REE 4103 Unit 2 Quizzes
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the total depreciated value of the long-lived items? $489,750 $243,000 $653,000 None of the above or not enough information to determine the answer.
$489,750
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the total dollar amount of deferred maintenance? $5,000 $10,000 $800,000 None of the above or not enough information to determine the answer.
$5,000
Consider a 10,000 sf strip shopping center that sold five years ago for $300,000 and then sold again recently for $345,000. The indicated average annual appreciation of the shopping center would be? $9,000 $45,000 -$45,000 -$9,000
$9,000
Residential sites are often valued using A price per square foot A price per animal unit month A price per room A price per cubic meter
A price per square foot
A 30-year-old buidling with an effective age of 20 years has a total life expectancy of 50 years. How much depreciation has occurred? 10% 20% 40% 60%
40%
A property sold for $125,000 in a cash sale. It was 12 years old and had a site value of $30,000. The reproduction cost of the building improvements was $102,350. What is the amount of depreciation overall? 6.50% 7.18% 7.56% 8.85%
7.18%
To estimate its market value, the land under an improved property is best compared to sales of vacant land that Have the same or similar highest and best use Have the same type of building on them (after the sale) Show the maximum value for the subject property Show the minimum value for the subject property
Have the same or similar highest and best use
Which approach would be best to use when appraising a 15-20 year old house? Cost Feasibility study Sales comparison Income capitalization
Sales comparison
For a property to be considered as a comparable: It must have sold within five years It must be a competitive property It must be an open market transaction Both (b) and (c)
Both (b) and (c)
Price per front foot is a physical unit of comparison not as accurate as price per acre rarely used in residential site analysis an accurate guide to site marketability
a physical unit of comparison
Effective age refers to: chronological age average age apparent age, considering the physical condiion and marketability of a structure the age depreciation method
apparent age, considering the physical condiion and marketability of a structure
In the same market, a 12,000 sf shopping center with similar characteristics sold for $323,000 five years ago, and another 12,000 sf property sold last year for $365,000. What is the average annual change per unit (sf) for those comparable properties? $42,000 sf $10,500 sf $0.87 /sf $3.50 / sf
$0.87 /sf
Qualitative analysis is based on Adjusting the sale prices of comparables on a percentage basis "Inferior" or "superior" ratings Dollar ratios Price per square foot
"Inferior" or "superior" ratings
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is the dollar amount of depreciation associated with deferred maintenance? $10,000 $60,000 $40,000 None of the above.
$10,000
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The total amount of depreciation for all the short-lived items together: HVAC, Plumbing, Lighting Fixtures, Roof covering, and carpet/vinyl is: $7,870 $12,566 The same as the long-lived items. None of the above or not enough information
$12,566
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is the cost new of all short-lived items. $120,000 $60,000 $40,000 Not enough information to answer the question.
$120,000
In the subject property's neighborhood, improved properties are selling for prices in a range of $140,000 to $160,000. Research reveals a typical land value-to-total property value ratio of 20%. What is the range of value for a similar site in this neighborhood? $14,000 to $16,000 $16,000 to $20,000 $22,000 to $25,000 $28,000 to $32,000
$28,000 to $32,000
Functional Obsolescence Suppose the subject is a three-story officebuilding that has no elevator in a market that demands an elevator. The cost of the elevator if installed new when built was $75,000, but the cost to install it today is $210,000. Similar properties with the same problem in this market generally sell for $200,000 less than properties with elevators. The improvement is 14 years old, and the physical depreciation would be 2% per year. What is the depreciation for functional obsolescence? $200,000 $210,000 $125,000 None of the above or not enough information
$125,000
This Narrative Applies to the Next Question Comparable sale sold for $150,000 with down payment of $30,000 · Seller financed mortgage for a 30-year term @ 7% interest compounded monthly. · Homes in area are typically held for 30 years · Market derived interest rate is 9% compounded monthly. (Implicit in this method is the assumption that the difference between the market interest rate and the contract rate will remain constant for the entire 30 years) What is the adjusted sale price after taking into consideration financing terms? $107,615.52 $129,222.04 $99,222.04 $170,777.95 None of the above
$129,222.04
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The depreciation of all the long-lived items is: $18,017.85 $233,582.14 $12,498 None of the above or not enough information
$18,017.85
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is the amount of depreciation of the long-lived items? $199,500 $700,000 $570,000 Not enough information to answer the question.
