CG Exam Prep
A 15-year old office property recently sold for $1,400,000. The cost to replace the building is $1,625,000. Land in that office complex sells for $30,000 per acre and this sale had 10 acres. While the paving and landscaping costs $80,000, they contributed $50,000 to the sale. What is the annual depreciation rate of the building?
1) $30,000 (per acre) * 10 (acres) = $300,000 2) $1,400,000 (sale price) - $300,000 (price in acres) = $1,100,000 3) $1,100,000 - $50,000 (contributory value of paving/landscaping) = $1,050,000 4) $1,625,000 - $1,050,000 = $575,000 5) $575,000/$1,625,000 (replacement cost) = .353846 6) .353846/15 (building age) = .02358 ~ 2.3%
BUILDINGS THAT COST MORE TO BUILD THAN THE SITE'S HIGHEST AND BEST USE ARE: A. OVERIMPROVEMENTS. B. SINGLE-FAMILY HOMES. C. NONCONFORMING USES. D. UNDERIMPROVEMENTS.
A. OVERIMPROVEMENTS. B. SINGLE-FAMILY HOMES. C. NONCONFORMING USES. D. UNDERIMPROVEMENTS. Correct Answer: A
The CPI was 100 in 1994 and 121.6 in 2002. What is the semi annual change in market conditions? A. 7.25% B. 5.25% C. 2.7% D. 1.35%
Correct Answer D: 1) 121.6-100=21.6 2) 21.6/100=.216 3).216/8=.027 4).027/2 = .0135
A certified residential appraiser was initially licensed as an appraiser trainee on January 30, 2008 and earned the residential certification April 15, 2010. An assignment was offered on May 3, 2010 to appraise a single family home under FNMA guidelines with an effective date of March 15, 2006. The report will be dated May 8, 2010. Assuming the appraiser is competent, is it legally permissible to accept this assignment? A. Yes, as long as the residential certification is valid as of the date of the report. B. Yes, as long as the residential certification is valid as of the date the assignment is accepted. C. No, the appraiser would need to possess a valid appraisal credential on the effective appraisal date. D. No, the appraiser would have to possess a certification as a residential appraiser as of the appraisal's effective date.
Correct Answer: A
A PROPERTY THAT BEARS AN EASEMENT IS A(AN): A. SERVIENT ESTATE. B. DOMINANT ESTATE. C. EASEMENT APPURTENANT. D. EASEMENT IN GROSS.
Correct Answer: A A property that benefits from an easement is the dominant estate. An easement that will survive a sale and therefore is relevant in a market value appraisal is an appurtenant easement (runs with the land).
WHICH OF THE FOLLOWING WOULD NOT BE RECOGNIZED IN A FEDERALLY RELATED TRANSACTION? A. ORAL APPRAISAL REPORT. B. RESTRICTED USE APPRAISAL REPORT. C. APPRAISAL REPORT. D. NONE OF THE ABOVE.
Correct Answer: A As stated in USPAP.
COMPARABLE PROPERTY A IS A WOODED AND SLOPED LOT THAT RECENTLY SOLD FOR $10,000. COMPARABLE PROPERTY B IS A WOODED AND LEVEL LOT THAT RECENTLY SOLD FOR $13,000. THE SUBJECT PROPERTY IS WOODED AND LEVEL. THE COMPARABLES ARE IDENTICAL TO THE SUBJECT IN ALL OTHER RESPECTS. WHAT TYPE OF ADJUSTMENT SHOULD BE MADE? A. POSITIVE ADJUSTMENT TO A. B. NEGATIVE ADJUSTMENT TO B. C. NEGATIVE ADJUSTMENT TO A. D. POSITIVE ADJUSTMENT TO B.
Correct Answer: A Comparable A is adjusted to match the characteristics of the subject.
THE FRAMEWORK WHICH HOLDS THE GLASS IN A WINDOW OR DOOR IS A: A. SASH. B. MUNTIN. C. MULLION. D. STILE.
Correct Answer: A Description of sash.
WHAT TYPE OF WINDOW IS HINGED AT THE TOP OF THE SASH, PERMITTING THE WINDOW TO OPEN HORIZONTALLY? A. AWNING. B. DOUBLE-HUNG. C. SINGLE-HUNG. D. CASEMENT.
Correct Answer: A Double hung windows may open from either top or bottom. Single hung windows open in only one direction. Casement windows do not open.
THE GEOMETRICAL PROJECTION OF THE UPRIGHT EXTERNAL PARTS OF A BUILDING IN FRONT, REAR, OR SIDE VIEW IS THE BUILDING'S: A. ELEVATION. B. FACADE. C. FACE. D. FASCIA.
Correct Answer: A Fascia is a covering of some sort. Face is the front of the building. Facade is a false front or false covering. The is the definition of elevation.
THE LOWER PART OF AN INTERIOR WALL WHEN THE SURFACE IS A DIFFERENT MATERIAL OR SEPARATED BY A MOLDING AND DIFFERENTLY DECORATED FROM THE UPPER PORTION IS: A. WAINSCOT. B. FENESTRATION. C. NOGGING. D. SHEATHING.
Correct Answer: A Fenestration is the design and location of openings in a building's walls. Nogging is the mortar between block or brick construction. Sheathing is plywood construction found in walls.
WHICH OF THE FOLLOWING COULD BE FINANCED BY A CHATTEL MORTGAGE? A. FURNITURE. B. VACANT LAND. C. LEASEHOLD ESTATE. D. FIXTURE.
Correct Answer: A Furniture is personal property that may be financed. All other choices represent real property.
HIGHEST AND BEST USE IS AN ISSUE IN WHICH OF THE FOLLOWING APPRAISAL ASSIGNMENTS? A. MARKET VALUE. B. VALUE IN USE. C. INSURABLE VALUE. D. ALL OF THE ABOVE.
Correct Answer: A Highest and best use is the cornerstone of the market as it determines how property will sell. It is not relevant in the measurement of any other type of value.
You receive a request to review an appraisal. The original appraiser's name has been removed from the report. Can you accept this review assignment? A. Yes, you do not need to know the original appraiser's identity. B. Yes, as long as you clearly disclose the original appraiser's identity was withheld. C. No, as the reviewer you must know whose work you are reviewing. D. No, without the signature of the appraiser it is not an appraisal report.
