Chapter 16 Back of the Book Test - Appraising and Estimating Market Value

To complete the sales comparison approach, the appraiser

weighs the comparables

A significant difference between and appraisal and a broker's opinion of value is

the broker may not be a disinterested party.

The steps in the income capitalization approach are:

Estimate net income, and apply a capitalization rate to it.

If the monthly rent of a property is $3,000 and the gross rent multiplier (GRM) is 80, what is the value of the property?

$240,000

If a net income on a property is $20,000 and the cap rate is 5% the value of the property using the income capitalization method is:

$400,000

The roof of a property cost $10,000. The economic life of the roof is 20 years. Assuming the straight-line method of depreciation, what is the depreciated value of the roof after 3 years?

$8,500

The income capitalization approach to appraising value is most applicable for which of the following property types?

Apartment buildings

In appraisal, loss of value in a property from any cause is referred to as

depreciation

The first two steps in the cost approach are to estimate the value of the land and the cost of the improvements. The remaining steps are

estimate depreciation, subtract depreciation from cost and add back the land value.

An office building lacks sufficient cooling capability to accommodate modern computer equipment. This is an example of

functional obsolescence

As a component of real estate value, the principle of substitution suggests

if two similar properties are for sale, a buyer will purchase the cheaper of the two.

A home is located in a neighborhood where homeowners on the block have failed to maintain their properties. This is an example of

incurable economic obsolescence.

Highest and Best Use of a property is that use which

is physically and financially feasible, legal and the most productive.

One weakness of the cost approach for appraising market value is that

market value is not always the same as what the property cost.

The principal shortcoming of the gross rent multiplier approach to estimating value is that

numerous expenses are not taken into account

Net Operating income is equal to

potential gross income minus vacancy and credit loss minus expenses.

The cost of constructing a functional equivalent of a subject property is known as

replacement cost

The steps in the market data approach are

select comparable properties, adjust the comparables, estimate the value.

The concept of market value is best described as

the price that a willing, informed and un-pressured seller and buyer agree upon for a property assuming cash price and the property's reasonable exposure to the market.

In the sale comparison approach, an estimate is warranted if

the seller offers below market seller financing.

A notable weakness of the sales comparison approach to value is that

there may be no recent sale price data in the market.