FIN 3070 Chapter 7 SmartBook Questions
True or false: Replacement cost estimates are typically easier to obtain than reproduction cost estimates
True
______ adjustments focus primarily on the physical and locational differences between the subject and comparable properties. Multiple choice question. -Property -Transactional -Financing -Market value
-Property
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. - 0.52 - .035 - 0.25 - 0.60
- 0.60
Generally, how many approaches to estimating market value are considered by the appraiser for use in a formal appraisal? Multiple choice question. -1 -3 -2
-3
The organization with independent authority over the generally accepted standards of appraisal is the Multiple choice question. -Appraisal Sub-Committee -U.S. Congress -Appraisal Foundation -Appraisal Institute
-Appraisal Foundation
It is often necessary to value the site independent of the improvements to the site. Which of the following approach requires a separate site valuation? Multiple select question. -Cost approach -Comparable sales analysis -Highest and best use analysis
-Cost approach -Highest and best use analysis
Which of the following steps in the evaluation of an appraisal is the most important? Multiple choice question. -Make sure the comparables used are appropriate -Make sure the calculation of adjustments to comparable sale prices are reasonable -Make sure all dollar adjustments are applied first
-Make sure the comparables used are appropriate
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
-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
USPAP standards require that, when using the sales comparison approach, appraisers use how many comparables? Multiple choice question. -USPAP has no requirement regarding the number of comparable sales -As many comparables as necessary but no more than three -always three
-USPAP has no requirement regarding the number of comparable sales
The most common appraisal report is the: Multiple choice question. -Unique Residential Appraisal Report (URAR) Form 1003. -Uniform Residential Appraisal Report (URAR) Form 1004. -United Residential Appraisal Report (URAR) Form 1004. -Unique Residential Appraisal Report (URAR) Form 1004.
-Uniform Residential Appraisal Report (URAR) Form 1004.
A good comparable property is a property that the typical buyer would consider Multiple choice question. -a close substitute for the subject -inferior to the subject -superior to the subject
-a close substitute for the subject
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. -no -an upward -a downward
-a downward
An adjustment for differences in economic characteristics is not usually required when valuing Multiple choice question. -an income-producing property -a leased-fee interest -a personal residence
-a personal residence
Typically, reconciliation of final adjusted sale prices of the comparable properties involves the use of Multiple choice question. -a weighted average -a market value range -a median -an equally-weighted average
-a weighted average
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 downward by the cost of the new roof -adjust the comparable sale price upward 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. -always negative -usually negative -always positive -usually positive
-always positive
Location adjustments to comparable sale prices Multiple choice question. -are infrequently required -are almost always required -require only limited knowledge of the local market
-are almost always required
The concept of market value in formal appraisal practice includes Multiple select question. -buyer and seller acting prudently -a good buy for an investor -most probable selling price -a competitive market
-buyer and seller acting prudently -most probable selling price -a competitive market
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 ________. Multiple choice question. -comparable, downward -comparable, upward -subject, upward
-comparable, downward
The sale of the comparable property included a clause that stated that legal title to the property would revert back to the seller in 20 years. If this comparable is used by the appraiser, the sale price of the __________ would have to be adjusted _________ Multiple choice question. -comparable, downward -subject, downward -comparable, upward
-comparable, upward
Repeat-sale analysis is the process of Multiple choice question. -comparing the subject to the differences in the comparables -comparing similar items from all comparable sales -comparing the sale prices of properties that have sold twice
-comparing the sale prices of properties that have sold twice
Reliable sources of construction cost estimates include: Multiple select question. -construction cost estimating firms -local land use planners -other appraisers -experienced builders
-construction cost estimating firms -experienced builders
The goal of the numerous required adjustments to comparable sale prices is to Multiple choice question. -convert the subject into a closer approximation of the comparable sale -convert each comparable sale into a closer approximation of the subject -decrease the time required to complete the appraisal assignment
-convert each comparable sale into a closer approximation of the subject
Conventional approaches to estimating the market value of real estate include the Multiple select question. -cost approach -sales comparison approach -USPAP approach -income approach
-cost approach -sales comparison approach -income approach