Correct Answer: A It is not uncommon to have the identity of the appraiser withheld to eliminate a potential source of bias.
A LOT MEASURES 90 FEET BY 125 FEET. A 10 FOOT SETBACK REQUIREMENT EXISTS ALONG EACH BOUNDARY WITH AN ADDITIONAL 15 FOOT UTILITY EASEMENT ALONG THE FRONT. WHAT TYPE OF HOME CAN NOT BE BUILT ON THIS LOT? A. RANCH. B. BI-LEVEL. C. TRI-LEVEL. D. TWO STORY.
Correct Answer: A Ranch constuction is single story placing the greatest amount of emphasis on lot size. All other answer choices allow for living area to be placed on multiple stories.
WHICH OF THE FOLLOWING HAS THE GREATEST IMPACT ON THE VALUE OF A LOT? A. OCEAN-FRONT VIEW. B. CORNER INFLUENCE. C. SLOPE. D. CLIMATE.
Correct Answer: A Self evident question requires an assumption by the exam candidate.
AN APPRAISAL ASSIGNMENT REQUIRES THE VALUATION OF NONCONFORMING PROPERTY THAT IS PRODUCING MORE INCOME THAN CONFORMING USES. HOW SHOULD THIS BONUS BE HANDLED? A. ATTRIBUTED TO THE IMPROVEMENT. B. ATTRIBUTED TO THE LAND. C. DEDUCTED FROM PROPERTY VALUE. D. ADDED TO PROPERTY VALUE.
Correct Answer: A Since land is appraised as though vacant and inappropriate improvements do not change the value of land, any bonus income must be attributed to the improvements only. If the improvements are lost, the opportunity to collect the bonus disappears.
COMBINING TWO CONTIGUOUS PARCELS OF PROPERTY UNDER ONE OWNERSHIP TO INCREASE VALUE IS: A. ASSEMBLAGE. B. PLOTTAGE. C. PLOTTAGE VALUE. D. CONSOLIDATION.
Correct Answer: A The combination of properties is assemblage. The increase in value that may result is plottage (value).
THE INSIDE LID OF THE TOILET IN AN OLDER PROPERTY OFTEN WILL GIVE THE: A. APPROXIMATE DATE OF CONSTRUCTION. B. NAME OF THE PLUMBER. C. NAME OF THE BUILDER. D. DETAILS OF INSTALLATION.
Correct Answer: A The date the toilet lid was cast will be found under the lid inside the tank.
WHICH OF THE FOLLOWING TYPES OF WIRING WOULD THE MARKET TYPICALLY PREFER? A. COPPER. B. ALUMINUM. C. NICKEL. D. STEEL.
Correct Answer: A The only other possible wiring material would be aluminum which has been rejected by many markets because of its poor resistance to fire.
THE PURCHASE AND RENOVATION OR REHABILITATION OF HOUSES IN OLDER NEIGHBORHOODS BY MIDDLE AND UPPER-INCOME PEOPLE THEREBY DISPLACING OLDER RESIDENTS IS REFERRED TO AS: A. GENTRIFICATION. B. FENESTRATION. C. HYPOTHECATION. D. RESTRUCTURING.
Correct Answer: A This is the definition of gentrification.
WHEN ZONING CHANGES REDUCE THE PERMITTED INTENSITY OF PROPERTY USE, THE RESULT IS: A. NON-CONFORMING OVERIMPROVEMENTS. B. CONFORMING UNDERIMPROVEMENTS. C. NON-CONFORMING UNDERIMPROVEMENTS. D. CONFORMING OVERIMPROVEMENTS.
Correct Answer: A When zoning changes increase permitted intensity, underimprovements are the result.
WHICH OF THE FOLLOWING IS AN ECONOMIC FACTOR IN SITE ANALYSIS? A. COST OF UTILITIES. B. INCOME CHARACTERISTICS OF SURROUNDING RESIDENTS. C. ZONING ORDINANCES. D. OCCUPATIONAL CHARACTERISTICS.
Correct Answer: A Zoning ordinances are governmental. Income of residents and occupational characteristics are social factors.
The assignment is to value an unimproved property in an area being developed into a subdivision. A summary of the potential net cash flows for a subdivision development on the subject property is presented below. Year 1: -$50,000 Year 2: -$15,000 Year 3: $130,000 Year 4: $125,000 Year 5: $75,000 Assuming a discount rate of 26%, what is the value of the undeveloped land (rounded to the nearest $1,000)? a. $89,000 b. $99,000 c. $129,000 d. $187,000
Correct Answer: A 26 i 50,000 chs g cfj 15,000 chs g cfj 130,000 g cfj 125,000 g cfj 75,000 g cfjf npv = 89,066
SEVERAL HOUSES ARE AVAILABLE WITH THE SAME UTILITY. WHAT APPRAISAL PRINCIPLE STATES THAT THE ONE WITH THE LOWEST PRICE WILL ATTRACT THE GREATEST DEMAND? A. SUBSTITUTION. B. CONSISTENT USE. C. BALANCE. D. CONTRIBUTION.
Correct Answer: A Good definition od the principle of substitution
THE STABILITY STAGE OF THE NEIGHBORHOOD LIFE CYCLE WOULD TEND TO BE PROLONGED BY: A. HOMOGENEITY OF LAND USES. B. INCREASE OF WEALTH IN THE COMMUNITY. C. EXTENSIVE REMODELING AND RENOVATION. D. NEW CONSTRUCTION.
Correct Answer: A: Land uses remain constant during the stability stage. Increasing wealth and new construction suggests growth. Remodeling indicates revitalizing neighborhoods.
WHAT TYPE OF EMPLOYMENT EXISTS IN AN INDUSTRY WHOSE PRODUCTS ARE CONSUMED PRIMARILY IN THE LOCAL MARKET? A. SERVICE. B. BASIC. C. IMPORT. D. EXPORT.
Correct Answer: A: The definition of a service industry.
A 10,000 square foot building has a current reproduction cost of $110 per square foot and a current replacement cost of $105 per square foot. The building was originally built three years ago at a cost of $1,000,000 including incurable superadequate components of $50,000. Incurable physical deterioration is estimated at 2% annually (straight-line). What is the total incurable physical deterioration and functional obsolescence deduction to replacement cost new? a. $60,000 b. $63,000 c. $113,000 d. $117,000
Correct Answer: B 10,000 x 105 = 1,050,000 1,050,000 x .02 = 21,000 21,000 x 3 = 63,000 (Functional superadequacies are not included as part of replacement cost.)