$199,500
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The cost new to construct the residential space is: $200,000 $187,000 $251,700 None of the above or not enough information
$200,000
Functional Obsolescence Suppose the subject is a three-story officebuilding that has no elevator in a market that demands an elevator. The cost of the elevator if installed new when built was $75,000, but the cost to install it today is $210,000. Similar properties with the same problem in this market generally sell for $200,000 less than properties with elevators. The improvement is 14 years old, and the physical depreciation would be 2% per year. What is the present value of the loss associated with not having an elevator? $200,000 $210,000 $75,000 None of the above or not enough information.
$200,000
Based on the following cost estimates, what is the reproduction cost of a 2,350-sq.-ft. house with a 1,100-sq.-ft. basement, a 650-sq.-ft. attached garage, and a 300-sq.-ft. wood deck?· Above-grade residence cost = $77 per square foot; · Basement area cost = $18 per square foot; · Garage cost = $18 per square foot; · Wood deck = $11 per square foot $215,750 $212,450 $200,750 $180,950
$215,750
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The cost new of all the long-lived items is: $303,674 $252,250 $316,250 None of the above or not enough information
$252,250
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The cost new of all items is: $251,700 $316,250 $300,000 None of the above or not enough information
$316,250
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The total depreciation from all causes is: $0.00 $35,583 $30,543.85 None of the above or not enough information
$35,583
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The indication of value using the cost approach is: $280,665 $355,665 $316,250 None of the above or not enough information
$355,665
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is depreciated value of the long-lived items? $199,500 $370,500 $570,000 Not enough information to answer the question.
$370,500
You are analyzing a sale in which the mathematical calculation of cash equivalency calls for a $10,000 downward adjustment. However, by use of several paired data sets, you find that the market only recognizes a $4,000 downward adjustment. What is the adjustment for financing? $4,000 $7,000 $10,000 $14,000
$4,000
This Narrative Applies to the Next Two (2) Questions Valuation assignment for the subject property is for both the building and land. · A Comparable Office Bldg owned and sold separately from its site (land), which is subject to a 99-year ground lease. · The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or $50/sf. · Assume the annual ground rent is $150,000, which is consistent with the market · Market Land Capitalization rate is 11%. If no other adjustments were made except for the value of the land, what would be the final adjusted sales price of this comparable? $1,363,636 $4,000,000 $2,636,363.64 $5,363,636.36 None of the above
$5,363,636.36
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The cost new to construct the basement is: $200,000 $50,000 $23,000 None of the above or not enough information
$50,000
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The cost new to construct the garage is: $17,600 $50,000 $56,250 None of the above or not enough information
$56,250
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is the cost new of all the long-lived items? A. $120,000 B. $700,000 C. $570,000 D. Not enough information to answer the question.
$570,000
This Narrative Applies to the Next Question Valuation assignment for the subject property is for both the building and land. · A Comparable Office Bldg owned and sold separately from its site (land), which is subject to a 99-year ground lease. · The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or $50/sf. · Assume the annual ground rent is $250,000, which is consistent with the market · Market Land Capitalization rate is 11%. If no other adjustments were made except for the value of the land, what would be the final adjusted sales price of this comparable? $2,272,727.27 $4,000,000 $2,636,363.64 $6,272,727.27 None of the above
$6,272,727.27
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the total cost new of the long-lived items? $163,250 $243,000 $653,000 None of the above or not enough information to determine the answer.
$653,000
You are asked to appraise a vacant building lot. The neighborhood is about 75% built up. Most lots in the area are from 55 to 65 feet wide; the lot under appraisal is 60 feet. Comparable sales indicate that lots are selling at $120 to $150 per front foot. What is a good estimate of the price range for this lot? $9,000 - $11,000 $7,200 to $9,000 $5,400 to $6,750 $6,600 to $11,250
$7,200 to $9,000
Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age. Using the age-life method, what is the depreciated value of the building? $800,000 $80,000 $720,000 $10,000
$720,000
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the total dollar amount of depreciation for all of the short-lived items? $5,000 $75,000 $163,250 None of the above or not enough information to determine the answer.
