CESHOP Real Estate Appraisal Practice Tests

A commercial income property being appraised has a potential gross income of $2 million. The effective gross income is $1,640,000, reflecting an 18% vacancy and loss rate. After constructing the operating statement, the appraiser arrives at a figure of $1,305,000 for total expenses. Which calculation represents the NOI for this property?

$1,640,000 - $1,305,000 = $335,000

Tim wants to find the median value of the homes that he sold last year. The sales prices of those homes were: $135,000; $185,000; $200,000; $215,000; $216,000; $223,000; $223,000; $235,000; and $242,000. What is the median of this data set?

$216,000

Pablo is curious about the prices of the homes that he sold last year. The sales prices were: $135,000; $185,000; $200,000; $215,000; $216,000; $223,000; $223,000; $235,000; and $242,000. What is the mode of this data set?

$223,000

An 800-square-foot rectangular building sells for $75,000. What's the cost per square foot?

$93.75

The gross rent multiplier extracted from an area is 122. If the monthly rent is $800, what's the estimated value of the property?

$97,600

What do you get if you convert 1/5 to a decimal?

0.2

Alana and Michael want to build a 5,000-square-foot ranch home on two acres of land they just bought. Once the house is built, how many acres of land will remain unbuilt?

1.89 acres

What is 1/4 x 2/3?

1/6

What are the typical voltage levels in U.S. households?

120/240

Houses should be built a minimum of ______ feet away from existing, mature trees.

20; The recommended distance requirement is 20 feet.

For which of the following purchase-related appraisals must the Appraiser Independence Requirements be followed?

A conventional loan on a four-unit residential property

What rating scale do appraisers use to indicate the condition of the subject property and comparable properties?

A range from C1 for "like new" to C6 for "major repairs needed"

What would you expect to find in the condition field for a comparable property in the sales comparison grid of the URAR?

A rating from the C1‒C6 scale; C1 is for the highest-quality condition, and the condition is progressively worse as the numbers increase.

Direct capitalization converts what into a market value?

A single year's expected income

Sandra is using the straight-line method to measure depreciation. By what other name is this method known?

Age-life

Why do each of the three approaches to value used by appraisers lead to a different indication of value?

All of the approaches use different variables to estimate value.

What's the term for the amount of electricity flowing through a wire?

Amperage

The direct capitalization method would be a good choice of appraisal method in which of the following situations?

An apartment building that has consistent income and expenses year after year.; Direct capitalization is most effective for investment properties where the income and expenses are consistent year after year.

Which term describes a transaction in which there are no unusual circumstances, and both the buyer and seller act willingly, are under no pressure, and are aware of the present condition of and future potential for a property offered on the open market for a reasonable length of time?

An arm's length transaction

A fixed annual return on an investment is known as a(n) ______.

Annuity

Real estate professionals must be careful to avoid referring to their reports as ______.

Appraisals

What type of insulation is no longer used because it may cause cancer if its fibers are inhaled?

Asbestos

Which of the following actions toward an appraiser would be considered improper?

Asking an appraiser to remove information about adverse property conditions from an appraisal report

Which type of framing involves a single system of wall studs run from the foundation through the first and second floors to the ceiling support?

Balloon; This is a description of balloon framing.

Samantha, an appraiser, is determining which of the living room fixtures to include in her report. Which of the following items will she select?

Blinds

To measure depreciation using the observed condition method, the appraiser estimates the property's loss in value for ______.

Both curable and incurable items of depreciation

Lenders prefer that appraisers select at least one comparable that is superior and a comparable that is inferior to the subject property. What is this method of selecting comparable properties called?

Bracketing; Lenders like to see a property "bracketed" in terms of the elements and units of comparison, such as age, transaction price, and other features.

In the Improvements section of the Uniform Residential Appraisal Report form, Appraiser Lenny chooses the lowest possible rating, which is defined as "Improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity." Which rating is this?

C6

The return of principal at the end of ownership is known as return of investment or ______.

Capital recapture; This is capital recapture, when investors get back what they put in.

An appraiser reviews the expenses from an income property, and notices that the management records expenses when they're paid and income when it's received. What is this method of accounting called?