WHAT IS THE ANNUAL ABSORPTION RATE IF 25 OF THE AVAILABLE 200 UNITS ARE SOLD EVERY SIX MONTHS? A. 15% B. 25% C. 50% D. 100%
Correct Answer: B 25 X 2 = 50 50 / 200 = .25 Or 25/200 = .125 .125*2 (bc 6 months)
HOW MANY ACRES ARE FOUND IN THE PROPERTY DESCRIBED BY THE NE1/4 OF THE SW1/4 OF THE SE1/4 OF SECTION 10, R13E, T22S? A. 5 B.10 C. 15 D. 20
Correct Answer: B 640 acres in a section so: 640/4=160 160/4=40 40/4=10
GENTLY SLOPING OR UNDULATING LAND IS REPRESENTED BY WHICH OF THE FOLLOWING? A. 1% B. 8% C. 25% D. 33%
Correct Answer: B A change of 8 feet in elevation for every 100 feet is a gentle slope. A change of 1 foot for every 100 feet is essentially flat.
In an effort to restore wetlands, the US Army Corps of Engineers is diverting the flow of water in a river nearby your home. This will cause a canal adjacent to your property to flood a portion of your property saturating your land and making your property unusable. This is an exercise of: a. Riparian rights b. Flowage rights c. Easement d. Condemnation
Correct Answer: B A flowage easement is the right of the government to use the land of another to overflow, flood and submerge the affected lands. An owner of land is entitled to compensation whenever the waters of a stream or lake are impounded or altered so as to inundate, saturate, or flood his land.
SOIL DEVELOPED FROM MATERIAL TRANSPORTED AND DEPOSITED BY THE WIND IS: A. ALLUVIAL. B. AEOLIAN. C. COLLUVIAL. D. LACUSTRINE.
Correct Answer: B Alluvial soil is deposited by flowing water. Lacustrine soil is in a semi floating state near the shoreline of lakes, ponds, and retention areas. Colluvial soil is formed by the interaction of flowing water and wind.
WHO HOLDS TITLE TO FINANCED PROPERTY IN A DEED OF TRUST? A. TRUSTOR. B. TRUSTEE. C. BENEFICIARY. D. MORTGAGEE.
Correct Answer: B Deed of trust is a three party financing arrangement where the borrower is the trustor and the lender is the beneficiary. Title is held by a third party, the trustee.
THE DESIGN AND DISPOSITION OR ARRANGEMENT OF WINDOWS OR OTHER OPENINGS IN A BUILDING WALL IS DESCRIBED AS: A. HYPOTHECATION. B. FENESTRATION. C. GENTRIFICATION. D. NOVATION.
Correct Answer: B Fenestration is an architectural term. Hypothecation is a transfer of rights without transferring title or possession of the property. Gentrification is the displacement of older residents in a community, replacing them with younger residents. Novation means new person.
A SLENDER HORIZONTAL BAR OF WOOD OR METAL DIVIDING GLASS PANELS IN A WINDOW OR PANELS IN A DOOR IS A: A. SASH. B. MUNTIN. C. MULLION. D. STILE.
Correct Answer: B Horizontal construction members are muntins. Vertical framing are mullions. The sash represents the entire window construction. Stile is the outer perimeter framework of window construction.
STRICT ENFORCEMENT OF ZONING REQUIREMENTS IS AN EXERCISE OF THE PRINCIPLE OF: A. CONTRIBUTION. B. CONFORMITY. C. BALANCE. D. EXTERNALITIES.
Correct Answer: B If all properties conform to zoning, there will be some conformity to their appearance.
THE WORK TRIANGLE IN A KITCHEN CONSISTS OF: A. RANGE, REFRIGERATOR, PANTRY. B .RANGE, REFRIGERATOR, SINK. C. RANGE, SINK, PANTRY. D. SINK, REFRIGERATOR, PANTRY.
Correct Answer: B Major components of a kitchen establish the work triangle. Traffic should not be routed between these components and they should not be spread too far apart.
BY REMOVING THE PROTECTIVE LIGHT SWITCH PLATE, AN APPRAISER MAY DETERMINE: A. ELECTRICAL AMPERAGE. B PRESENCE OF INSULATION. C. SPACING BETWEEN STUDS. D. ELECTRICAL VOLTAGE.
Correct Answer: B Older homes without electric boxes for switches will reveal interior wall construction when the switch plate is removed. It will not be sufficient to reveal stud spacing, electrical amperage or voltage.
FACTORS THAT INFLUENCE THE SUBJECT PROPERTY FROM NEARBY PROPERTIES ARE: A. MACRONEIGHBORHOOD FACTORS. B. MICRONEIGHBORHOOD FACTORS. C. GENERALITIES. D. INFRASTRUCTURE.
Correct Answer: B Outlying properties influences may be considered macroneighborhood factors.
A SINKHOLE HAS APPEARED IN YOUR BACKYARD. WHAT TERM BEST DESCRIBES ITS IMPACT ON VALUE? A. ECONOMIC OBSOLESCENCE. B. FUNCTIONAL OBSOLESCENCE. C. INCURABLE PHYSICAL DEPRECIATION. D. CURABLE PHYSICAL DEPRECIATION.
Correct Answer: B Since the sinkhole is in your backyard, it is a functional issue. For it to exhibit economic (external) obsolescence, the sinkhole would be located in a neighboring property.
WHICH OF THE FOLLOWING IS A SOCIAL CONSIDERATION IN THE ANALYSIS OF A NEIGHBORHOOD? A. PROPERTY RENT LEVELS. B. POPULATION DENSITY. C. EFFECTIVE AGES OF PROPERTY. D. DEED RESTRICTIONS.
Correct Answer: B Social value influences relate to the characteristics of the people who make up the population. Rent level and effective age are property characteristics and are economic value influences. Deed restrictions are governmental value influences.
