Deck 17: Real Estate Appraisal

Question 1

Depreciation resulting from outmoded design is classed as

A) functional obsolescence.
B) physical deterioration.
C) economic obsolescence.
D) social obsolescence.

Answer 1

A
Depreciation resulting from outmoded design is classed as functional obsolescence.

Question 2

The method used to compute a gross rent multiplier is

A) averaging the net operating income of the subject property.
B) the sale price of the subject property divided by its original cost.
C) the sale price of similar properties divided by their rental income.
D) the maximum rent times twelve months.

Answer 2

C
The method used to compute a gross rent multiplier is to compute the sale price of similar properties divided by their rental income.

Question 3

In making an appraisal by the market comparison approach, an appraiser should

A) consider the physical and economic features of the subject property.
B) consider the yield of the subject's property with competitive rates of return.
C) make adjustments to the value of the subject property with competitive rates of return.
D) utilize comparable listings withdrawn from the market.

Answer 3

A
In making an appraisal by the market comparison approach, an appraiser should consider the physical and economic features of the subject property.

Question 4

The definition of fair market value requires, among other things, that the

A) property is exposed to the open market for a reasonable time.
B) seller can convey a fee simple title.
C) buyer is qualified for reasonable financing.
D) sale was free of high-pressure listing and sales agents.

Question 5

An apartment building sells for $600,000 and has a gross rent multiplier of 6.0.how much annual rent does the building produce?

A) $60,000
B) $100,000
C) $10,000
D) $36,000

Question 6

Which of the following in an old commercial building would most likely be a cause of incurable obsolescence?

A) Lack of computer wiring
B) Widely spaced support walls
C) Lack of intercom system
D) Unattractive décor

Question 7

The best definition of fair market value is the

A) value as determined by a fee appraisal.
B) highest price a seller can get for his property.
C) tax assessed value.
D) price a willing buyer will pay and a willing seller will accept, given a reasonable amount of time to effect the sale.

Question 8

In valuing a fire station, an appraiser would most likely emphasize the

A) market approach.
B) cost approach.
C) income approach.
D) capitalization approach.

Question 9

Net operating income on rental property is computed by deducting expenses from

A) net cash flow.
B) adjusted gross income.
C) net gross income.
D) rate of return.

Question 10

Which appraisal method would be most useful in appraising an unusual building which has a very limited and specific use?

A) Cost approach
B) Net income
C) Capitalization
D) Market comparison

Question 11

The amount of money required to duplicate a property as of a certain date is called

A) reproduction cost.
B) depreciation cost.
C) duplication approach.
D) capital improvement.

Question 12

An office building is on a lot valued at $40,000. It would cost $150,000 to replace the building structure today, but the improvements have depreciated 20%. Using the cost approach, what is the value of the property?

A) $40,000
B) $120,000
C) $160,000
D) $152,000

Question 13

A residential lot purchased 3 years ago for $10,000 has doubled in value. The house on the lot cost $40,000 and it increased $20,000 in value. If the house and lot are sold at market value today, how much profit will be realized?

A) $30,000
B) $40,000
C) 33 1/3%
D) 100%

Question 14

When the appraiser has decided to use the market approach, which of the following conditions would disqualify a sale as a fair market value transaction?

A) Low down payment followed by below-average interest rates on the balance due
B) Seller who was not in a hurry to sell
C) VA sale
D) Neighbor's house sold for a higher amount

Question 15

Depreciation resulting from the closing of a large business in a small town is classed as

A) functional obsolescence.
B) physical deterioration.
C) economic obsolescence.
D) political obsolescence..

Question 16

When real property loses value due to social or economic changes, this loss is called

A) obsolescence.
B) depreciation.
C) chattel loss.
D) recapture.

Question 17

If an appraiser felt some comparable sales were better indicators of value than other comparables, he would assign more weight to them in the

A) adjusted sales price.
B) correlation process.
C) 4-3-2-1- rule.
D) replacement cost approach.

Question 18

An office building is on a lot valued at $50,000. It would cost $150,000 to replace the building structure today, but the improvements have depreciated 10%. Using the cost approach, what is the value of the property?

A) $50,000
B) $152,000
C) $160,000
D) $185,000

Question 19

The most commonly used methods of real estate appraisal are

A) market approach, income, and cost.
B) income, reproduction, and cost.
C) residual, cost, and market data.
D) comparison, income, and capitalization.

Question 20

Which of the following operating expense ratios indicate one dollar of total operating expenses for every two dollars of effective gross income?

A) 33.3%
B) 50%
C) 200%
D) 25%

Question 21

The added value resulting from the combination of two or more parcels of land is called

A) replacement value.
B) liquidation value.
C) plottage value.
D) subjective value.

Question 22

The value of vacant land is commonly stated in any of the following terms EXCEPT value per

A) square foot.
B) acre.
C) front foot.
D) square yard.

Question 23

Which of the following is NOT one of the three standard approaches to value?

A) Income approach
B) Cost approach
C) Price approach
D) Market approach

Question 24

In using the market approach, the appraiser assumes that the cost to rebuild is related to the present value.

Question 25

The concept of the market approach to valuation rests on the principle of highest and best use.

Question 26

When an appraiser has a property to evaluate, which of the following would he need to know first?

A) Comparable properties
B) Amount of his fees
C) Assessed valuation
D) Highest and best use

Question 27

Adjustments for advantageous financing would be made in the

A) market comparison approach to appraisal.
B) cost approach to appraisal.
C) income approach to appraisal.
D) revised market price.

