REE chapter 7

A comparable property sold 15 months ago for $105,000. If the appropriate adjustment for market conditions is 0.25% per month (without compounding), what would be the adjusted price of the comparable property? Multiple Choice $105,262.50 $105,393.80 $108,937.50 $144,375

$108,937.50

Suppose that an income producing property is expected to yield cash flows for the owner of $150,000 in each of the next five years, with cash flows being received at the end of each period. If the opportunity cost of investment is 8% annually and the property can be sold for $1,250,000 at the end of the fifth year, determine the value of the property today. Multiple Choice $304,704.00 $1,449,635.50 $1,481,143.98 $2,000,000.00

$1,449,635.50

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of total claims?

chapter 7 bankruptcy

Although otherwise very similar to the subject property, the back yard of a comparable sale provides a view of a small, clean lake. The sale price of the ____________ needs to be adjusted ________. comparable, downward subject, upward comparable, upward

comparable, downward

If an important characteristics of the comparable property is superior to the subject property, the sale price of the __________ property must be adjusted _______. Multiple choice question. subject, upward subject, downward comparable, downward comparable, upward

comparable, downward

Reliable sources of construction cost estimates include: Multiple select question. construction cost estimating firms experienced builders other appraisers local land use planners

construction cost estimating firms experienced builders

Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause?

conventional home loan

Which of the following approaches for calculating the market value of a property involves estimating the dollar value associated with replacing the property new, as well as determining the loss in value due to physical, functional, and external obsolescence? Multiple Choice income approach sales comparison approach cost approach investment approach

cost approach

For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off?

defeasance prepayment penalty

Appraisers rely on recently completed transactions of similar properties to guide their selection of the cap rate to be used to value a single property. The method of estimating a cap rate from a series of comparable properties is more commonly referred to as:

direct market extraction

If a comparable property sale included some valuable personal property, the sale price of the comparable is usually adjusted ______ by the ______ of the personal property Multiple choice question. upward, current market value upward, original cost downward, original cost downward, current market value

downward, current market value

The formal appraisal process involves eight steps, the first of which is to Multiple choice question. identify the appraisal problem perform data analysis collect data and describe property determine value of the land

identify the appraisal problem

Suppose that an appraiser has just completed her analysis using the cost approach to valuation. She has determined that the reproduction cost of the subject property is $370,000. If the added value of the site was $80,000 and accrued depreciation amounted to $50,000, what was the estimated value of the building using the cost approach? Multiple Choice $320,000 $370,000 $400,000 $500,000

$400,000

Conventional approaches to estimating the market value of real estate include the Multiple select question. income approach USPAP approach cost approach sales comparison approach

income approach cost approach sales comparison approach

The market determined interest rate that is the "moving part" in an adjustable rate mortgage is more commonly referred to as the:

index rate

At the conclusion of the traditional sales comparison approach to valuation, the appraiser evaluates and reconciles the final adjusted sale prices into a single value for the subject property. This single value is commonly referred to as: Multiple Choice indicated value. investment value. transaction value. replacement value.

indicated value

The text argues that successful market analysis and research Multiple choice question. is a process should follow the same formula in any market should come before the subject property is described

is a process

In order for the sale price of a property to be considered a good comparable for the subject, Multiple select question. it must be a property that typical buyers would consider a substitute it must have sold within the last three years it must have been an arms-length transaction it must be within five miles of the subject property

it must be a property that typical buyers would consider a substitute it must have been an arms-length transaction

Valuation of real estate is complicated by the Multiple select lack of perfect substitutes high purchase price of real estate lack of observable transactions immobility of real estate

lack of perfect substitutes lack of observable transactions immobility of real estate

The highest and best use of a property must be Multiple select question. unchanging over long periods of time legally permissible financially feasible physically possible

legally permissible financially feasible physically possible

A house sold for $650,485 five months ago. A very comparable house sold yesterday for $670,000. The implied (non-compounded) monthly rate of increase in property prices is ______ percent. Multiple choice question. 0.25 0.52 0.60 .035

.60

In certain states, such as the state of Florida, the transfer of title to the lender does not occur until the borrower defaults. These states are referred to as:

lien theory states.