The appraisal of a building under construction requires a value as of the date of stabilized occupancy. What value is required and what assignment condition is employed? a. Prospective market value and hypothetical condition b. Prospective market value and extraordinary assumption c. Current market value and hypothetical condition d. Current market value and extraordinary assumption
Correct Answer: B Something is known not to be true but taken to be true = hypothetical condition Something is likely to be true and is taken to be true = extraordinary assumption Occupancy is possible only following completion of construction. Using a current effective date, this requires the appraiser to take the position that something is true when it is known not to be true (completed construction). This is a hypothetical condition. In this question, the market value will be measured as of the date of stabilized occupancy which requires the construction to be complete. At that future date, completion of construction is not known to be true or untrue. The appraiser would be making an extraordinary assumption since the condition of the construction is uncertain. The effective date is the key element.
THE MOST FAVORED EXPOSURE FOR IMPROVEMENTS IS: A. NORTH. B. SOUTH. C. EAST. D. WEST.
Correct Answer: B Southern exposure insures that sunlight is lower in the southern sky during the colder winter months where it will be helpful in naturally supplying the heat needed in winter. The side of the home with exposure is the side with the greatest amount of glass area.
WHAT IS THE BEST SOURCE FOR VERIFICATION OF A SALE PRICE? A. PUBLIC RECORDS. B. PARTIES TO THE SALE. C. REALTORS. D. MULTIPLE LISTING SERVICES.
Correct Answer: B Speaking to those who participated in the transaction is more reliable than using second hand sources.
THE PRINCIPAL, EXTERIOR FACE OF A STRUCTURE THAT MAY DIFFER FROM THE REST OF THE BUILDING IN DESIGN, MATERIALS, AND ARCHITECTURE IS THE BUILDING'S: A. ELEVATION. B. FACADE. C. FASCIA. D. FACILE.
Correct Answer: B The definition of facade. It means "false front".
From a point of beginning North 60 degrees West 250'; thence South 30 degrees West 50'; thence South 60 degrees East 150'; thence South 30 degrees West 175'; thence South 60 degrees East 100'; thence North 30 degrees East 225' along the road to the point of beginning. a. .69 acres; T shaped b. .69 acres; L shaped c. .80 acres; T shaped d. .80 acres; L shaped
Correct Answer: B The dimensions create two rectangles: 100 x 225 = 22,500 50 x 150 = 7,500 22,500 + 7,500 = 30,000 30,000/43,560 = .6887
WHICH OF THE FOLLOWING ARE DESIGNATED FLOOD ZONES WHICH REQUIRE FLOOD INSURANCE? A. A U B. A V C. A W D. A Z
Correct Answer: B The only flood zone on the list is AV.
LOCAL EMPLOYMENT IN THE TOURISM INDUSTRY IS 15 PERCENT OF THE TOTAL WORK FORCE. NATIONAL EMPLOYMENT IN THE TOURISM INDUSTRY IS 4.5 PERCENT. THE LOCAL COMMUNITY CONSIDERS TOURISM TO BE A: A. GROWTH INDUSTRY. B. BASIC INDUSTRY. C. SERVICE INDUSTRY. D. DEPRESSED INDUSTRY.
Correct Answer: B This industry is attracting wealth to the local economy. Where national employment exceeds local employment percentages, wealth is not attracted and the industry is a service industry. The other two answer choices are not relevant.
TIME-DISTANCE RELATIONSHIPS BETWEEN A SITE AND PROBABLE DESTINATIONS ARE: A. SITUS. B. LINKAGES. C. THOROUGHFARES. D. LOCATION FACTORS.
Correct Answer: B This is the definition of a linkage. Situs represents the fact that a property's location is a primary determinant of its value.
The blueprints of a building indicate the measurement of one wall to be 43'9" and the intersecting wall to be 29'3". What is the indicated square foot of the building? A. 1286 B. 1280 C. 1247 D. 1320
Correct Answer: B *Inches must be converted to tenths of a foot for this calculation. Take the inch figure and divide by 12*
THE SUBJECT IS 60,000 SQUARE FEET. COMPARABLE 1 SOLD ONE YEAR AGO FOR $2.92 PER SQUARE FOOT. COMPARABLE 2 SOLD ONE YEAR AGO FOR $3 PER SQUARE FOOT. COMPARABLE 3 IS A CURRENT SALE FOR $3.01 PER SQUARE FOOT. WHAT IS THE VALUE OF THE SUBJECT? a. $175,200 b. $178,600 c. $180,600 d. $181,000
Correct Answer: B Average out the PSF of the comps and apply to the subject SF.
WHICH OF THE FOLLOWING IS NOT A COMMON ROOF STYLE? A. GAMBREL. B.BARREL. C. HIP. D. GABLE.
Correct Answer: B Barrel roof style is very uncommon.
The process of enforcing the right of government to take private property for public use is: A. Eminent Domain B. Condemnation C. Police Power D. Escheat
Correct Answer: B Eminent Domain is the RIGHT to take property for the good of the public. Condemnation describes the PROCESS of the taking. Escheat TRANSFERS title to a government entity when there is no owner identified upon death of the original property owner.
