONE best answer.

A) Legal permissibility, physical possibility, financial feasibility, maximally productive
B) Legal permissibility, marketability, financial feasibility, economic productivity
C) Marketability, financial feasibility, economic productivity, scarcity
D) Marketability, legal permissibility, economic productivity, scarcity

A

THINK LPFM

A) Legal permissibility, physical possibility, financial feasibility, maximally productive

74
Q

Victor is a real estate professional with Elite Real Estate Brokerage. He is listing his client’s property for sale. The property is an older residential property currently divided into two rental suites, located in an R-1 land use designation that allows for single-family residences. What is the highest and best allowable use of the property?

Choose only ONE best answer.

A) Investment property
B) Commercial property
C) Single-family Residential property
D) Multi-family residential property

A

C) Single-family Residential property

75
Q

Conway is a real estate professional with Highland Realty. He is doing a valuation on a brand new infill property in Bolliver Heights. While driving in the area, he notices that properties in the area are looking run down and in need of maintenance. Some neighbors have not mowed their lawns and while others have discarded items in the front yard. What principle of valuation would Conway need to keep in mind while doing the property valuation?

Choose only ONE best answer.

A) The principle of conformity
B) The principle of substitution
C) The principle of regression
D) Principle of contribution

A

C) The principle of regression

76
Q

Which of the following principles of valuation is best described by the statement “A buyer will pay no more for a property than the cost of acquiring a similar and equally desirable property on the market”?

Choose only ONE best answer.

A) The principle of supply and demand
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

B) The principle of substitution

77
Q

Bill is looking to sell his property. In doing his research, he learns that developing his basement would add to the value of his property. Therefore, he decides to finish his basement and add a bedroom and bathroom. The construction costs $38,000, and he ensures that it meets all applicable municipal land/building requirements. After construction, a new property valuation is done which shows that the property has increased in value by $28,000. Which principle of valuation is demonstrated in this scenario?

A) The principle of supply and demand
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

C) The principle of contribution

78
Q

Which principle of valuation states that “when properties in the same area are dissimilar, the property with the greater value will be adversely affected in value by its close proximity to properties of lesser value in the immediate vicinity”?

Choose only ONE best answer.

A) The principle of conformity
B) The principle of progression
C) The principle of regression
D) The principle of anticipation

A

C) The principle of regression

79
Q

Jay, a real estate professional, is helping his clients find a larger property to accommodate growing family. They look at three properties for sale in the same subdivision. The lots are similar and the properties have similar features. One property seller is asking $425,000, another is asking $450,000, and the third asking $465,000 for their property. Jay’s clients choose to purchase the property priced at $425,000. Which principle of valuation is their decision based on?

A) The principle of supply and demand
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

B) The principle of substitution

80
Q

Maya is a real estate professional with Top Tier Realty. She is doing a valuation on a property on Hyde street. The subject property is a single-family residence on R1 zoned lot. One side of the street has single-family residences and the other side has a 3-story condominium building with parking for residents and visitors. She makes a negative adjustment to the property value. What principle of valuation is her action based on?

A) The principle of conformity
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

A) The principle of conformity

81
Q

Which principle of valuation states that “When properties in the same area are dissimilar, the property with the lesser value will be enhanced in the value by its close proximity to properties of greater value in the immediate vicinity”?

A) The principle of progression
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

A) The principle of progression

82
Q

Which principle of valuation states that “Value is created for the buyer by the expectation of future benefits realized by that individual.

A) The principle of progression
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

D) The principle of anticipation

83
Q

Scott and Jen Lee are a couple with two children, aged 10 and 12. They approach Miranda Young from Prime Brokerage to help them find a new home. Miranda shows them several properties and they decide to purchase one close to community center that offers many recreational activities for both adults and children. Which principle of valuation is demonstrated in this scenario?

A) The principle of progression
B) The principle of substitution
C) The principle of contribution
D) The principle of anticipation

A

D) The principle of anticipation

84
Q

Vanessa bought a small house in an older inner-city neighborhood two years ago for $250,000. At that time, the neighborhood was run down but city had committed to investing in improving the area. The area is now becoming a trendy, inner city location for young professionals who want to live close to work and the city attractions. Based on a recent property valuation, Vanessa’s house is now worth $305,000. Which principle of valuation is demonstrated in this scenario?

A) The principle of submission
B) The principle of change
C) The principle of contribution
D) The principle of anticipation

A

B) The principle of change

85
Q

Blair Kennedy is a young professional with a software company. He purchases a property in an up-and-coming area. On his way to work every morning, he likes to stop at the corner coffee shop to grab a bagel and coffee. The coffee shop is always busy and seem to be doing brisk business. A few months later, he notices 2 more coffee shops across the street. Over time his favorite coffee shop starts to look less busy and their business seems to drop. Which principle of valuation is demonstrated in this scenario?

