5 - Valuation

The principle of substitution is that: a. A person will not pay more for a property than the cost of another property of equal utility and desirability. b. Amenities are always balanced in appraising. c. Locations can be freely substituted. d. The period for which a property can show a return attributable to the improvements.

a. A person will not pay more for a property than the cost of another property of equal utility and desirability.

The factors of value DOES NOT include: a. Cost b. Utility c. Scarcity d. Demand.

a. Cost

The period for which a property can show a return attributable to the improvements is known as: a. Economic life b. Chronological life c. Effective age d. Depreciation life

a. Economic life

As to economic life and physical life: a. Economic life is shorter. b. Physical life is shorter. c. Economic life is longer. d. They normally are of the same duration.

a. Economic life is shorter.

In using the cost approach, you would NOT need to know: a. Original cost b. Square footage c. Depreciation d. Land value

a. Original cost

When we speak of "fair market value" we are referring to: a. Property on an open market offered for sale when neither buyer nor seller is pressured to buy or sell. b. Selling price of property. c. Loan value. d. Net proceeds of the seller.

a. Property on an open market offered for sale when neither buyer nor seller is pressured to buy or sell.

Jim Jackson wanted to have a 14% return on his building which he valued at $140,000. What kind of monthly rent should be charged? a. $19,600 b. $1,633 c. $1,000 d. $1,233

b. $1,633

Rental income from an office building is now $800.00 less per month since street parking was made illegal. Assuming a capitalization rate of 8%, the building suffered a loss in value of: a. $10,000 b. $120,000 c. $100,000 d. A change in rents doesn't affect value.

b. $120,000

A building with an economic life of 20 years would depreciate at what rate each year? a. 2% b. 5% c. 10% d. 20%

b. 5%

The investor's rate of return is the: a. Debt Service b. Capitalization Rate c. Rent Multiplier d. Net present value.

b. Capitalization Rate

A method used by brokers and salespeople to determine the value of a property in order to place it on the market is: a. Income approach b. Competitive market analysis c. GRM d. Cost approach

b. Competitive market analysis

A separate value for the land must be computed for: a. Market approach b. Cost approach c. Capitalization approach d. Income approach.

b. Cost approach

The best method for appraising new properties or properties that are unique is the: a. Income approach b. Cost approach c. Market Data approach d. Assemblage approach

b. Cost approach

Which of the following determines the gross rent multiplier: a. Multiplying the capitalization rate by the net income. b. Dividing the sales price by the gross rents. c. Multiplying the gross rents by the capitalization rate. d. Dividing the net income by the capitalization rate.

b. Dividing the sales price by the gross rents.

A junk yard located across from a subdivision would cause: a. Functional obsolescence b. Environmental obsolescence c. Physical obsolescence d. Non-conforming obsolescence

b. Environmental obsolescence

In appraising a vacant lot, you should first determine: a. Asking price. b. Highest and best use. c. Price asked for similar lots. d. Original cost and when purchased.

b. Highest and best use.

Using similar properties selling in the same area for the purpose of appraising, is known as the: a. Cost approach b. Market Data approach c. Highest and Best Use approach. d. Income approach.

b. Market Data approach

When using the income approach, the appraiser divides the capitalization rate into: a. Gross income b. Net income c. Effective gross income d. Operating expense

b. Net income

After assembling two parcels of property and selling the new single parcel, you realized a profit of $50,000. This would be known as: a. Assemblage b. Plottage c. Substitution d. Income

b. Plottage

The art of analyzing and effectively weighing the findings under the cost, market and income approach is: a. Plottage b. Reconciliation c. Assemblage d. Emblements

b. Reconciliation

A 3,000 square foot house built among many 2,000 square foot houses would probably experience: a. Progression b. Regression c. Anticipation d. Assemblage

b. Regression

In appraising a house for insurance coverage, you would be most concerned with: a. Income b. Replacement cost c. Selling price of similar homes. d. Age of the house.

b. Replacement cost

To determine the annual gross rent multiplier: a. Monthly rent divided into the sales price. b. Sales price divided by the monthly rent. c. Annual rent divided into the sales price. d. Sales price divided by the annual rent.

b. Sales price divided by the monthly rent.

The personal choice of people for one area over another is: a. Amenities b. Situs c. Plottage d. Reconcile

b. Situs

A buyer who wants a property and has the money to buy it best defines: a. utility b. demand c. scarcity d. transferability

b. demand

The most difficult depreciation to correct would be: a. functional b. economic c. physical d. accelerated

b. economic

The annual net income for a property is $30,000. If the owner realizes an 8% return on his investment, the value of the building would be: a. $160,000 b. $315,000 c. $375,000 d. $325,000

c. $375,000

A property with a market value of $140,000 and the annual net income of $19,600 would have a capitalization rate of: a. 12% b. 7% c. 14% d. 17%

c. 14%

Three lots were combined to make one large useful parcel. This is known as: a. Partition b. Plottage Incorrect. c. Assemblage d. Competition

c. Assemblage

Of the following, which applies to the Market Data Approach of appraising? a. Based on how many days the property has been on the market. b. Based on the income the property can produce. c. Based on the principle of substitution. d. Based on the cost to rebuild the building.

c. Based on the principle of substitution.

When an appraiser assigns value to the rights to future income he is most likely using the: a. Market data approach b. Cost approach c. Capitalization approach d. Future forecast approach

c. Capitalization approach

The formula for the cost approach is replacement cost minus _________ plus land value = property value. a. Tax value b. Original cost c. Depreciation d. Sales price.

c. Depreciation

One bathroom in a four bedroom home would result in: a. Economic obsolescence b. Physical obsolescence c. Functional obsolescence d. Transferrable obsolescence.

c. Functional obsolescence

A residential property GRM would use: a. Gross annual rent b. Net monthly rent c. Gross monthly rent d. Net annual rent

c. Gross monthly rent

An appraisal of property determines the: a. Selling price b. Highest and best use. c. Market value d. Economic value

c. Market value

The first step of an appraisal is for the appraiser to realize the: a. Market Value b. Fair Market Value c. Purpose of the appraisal. d. Cost of materials used to build.

c. Purpose of the appraisal.

Economic obsolescence DOES NOT result from: a. Adverse zoning changes. b. A large industry in the city closing its doors. c. A waste dump next to a subdivision. d. An outdated kitchen.

d. An outdated kitchen.

The idea that a property's value is safer when surrounded by similar properties is the principle of: a. Substitution b. Progression c. Regression d. Conformity

d. Conformity

The first step in the appraisal process is: a. Collection of the data. b. Analysis of the data. c. Inspection of property d. Definition of the problem.

d. Definition of the problem.

A large warehouse office that CANNOT be air-conditioned would best define: a. Economic obsolescence b. Locational obsolescence c. Physical depreciation d. Functional obsolescence

d. Functional obsolescence

The relationship of the value of property to its monthly rental income determines the: a. Capitalization rate b. Recovery rate c. Recapture rate d. Monthly gross rental multiplier.

d. Monthly gross rental multiplier.

Physical deterioration of a property is associated with which of the following? a. Eccentric design b. Changing function c. Obsolescence d. Ordinary wear and tear.

d. Ordinary wear and tear.

With the Principle of Change, you have ALL the following EXCEPT: a. Growth b. Stability c. Decline d. Progression

d. Progression