The assignment is to value an approved subdivision. The project is expected to be sold out in three years, selling eight lots in the first year, four lots in the second year, and three lots in the third year. The lots will sell for $88,500 each the first year, $91,200 the second year, and $93,900 in the third year. From the sale proceeds, a 6% commission will be paid. The project will pay $10,000 in taxes in the first year, $4,000 in the second year, $2,000 in the third year. All other infrastructure costs are complete. Developers require a 25% return on investment. What is the value of the subdivision today, rounded to the nearest $100? a. $664,300 b. $875,900 c. $1,258,400 d. $1,355,100
Correct Answer: B Year 1: 88,500 (Price Per Lot) x 8 (# of lots) = 708,000 708,000 x .06 (Commission %) = 42,480 708,000 - 42,480 - 10,000 (Taxes) = 655,520 (CF1) Year 2: 91,200 (Price Per Lot) x 4 (# of lots) = 364,800 364,800 x .06 (Commission %) = 21,888 364,800 - 21,888 - 4,000 (Taxes) = 338,912 (CF 2) Year 3: 93,900 (Price Per Lot) x 3 (# of lots) = 281,700 281,700 x .06 (Commission %) = 16.902 281,700 - 16,902 - 2,000 (Taxes) = 262,798 (CF 3) 25i 655,520 g cfj 338,912 g cfj 262,798 g cfj f npv = 875,872 *Calculator work: CF Function
An owner receives four offers to purchase. Offer 1 is $195,000 all cash. Offer 2 is for $215,000 seller financing with 10% down, 6% interest, 10 year amortization. Offer 3 is for $220,000 seller financing with with 5% down, 6.5% interest, 15 year amortization. Offer 4 is for $210,000 seller financing with 10% down, 6% interest, 10 year amortization with a 5 year balloon. Assuming monthly payments for all financing and a market interest rate of 8%, what offer represents the highest value to the seller? a. Offer 1 b. Offer 2 c. Offer 3 d. Offer 4
Correct Answer: C 1. 195,000 2. 215,000 x .10 = 21,500 215,000 - 21,500 = 193,500 10gn 6gi 193,500PV PMT = 2,148 10gn 8gi 2,148PMT PV = 177,041 + 21,500 = 198,541 3. 220,000 x .05 = 11,000 220,000 - 11,000 = 209,000 15gn 6.5gi 209,000PV PMT = 1,820 15gn 8gi 1820PMT PV = 190,445 + 11,000 = 201,445 4. 210,000 x .10 = 21,000 210,000 - 21,000 = 189,000 10gn 6gi 189,000PV PMT = 2,098 5gn 8gi 2098PMT PV = 103,470 5gn 6gi 2098PMT PV = 108,520 5n 8i 108,520FV PV = 73,856 103,470 + 73,856 + 21,000 = 198,326
YOU ARE ESTIMATING THE MARKET VALUE OF A PROPERTY WITH A ONE STORY INDUSTRIAL BUILDING THAT IS 17 YEARS OLD AND HAS AN EFFECTIVE AGE OF 10 YEARS. THE BUILDING HAS A REMAINING ECONOMIC LIFE OF 50 YEARS AND MEASURES 125' X 160'. THE COST TO REPLACE THE BUILDING IS $55 PER SQUARE FOOT AND YOU HAVE ESTIMATED THE SITE VALUE TO BE $180,000. WHAT IS THE PROPERTY'S MARKET VALUE? a. $1,296,000 b. $1,115,000 c. $1,096,000 d. $1,005,000
Correct Answer: C 125 x 160 = 20,000 size of the building 20,000 x 55 = 1,100,000 total replacement cost 10 + 50 = 60 total life 10/60 = .1667 age/life = depreciation percentage .1667 x 1,100,000 = 183,333 depreciation percentage multiplied by cost to find depreciation 1,100,000 - 183,333 = 916,667 value of improvement 916,667 + 180,000 = 1,096,667 improvement value plus site value = total property value
WHAT IS THE LENDER'S EFFECTIVE YIELD IF THE ORIGINAL LOAN AMOUNT IS $250,000, THE ANNUAL INTEREST RATE IS 7% WITH 2 DISCOUNT POINTS, PAYMENTS ARE PAID MONTHLY WITH A LOAN TERM OF 25 YEARS, AND THE LOAN IS PAID IN FULL IN 5 YEARS? A. 6.249% B. 7.225% C. 7.499% D. 7.999%
Correct Answer: C 250,000 x .02 = 5,000 discount amount 250,000 - 5,000 = 245,000 effective loan amount 25 gn 7 gi 250,000 PV PMT = 1,766.947993 payments based on the actual loan amount 60 f amort payoff period RCL PV = 227,905 loan balance in five years 5 gn 245,000 PV effective loan amount 1,766.947993 CHS PMT actual payment enter as a negative number 227,905 CHS FV loan balance after 5 years enter as a negative number i =.62499706 solve for the effective rate (monthly) 12 x = 7.499 annualized
THE LENDER REQUIRES 2 DISCOUNT POINTS. THE ORIGINAL LOAN AMOUNT IS $250,000 AT AN ANNUAL INTEREST RATE OF 7%. THE LOAN TERM IS 25 YEARS WITH MONTHLY PAYMENTS. WHAT IS THE LENDER'S EFFECTIVE YIELD IF THE LOAN IS PAID IN FULL OVER THE 25 YEAR TERM? A. 9.252% B. 8.275% C. 7.225% D. 6.255%
Correct Answer: C 250,000 x .02 = 5,000 loan discount 250,000 - 5,000 = 245,000 effective loan amount 25 gn 7 gi 250,000 PV PMT = 1,766.9479 actual payment calculation 245,000 PV effective loan amount i = .602091451 monthly yield rate 12 x = 7.225 lender's effective yield
A water tower holds sufficient water for a week's supply at 70 gallons per capita per day for the 30 unit development. The average occupancy is 3.5 people per unit. What is the minimum required capacity of the water tower? a. 7,350 gallons b. 14,700 gallons c. 51,450 gallons d. 81,075 gallons
Correct Answer: C 3.5 x 30 = 105 people 70 x 105 = 7,350 gallons per day 7,350 x 7 = 51,450
A mortgage loan was originated with an interest rate of 8.5%, 30 year term, monthly amortization, and an original loan amount of $198,000. The property produces NOI of $28,500. The anticipated reversion is $280,000 after an investment period of 10 years. Based on an equity dividend rate of 14.5%, what is the value of the equity? A. $94,720 B. $89,970 C. $79,340 D. $52,340
Correct Answer: C 30 gn 8.5 gi 198,000 PV PMT = 1,522.45 x 12 = 18,269 The annual debt service is calculated 28,500 - 18,269 = 10,231 Debt service is removed from NOI to find equity income 10 n 14.5 i 10,231 PMT PV = 52,340 Equity income is discounted at the equity dividend rate over the investment period 20 gn 8.5 gi 1,522.45 PMT PV = 175,433 Discount payments over the remaining loan term to find loan balance at the end of the investment period 280,000 - 175,433 = 104,567 value of the equity at the end of investment period from sale proceeds 10 n 14.5 i 104,567 FV PV = 26,998 present value of sale proceeds for the equity position 52,340 + 26,998 = 79,340 combine the present value of the equity income and sale proceeds to the equity
WHICH OF THE FOLLOWING IS NOT CONSIDERED A SITE IMPROVEMENT? A. LANDSCAPING. B. FENCING. C. CARPORT. D. DRIVEWAY.
Correct Answer: C A carport is part of the building improvements. Site improvements create a site from vacant land.