Question 28

To apply the market data approach, a real estate appraiser must collect all the following data on each comparable sale EXCEPT

A) date of sale.
B) marketability of title.
C) financing terms.
D) sale price.

Question 29

That a dollar should be invested only when it will return more than a dollar's worth of benefits is called the principle of

A) conformity.
B) supply and demand.
C) contribution.
D) highest and best use.

Question 30

A gross rent multiplier is most used by owners in self-evaluating owner-occupied dwellings.

Question 31

The term "scheduled gross" refers to projected gross income if fully leased.

Question 32

The best way for an appraiser to find the actual age of a residence is to check the tax assessor's records.

Question 33

The American Institute of Real Estate Appraisers issues the

A) GRI designation.
B) MAI designation.
C) CPM designation.
D) MIA designation.

Question 34

The operating expense ratio is

A) operating expenses divided by effective gross income.
B) operating expenses divided by scheduled gross income.
C) operating expenses plus scheduled gross income divided by effective gross income.
D) reserves plus collection loss divided by effective gross income.

Question 35

The basic support for validity of the market data approach to appraisal is willing buyers and willing sellers acting without undue pressure.

Question 36

Social obsolescence would be an example of physical deterioration.

Question 37

Loss of value of a structure because it is in a deteriorating neighborhood would be called economic obsolescence.

Question 38

After all adjustments are made to a comparable property, its comparative value for appraisal purposes is known as its

A) adjusted market price.
B) indicated market value.
C) amended market value.
D) revised market price.

Question 39

The phrase "more houses are torn down than fall down" is referring to the basic theory of obsolescence.

Question 40

The average assessed value of three comparable homes is likely to be the highest in value.

Question 41

In appraising an historically significant Victorian era residence using the cost approach, the will probably appraise it on the basis of its reproduction cost.

Question 42

____________________ cost is the cost at today's prices of constructing an exact replica of the subject improvements using the same or very similar materials.

Question 43

The property to be appraised is known as the ____________________ property.

Question 44

A popular market comparison method that is used when a property produces income is the gross rent ____________________, or GRM.

Question 45

The conversion of future income into present value is known as hypothecation.

Question 46

The rents that a property can be expected to produce on an annual basis may be referred to as the projected gross income.

Question 47

The principle that holds that maximum value realized when a reasonable degree of homogeneity is present in a neighborhood is known as the principle of ____________________.

Question 48

A market where there is an excess of supply over demand is known as a ____________________ market.

Question 49

The operating expense ratio of a building is determined by dividing the total operating expenses by the effective gross income.

Question 50

____________________ obsolescence is he loss of value due to external forces or events.

Question 51

Seller motivation is considered most in the income approach.

Question 52

The Society of Real Estate Appraisers offers the CREI designation.

Question 53

The process of combining two or more parcels of land into one larger parcel is called ____________________.

Question 54

In the market approach, houses with similar physical features and amenities that have sold recently under market value conditions are called ____________________.

Question 55

The appraisal method most likely to provide only a rough estimate of the value of a rental property is the cost approach.

Question 56

The owner of a beautiful old house was told that because of the location of the property, bordered by two very busy streets, that it would have more value if the house was torn down and the empty lot put on the market. This is an example of highest and best use.

Question 57

From the viewpoint of a qualified appraiser, the value of the subject property is most affected by its highest and best use.

Question 58

The relationship between added cost and the value it returns is known as the principle of ____________________.

Question 59

____________________ are made for price changes since each comparable was sold, as well as for differences in physical features, amenities, and financial terms.

Question 60

Functional obsolescence results from factors outside the property.

Question 61

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
a market where there are few buyers and many sellers

Question 62

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
expenditures necessary to maintain the production of income

Question 63

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
depreciation resulting from wear and tear of the improvements

Question 64

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
cost at today's prices of constructing an exact replica of the subject improvements using the same or similar methods

Question 65

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
a method of valuing property based on the monetary return it is expected to produce

Question 66

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
the estimated rent a fully occupied property can be expected to produce on an annual basis

Question 67

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
corrections made to comparable properties to account for differences between them and the subject property

Question 68

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
depreciation that can be remedied at a reasonable cost

Question 69

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
to convert future income to current value

Question 70

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
land value plus construction costs less depreciation

Question 71

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
depreciation that cannot be remedied at a reasonable cost

Question 72

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
the property that is being appraised

Question 73

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
a number that is multiplied by a property's gross rents to produce an estimate of its worth

Question 74

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
loss in value due to deterioration and obsolescence

Question 75

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
depreciation resulting from improvements that are inadequate, overly adequate, or improperly designed for today's needs

Question 76

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
properties similar to the subject property that have sold recently

Question 77

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
to estimate the value of something

Question 78

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
that use of a parcel of land that will produce the greatest current value for the parcel

Question 79

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
gross income less operating expenses, vacancies, and credit losses

Question 80

Choose the one most appropriate answer for each.
a.adjustments
k.highest and best use
b.appraisal
l.income approach
c.buyer's market
m.incurable depreciation
d.capitalize
n.market approach
e.comparables
o.net operating income (NOI)
f.cost approach
p.operating expenses
g.curable depreciation
q.physical deterioration
h.depreciation
r.reproduction cost
i.functional obsolescence
s.scheduled gross income
j.gross rent multiplier (GRM)
t.subject property
a method of valuing property based on the prices of recent sales of similar properties