Cash basis; This is the cash basis of accounting. The appraiser may reconstruct the operating statement for an income-based appraisal using either the cash basis or the accrual basis.

Income over and above expenses received from an investment is known as ______.

Cash flow

Which of the following is the highest federal level of licensure an appraiser can attain?

Certified General Real Property Appraiser

Lenders like to see the subject property "bracketed" in the appraisal. This means ______.

Comparables are used that are both superior and inferior units of comparison

When prices go down because there are too many homes on the market and too few buyers, what economic principle is at work?

Competition; Competition is related to supply and demand. Multiple similar properties on the market create competition, causing a decrease in value (lower prices) because the supply exceeds demand. Fewer homes on the market means less competition, increasing demand and driving prices upward.

Under a land trust, the owner directs a ______ to hold title to the real estate.

Corporate fiduciary; With a land trust, a corporate fiduciary holds title to the real estate.

______ basically answers the question, "How much could my money have earned if I had put it into a different investment?"

Cost of capital; Most investors have a minimum rate of return they require from their investment; this is known as the cost of capital.

Kiki is looking at a small apartment complex and trying to determine its age. What's Kiki measuring?

Effective age

Because of the topography of Elsie's and Lawrence's respective yards, Elsie had to install her fence at the top of a hill, which is actually two feet over Lawrence's property line. What word or phrase best describes Elsie's fence?

Encroachment

Which line item in the Cost Approach section in the URAR form is only used if the appraisal is being completed for property that is being purchased through a HUD or VA loan?

Estimated Remaining Economic Life; If the property is being purchased through a HUD or VA loan, the appraiser must provide an estimate of how many years the property will have a value that is greater than what it will cost to renovate.

What does the Financial Institutions Reform, Recovery, and Enforcement Act require?

Federally related appraisals must be conducted by an appraiser who's either licensed or certified by the state.

Which type of an estate doesn't end automatically when the stated event or condition occurs?

Fee simple subject to a condition subsequent; This is a description of a fee simple subject to a condition subsequent. The grantor can reclaim ownership by taking action.

The statistical mode is determined by which of these methods?

Find the value in the data set that occurs most often

Tony is an appraiser and is performing a valuation on a property. What's another term for what Tony is doing?

Formal appraisal; Another term for a valuation is a formal appraisal.

______ means that a building is unusable for today's needs. Some of these will be curable defects and some will be incurable.

Functional obsolescence; Functional obsolescence relates to the building's use.

What type of information would an appraiser gather from transit authorities?

General data

Building codes, zoning laws, and environmental legislation can all influence the value of real property. How do appraisers refer to this type of value influencer?

Governmental

What hazard do mining activities, landfills, or agricultural pesticides contribute to?

Groundwater contamination

When appraiser Abe has finished gathering the necessary data from comparables for the subject property, which of the following is true?

He must analyze the elements of comparison in a certain order.; To be able to make valid computations of adjustments, it's important that the elements of comparison are applied in this order: 1. Financing 2. Conditions of sale 3. Market conditions 4. Location 5. Physical characteristics.

How would Mark, an appraiser using the sales comparison approach to value, reconcile the adjusted sales prices of comparable properties to indicate the value of the subject property?

He would choose the adjusted sales price of the property most like the subject property.; Appraisers reconcile the three adjusted sales prices of comparables by picking the one most like the subject property as the indicated value.

Licensee Ralph wants to show his clients how quickly his listings sell compared to the average time other single-family homes spend on the market. He decides that the best way to show this relationship would be with a ______.

Histogram

Which of the following is true regarding the purchase of a condominium?

If the prospective buyer has the financial means to buy the condominium, neither the association nor the residents can block the purchase.; With a condominium, ownership is very easy. You pay, you're in. This can be a boon or a drawback depending on whether you like your new neighbors.

Where would you find the landscaping plans for a home?

In the building specifications; The building specifications detail the landscaping plans, as well as the materials to be used in construction, descriptions of the mechanical and plumbing systems, and design features that are too intricate for or not obvious in the blueprint.

Which type of cost included in the quantity survey method has to do with the cost of having to pay for such things as permits, surveys, and the builder's overhead and profit?