WHICH OF THE FOLLOWING IS CHARACTERISTIC OF THE COOPERATIVE FORM OF OWNERSHIP? A. FEE SIMPLE OWNERSHIP OF INDIVIDUAL UNITS. B. TENANCY IN COMMON WITH A RIGHT OF PARTITION. C. OCCUPANCY BY MEANS OF A PROPRIETARY LEASE. D. INTERVAL OWNERSHIP.
Correct Answer: C A cooperative is a type of corporation ownership of real property. Stockholders of the corporation are provided with the right to occupy specific portions of the building through this tightly controlled private lease. Fee simple ownership of units is found in condominium ownership. Interval ownership is a type of timesharing.
A THIN VERTICAL BAR OF WOOD, LEAD, OR STONE WHICH DIVIDES MULTIPLE WINDOWS OR PANES OF GLASS IS A: A. SASH. B. MUNTIN. C. MULLION. D. STILE.
Correct Answer: C A good description of a mullion.
THE VALUE OF A BUILDING IS EQUAL TO ITS CONSTRUCTION COST WHEN THE BUILDING IS: A. Newly Constructed B. Overimproved C. The Highest and Best Use of the Site D. None of the Above
Correct Answer: C A newly constructed building may experience functional or external obsolescence. New construction only guarantees no physical depreciation. The highest and best use of land guarantees the perfect improvement, no depreciation, cost equals value.
AN APPRAISER HAS ACCEPTED AN ASSIGNMENT TO APPRAISE REAL PROPERTY. WHICH OF THE FOLLOWING WOULD NOT BE INCLUDED IN HIS ESTIMATE OF VALUE? A. DOG KENNEL. B. TELEVISION ANTENNA. C. WALL-SIZE BOOKCASE. D. ATTACHED GARAGE.
Correct Answer: C All of the choices represent real property except for the bookcase. The size is not relevant. The bookcase becomes real property if it is built-in or custom to that property.
POTENTIAL USES ARE BEING CONSIDERED FOR DEVELOPMENT. BASED ON THE FOLLOWING INFORMATION, WHICH INVESTMENT ALTERNATIVE IS THE HIGHEST AND BEST USE OF THE SITE? COST TO CONSTRUCT: $400,000.00 (APARTMENT), $290,000.00 (RETAIL), $350,000.00 (OFFICE) NET OPERATING INCOME: $100,000.00 (APARTMENT), $80,000.00 (RETAIL), $95,000.00 (OFFICE) RETURN ON BUILDING: 12% (APARTMENT), 12% (RETAIL), 12% (OFFICE) APARTMENT. RETAIL. OFFICE. ALL OF THE ABOVE.
Correct Answer: C Apartment: 400,000 X .12 = 48,000 100,000 - 48,000 = 52,000 Retail: 290,000 X .12 = 34,800 80,000 - 34,800 = 45,200 Office: 350,000 X .12 = 42,000 95,000 - 42,000 = 53,000 This is an application of the land residual income capitalization technique. The use that generates the greatest residual income to land is considered the highest and best use. In this example, note the apartment is an overimprovement and the retail is an underimprovement based on construction costs.
THE OPTIMUM LAND-BUILDING RATIO FOR THE PARCEL UNDER APPRAISAL ILLUSTRATES THE PRINCIPLE OF A. SUBSTITUTION. B. OPPORTUNITY COST. C. BALANCE. D. CONTRIBUTION.
Correct Answer: C Balance suggests that neither an overimprovement nor an underimprovement exists, that the improvement is ideal ie...highest and best use.
OF THE FOLLOWING, WHICH ROOF STYLE WOULD BE EXPECTED TO BEST WITHSTAND THE IMPACT OF HURRICANE-FORCE WINDS? A. GAMBREL. B. GABLE. C. HIP. D. SALT BOX.
Correct Answer: C Because a hip roof has slopes on each of the four sides, the wind will tend to press the roof down on the structure.
*The subject has 300 acres of improved pasture, 200 acres of natural pasture, and 500 acres of wooded land. The only comparable in the market is very similar and sold for $1,050 per acre. The comparable has 200 acres of improved pasture, 400 acres of natural pasture, and 400 acres of wooded land. If natural pasture sells for 80 percent of improved pasture, and wooded land sells for 30 percent of improved pasture, what is the value of the subject? A. $1,550/acre B. $1,137/acre C. $1,102/acre D. $1,002/acre
Correct Answer: C Comparable: Improved - 200 x 1.00 = 200 Natural - 400 x .80 = 320 Wooded - 400 x .30 = 120 640 x 1,050 = 672,000 Subject: Improved - 300 x 1.00 = 300 Natural - 200 x .80 = 160 Wooded - 500 x .30 = 150 300 + 160 + 150 = 610 672,000 = 610 x ($x/acre) 672,000/610 = 1101.639
FOOTINGS AND SLABS ARE PARTS OF A BUILDING'S: A. INFRASTRUCTURE. B. INTERSTRUCTURE. C. SUBSTRUCTURE. D. SUPERSTRUCTURE.
Correct Answer: C Foundation components are substructure elements of construction. The portion of the structure above grade is the superstructure.
WHICH OF THE FOLLOWING IS INCLUDED IN GROSS LIVING AREA? A. FINISHED BASEMENT. B. PATIO. C. WALK IN CLOSET. D. ATTIC.
Correct Answer: C Gross living area consists of that which is above-grade finished and habitable as residential space.
WHAT TYPE OF SOIL HAS A MIXTURE OF SAND, SILT, AND CLAY IN SUCH PROPORTIONS THAT THE CHARACTERISTICS OF NO ONE PREDOMINATE? A. GUMBO. B. MUCK. C. LOAM. D. PEAT.
Correct Answer: C Gumbo is primarily clay. Muck is organic and wet. Peat is organic and dry.
WHAT TYPE OF OWNERSHIP IS CHARACTERIZED BY BOTH VERTICAL AND HORIZONTAL TRAITS? A. COOPERATIVE. B. PUD. C. CONDOMINIUM. D. SEVERALTY.
Correct Answer: C Individual ownership of units in a multi-story building would have both horizontal and vertical traits ie.... 3rd floor unit. Cooperative ownership involves ownership of the entire structure by a corporate entity and therefore, no concern regarding vertical characteristics. Severalty is ownership by one entity and is not applicable as an answer to this question.