$75,000
Functional Obsolescence Suppose the subject is a three-story officebuilding that has no elevator in a market that demands an elevator. The cost of the elevator if installed new when built was $75,000, but the cost to install it today is $210,000. Similar properties with the same problem in this market generally sell for $200,000 less than properties with elevators. The improvement is 14 years old, and the physical depreciation would be 2% per year. What is the cost of the correct item if installed new as of the appraisal date? $200,000 $210,000 $75,000 None of the above or not enough information.
$75,000
Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age. Using the age-life method, what is the total dollar amount of depreciation? 10% $80,000 $720,000 $10,000
$80,000
If the site represents 40% of the total value in a particular neighborhood, how much land value would be allocated from a $200,000 sale of a single family home? $120,000.00 $8,000.00 $80,000.00 $200,000.00
$80,000.00
The appropriate time adjustment is concluded to be an increase of 7% per year compounded. The time adjustment for a comparable sale that sold for $40,000, 2 years ago is: -5796 +$5,796 -2800 5600
+$5,796
Consider a corner vacant lot being appraised and two sales of vacant lots similar to the subject in most respects except for location. Comparable A, a corner lot with frontage on two streets, was sold for $12/sf. Comparable B, an interior lot with frontage on only one street, was sold for $9/sf. What is the adjustment for Comparable B? -25% +25% -33% +33%
+33%
Based on the data in the following example, what is the approximate average annual rate of depreciation? Apartment house sale price $450,000 Estimated site value $ 50,000 Estimated Reproduction cost $500,000 Effective age 20 years 1.5% per year 2.0% per year 1.0% per year 10% per year
1.0% per year
The owner of a two-acre commercial site insists that her property has appreciated by at least 5% per year since she bought it four years ago. As the appraiser, you are asked to factor this into the appraisal or refute her contention. Research in this market revealed the following sales and reseals of comparable properties: Date Price Annual Appreciation Rate 1 Price 1 month ago= $200,000 Price 3 years and 1 month ago= $195,000 % 2 Price 3 months ago= $195,000 Price 2 years and 4 months ago= $187,000 % 3 Price 1 month ago= $210,000 Price 2 years and 4 months ago= $210,000 % 4 Sale 2 months ago= $192,000 Sale 1 year ago= $187,000 % What is the average annualized reconciles appreciation rate on a straight- line basis? Use annual accounting. 1.53% .86% 2% 3.2%
1.53%
Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age. Using the age-life method, what is the total percentage depreciation of the building? 10% 5% .05% 50%
10%
Cost Approach: Residence: 2,000 square feet $100/sf cost to build Basement: 1,000 square feet $50/sf cost to build Garage: 750 square feet $75/sf cost to build Screened porch: 400 square feet $25/sf cost to buid Short-lived items: HVAC $10,000 new effective age of 5 years life expectancy of 25 years Plumbing Fixtures $20,000 new effective age of 5 years life expectancy of 30 years Lighting Fixtures $15,000 new effective age of 5 years life expectancy of 30 years Roof covering $12,000 new effective age of 5 years life expectancy of 25 years Carpet/Vinyl $7,000 new effective age of 5 years life expectancy of 15 years No Deferred Maintenance Long-lived items - effective age of 5 years life expectancy of 70 years Functional obsolescence - $5,000 in depreciation resulting from bad floor plan External obsolescence - None. Market Value of Land = $75,000 The amount of depreciation for the HVAC, Plumbing, Lighting Fixtures, Roof covering, and carpet/vinyl are: 20%, 16.7%, 16.7%, 20%, and 33.3% respectively 20%, 16.7%, 16.7%, 20%, and 14.29% The same as the long-lived items. None of the above or not enough information
20%, 16.7%, 16.7%, 20%, and 33.3% respectively
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the percentage depreciation of the roof? 25% 5% 20% None of the above or not enough information to determine the answer.