Indirect costs; The costs involved in non-construction-related, but still necessary, expenses—including permits, surveys, the builder's overhead and profit, and payroll taxes—are known as indirect costs.

Which of the following is an advantage of using the sales comparison approach to valuation?

It shows what the market is doing.; The sales comparison approach, if sufficient accurate sales data is available, can give a "snapshot" of the market value of a property.

Widget Corporation just bought land on which it plans to build a new manufacturing facility. How is the land owned?

It's owned as an estate in severalty.; Corporations are legal entities and hold property similar to the way a sole proprietor or an individual does: in severalty.

What type of windows have a similar design to Venetian blinds?

Jalousie; Jalousie windows, with their horizontal slats of glass and crank or lever method of opening and closing, function similarly to Venetian blinds.

What determines a plumbing system's structure and the materials used to construct it?

Local building codes; Local building codes dictate the rules about plumbing systems' structure and what materials go into building them. For example, the system must be set up so that incoming and outgoing water don't mix.

If an appraiser were using three comparables, which factor would weigh most heavily?

Location; Location is a key factor in appraisal value.

Which type of legal description is this: "Plat of Block 28, Woodmen Heights Tract, recorded in Map Book 27, page 68, at the Eldor County Records Office"?

Lot and block

When cold water enters a gas water heater, the gas turns on. When the water heats up, what does the thermostat inside the heater do?

Lowers the flame

When an appraiser is adjusting for differences in a sales comparison approach to value, why is a market timing adjusted before a feature, such as a formal dining room?

Market timing relates to the property, whereas features relate to one line item.; If features are adjusted before the market timing adjustment (which is a percentage), the percentage will be computed on the features, as well, which could skew the result.

Which REITs make money by incurring short-term debt to acquire longer-term mortgage securities, earning the spread between the two rates?

Mortgage REITs

In which of the following situations can the state use its power of escheat?

Nadine died with no heirs and no debt.

A thorough identification of the property, which provides the reader with a true picture of the property being valued, is located in the ______ section of the narrative appraisal report.

Overview and summary; Beyond merely identifying the address and type of building, the appraiser will include neighborhood, boundaries, adjacent streets and roadways, access points, development ratio of the area, size, improvements, and more in the introduction.

Ken, Dale, and James were brothers who owned more than 100 acres as tenants in common. The relationship between Ken and James disintegrated, and so James initiated a lawsuit. The end result was that the court gave each brother a designated set of acres to own. What did the court grant?

Partition; Partition is the term used to describe a specific, divided portion of property that's created as part of a co-ownership termination.

Janson Industries worked with architects and engineers to draw up plans for a planned community that will include residential, shopping, dining, and entertainment uses within the community itself. As a property that falls under mixed-use zoning, what does the company have to provide to the planning commission?

Plat map

What source of information would an appraiser rely on to determine the dimensions and area of a subject property?

Plats; Appraisers visit and observe the subject property to learn more about the property's dimensions and area, floor plan, landscaping, and much more.

Marcia Weinstein died, and her property wasn't held in a trust. Thus, her estate will go through ______ to ensure her property is distributed to her beneficiaries in accordance with her will.

Probate

Which of the following is a piece of specific data an appraiser may gather?

Property lot size

What rating is given to insulation to describe its effectiveness?

R-value

Which of the following is a framing member?

Rafters; Studs, joists, and rafters are all framing members.

One benefit to landscaping is that it ______.

Reduces soil erosion

In terms of an appraisal, which of the four measures of time is the most important?

Remaining economic life

Interest earned on an investment is also known as ______.

Return on investment

In which field of the sales comparison grid would you find an indication of an arm's length sale?

Sale or financing concessions; "ArmLth" indicates an arm's length sale in the sale or financing concessions field of the sales comparison grid in the URAR.

Which of the four methods used to find the reproduction cost of a structure is most often used by appraisers?

Square-foot

When recording neighborhood growth in the Neighborhood section on the Uniform Residential Appraisal Report, an appraiser will select what status if a neighborhood is fully developed?