A NEW BUILDING REPRESENTING THE HIGHEST AND BEST USE OF THE SITE CAN BE CONSTRUCTED AT A TOTAL COST, INCLUDING ENTREPRENEURIAL INCENTIVE, OF $12,000,000. THE BUILDING CAPITALIZATION RATE IS 11% AND THE LAND CAPITALIZATION RATE IS 7%. THE PROPERTY WILL GENERATE A NET OPERATING INCOME OF $1,500,000. WHAT IS THE INDICATED VALUE OF THE SITE, ROUNDED TO THE NEAREST $1,000? a.$6,667,000 b.$4,750,000 c.$2,571,000 d.$1,636,000
Correct Answer: C Land Residual 12,000,000 x .11 = 1,320,000 income attributed to the building 1,500,000 - 1,320,000 = 180,000 calculate income attribute to the land 180,000/.07 = 2,571,428 land value
WHICH OF THE FOLLOWING IS NOT A TYPE OF SOIL? A. LOESS. B. AEOLIAN. C. MEADOW. D. GUMBO.
Correct Answer: C Meadow describes vegetation. Loess is windblown silt, aeolian soil is deposited by wind, and gumbo is soil primarily comprised of clay.
THE LOAN TO VALUE RATIO IS 75%. THE MORTGAGE INTEREST RATE IS 6.25 WITH PAYMENTS MADE MONTHLY OVER A 20 YEAR TERM. THE LOAN IS FULLY AMORTIZING. IF THE OVERALL CAPITALIZATION RATE IS 9.5, WHAT IS THE EQUITY DIVIDEND RATE? A .6578 B. .8771 C. .1168 D. .2921
Correct Answer: C Mortgage-equity band of investment 20gn 6.25gi 1PV PMT = .007309282 monthly mortgage constant .007309282 x 12 = .087711384 annual mortgage constant Rm). 087711384 x .75 = .0657835 weighted value of the financing .095 - .0657835 = .02921646 weighted value of the equity .02921646/.25 = .11686584 equity dividend rate
WHICH OF THE FOLLOWING IS NOT A COMMON COMPONENT OF ROOF FRAMING? A. PURLIN. B. RAFTERS. C. MUNTIN. D. COLLAR-TIE.
Correct Answer: C Muntins are the horizontal framing members of window construction.
WHICH OF THE FOLLOWING IS NOT A COMMON TYPE OF WOODEN FRAME CONSTRUCTION? A. PLATFORM. B. BALLOON. C. BARREL AND JOINT. D. POST AND BEAM.
Correct Answer: C Platform construction using studs is the most common wood frame construction. Barrel and joint does not exist as a construction technique.
TAKING CORRECTIVE MEASURES TO BRING A PROPERTY INTO CONFORMITY WITH CHANGES TO MEET CURRENT DEMAND IS: A. REMODELING. B. REHABILITATION. C. MODERNIZATION. D. RENOVATION.
Correct Answer: C Renovation is all encompassing and is therefore essentially an "all of the above" type answer choice. Remodeling is a change in design. Rehabilitation takes an old structure and makes it look new again. Modernization brings an old home into the current market.
WHICH OF THE FOLLOWING LAND TO BUILDING RATIOS REPRESENTS A BUILDING COVERING THIRTY PERCENT OF THE LOT? A. 3:10 B. 7:10 C. 7:3 D. 10:3
Correct Answer: C Seven parts land: three parts building. The total must be 10 or 100% of the property. This question does not state the building to the total property.
A property was purchased for $1,200,000. It had first year net operating income of $110,500 increasing annually by 3% for the term of the lease which ends in 10 years. The property was financed with a 70% loan, a 7% interest rate, and a twenty year term with monthly payments. The property was sold at the end of year 5 with a reversion based on a capitalization rate of 9.3% applied to year 6 income. Cost of sale for the reversion is projected to be 5% of the gross sale proceeds. What is the yield to the lender? a. 9.8% b. 9.5% c. 7% d. 6.8%
Correct Answer: C The lender's yield is the interest rate. The lender is not participating in the income or sale benefits of this investment.
AN INCREMENT OF VALUE OBTAINED WHEN TWO OR MORE SITES ARE COMBINED UNDER A SINGLE OWNERSHIP IS: A. ASSEMBLAGE. B. AGGLOMERATION. C. PLOTTAGE. D. GENTRIFICATION.
Correct Answer: C The value earned by the combination is plottage (value). The combination itself is assemblage.
Your client desires a minimum 12% annual return on his equity investment. You have identified an investment that will yield the following characteristics. The property would be purchased with 80% financing, annual debt service is $82,000, and the loan balance at the end of the investment period would be $768,000. What is your recommendation to this client? Purchase price $1,000,000 NOI year 1 $112,000 NOI year 2 $105,000 NOI year 3 $110,000 NOI year 4 $118,000 NOI year 5 (includes reversion) $1,050,000 A. This investment will not meet his investment criteria. B. Additional equity contribution (down payment) must be made to make this investment acceptable. C. A reduced equity contribution (down payment) must be made to make this investment acceptable. D. This investment is acceptable as structured.
Correct Answer: D 1,000,000 x .80 = 800,000 1,000,000 - 800,000 = 200,000 equity (down payment) 112,000 - 82,000 = 30,000 equity 105,000 - 82000 = 23,000 equity 110,000 - 82,000 = 28,000 equity 118,000 - 82,000 = 36,000 equity 1,050,000 - 768,000 - 82,000 = 200,000 equity 200,000 chs g CFo 30,000 g CFj 23,000 g CFj 28,000 g CFj 36,000 g CFj 200,000 g CFj f IRR = 12.203
A 54,000 square foot private school building sold for 6.48 million. Upon confirming the sale, it is discovered that the seller provided a 5.25% interest only purchase money mortgage in the amount of 4.96 million payable monthly with a balloon payment due in 5 years. The market loan terms at the time were 75% loan to value ratio with a 7% fixed rate, fully amortizing 30 year term, paid monthly, with a 5 year balloon. Based on this information, what is the adjustment for cash equivalency per square foot? A. -8.84 B. -8.62 C. -6.62 D. -4.22
Correct Answer: D 4,960,000 x .0525 = 260,400 annual debt service 260,400/12 = 21,700 monthly debt serve 5 gn 7 gi 21,700 PMT PV = 1,095,893 market value of the payments 5 n 7 i 4,960,000 FV PV = 3,536,411 market value of the loan amount 6,480,000 x .25 = 1,620,000 down payment amount (cash) 1,095,893 + 3,536,411 + 1,620,000 = 6,252,304 combination of the three elements of purchase 6,480,000 - 6,252,304 = 227,696 difference between the loan amount and market value of financing is the adjustment amount 227,696/54,000 = 4.2166 convert to adjustment per square foot
A farm was owned by three brothers. A recent appraisal was done valuing the farm at $600,000. One brother wants the other two to buy him out so that he can gift the proceeds to his two children. A recent court case resolved the value of a partition at 94% two additional court cases were resolved at 97%, and a newly settled claim was resolved at 101%. How much should be gifted to each child? a. $94,000 b. $97,000 c. $97,333 d. $100,000
Correct Answer: D 600,000/3=200,000 200,000/2=100,000
WHICH OF THE FOLLOWING IS/ARE CHARACTERISTIC OF A PUD? A. LOTS ARE SMALLER THAN USUAL. B. UNITS OWNED BY INDIVIDUALS. C. JOINT OWNERSHIP OF COMMON AREAS. D. ALL OF THE ABOVE.
