Valuation and Market Analysis

Question 1

All appraisals must be in accordance with this standard

Answer 1

Uniform Standards of Professional Appraisal Practice (USDAP)

Question 2

The ____ is the law that requires that appraisals be performed in conjuntion with federally related transactions must be completed by licensed appraisers.

Answer 2

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)

Question 3

The ____ requires that appraisers be certified in their state, knowledgable about the local market, qualified to appraise the subject property - and prohibits lenders from attempting to influence an appraiser’s opinion of value.

Answer 3

Appraiser Independence Requirements (AIR)

Question 4

What are the 4 characteristics of value?

Answer 4

Demand, utility, scarcity, and transferability

Question 5

Define external depreciation (also known as economic obsolesence)

Answer 5

factors outside the property

i.e. an airport is nearby, causing noise

Question 6

Function obsolesence

Answer 6

a form of depreciation or loss in value caused by defects in design and can occur with outdated structures

Question 7

Physical deterioration

Answer 7

occurs with wear and tear, damage, and improper maintanence

Question 8

The gross rent multiplier is used for ____ or fewer units, and the formula is:

Answer 8

four or less,

GRM = sales price / gross monthly rent
gross monthly rent x grm = value

Question 9

The gross income multiplier is used for the appraised value of ____ or more units, the formula is:

Answer 9

five or more

GIM = sales price / gross annual income
gorss annual income x GIM = value

Question 10

Define capitalization (or cap) rate

Answer 10

an annual rate of return from an income producing property

I / V = R