Stable

When a large tract of land is purchased and prepared for development, and then split into parcels, the value of each lot as a residential building site must be determined. The method used to value each individual parcel is known as the ______ method.

Subdivision development; The subdivision, or "land development," model is used for this purpose. It's more involved than other methods, because it requires forecasting the sales rate for the properties, as well as determining the total income they will produce.

Which method is best used to value raw, vacant land, when the highest and best use is to develop the land into a subdivision?

Subdivision; The subdivision, or "land development," model is more involved than other methods, because it requires forecasting the sales rate for the properties, as well as determining the total income they will produce.

When two properties in a neighborhood are essentially identical, they're likely to sell for similar prices. This is an example of the principle of _______.

Substitution; The principle of substitution is the basis for the sales comparison approach.

Where's an appraiser most likely to find accurate information about property taxes in a market area?

Tax assessor records

You are viewing a home with a buyer client. When you open one of the bedroom closets, you find a piece of paper with some information stuck to the inside of the door. What have you most likely discovered?

The home is a manufactured home and this is the data plate.; Manufactured homes leave the factory with a data plate that provides information about the manufacturer and the zone for which it was constructed. Return To Course Home View Exam Results

Which of the following land valuation methods is more involved than other methods, because it requires forecasting the sales rate for the properties, as well as determining the total income they will produce?

The land development method; The subdivision, or "land development" model is used to value raw, vacant land when the highest and best use is subdivision development.

For which party is an expense stop clause in a lease considered a benefit?

The lessor

Marshall is a home inspector who is walking the lot of the property he's inspecting with a survey in hand. Which of the following will he note as an encroachment on the inspection report?

The neighbor installed a basketball hoop next to his driveway, six inches over the property line.; An encroachment occurs when someone illegally places a structure or object on another person's property, like a basketball hoop.

When the sales comparison method is used for appraising a site, if the comparable property has positive characteristics that the subject property does not, which of the following is true?

The sales price of the comparable property is decreased.; When the comparable property is superior to the subject property, the sales price of the comparable property is decreased to arrive at a market value for the subject property. This is just another way of saying the subject property isn't as valuable as the comparable property.

There are several potential drawbacks to using the cost approach to determine the value of residential property. Which of the following is one of those drawbacks?

The site's highest and best use isn't taken into consideration.

What risk do borrowers assume when a lender provides a property inspection waiver (PIW)?

They risk overpaying for the property by relying on automated valuation models.

Stella is an appraiser who's using the direct capitalization method to calculate a value for an investment property. Which of the following is true?

This method converts a single year's expected income into a market value.; The direct capitalization method converts a single year's expected income into a value. It doesn't consider future resale value or future income streams, and is primarily used with properties where yearly income doesn't vary a lot over time.

How many approaches do appraisers generally use to determine value?

Three

The sixth step in an appraiser's process for finding the value of a property describes _______ possible approaches to valuation.

Three

To measure depreciation using the age-life method, the appraiser divides the effective age by which of the following?

Total economic life

Which material covers the joints between walls and ceilings?

Trim; Decorative trim, such as crown molding, covers joints between walls and ceilings, creating a more polished look in a room.

When there is a very low loan‐to‐value ratio, or when the financial strength of the borrower is unquestioned, clients often opt for which of the following reports?

Uniform Residential Appraisal Report (Form 1004); Often called a "drive by," the scope of work the client requires includes fewer steps than other types of reports.

The ______ is a set of procedures and ethical guidelines set by the Appraisal Standards Board.

Uniform Standards of Professional Appraisal Practice

For which of the following properties will the appraiser provide a value for owner shares of a corporation?

Unit in cooperative housing

What is another name for economic life?

Useful life; Economic life is also known as useful life. It's the period of time a structure can be used for its originally intended purpose.

Can police power ever be used in a way that restricts citizens' freedom?

Yes, if it's for the public good.

Jared is looking to purchase property. One of the properties he's interested in was formerly zoned for commercial use. It has a steep drop off at the back of the property, as well as some soft spots and mounds. Does this matter?

Yes, these are clues that the property may have been used as a waste disposal site.

When ______ capitalization is used, future income estimates are calculated, then a discount rate is applied.

Yield