Section 4, Unit 1: The Appraisal Process and Valuation Approaches

Using the income approach, determine the value of a property that has a net operating income of $15,000 and a cap rate of 15%.

$100,000

Giant Industries has a $674,232 gross operating income, operating expenses of $329,129, and other expenses totaling $38,719. What is the net operating income?

$345,103 The formula for finding net operating income is: gross income - operating expenses = net operating income. So, $674,232 - $329,129 = $345,103. Other expenses like loan interest and debt repayment aren't included in this calculation.

What type of property is Gerald appraising if he's using the cost approach?

An industrial warehouse

In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what?

Bracketing Bracketing is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject.

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed has the highest priority?

Conditions of sale

With the cost approach to value, what is the reproduction cost?

Cost to build an exact replica of the subject, with the same materials and deficiencies

Related to depreciation, what are the two types of physical deterioration?

Curable and incurable

Which factor influences property value and addresses questions such as, "What's the market like?" and "Are there more buyers than sellers, or vice versa?"

Demand

A loss in value caused by an undesirable or hazardous influence offsite is which type of depreciation?

External depreciation

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?

Financing terms and cash equivalency

When you're using the sales comparison approach to value a property, which of the following is considered a category of adjustment?

Financing terms and cash equivalency

Homes in a new home development have been built with a floor plan that doesn't appeal to today's buyers. In a cost approach valuation of the houses, what sort of depreciation will the appraiser apply?

Functional obsolescence

Which of the following might involve old wiring or plumbing?

Functional obsolescence

Kobi, an appraiser, is appraising a single-family home used for a rental. If he wants to use the income approach, he will likely use ______.

GRM

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed is applied last?

Physical characteristics

The loss in value caused by deterioration in physical condition is called _______.

Physical depreciation

Which appraisal approach will likely weigh most heavily during the reconciliation step when appraising a single-family residence?

Sales comparison

If there is some kind of defect on a property's title, what effect does this level of transferability have on the property's value?

The value falls.