Correct Answer: D All are characteristic of planned unit developments.
A HOUSE IN A COMMERCIAL ZONE HAS A TOTAL PROPERTY VALUE OF $300,000 AND A COMMERCIAL SITE VALUE OF $350,000. WHICH OF THE FOLLOWING HOUSE DEMOLITION COST ESTIMATES OBTAINED BY THE HOMEOWNER WILL RESULT IN A HIGHEST AND BEST USE CONCLUSION AS A VACANT COMMERCIAL SITE? A. $65,000 B. $60,000 C. $55,000 D. $45,000
Correct Answer: D DEDUCTION OF $45,000 AS A DEMOLITION COST LEAVES THE GREATEST RESIDUAL VALUE TO THE SITE.
THE MOST RELIABLE SOURCE OF DATA FOR AN APPRAISER IS THE: A. REAL ESTATE BROKER. B. SELLER. C. BUYER. D. APPRAISER'S OWN FILES.
Correct Answer: D Information contained in the appraiser's own files should have already been verified for accuracy when initially researched.
AN APPRAISAL FOR THE PRICE THAT A PROPERTY WOULD SELL FOR BASED ON A QUICK SALE WOULD BE FOR WHAT TYPE OF VALUE? A. VALUE-IN-USE. B. VALUE-IN-EXCHANGE. C. GOING CONCERN VALUE. D. LIQUIDATION VALUE.
Correct Answer: D Less than reasonable marketing time results in a liquidation type sale.
THE OUTSIDE OR PERIMETER MEMBERS OF A WINDOW IS THE: A. SASH. B. MUNTIN. C. MULLION. D. STILE.
Correct Answer: D Outer framework of window construction.
THE SOURCE OF UTILITIES FOR A HOME IS FOUND IN THE: A. SUBSTRUCTURE. B. SUPERSTRUCTURE. C. INTRASTRUCTURE. D. INFRASTRUCTURE.
Correct Answer: D Substructure is below-grade (foundation components) construction. Superstructure is above-grade. Infrastructure is described by this question. Intrastructure is a fabricated word.
MORTGAGE MARKET ACTIVITY IS IMPORTANT TO THE APPRAISER BECAUSE: A. RATES DETERMINE WHETHER PURCHASERS WILL BUY. B. MOST APPRAISERS ARE ALSO BROKERS. C. RATES DETERMINE MARKET VALUE. D. THE MORTGAGE MARKET IMPACTS MARKET VALUES.
Correct Answer: D The mortgage market has an influence on how much will be paid and ultimately, market values.
Compensation in a condemnation proceeding is determined by the: A. Condemning Authority B. Property Owner C. Certified Appraiser D. Applicable Court
Correct Answer: D Condemnation is a JUDICIAL proceeding that will use information for the three other answer choices in selecting an award.
Which of the following can not impact value as an environmental influence? A. View B. Location C. Climate D. Crime
Correct Answer: D Criminal activity is a SOCIAL VALUE INFLUENCE
WHAT IS THE MAXIMUM NUMBER OF YEARS THAT A STATE LICENSED OR CERTIFIED APPRAISER MAY HAVE TO MAINTAIN COPIES OF APPRAISAL REPORTS AND SUPPORTING DOCUMENTS? A. 7 B. 5 C. 2 D. NO MAXIMUM HAS BEEN ESTABLISHED.
Correct Answer: D Two years will be added to the retention of records requirement upon the close of litigation, regardless of when that occurs.
WHICH OF THE FOLLOWING WOULD BE AN EXAMPLE OF THE APPRAISAL'S PURPOSE? A. ESTABLISHING A LISTING PRICE. B. DETERMINING A RANGE OF BID PRICES. C. ASSESSING THE PROPERTY FOR TAXES. D. ESTIMATING INVESTMENT VALUE.
Correct Answer: D The appraisal's purpose is to measure a type of value. The alternative choices are all uses for the appraisal.
A farm was leased three years ago for a 10 year term of $150 per acre with payments at the end of each year. Current market rates for similar farms is $175 per acre. At the end of the lease term, the property is expected to have a market value of 2,300 per acre. The capitalization rate in the market is 8% and the discount rate is 12%. What is the value of the fee simple estate? a. 1,838 b. 1,875 c. 2,028 d. 2,388
Correct Answer: a 7 n 12 i 175 PMT PV = 798.6573 7 n 12 i 2,300 FV PV = 1,040 1,040 + 798 = 1,838
A DESIGNATION OF THE U.S. CENSUS BUREAU FOR METROPOLITAN AREAS WITH A CENTRAL CITY HAVING AT LEAST 50,000 PEOPLE AND INCLUDING ALL COUNTIES THAT ARE ECONOMICALLY LINKED TO THE CENTRAL CITY IS A: A. TOWNSHIP. B. REGIONAL DISTRICT. C. METROPOLITAN STATISTICAL AREA. D. STANDARD METROPOLITAN AREA.
Correct answer: C
The sale price constant is $250,000. The variable is $35 per square foot. The subject improvement is 3,545 SF. NOI is $25,000. What is the value of the subject?
Simple Linear Regression y = a + bx $250,000 (a) + ($35 (b) * 3,545 (x))