A) The principle of competition
B) The principle of change
C) The principle of contribution
D) The principle of anticipation

A

A) The principle of competition

86
Q

Tom and Tessa Smith are a young couple expecting their first child. They hire Jessica Yates from Pacific Realty to help them buy their first home. They look at several houses and like two of them. One house is listed for $425,000. The other house is listed for $450,000. It is similar to the first house but next to a park and near the new elementary school. They decide to buy the second house. Which principle of valuation is their decision based on?

A) The principle of competition
B) The principle of change
C) The principle of contribution
D) The principle of anticipation

A

D) The principle of anticipation

87
Q

Meg owns a 14-unit apartment building in West Edmonton. The building was a little run down at the time of the purchase. Meg renovated the building and was able to charge higher rents as a result. Over the last 2 years, the property has been making a tidy profit after paying all the expenses. Meg is considering selling the property as she wants to retire. John, a real estate professional with Highland Realty, provides her a valuation based on the net income produced by the property. Which principle of valuation is demonstrated in this scenario?

A) The principle of surplus productivity
B) The principle of change
C) The principle of contribution
D) The principle of anticipation

A

A) The principle of surplus productivity

88
Q

Sue develops a new 3-piece bathroom in the basement of her house using standard quality plumbing fixtures. Her real estate professionals estimate that it added $8,000 to the property’s value. Delighted with the increased value, sue spends another $3,000 on deluxe light fixtures and fancy wallpaper. When the work is done, she gets a new property valuation. The new valuation shows no increase in the value of the property. Which principle of valuation is demonstrated in this scenario?

Choose only ONE best answer.

A) Principle of increasing and decreasing return
B) The principle of surplus productivity
C) The principle of balance
D) The principle of conformity

A

A) Principle of increasing and decreasing return

89
Q

Which of the following are the different approaches used by appraisers for property valuation?

  1. The Direct Comparison Report
  2. The Income Approach
  3. The Cost Approach
  4. Revenue approach
A
  1. The Direct Comparison Report
  2. The Income Approach
  3. The Cost Approach
90
Q

Which of the following are the different types of appraisal reports for property valuation?

Letter of Opinion
Estimate Report
Form Report
Narrative Report

A

Letter of Opinion
Form Report
Narrative Report

91
Q

Which of the following approach is used for revenue generating properties?

Choose only ONE best answer.

A) The Direct Comparison Report
B) The Income Approach
C) The Cost Approach
D) Comparative Market Analysis approach

A

B) The Income Approach

92
Q

Which of the following terms best describes the statement “This provides the current costs to replace the subject property with similar structure to what currently exists”?

Choose only ONE best answer.

A) Reproduction cost
B) Replacement cost
C) Depreciated cost
D) Rebuild cost

A

B) Replacement cost

93
Q

Which of the following terms best describes the statement “the cost to reproduce the subject property with the exact same structure as currently exits”?
Choose only ONE best answer.

A) Reproduction cost
B) Replacement cost
C) Depreciated cost
D) Rebuild cost

A

A) Reproduction cost

94
Q

Which of the following approaches is based on the theory that the value attributed to a revenue producing property is equal to the future income to be received from the property?

A) The Direct Comparison Report
B) The Income Approach
C) The Cost Approach
D) Comparative Market Analysis approach

A

B) The Income Approach

95
Q

Which of the following approaches requires a solid knowledge of finance and accounting plus construction costing?

A) The Direct Comparison Report
B) The Income Approach
C) The Cost Approach
D) Comparative Market Analysis approach

A

C) The Cost Approach

96
Q

In which of the following approaches the valuation of the subject property is based on the capitalization of the net income produced by the subject property?

A) The Direct Comparison Report
B) The Income Approach
C) The Cost Approach
D) Comparative Market Analysis approach

A

B) The Income Approach

97
Q

When performing data collection and analysis, what are the two main categories of data used by real estate appraisers?

A) Local and foreign
B) General and specific
C) General and environmental
D) None of the above

A

B) General and specific

98
Q

Which of the following statements is applicable to the Direct Comparison Approach?

I. It requires a sufficient number of recent comparable sales

II. It is often used for residential and/or non-revenue property appraisals

III. It may not be effective if there are inadequate comparable sales

IV. It is used to directly compare the cost per square meter between properties

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

A) Statements I, II, and III

99
Q

Which of the following are a part of the 6 steps of the appraisal process

  1. Define the Problem
  2. Complete Preliminary inspection and an appraisal plan
  3. Collect and analyze data
  4. Decide on an approach
  5. Reconcile final property value estimate
  6. Write an appraisal report
A

All of the above

100
Q

What one is NOT one of the three types of approaches?

