Texas Real Estate Appraisal

A residential income property under appraisal has a potential gross income of $200,000. The effective gross income is $170,000, reflecting a 15% vacancy and loss rate. After constructing the operating statement, the appraiser arrives at a figure of $105,000 for total expenses. Which calculation represents the NOI for this property?

$170,000 - $105,000 = $65,000 The NOI is the amount remaining after total expenses are deducted from effective gross income.

What is 5/8 ÷ 1/4?

5/2

What is 40% of 200?

80

Suppose an appraiser tells a seller a ballpark range of value for the listed property. What is this considered, per USPAP?

A formal opinion of value Per USPAP, an oral quote or range of numbers stated by a licensed professional appraiser constitutes rendering an opinion of value. And this is against ethical standards.

What is a bound?

A physical feature that defines the boundaries of the land

An appraiser is valuing a large piece of acreage with no comparables available. She will use the sales price and subtract the cost of improvements less depreciation to arrive at a value for the land. What method is she using?

Abstraction

To determine property value with the cost approach, the appraiser subtracts the ______ from the reproduction/replacement cost and then adds the site value.

Accrued Depreciation

Real estate licensee Sandy wants to know the median square footage of single-family homes in River Heights so she can compare it to the size of the homes she tends to work with. Which of these would be the population that she is studying?

All single-family homes in River Heights

What is a base line, as used in the rectangular government survey system?

An east-west line used as a reference point Base lines run east-west, and principal meridians run north-south. Both are used in the rectangular survey system.

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

Both curable and incurable items of depreciation

When the land value is known, but the building value is unknown, the ______ technique can be used.

Building Residual

With which of the methods used to measure depreciation must the appraiser use comparable properties with and without the same defect to help determine the rental value difference caused solely by the defect?

Capitalized value With the capitalized value method, the appraiser calculates the loss in income—due to depreciation—by comparing the income that similar properties produce.

When working with commercial properties, the appraiser develops an estimate of market rent by ______ and comparing rents across the subject and comparable properties.

Converting rental income to annual dollars per square foot

From what do appraisers usually derive cost data?

Cost handbooks Appraisers will often use a cost handbook, such as Marshall and Swift, to verify current costs. They may also base their estimate on what local contractors are charging.

Which federal entity sets the recommendations for R-value of insulation?

Department of Energy The U.S. Department of Energy bases its R-value recommendations on the climate, heating and cooling needs, and energy prices of specific ZIP codes.

How is gross rent multiplier calculated?

Divide the sales price of comparable properties by the gross monthly rent

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

Exterior‐Only Inspection Residential Appraisal Report (Form 2055) Often called a "drive by," the scope of work the client requires includes fewer steps than other types of reports.

With ______, the property owner has no control over the issue.

External obsolescence

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

Formal Appraisal

Kobi, an appraiser, is appraising a single-family home used for a rental. If he wants to use the income approach, he will likely use ______.

GRM

The ______ method of land valuation converts the amount of yearly income a site will produce into a value using a capitalization rate.

Ground rent capitalization When this method is used, the appraiser must consider lease terms (amount of time remaining, rent paid, and other conditions) in order to compute an accurate and complete appraisal.

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

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

Where on the Uniform Residential Appraisal Report is information about the building's exterior and interior materials and condition noted?

Improvements The Improvements section includes ratings of the property's overall condition, interior and exterior features, the foundation, attic, car storage, and any physical deficiencies or adverse conditions that would affect the property value.

Which approach to finding value would licensed appraiser Christina probably weigh most heavily when appraising a three-unit rental property?

Income

Which of the following approaches to value uses a capitalization rate?

Income approach

Which of these should tenants keep in mind regarding trade fixtures?

Installation and removal should not cause damage to the property. The property shouldn't be damaged when trade fixtures are installed or removed. If damage occurs, the tenant is responsible for the repairs. These fixtures only become the landlord's property if the tenant doesn't remove them by the end of the lease.

Government regulation of a property that deprives the landowner of the economic value of the property without compensation from the government is called

Inverse condemnation Inverse condemnation occurs when government takes private property, either physically or by the effect of regulation on the property value, without offering the owner just compensation as is required by eminent domain.

Which of the following statements is true about the allocation method?