25%
Adjustments for financing terms compensate for A comparable that sold with financing below the current market rate A comparable that sold with financing terms that were different than the terms defined in the appraisal report A comparable that sold with financing provided by a commercial bank A comparable that sold with cash to the seller
A comparable that sold with financing terms that were different than the terms defined in the appraisal report
Comparative analysis is A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach The tool used in the cost approach to estimate depreciation to the buildings A tool used to convert income to value in the income approach A term used to describe levels that support construction costs
A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach
Units of comparison Rates are difficult to estimate Classifications are difficult to estimate Are items that represent a breakdown of the price based on a significant variable Are the characteristics that cause the prices paid for real estate to vary
Are items that represent a breakdown of the price based on a significant variable
Property sale prices Are negotiated by appraisers Are negotiated between buyers and sellers Are set by brokers Are opinions
Are negotiated between buyers and sellers
Cost index trending is Estimating current cost based on the original cost extended to the effective date Estimating the reproduction cost of an improvement based on an extraction from a new property sale Estimating the cost of an improvement based on rent Estimating the reproduction cost of an improvement based on statistical inference from grouped data of sales of existing properties
Estimating current cost based on the original cost extended to the effective date
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 Conditions of sale adjustment Expenditures made immediately after purchase adjustment Real property rights conveyed adjustment
Financing terms adjustment
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 Conditions of sale adjustment Expenditures made immediately after purchase adjustment Real property rights conveyed adjustment
Financing terms adjustment
In the cost approach, the valuation of land involves the principle of: conformity Contribution Highest and Best use variable proportions
Highest and Best use
Comparable sales that require no adjustment to the subject are usually sales: Within two years Of properties equal in square footage In the same neighborhood In new developments with nearly identical properties
In new developments with nearly identical properties
The current reproduction cost Includes all items at their historical cost when they were installed new Includes all items at today's prices and with modern materials, including none of the deficiencies caused by changes in building techniques Includes the estimated cost of all items as of the effective date of appraisal with materials as they were installed Includes long-lived items only
Includes the estimated cost of all items as of the effective date of appraisal with materials as they were installed
The subdivision development analysis technique is More accurate than a well-prepared sales comparison analysis Less accurate than the allocation method Is very applicable when the main criteria of value is the number of lots that can be developed out of a parcel of land Is not an accepted technique for the valuation of land
Is very applicable when the main criteria of value is the number of lots that can be developed out of a parcel of land
Land is always valued considering Its highest and best use as improved. Its highest and best use as though vacant. The improvements thereon The likelihood of conversion to commercial zoning
Its highest and best use as though vacant.
In a market value appraisal assignment, the appraiser found prices were increasing at 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 Financing terms adjustments Conditions of sale adjustments Market conditions adjustments Real property rights conveyed adjustments
Market conditions adjustments
The three principal methods of estimating depreciation are Age-life, breakdown, and direct capitalization Age-life, economic extraction, and direct cost allocation Market extraction, economic age-life, and physical breakdown Market extraction, age-life, and breakdown
Market extraction, age-life, and breakdown
This Narrative Applies to the Next Three (3) Questions An appraiser noted the following about a rental home: Needs exterior paint $750 cost to cure; Needs new water heater $250 cost to cure; Has one bath in market for two ($4,000 capitalized rent loss); Has poor floor plan ($2,500 capitalized rent loss); Is located next to a convenience store ($1,200 capitalized rent loss). How much is curable physical deterioration? $250 $750 $4,000 None of the above
None of the above
When reconciling the adjusted sales price of comparables, the greatest emphasis should be given to: The average The median The mode None of the above
None of the above
Depreciation 25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration? What is the percentage depreciation of the decorations? 25% 5% 20% None of the above or not enough information to determine the answer.
None of the above or not enough information to determine the answer.
Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items. What is the dollar amount of depreciation for all short-lived items. $10,000 $60,000 $40,000 Not enough information to answer the question.
Not enough information to answer the question.