A) Direct comparison
B) Cost
C) Income
D) Balanced

A

D) Balanced

101
Q

Which of the following statements is applicable to the Income Approach?

It is the approach used for properties that generate revenue

It arrives at a capitalization rate that converts to market value

It involves analysis of gross income, net income and cash flows

It requires some knowledge of finance and accounting

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

D) All statements apply

102
Q

Which of the following is NOT a type of real estate appraisal report?

A) Form Report
B) Narrative Report
C) Letter of Opinion
D) Condensed Report

A

D) Condensed Report

103
Q

Which of the following statements is NOT applicable to the Cost Approach?

A) It requires knowledge of replacement/reproduction costs
B) It requires knowledge of the methods of depreciation
C) It is often the approach used for residential property appraisals
D) It may be used where there are limited or no comparable sales

A

C) It is often the approach used for residential property appraisals

104
Q

For the first step in the appraisal process, the real estate appraiser does which of the following?

Identify the purpose for the appraisal

Define the type of value required

Identify the real estate and property rights being appraised

Identify the effective date of the appraisal

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

D) All statements apply

105
Q

When gathering area data, which of the following would real estate appraisers NOT consider?

A) The area type
B) The area climate
C) The area life cycle
D) The area boundaries

A

B) The area climate

106
Q

When collecting data, real estate appraisers gather information about which of the following?

Information about the market such as external forces and trends

Information about the area where the subject property is located

Information about the subject property and site improvements

Information about the land use regulations that apply to the subject property

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

D) All statements apply

107
Q

In the Direct Comparison Approach, a property’s price can be adjusted based on the value of its features and attributes as compared to similar properties. according to which of the following Principles of Value?

A) Substitution
B) Contribution
C) Anticipation
D) Increasing and Decreasing Return

A

B) Contribution

108
Q

Which of the following statements best describes what is meant by REPLACEMENT costs?

A) The costs to replace land that has been destroyed
B) The costs to replace structures that currently exist with similar structures
C) The costs to replace land and structures that currently exist with similar ones
D) The costs to replace structures with the exact same ones that currently exist

A

B) The costs to replace structures that currently exist with similar structures

109
Q

When utilizing the Cost Approach, which of the following statements is correct regarding depreciation?

Depreciation applies to the land related to the subject property

Depreciation applies to structures and other site improvements

Depreciation must be considered when appraisers use the Cost Approach

There are a variety of methods that can be used to calculate depreciation

A) Statements I, II, and III
B) Statements I, III, and IV
C) Statements II, III, and IV
D) All statements apply

A

C) Statements II, III, and IV

110
Q

Which of the following statements best describes what is meant by REPRODUCTION costs?

A) The costs to reproduce land that has been destroyed
B) The costs to reproduce structures that currently exist with similar structures
C) The costs to reproduce land and structures that currently exist with similar ones
D) The costs to reproduce structures with the exactly the same ones that currently exist

A

D) The costs to reproduce structures with the exactly the same ones that currently exist

111
Q

Which of the following real estate appraisal rep orts provides the most detailed information?

A) Form Report
B) Narrative Report
C) Letter of Opinion
D) Complete Report

A

B) Narrative Report

112
Q

Which Principle of Value allows adjustments to be made to the sale price of comparable properties?

A) The Principle of Substitution
B) The Principle of Balance
C) The Principle of Contribution
D) The Principle of Anticipation

A

A) The Principle of Substitution

113
Q

Which Principle of Value identifies how economic, social, and political factors effect property values?

A) Principle of Change
B) Principle of Balance
C) Principle of Highest and Best Use
D) Principle of Contribution

A

A) Principle of Change

114
Q

Which of the following statements best describes the term mortgage?

Choose only ONE best answer.

A) The pledging of real property as security for debt
B) The amount of time the borrower is committed to a lender for debt
C) The repayment of debt through a series of equal payments
D) A loan from a lender

A

A) The pledging of real property as security for debt

115
Q

The pledging of real property to a lender as security for a loan refers to a__________

A) Mortgage
B) Referral
C) Mortgagee
D) Mortgagor

A

A) Mortgage

116
Q

The legal term in the mortgage agreement that refers to the party who LENDS the funds.

A) Mortgage
B) Referral
C) Mortgagee
D) Mortgagor

A

C) Mortgagee

117
Q

The legal term in the mortgage agreement that refers to the party who borrows the funds

A) Mortgage
B) Referral
C) Mortgagee
D) Mortgagor

A

D) Mortgagor

RECA (12 decks)

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