Real Estate Final
A convenience store building contains 2,700 square feet of building area and has an attached canopy measuring 42 by 24 feet. The per-square-feet reproduction cost is estimated at $92.00 for the building are and $34.00 for the canopy. The total reproduction cost new of the entire structure is
$282,672 2,700 * 92 = 248,400 (42*24) * 34 = 34,272 248,400 + 34,22 = 282,672
A property has a net income of $36,000 per year. The operating expense ratio is 36%. The vacancy and collection loss is estimated to be 4%. What is the effective gross income?
$56,250
The subject building was reported to cost $4,560,000 when it was built 11 years ago. The comparative multiplier for the subject's area in the year of construction was 1.5656. Determine the cost estimate as of today using cost index trending and straight-line calculations.
$7,139,000
A property has an overhead garage door that is 13 years old and costs $1,900 to replace. Because the inclement weather comes out of the northwest, these doors typically last 15 years if they face west and 25 years if they face east. This door faces east. What is the amount of value left in this item?
$912 25-13 = 12 (12/25) * 1,900 = 912
A property has a net operating income of $95,000, and the capitalization rate used in the market is 10%. What is the indicated value?
$950,000
A new building cost $3,234,500 to build nine years ago. The cost service calculation shows that it would cost $3,987,500 to construct this building today. What is the straight-line annual rate of increase shown by this calculation?
2.59%
If a window has an effective age of 10 years and a remaining economic life of 40, the percentage of depreciation (rounded) is
20% 10/(10+40)
The subject property is a 15-year-old building that just sold for $724,000 (cash). The estimated land value (VL) is $275,000, and the value of the site improvements is $30,000. The cost of construction is $775,000. What is the annual rate of depreciation on a percentage basis?
3.0%
If an extraction of depreciation shows an annual depreciation percentage of 2.5% per year, what is the indicated total economic life?
40 years
A property sold for $655,000. The buyer anticipated that the potential gross income (PGI) would be $83,000, the vacancy would be 3%, and expenses would be 40% of the effective gross income (EGI) in the year after purchase. What is the overall capitalization rate (Ro)?
7.37%
The comparative-unit method of estimated cost of construction would normally include
A cost amount based on a price per square food of building area, basement area, etc.
Real estate market is
A group of individuals or firms that are in contact with one another for the purpose of conducting real estate transactions
An appraiser developed an analysis of the supply and demand factors for all of the the office space for rent in Bigville. This would be considered an example of
A market study
Demand for improved real estate increases when
A new factory opens and brings in 1,000 new employees
In the analysis of the highest and best use of land as though vacant, one important consideration is
A reasonable probability of rezoning
The final opinion of value must be
A single point estimate, a range in value, or a benchmark
When appraising an improved property with substantial functional losses, you should
Accurately estimate the cost and deal with the obsolescence in the depreciation estimate
Real property includes
All interest, benefits, and rights inherent in the ownership of real estate
Retail space demand is affected by
All of the above
Giving a client a range of values rather than a single value opinion
Allows for a greater probability of correctness
The sales comparison approach is primarily
An analysis based on historical sales of similar properties
An incurable functional problem is best defined as
An item that will not return as much in value as it costs to fix
Which economic principle is fundamental to the income capitalization approach?
Anticipation
A client ordered an appraisal of his property at 2134 Roberts Road in Smallburg. The local appraiser developed an opinion of value. Before she could finish the job, the client cancelled the order. The appraiser never provided any of her findings to the client orally or in writing. The appraiser completed an
Appraisal only
An attorney is reading a document prepared by an appraiser on a vacant lot. The document states and supports a value of $1,000,000 on the property. This document is called a(n)
Appraisal report
Units of Comparison
Are used by appraisers to reduce sales or lease data to meaningful unit-related prices
The unit-in-place cost-estimating is
Based on the cost of each component of the building, including all labor and materials
The final value of opinion should
Be rounded to show that the number is an opinion, not a precise calculation
Replacement cost is defined as the cost of
Building the improvements with a structure of like utility but new as of effective date of valuation
Elements of comparison are the
Characteristics of properties that cause their prices to vary
The test of legal permissibility includes all of the following requirements except
Compliance with supply and demand criteria
Suppose a lease contract called for a rent of $10 per square foot. However, similar space in the market rented for $15 per square foot. The amount specified in the lease is known as the _____ rent.
Contract
A cost-estimating method in which appraisers estimate the current cost of construction based on the amount paid for the building when it was built is called
Cost index trending
If a property has diminished valued because of factors outside the property, the loss is classified as
External obsolescence
What type of depreciation would a house with a 24-hour truck-stop next door represent:
External obsolescence
A property's potential to meet an investor's objectives for financial success is analyzed in a
Feasibility analysis
A comparable sale included the seller taking back a purchase-money mortgage at 3% under the market rate for 10 years. The appraisal was based on the cash-equivalent market value. The adjustment for this factor would be called a
Financing terms adjustment
A property has a poor floor plan because it has only 1 1/2 bathrooms in a market that clearly requires 2 or 2 1/2 bathrooms. This problem could be corrected for about $5,500 by moving dome interior walls around. The floor plan problem is fairly common in this market, and there is enough data to show that homes with the problem sell for $160,000 and homes without the problem (with 2 baths) sell for $170,000. This house is 30 years old. Adding a half bath during construction would have cost $1,000. This problem is best defined as
Functional curable obsolescence
What type of depreciation would a 40-year-old kitchen represent:
Functional obsolescence
A narrative appraisal report
Gives the appraiser the freedom to design the report in the manner that is most efficient
The type of appraisal report
Has no influence on the appraisal process
An appraiser is developing a real property appraisal for a local bank for an improved, owner-occupied restaurant property. The restaurant is a sit-down, white-tablecloth operation with an expensive menu. The owner/applicant thinks his property value is enhanced because of the success of his restaurant within the facility due to his superior menu, so he makes a pitch to the appraiser about gross income from food sales. This owner is
Incorrect in his pitch because the owner is confusing the real estate value with the intangible (business enterprise) value
Reproduction cost
Is the cost to construct an exact duplicate of the subject improvements
Depreciation
Is the difference between the cost of the improvements and the value as of the effective data of the appraisal
Which of the following is true regarding the sales comparison approach?