When an appraiser researches the market directly with participants and the data has not been previously collected, it is called Secondary data Primary data Useful data Quantitative data
Primary data
The preferred sequence of adjustment is Property rights, conditions of sale, expenditures after sale, financing, market conditions, and physical attributes Property conditions, financing, conditions of sale, expenditures after sale, market conditions, and physical attributes Property rights, conditions of sale, physical attributes, expenditures after sale, financing, and market conditions Property rights, financing, conditions of sale, expenditures after purchase, market conditions, and physical attributes
Property rights, financing, conditions of sale, expenditures after purchase, market conditions, and physical attributes
Which of the following tends to set the upper limit of value? Replacement cost new of the improvements plus the market value of the land. Market data approach Income approach Gross rent multiplier
Replacement cost new of the improvements plus the market value of the land.
Which approach is usually the most applicable for appraising residences? Cost Sales Comparison. Income capitalization Cost and income capitalization
Sales Comparison
Land can be valued by Sales comparison, allocation, extraction, and abstraction Sales comparison, land residual, ground rent capitalization, and determination Sales comparison, land residual, allocation, and extraction Highest and best use, sales comparison, and asset management
Sales comparison, land residual, allocation, and extraction
An open market transaction would not be one: Listed for at least 30 days Listed on a multiple listing service Advertised in local newspapers Sold to a relative
Sold to a relative
The principle of _____________ states that a buyer will not pay more for a site than for another equally desirable one: Anticipation Imbalance Substitution Balance
Substitution
Current listings that have been exposed to the market for a reasonable time Tell the appraiser what the subject's market value cannot exceed Tell the appraiser what the subject's market value is Tell the appraiser what the subject's value in use is Tell the appraiser what the subject's investment value is
Tell the appraiser what the subject's market value cannot exceed
Functional obsolescence is The difference between what you have and what you should have The loss in value due to an oversupply in the market The loss in value due to a property's proximity to an adverse condition The loss in value from the passage of time
The difference between what you have and what you should have
A conditions of sale adjustment reflects The difference in the market on the effective date of the appraisal and the dates of sale of the comparables The differences between the motivations of the seller and buyer on the date of sale of a comparable and the typical motivation of buyers and sellers as described in the definition of value The differences in the sale prices of properties that sold for cash and the ones that sold with financing The differences in sale prices of properties that sold from non-related parties
The differences between the motivations of the seller and buyer on the date of sale of a comparable and the typical motivation of buyers and sellers as described in the definition of value
A market conditions adjustment is applied in some situations because Financing terms have altered prices The market has changed since the comparable property sold It allows the appraiser more flexibility in the indication of value All real estate values increase on a regular basis
The market has changed since the comparable property sold
Which method of estimating cost considers each building component, as installed, including the material and labor? Comparative-unit, also known as price per square foot Unit-in-place Quality survey Contractor trending
Unit-in-place
Adjustments for the property rights conveyed, financing, conditions of sale, and the date of sale are often made to the _______________ of the comparable property. Unit price Actual sale price Square foot price Gross income multiplier
actual sale price
The land valuation technique that relies on an analysis of ratios of land value to property value is Allocation Extraction Interpolation Land residual
allocation
A building that is too large for the neighborhood is an example of functional obsolescence in the form of overimprovement. Another example of functional obsolescence is: a sound building with a worn-out heating system an awkwardly shaped floor plan in an office building a residence abutting a new freeway an older building with modernized elevators
an awkwardly shaped floor plan in an office building
The cost appraoch is not useful for checking value approaches estimating the value of new property appraising older homes in an active market appraising institutional or special-use properties
checking value approaches
Reproduction or replacement cost includes all of the following except direct or hard costs indirect or soft costs fixed and variable expenses of operations elevator shafts
fixed and variable expenses of operations
The most detailed, complex, costly and time-consuming method of cost estimation is the: quantity survey unit-in-place comparative-unit method unit breakdown
quantity survey
Physical units of comparison are a substitute for adjusting for: Location Terms of financing Age Size
size
The cost approach is based on the assumption that: the cost to produce a building plus the cost of the site are an indicator of its value. the cost to produce a building is often more than its value. there is little relationship between cost and value. none of the above.
the cost to produce a building plus the cost of the site are an indicator of its value.