It provides a broad indicator of market value

Which of the following statements about a license is true?

Licenses may be revoked by the owner at any time, unless a termination date has been specified by contractual agreement

If a comparable property is situated in a more desirable neighborhood, for what feature will an appraiser adjust the sales price when using the sales comparison approach?

Location

The mean, median, and mode are called ______.

Measures of central tendency

Which two operating statement ratios will equal one when added together?

Operating expense ratio and net income ratio

An appraiser uses ______ to compare how much of a subject property's income is used for operating expenses with what is expected or standard for the property type.

Operating statement ratios The operating statement ratios provide a perspective on the relationship between expenses and income that can be compared to similar properties.

Which of the following formulas represent the operating expense ratio?

Operative Expenses / effective gross income

If an appraiser using the sales comparison approach adjusts for a change in market value of 5% due to average property depreciation, what type of adjustment is the appraiser making?

Percentage adjustment

In which type of framing are the framing members much larger and spaced much farther apart?

Post-and-beam

Which of the following describes the amount of income a property can produce if it's fully occupied and earning market rent?

Potential gross income Appraisers use potential gross income as the basis for determining an opinion of value for some types of income property.

Thinking about the five legal tests of a fixture, what does the R in MARIA stand for?

Relationship of the parties Method of attachment Adaptability Relationship of the parties The intention of the party Agreement between the parties

Gabrielle is an appraiser. The property owner has indicated that the home she is appraising has central air conditioning. When she does a visual inspection of the property, in which of the following areas would she most likely find the central air unit, if it exists?

Right outside the home

Which type of site provides better natural drainage?

Sloped Site

What's a fraction?

Something that's divided into a number of equal parts

With which of the four methods used to find the reproduction cost of a structure does the appraiser multiply the cost per square foot of a recently built comparable structure by the number of square feet in the subject building?

Square-foot Generally, appraisers use this method to estimate construction costs.

Which of these is a vertical component used in wall framing?

Stud A stud is a vertical component used to frame a wall. Studs make up the roofing rafters, as well.

Along with property ownership, rights are granted to use the land's physical components. Which right allows a property owner to use or sell the underground resources, such as natural gas and minerals?

Sub-surface

The _________ measures the cost to reproduce a property, including land acquisition and construction costs.

The cost approach

For most residential properties, the highest and best use of the property is relatively obvious. What is it?

The current use

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

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

An expense stop clause in a lease is considered a benefit for ______.

The lessor Because an expense stop clause allows a lessor to control operating costs, it's considered a benefit to the lessor when determining lease interest values.

Why would an appraiser use gross income multiplier, direct capitalization, or yield capitalization—rather than gross rent multiplier—to determine the value of an income property?

The property has income from other sources in addition to rent.

Which of the following is included in an appraisal?

The property's probable monetary value on the open market

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

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

When Edmund died, he left several properties to his heirs. He owned a grocery store and a campground outright, and a strip mall that was held in a living trust. Which of the properties, if any, did NOT have to go through the probate process after his death?

The strip mall

Your clients, Julie and Doug Stark, are selling 100 acres of rural forest land. The appraiser has noted in his report there's evidence that the land is the habitat of several endangered species. He also believes the use of the land will be limited because of the large area of wetlands. Which of the following is true?

These are both environmental concerns that can directly impact the property's appraisal value.

Ellen is a state-certified appraiser who's been hired to perform an appraisal on a home that has an accepted purchase offer. What is the most common purpose for Ellen's appraisal in this situation?

To inform the buyer's lender of the value of the property that will be acting as security

What is the purpose behind Appraiser Independence Requirements?

To protect appraisers' ability to assess an accurate value for a property by avoiding outside pressure or influence

For what do real estate professionals use a comparative market analysis?

To recommend an appropriate listing price

Denny inherited his uncle's lakefront home. Denny was excited to sell the home, since there were hardly any similar properties on the market. Denny visited the property and saw that it was in extreme disrepair and uninhabitable in its current state. What effect will this have on its value?

Value will be pushed downward

Lessee Margo is paying rent that's above market rent to her landlord, Wayne. This is a benefit to ______.

Wayne

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

Yes, if it's for the public good. While it's not the intent of police power, personal rights are sometimes sacrificed in the name of the public good.

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

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