It provides the most straightforward and simple indication of value if good comparable sales are available.
Physical deterioration refers to
Losses in value from wear and tear
In a market value appraisal assignment, the appraiser found that prices were increasing at a rate of about 3% per year compounded annually. The appraiser found several comparable sales, but they were not very recent transactions. She decided to make an adjustment to compensate for price increases in this market. These adjustments are called
Market conditions adjustments
Highest and best use analysis is required in
Market value appraisals
In an appraisal of a property using the three approaches to value, each approach resulted in a different value indication. The indicated value by the cost approach was $100,000; the indicated value by the sales comparison approach was $93,500; and the indicated value by the income capitalization approach was $95,000. Are you forced to choose one of these value indications?
No, you can choose any one of the numbers or any number between and, in some cases, slightly above or below the range.
Which of the following has the most efficient market?
One-unit residences
What type of depreciation would a 40-year-old oak floor represent:
Physical deterioration
One of the criteria for determining highest and best use is
Physical possibility
Which of the following items are usually classified as real estate?
Plumbing fixtures in an occupied house
The preferred sequence of adjustments is
Property rights, financing, conditions of sales, expenditures after purchase, market conditions, and physical attributes
A revaluation lease
Provides for increase in the rental rates based on the revaluation of the property value or rental rate by an appraiser
The most detailed method of estimating the cost new of a structure is the
Quantity survey method
Which of the following should always be part of the reconciliation process?
Reading the first draft of the report to look for inconsistencies in logic and process
Fixtures such as attached cabinets would be considered
Real estate
Which of the following is not a variable expense?
Real estate taxes
The process by which the appraiser evaluates, chooses and selects a final value opinion is known is
Reconciliation
Which of the following statements about the reconciliation process is the most correct
Reconciliation is the final phase of any valuation in which two or more value value indications are derived
All appraisals opinions should be
Rounded to show the precision the appraiser considers appropriate based on the subject and the data available
A market with few properties for sale and many potential buyers is called a(n) _ market
Seller's
How significant is the reported open market sale price of the subject property if the sale has not closed yet?
Significant because the buyers have made a statement with their checkbook
The economic principle stating that the value of a property tends to be set by the price that would be paid to acquire a property of similar utility and desirability is
Substitution
Appraisal is
The act or process of developing an opinion
Entrepreneurial incentive is
The amount of money entrepreneurs expect to receive as a reward for their efforts
Market rent is
The amount of rental income a property would demand in the open market
Office supply is most affected by
The conversion or new construction of office buildings
An item of depreciation is curable if
The cost to cure is less than the expected increase in value
Adjustments for financing terms reflect
The differences in sale prices of properties that sold for cash or market rate financing and the ones that sold with special financing that favors the buyer
Adjustments for real property rights conveyed reflect
The differences in the rights in realty transferred between the subject and comparables
If the subject improvement is in better-than-average condition,
The effective age is less than the actual age
Potential gross income (PGI) is
The estimated amount of money collected by the property owner
Office demand is most affected by
The expansion trends of local businesses
The most complete form of ownership in real property is called
The fee simple estate
The cost approach is typically very effective when
The improvements are newer and represent the highest and best use of the site
In a gross rent, who pays the utility costs?
The landlord
Which of the following is not a criterion for highest and best use?
The maximum size improvement
Real estate is
The physical land and appurtenances affixed to land
An overall capitalization rate is
The ration of one year's income to value for the entire property
The cost approach is based on the
Theory of substitution
Market analysis is included in appraisals
To show support for the estimated highest and best use and the existence of a market
Effective age is
Total economic life minus remaining economic life
All opinion of market value via the sales comparison approach is through the eyes of
Well informed purchasers
indirect construction costs do not include
builder's overhead
Reproduction cost is defined as the cost of
building improvements exactly as they would appear if they were new on the effective date of appraisal
A signed certification
is required in all appraisal reports
The total construction cost of a structure requires consideration of which of the following?
Direct and indirect costs along with entrepreneurial profit
Potential gross income (PGI) less vacancy and collection losses is known as
Effective gross income (EGI)
By estimating replacement cost in lieu of reproduction cost, an appraiser
Eliminates the needs to measure many, but not usually all, forms of functional obsolescence
The right government to take private property for public use with payment of just compensation is known as
Eminent domain
All estates in land are subject to the four powers of government, which are
Eminent domain, police power, taxation, and escheat
The law that gives the state ownership of a property when its owner dies interstate (without a will or legal heirs) is known as
Escheat
Direct costs are
Expenditures for the labor and material used in the construction of the improvements
The cost approach is
Most applicable when the subject improvements represent the highest and best use of the site as though vacant and are relatively new
The subject is a residential property located next to a busy street. An extraction via paired sales analysis of the diminution in value caused by this location next to the busy street a loss of $20,000. The amount
Must be allocated between land and building in the cost approach
Appraisers who use residential real estate appraisal forms
Must comply with all USPAP regulations
Effective gross income (EGI) less operating expenses and reserves (if applicable) is known as
Net operating income (NOI or Io)
The supply of improved real estate is directly impacted by
New constructions of competing properties