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. -downward, original cost -upward, current market value -upward, original cost -downward, current market value
-downward, current market value
In the cost approach to valuation, which factors of "depreciation" are considered? Multiple select question. -tax depreciation -functional obsolescence -physical deterioration -external obsolescence
-functional obsolescence -physical deterioration -external obsolescence
You recently purchased a home that included a new, (very) large TV that incorporated all the latest technology and also included a large number of high quality speakers. If an appraiser uses your sale as a comparable sale in a appraisal assignment, the sale price of your home will likely Multiple choice question. -have to be adjusted upward -not require an adjustment -have to be adjusted downward
-have to be adjusted downward
Unless the characteristics of the comparable property are ______ to the subject property, adjustments must be made to the sale price of the comparable property. Multiple choice question. -identical -nearly identical -similar
-identical
The required number of comparable sales Multiple select question. -increases as the reliability of comparable sale information decreases -decreases if those comparables already selected are very similar to the subject property -is always greater than three
-increases as the reliability of comparable sale information decreases -decreases if those comparables already selected are very similar to the subject property
The text argues that successful market analysis and research Multiple choice question. -is a process -should come before the subject property is described -should follow the same formula in any market
-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 have been an arms-length transaction -it must be within five miles of the subject property -it must have sold within the last three years -it must be a property that typical buyers would consider a substitute
-it must have been an arms-length transaction -it must be a property that typical buyers would consider a substitute
Valuation of real estate is complicated by the Multiple select question. -high purchase price of real estate -lack of perfect substitutes -lack of observable transactions -immobility of real estate
-lack of perfect substitutes -lack of observable transactions -immobility of real estate
The seller of a comparable property purchased a new home just days after the sale of the comparable was completed. The seller needed cash from the sale of the comparable to purchase the new home. An appraiser using the comparable sale might need to be concerned that seller agreed to sell the comparable for ________ its market value, which would require _________ adjustment to the sale price of the comparable. Multiple choice question. -less than, an upward -more than, a downward -more than, an upward -less than, a downward
-less than, an upward
Potential sources of data from public records include Multiple select question. -local property tax assessors -the local board of Realtors -cities and counties -many agencies of the federal government
-local property tax assessors -cities and counties -many agencies of the federal government
Examples of physical differences that would require an adjustment to the sale price of the comparable include Multiple select question. -lot size -the existence of a pool -time of sale -structure size
-lot size -the existence of a pool -structure size
The rules for making adjustments to the sale prices of comparable properties include which of the following? Multiple select question. -make transactional adjustments in the proper order -always use dollar adjustments -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 -Use market-related adjustments
The value that real estate appraisers generally estimate is market value, which is synonymous to Multiple choice question. -investment value -reproduction cost -value in use -most probably selling price
-most probably selling price
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
Physical deterioration may result from Multiple select question. -a bad building design -neglect -weathering from the elements -ordinary wear and tear
-neglect -weathering from the elements -ordinary wear and tear
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 ________ the subject property the _______ difficult it is to estimate reproduction cost. Multiple choice question. -more unique, less -older, more -older, less
-older, more
The text argues that the most significant errors in appraisal reports typically result from Multiple choice question. -poor selection of comparables -errors in calculating transactional adjustments -errors in calculating property adjustments
-poor selection of comparables
As the final step in arriving at the indicated value of the subject property based on the sales comparison approach, the appraiser must Multiple choice question. -reconcile the final adjusted sale prices of the comparable properties -write a final report -estimate the value of the land separately -calculate the final adjusted sale prices of the comparable properties
-reconcile the final adjusted sale prices of the comparable properties
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. -replacement cost -fair market value -reproduction cost -substitution cost
-replacement cost
