Ch 10 Book Quiz (Value)

Using a 12% cap rate, an apartment complex is valued at $480,000. What will the same complex be valued at with a 10% cap rate? A. $576,000 B. $400,000 C. $520,000 D. $440,000

A. $576,000 Using the power T __________X____________ 480000 | 12% $480,000X12%=57600 therefore 57600 ---------------------------------- x | 10% $57600/10% = 576000

Which of the following can be used to figure accrued depreciation? A. Age-life or straight line method B. Economic obsolescence C. Net Operating income D. Reserve for replacement method

A. Age-life or straight line method

Which of the following is used when estimating value using the gross rent multiplier method? A. Market rent of the subject property B. Correlation technique C. Operating expenses of comparable properties D. Vacancy and collection losses

A. Market rent of the subject property

In the appraisal of residential property, the cost approach is most reliable in the case of: A. a new home B. older home C. multi-family home D. all of the above

A. a new home

In the sale comparison approach, the value of a feature present in the subject property but NOT in the comparable would be: A. added to the selling price of the comp B. subtracted from the selling price of the comp C. omitted from the final estimate D. subtracted from the value of the subject property

A. added to the selling price of the comp

In attempting to estimate the market value of a house he is listing, a licensee discovers that the owner paid $310,000 for the house 6 years ago. What effect will this number have on this estimate? A. it will have no effect at all B. it will tend to raise his estimate C. it will tend to lower his estimate D. a lower limit is placed on his estimate

A. it will have no effect at all

The actual selling price can be described as which of the following? A. market price B. market value C. market cost D. appraised value

A. market price

On an operating statement, the allowance for items that have a useful life of more than one year is called: A. Accrued depreciation B. Reserve for replacements C. a variable operationg expense D. dept service

B. Reserve for replacements

When selecting comparables for a comparison approach to value, it is a good practice to: A. choose as many as you can find B. place emphasis on the ones that require the fewest adjustments. C. select only the sales that were within a very short distance from the subject property D. pay particular attention to the one sale that was much lower in price.

B. place emphasis on the ones that require the fewest adjustments.

Which of the following approaches to value estimation is based on the calculation of construction costs at current prices of a property that serves the same purpose or function as an original property? A. Sales comp B. replacement cost C. income D. Reproduction cost

B. replacement cost

In appraising, the term location is closely associated with: A. Orientation B. situs C. correlation D. key lot

B. situs

When estimating the capitalization of a property: A. the lower the cap rate the lower the estimated value B. the lower the cap rate the higher the estimated value C. the hight the cap rate, the higher the estimated value D. the cap rate has no effect on value

B. the lower the cap rate the higher the estimated value

The cost approach would be the least reliable method to use in estimating the value of a seventy year old building because of: A. changes to building codes B. the problem associated with estimating depreciation C. changes in the cost of labor and materials D. the impact of new safety standards

B. the problem associated with estimating depreciation

The method of estimating proposed construction costs by adding the costs of all the building's component parts is call the: A. square foot method B. unit in place method C. quantity survey method D. summation method

B. unit in place method

An investor wants to purchase a twenty unit apartment complex. Ten units rent for $300 per month, five for $325, and five for $350. Vacancy and collection losses are estimated to be five percent of the potential gross income and operating expenses are expected to be $31,950. Using a cap rate of 10%, what should the investor pay for the property? A. $453,900 B. $407,250 C. $380,500 D. $400,000

B: $407250 --------------------------------- step one - find PGI (Potential gross Income) (10 units X $300 X 12 months)=$36,000.00 (5 units X $325 X 12 months)= $19500.00 (5 units X $350 X 12 months)= $21,000.00 ------ total PGI 36,000 21,000 19,500 ======= 76,500 vac and losses = 5% PGI 76,500 X 5% = 3825 EGI = PGI - vac and loss EGI = 76500-3825 EGI = $72,675.00 NOI = EGI - OPEX NOI = 72675-31950 NOI = 40725 V = NOI/CAP V = 40725/10% V = 407250

Which of the following would not be considered an operating expense of an apartment building? A. Manager's salary B. Utlities C. Collection losses D. Repairs and reserve for replacements

C. Collection losses

In the capitalization approach which of the following steps comes first: A. Estimating operatiing expenses B. Selection of an appropriate cap rate C. Determining potential gross income D. Subtraction of vacancy and collection losses

C. Determining potential gross income

The most difficult depreciation to correct would be: A. functional B. Physical C. Economic D. Accelerated

C. Economic

The gross rent multiplier produces the best results when used to estimate the value of: A. an office building B. a warehouse C. an apartment building D. a shopping center

C. an apartment building

After a neighborhood experiences a period of growth, expansion and rising property values; the next phase of the change that it will experience is: A. progression B. decline C. stability D. balance

C. stability

When using the sales comparison approach the appraiser would utilize data derived from: A. acquisition cost to present owner B. foreclosue sale C. cubic foot method D. data from MLS

D. data from MLS

A key lot is: A. the most desireable lot in e residential neighborhood B. one located at the end of a culdesac C. the one in the center of the subdivision D. essential plottage

D. essential plottage

In the cap approach to establishing value, the selection of the cap rate to use reflects all of the following EXCEPT: A. an investment return currently sought by investors B. how much net income the property will produce C. how long the property will continue to produce the projected net D. how soon the property can be resold for profit

D. how soon the property can be resold for profit

Karlie Sinclair has paid $300,000 for a new house in a neighborhood of properties that are worth a similar price. Now she is considering some major improvements to both the house and lot, that would cost $200,000. Which principle of valuation might suggest that this is not a wise move? A. highest and best use B. anticipation C. substitution D. progression and regression

D. progression and regression

When a property's value increases due to the impact of physical, governmental, economic, and social forces, that increase in value is called: A. principle of anticipation B. correlation C. recapture D. unearned increment

D. unearned increment