fin 353 test 3 ole miss

Suppose that we observe two comparable properties that have each sold twice within the past two years. Property A sold 24 months ago for $350,000 and Property B sold 18 months ago for $325,000. If the two properties were sold today at $375,000 and $340,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis.

.28%

In using transaction data to determine the current value of the subject property, it is important to recognize that general market conditions may have changed since a particular transaction occurred. Property A sold 18 months ago for $235,000 and Property B sold 12 months ago for $215,000. If the two properties are priced today at $239,500 and $222,300, respectively, what is the average monthly rate of increase that can be used to adjust comparable prices for changes in market conditions?

0.19%

Suppose that we observe two comparable properties that have each sold twice within the past two years. Property A sold 24 months ago for $350,000 and Property B sold 18 months ago for $325,000. If the two properties were sold today at $375,000 and $340,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis. (Use straight line growth with no compunding, for example if the price difference is $12,000 in one year the property appreciated a $1,000 per month. If the initial price was $100,000 then the growth was 1% per month.)

0.28

Given the following information, determine the value of having an additional bathroom. Assume that the comparable properties are similar in all other attributes besides those listed in the table below. Comparable 1Comparable 2Comparable 3Comparable 4Time soldToday1 year agoTodayTodayBathrooms1122Size3500 sq. ft3000 sq. ft.3500 sq. ft3000 sq. ft.Sale price$150,000140,000$160,000$156,000

10,000

The subject is located in a market where lenders are making commercial loans on properties like the subject at 8.5% per year with monthly payments and a 20-year amortization with a 75% loan-to-value ratio. The equity dividend rate ( RE) in this market is 10%. What is the overall capitalization rate?

10.31%

Given the following information, determine the value of having an additional 500 sqft. Assume that the comparable properties are similar in all other attributes besides those listed in the table below. Comparable 1Comparable 2Comparable 3Comparable 4Time soldToday1 year agoTodayTodayBathrooms1122Size3500 sq. ft3000 sq. ft.3500 sq. ft3000 sq. ft.Sale price$150,000140,000$160,000$156,000

16,000

A property sold for $2,345,000. The net operating income ( NOI) is $255,000, and the expenses are 35% of the effective gross income ( EGI). What is the effective gross income multiplier ( EGIM)?

5.98

How much is $12,000 paid per year for five years worth today if the discount rate is 4.0%?

53,421.87

A property recently sold for $444,000 (cash equivalent) and had $65,700 in potential gross income ( PGI) for the following year. The expenses were 33% of the effective gross income ( EGI). The vacancy and collection losses were estimated at 5%. What is the overall capitalization rate ( RO)?

9.42%

Elements of comparison are the

Characteristics of properties that cause their prices to vary

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

replacement cost

Is the cost associated with the construction of a similar building using modern construction materials and techniques

The preferred sequence of adjustments is

Property rights, financing, conditions of sale, expenditures after purchase, market conditions, and physical attributes

The cost approach is typically very effective when

The improvements are newer and represent the highest and best use of the site

One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a graduated or step-up lease?

The lease establishes a schedule of rental rate increases over the term of the lease.

Which of the following is true regarding the valuation of land?

The sales comparison approach is preferable for estimating the market value of a site.

If an appraiser is estimating the land value of a parcel of land that has improvements on it, the land must be valued a)On the basis of the use implied by the improvements b) As of the date of construction c) As if the improvements were not there d) As if the zoning could be changed to permit the current use

c

The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as

capital expenditures

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

indicated value

How does a projected decline in value and income affect capitalization rates?

it raises them

In a market value appraisal assignment, the appraiser found that prices were increasing at a rate of 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

market condition adjustments

The dollar amount by which total rent exceeds base rent under a percentage lease for retail is referred to as:

overage rent

The subject property was built in 2010, and a comparable property was built in 1995. Assuming that new buildings are preferred over old ones, the adjustment for age of improvement in this case would be

positive

Which of the following is not a variable expense?

real estate taxes

The economic principle stating that the value of a property tends to be set by the price that would be paid to acquire a property of similar utility and desirability is

substitution

Items that must be considered in the valuation of land include

topography

Potential gross income ( PGI) less vacancy and collection losses is known as

Effective gross income (EGI)