When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected. While borrowers can recover from this reduction in their credit score, if a default goes into the borrower's records it will remain for:

7 years

Although there are multiple approaches to estimating market value, there is only _____ true market value.

1

Select all that apply Which of the following statements about market value are true? Multiple select question. Market value and transaction price are identical The fair market value is the most probable selling price The specific bundle of rights associated with the property's ownership affects fair market value

1. The fair market value is the most probable selling price 2. The specific bundle of rights associated with the property's ownership affects fair market value

Which of the following are not considered representative sales; thus generally unusable as a comparable sale for a market value estimate? Multiple select question. An arms-length transaction following the listing of the property with a local Realtor A voluntary sale in lieu of foreclosure A sale to a family member A sale forced by a local property tax jurisdiction

A voluntary sale in lieu of foreclosure A sale to a family member A sale forced by a local property tax jurisdiction

Potential sources of data from public records include Multiple select question. many agencies of the federal government local property tax assessors cities and counties the local board of Realtors

many agencies of the federal government local property tax assessors cities and counties

To the extent the comparable property is physically lacking in some respect to the subject, the sale price of the comparable Multiple choice question. must be higher than the value of the subject property must be adjusted upward must be adjusted downward

must be adjusted upward

Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be:

negatively amortizing.

The sale of a single-family, detached home that is currently rented to a music studio should not be used as a comparable property if the subject property is a single-family, detached home Multiple choice question. occupied by the owner rented to a provider of music lessons rented to a law firm

occupied by the owner

The ordinary and necessary expenditures owners expect to incur during the next 12 months that do not materially add value, but keep the property competitive in its local rental market are more commonly referred to as:

operating expenses

When using discounted cash flow analysis for valuation, an appraiser will prepare a cash flow forecast, often referred to as a:

pro forma

Required sale price adjustments are divided by USPAP into two major categories including Multiple select question. property adjustments transactional adjustments financing adjustments market adjustments

property adjustments transactional adjustments

To complete the sales comparison approach, the appraiser ______ the adjusted sale prices of the comparable properties to obtain a single indicated value for the subject. Multiple choice question. averages equally weights reconciles

reconciles

The estimated cost to build a structure with equal functionality (utility) as the existing structure using modern methods is generally referred to as the Multiple choice question. substitution cost fair market value reproduction cost replacement cost

replacement

The most reliable approach to estimating land values is usually the Multiple choice question. sales comparison approach income approach cost approach

sales comparison approach

Most appraisers adhere to an "above-line" treatment of capital expenditures. This implies which of the following?

Capital expenditures are subtracted in the calculation of net operating income.

Most appraisers would say that report writing is one of the most important functions that they perform. Assume that an appraiser is putting together a report for a single family home. Which of the following reporting options would be the most commonly used in this scenario? Multiple Choice self-contained appraisal report summary appraisal report restricted appraisal report oral appraisal report

summary appraisal report

Most appraisals of single-family homes are Multiple choice question. narrative reports restricted reports summary reports

summary reports

The organization with independent authority over the generally accepted standards of appraisal is the Multiple choice question. Appraisal Institute Appraisal Sub-Committee Appraisal Foundation U.S. Congress

Correct Answer Appraisal Foundation

The value estimate reported in an appraisal report or restricted appraisal report is valid for one ______ Multiple choice question. week month year day

Day

The current market interest rate on fixed rate, long-term mortgage for single-family homes is 4%. To help sell her home, the seller of a comparable sale provided long-term, fixed rate financing to the buyer at an interest rate of 3%. (that is, the seller was also the lender). This would required __________ adjustment to the sale price of the comparable Multiple choice question. a downward no an upward

Downward

True or false: The fact that the last sale of a house was made by the seller to avoid an almost certain default and foreclosure likely had no effect on the sale price

False

True or false: The required adjustment for difference in legal estates is typically a relatively simple adjustment. True false question. True False

False

What are the two values considered during a highest and best use (HABU) analysis? Multiple select question. HABU as though newly constructed HABU as though site is vacant HABU as improved

HABU as though site is vacant HABU as improved

The subject property has a very nice pool. The comparable property does not have a pool. As a result, Multiple choice question. the subject property's value would have to be adjusted downward the comparable's sale price would have to be adjusted upward the comparable's sale price would have to be adjusted downward

the comparable's sale price would have to be adjusted upward

MLS stands for

Multiple Listing Service

The proportion of potential gross income not collected, even when supply equals demand in the rental market, is more commonly referred to as the:

Natural vacancy rate

The cap rate is an important metric that investors use to analyze the state of commercial real estate markets. When interpreting cap rate movements, an increase in cap rates over time would indicate that:

the property value has decreased

Which of the following should be included in the identification of the appraisal problem? Multiple select question. the data that will be used to perform the appraisal the type of value to be estimated the effective date of the valuation the intended use of the appraisal

the type of value to be estimated the effective date of the valuation the intended use of the appraisal

A comparable sale price should be adjusted for the terms of sale when Multiple choice question. the property was purchased by the buyer with all cash there was favorable seller-provided financing conventional, market rate financing is involved

there was favorable seller-provided financing EXPLAINED- Transactional Adjustments: Property rights conveyed Financing terms Conditions of sale Expenditures made immediately after purchase Market conditions

Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between:

15-30 years

Reproduction cost is defined as the cost Multiple choice question. to construct a building of equal utility to the comparable property to build an exact replica of the subject property to build an exact replica of the comparable property to construct a building of equal utility to the subject property

to build an exact replica of the subject property

True or false: Although most appraisal assignments involve the valuation of properties with improvement (buildings) on the land, appraisers often must separately value the land. True false question. True False

true

The final estimate of market value is usually a ______ average of the indicated values from the different approaches. Multiple choice question. simple moving weighted

weighted

Suppose that we observe two comparable properties that have each sold twice within the past four years. Property A sold 24 months ago for $500,000 and Property B sold 48 months ago for $575,000. If the two properties were sold today at $425,000 and $465,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis. Multiple Choice -0.56% -0.51% 0.61% 0.68%

Percentage change in prices= (New price - old price)/Old price = (425000-50000)/500000= -75000/500,000 =-15% Monthly percentage = % change in price / number of months Monthly percentage= -15%/24= -0.625 % Property B: Percentage change in prices= (New price - old price)/Old price = (465000-575000)/575000 = -110000/575000 = -19.13043 or -19.13% Monthly percentage= -19.13043% /48= -0.3986% or -0.40% Average weight= ( Monthly percentage A + Monthly percentage B)/2 As they have equal weightage= -0.6250% -0.3986%)/2 = -0.5118% or -0.51%

The approach most relied on to value single-family homes is the Multiple choice question. income approach sales comparison approach land value approach cost approach

Sales comparison approach

The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT: A. The power of sale treatment is faster than judicial foreclosure. B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale.

The foreclosed property is typically sold through a public auction administered by the court.

A comparable property having a different legal estate than the subject property should generally not be used as a comparable. True false question. True False

True

True or false: A comparable property having a different legal estate than the subject property should generally not be used as a comparable. True false question. True False

True

True or false: Step 6 involves applying the three approaches to valuation. True false question. True False

True

True or false: The goal of market analysis is generally to develop an understanding of the factors that affect demand and and supply in a particular market and use that knowledge to forecast how values in that market are likely to change over time.

True

True or false: USPAP addresses the ethical obligations of appraisers and provides the minimum appraisal standards that most be followed by all appraisers True false question. True False

True

Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)? Multiple Choice

Truth-in-Lending Act (TILA)

The rules for making adjustments to the sale prices of comparable properties include which of the following? Multiple select question. Use market-related adjustments always use dollar adjustments make transactional adjustments in the proper order Adjust the sale price of the comparable toward the subject property

Use market-related adjustments make transactional adjustments in the proper order Adjust the sale price of the comparable toward the subject property

Both the buyer and seller of a home that recently sold knew the house needed a new roof. The buyer replaced the roof immediately after purchasing the home. An appraiser using this sale as a comparable should Multiple choice question. adjust the comparable sale price upward by the cost of the new roof adjust the comparable sale price downward by the cost of the new roof not use the sale as a comparable even if it is highly similar in physical characteristics to the subject property

adjust the comparable sale price upward by the cost of the new roof

Adjustments made to the sale price of comparable properties for expenditures made after purchase are Multiple choice question. usually negative usually positive always negative always positive

always positive