Question 1

Comparable properties must be chosen from those homes that have been sold,or have been listed for sale,most recently and that are located in the same city as the subject property.

Accepted Answer

False

Question 2

Estimating the land value for an improved property cannot be accomplished using the sales comparison method of valuation.

Accepted Answer

The sales comparison method of valuation can be used to estimate the land value for an improved property by analyzing the sales of comparable vacant land in the same area, and making adjustments for any differences in location, size, and features.

Question 3

Housing futures contracts allow investors to speculate on changes in home prices without actually owning a home.

Accepted Answer

This statement is true. Housing futures contracts allow investors to buy or sell the right to buy or sell a specified amount of housing at a certain price, with the hope of making a profit based on changes in the housing market. However, investors do not actually own a home when trading these contracts.

Question 4

When the value of public goods exceeds their cost,the effect on house prices is called the "capitalization effect."

Accepted Answer

The capitalization effect refers to the phenomenon where the value of a public good is reflected in the price of nearby properties, resulting in an increase in their value. This occurs when the benefits of the public good are perceived to exceed the costs, leading to an increased demand for properties located near it.

Question 5

Residential appraisers use only the sales comparison approach to determine value of the homes they appraise.

Accepted Answer

While the sales comparison approach is one of the three approaches to value that residential appraisers use, it is not the only one. The other two approaches are the cost approach and the income approach.

Question 6

One concern of appraisers when using the sales comparison approach is that financing benefits paid for by a seller of a property may result in a selling price for the comparable property that is lower than the market value.

Accepted Answer

Financing benefits paid for by a seller typically result in a selling price for the comparable property that is higher than the market value, not lower, because they represent an additional value or incentive provided by the seller.

Question 7

Cluster analysis using location quotients and/or employment multipliers provides a snapshot of employment at a point in time but does not provide a forecast of future employment in a specific industry.

Accepted Answer

Cluster analysis using location quotients and/or employment multipliers is a descriptive analysis that provides information about the current state of an industry in a particular region or area. It is not a predictive tool, so it cannot give a forecast of future employment in a specific industry.

Question 8

A housing bubble occurs when there is a big increase in the supply of homes.

Accepted Answer

A housing bubble occurs when there is a big increase in demand for homes, causing prices to rise unrealistically high. When the demand decreases, prices eventually crash, leading to a market downturn.

Question 9

If mortgage interest rates increase,demand for purchased housing tends to increase.

Accepted Answer

If mortgage interest rates increase, the cost of borrowing increases, which makes it more expensive for homebuyers to purchase a home. Therefore, demand for purchased housing tends to decrease.

Question 10

A location quotient is the ratio of total employment to base employment.

Accepted Answer

A location quotient is actually the ratio of the proportion of employment in a particular industry in a specific region to the proportion of employment in the same industry nationally.

Question 11

The appraisal function is purely objective; an appraiser's judgment is not part of the decision process.

Accepted Answer

The appraisal function involves the professional judgment of the appraiser, which is a subjective element. The appraiser uses their expertise and experience to evaluate the value of the property being appraised.

Question 12

If the cost of rental housing increases relative to house prices,demand for purchased housing tends to increase.

Accepted Answer

When the cost of rental housing increases relative to house prices, people may choose to purchase a house instead of renting because the cost of renting has become relatively more expensive. This can lead to an increase in demand for purchased housing.

Question 13

Potential investors,in analyzing the profit potential for a distressed property,generally consider a financial framework including the acquisition phase,the holding period phase and the disposition phase.

Accepted Answer

This statement is generally true as potential investors typically consider the financial aspects of acquiring a distressed property, the period in which they will hold the property and attempt to improve it, and then the ultimate disposition or sale of the property to determine its profit potential.

Question 14

When using the cost approach to valuation,current market data for land values must be obtained.

Accepted Answer

The cost approach to valuation involves estimating the cost of replacing or reproducing a property, taking into account depreciation and adding the value of the land. Therefore, current market data for land values must be obtained in order to accurately calculate the property's total value using this method.

Question 15

Mortgage interest and property taxes are deductible for federal income tax purposes for homeowners.

Accepted Answer

Mortgage interest and property taxes are two common deductions that homeowners can take on their federal income tax returns. These deductions help to reduce the taxable income of homeowners and can result in significant tax savings. It is important to note that there are limitations and restrictions on these deductions, so homeowners should consult with a tax professional or use tax software to ensure they are claiming these deductions correctly.

Question 16

Assume that houses in an area appreciate at the rate of 4 percent a year.A borrower expects to have a loan-to-value ratio of 90 percent.What is the approximate expected appreciation rate on home equity (EAHE)?

Accepted Answer

The expected appreciation rate on home equity (EAHE) can be calculated by dividing the annual appreciation rate by the initial equity percentage. With a loan-to-value ratio of 90%, the initial equity is 10%. Therefore, EAHE = 4% / 10% = 40%.

Question 17

Use of construction costs is very important in the sales comparison approach to valuation.

Accepted Answer

The sales comparison approach primarily relies on comparing the property being valued to similar properties that have been sold recently, rather than focusing on construction costs.

Question 18

Which of the following statements best describes the "wealth effect"?

Accepted Answer

The "wealth effect" refers to the increased spending that can occur when individuals perceive themselves to be wealthier due to a rise in asset values. This can include homeowners who see their home equity increase in value, leading them to feel wealthier and potentially spend more on other goods and services. Therefore, option B best describes the "wealth effect".

Question 19

Population increases are usually associated with increases in demand and house price appreciation.

Accepted Answer

When the population increases, there is usually an increase in demand for housing, as more people need places to live. This increase in demand can lead to house price appreciation.

Question 20

It is likely that two identical houses located in different school districts will sell for different prices.

Accepted Answer

The location and quality of nearby schools can significantly affect the value and desirability of a home, even if the homes themselves are identical. Therefore, it is likely that two identical houses located in different school districts will sell for different prices.

Quiz 7: Single-Family Housing: Pricing, investment, and Tax Considerations