Chapter 11: Real Estate Appraisal

Which of the following is NOT a characteristic of value?

*Cost *Utility *Scarcity *Transferability Cost is not a determining factor in establishing value. Utility, scarcity, and transferability are all characteristics of value.

The term depreciation is best defined as loss in value due to:

*regression. *functional obsolescence. *physical wear and tear. *Any of the above Depreciation is a loss in value for any reason. Also used for the purpose of income tax deductions apportioning the cost of an item over a period.

Effective age is the term used to define the:

age the appraiser believes to reflect the condition of the improvement. Effective age is the age the appraiser believes to reflect the condition of the improvement. A well-maintained house will typically have a lower effective age than the house's actual age (e.g., how old the building is).

The features that usually increase the value of residential property, such as a water view, nice landscaping, quiet neighborhood, etc. are known as __________ .

amenities. An amenity is any feature that contributes to the pleasure or convenience (and therefore the value) of a property.

An appraisal by a certified appraiser is best defined as:

an opinion of value as of a specific date. An appraisal is an opinion of value as of a specified date.

In a properly developed community, values are upheld by:

conformity to land use objectives. The principle of conformity holds that the maximum value of a property is realized when there is social and economic conformity within a neighborhood.

If an appraiser uses more than one approach to value, the process of analysis and weighing of the differing values to determine an opinion of value is known as:

correlation or reconciliation of values. Correlation or reconciliation is the final step in the appraisal process, whereby the appraiser assembles and interprets the gathered data to arrive at a final estimate of value.

To appraise a special-use building, an appraiser would most likely use the:

cost approach. When appraising a special-use building the cost approach will most likely be used.

A home having only one bathroom located next to the kitchen suffers from:

functional obsolescence. Functional obsolescence is loss in value due to inadequate or outmoded design or equipment.

A capitalization rate incorporates the:

return on land and building, and recapture of building. Capitalization rate incorporates return on land and building, and recapture of building.

When applying the market data or sales comparison approach to value, an appraiser would most likely use:

sold properties in the same geographic area. An appraiser looks for similar properties sold within the prior six months that are located near the property being appraised.

Market value is:

the price a willing seller will accept and a willing buyer will pay. Market value is the price a willing seller will accept and a willing buyer will pay.

The cost method of appraisal uses all of the following, EXCEPT:

*square footage *quantity survey *unit in place *plottage reduction (correct answer) Plottage is the combining of two or more parcels to produce greater value and is a consideration in the valuation of undeveloped industrial or commercial land. It is not an appraisal term referring to the cost method.

Sean hired an appraiser to prepare a feasibility study for adding a swimming pool to a 12-unit apartment building. What basic principle of appraising would the appraiser use?

Contribution. The principle of contribution would be used to determine whether the cost of the investment will add sufficient value to the whole property and justify the cost of the addition.

Which of the following type of depreciation is always incurable?

Economic obsolescence. Economic obsolescence is caused by conditions outside the property itself and is beyond the property owner's control. Functional obsolescence may or may not be curable.

Which approach to value would an appraiser be concerned with when calculating the present worth of future benefits?

Income approach. One of the elements an appraiser considers in the income approach is present worth of future benefits.

Which of the following statements is correct?

Scheduled Gross Income is the total amount of income a property could generate if it were 100% occupied for 100% of the year. Scheduled Gross Income is the total annual income that a property COULD generate if it were 100% occupied for 100% of the year. Scheduled income inclues gross income from all sources including rent income, laundry facility income, recreation center visitor fees, storage room rental fees, and so forth.

The method of appraisal that carries the most weight in the valuation of residential property is known as the:

The market data or sales comparison approach is the most effective and most weighted approach in the appraisal of residential property.

The highest and best use of a property is the use that:

complies with zoning and deed restrictions and that results in producing the greatest net return for the owner. The zoning and deed restrictions will always govern the determination of highest and best use. Within the confines of those boundaries, the highest and best use will be the use, which, at the time of the appraisal, is most likely to produce the greatest net return from the property over a given period and complies with zoning and deed restrictions.

Chase bought a lot and constructed a high-quality home valued at $400,000 in a neighborhood of homes valued at $290,000. In appraisal terminology, the home would experience an immediate loss in value due to the principle of __________ .

regression. The principle of regression holds that a valuable property surrounded by properties of lesser value will tend to be worth less than if the property were in a different location.