The approach typically given the most weight in the appraisal of single-family, detached homes is the Multiple choice question. -sales comparison approach -cost approach -income approach
-sales comparison approach
The economic principle of ______ implies that the value of the subject property is determined by the sale prices of comparable properties. Multiple choice question. -substitution -supply and demand -scarcity
-substitution
Most appraisals of single-family homes are Multiple choice question. -summary reports -narrative reports -restricted reports
-summary reports
Each required transactional and property adjustment is made to Multiple choice question. -the adjusted sale price of the comparable after the prior adjustment -the adjusted value of the subject property -the sale price of the comparable property prior to any adjustments
-the adjusted sale price of the comparable after the prior adjustment
The subject property has a very nice pool. The comparable property does not have a pool. As a result, Multiple choice question. -the comparable's sale price would have to be adjusted upward -the subject property's value would have to be adjusted downward -the comparable's sale price would have to be adjusted downward
-the comparable's sale price would have to be adjusted upward
Most appraisal assignments entail estimating Multiple choice question. -the cost to construct the property -the current market value of a property -the future market value of a property
-the current market value of a property
If you know the value of one share of common stock in Simon Property Group (SPG), you know the value of all SPG shares because Multiple select question. -the share price is continuously revealed throughout the trading day -SPG shares trade in a liquid private market -SPG shares trade in a liquid public market -one share is a prefect substitute for another
-the share price is continuously revealed throughout the trading day -SPG shares trade in a liquid public market -one share is a prefect substitute for another
Which of the following should be included in the identification of the appraisal problem? Multiple select question. -the type of value to be estimated -the data that will be used to perform the appraisal -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. -there was favorable seller-provided financing -conventional, market rate financing is involved -the property was purchased by the buyer with all cash
-there was favorable seller-provided financing
From the appraiser's point of view, replacement cost estimates are preferred over reproduction cost estimates because Multiple select question. -they are less time consuming to obtain -they are more detailed -it is often impossible to build an exact replica of the subject property
-they are less time consuming to obtain -it is often impossible to build an exact replica of the subject property
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 comparable property -to construct a building of equal utility to the subject property -to build an exact replica of the subject property
-to build an exact replica of the subject property
Required sale price adjustments are divided by USPAP into two major categories including Multiple select question. -transactional adjustments -market adjustments -property adjustments -financing adjustments
-transactional adjustments -property adjustments
Generally, a current estimate of land value plus the reproduction or replacement cost of the building will set the ______ value of the property. Multiple choice question. -upper limit to the -average -lower limit to the -median
-upper limit to the
Each approach to valuation has its strengths and weaknesses. In arriving at a final opinion of value, the appraiser should Multiple choice question. -emphasize the approach that has the most available data -take a simple average of the market values indicated by the three approaches -choose the approach currently most popular with lenders -weight the strengths and weaknesses of each approach, as well as the reliability of the data collected for each approach
-weight the strengths and weaknesses of each approach, as well as the reliability of the data collected for each approach
The final estimate of market value is usually a ______ average of the indicated values from the different approaches. Multiple choice question. -moving -simple -weighted
-weighted
If all three approaches to value are used by the appraiser, the appraiser must reconcile ______________ indicated values
3
True or false: The required adjustment for difference in legal estates is typically a relatively simple adjustment.
False
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
"MLS" stands for
Multiple Listing Service
True or false: The final value number produced by reconciliation of the resulting estimates from two or more approaches to value is termed the final estimate of value.
True
____________ adjustments focus on the terms of the deal and the motivation or bargaining ability of the participants.
Transactional
True or false: A comparable property having a different legal estate than the subject property should generally not be used as a comparable.
True
True or false: A poor architectural design is an example of functional obsolescence.
True
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
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
The most reliable approach to estimating land values is usually the Multiple choice question. -cost approach -sales comparison approach -income approach
sales comparison approach