Ch 16 test

If the potential gross rental income from a property is $20,000, the vacancy rate is 5 percent, and the additional income from the laundry facilities and extra storage is $700, what is the effective gross income?

$19,700

An apartment building has $65,000 in potential gross annual income. The vacancy rate is estimated at 5%, total operating expenses are $29,000, and the capitalization rate is 9%. Using the income approach, what is the value of the building?

$363,889.

What is the GRM for a residential duplex with a selling price of $234,000 if the monthly rent for each unit is $925?

126.5

If a property's annual net income is $24,000 and it is valued at $300,000, what is its capitalization rate?

8%

All of the following statements are true about loss in value due to obsolescence EXCEPT: O a. An unattractive storefront window represents curable functional obsolescence. O b. A chemical plant located across the street from a private residence represents external obsolescence. O C. A larger property next door sold for 20 percent below the listed price. O d. Extra-large load-bearing columns in a 30-year-old commercial building represent incurable functional obsolescence.

A larger property next door sold for 20 percent below the listed price.

If the replacement cost shows a higher value than the appraised value, which of the following has MOST probably occurred?

Accrued depreciation.

The difference between the cost of replacement and current valuation of a single-family residence is equal to:

Accrued depreciation.

The gross income (rent) multiplier is calculated by dividing the sales price by the

Annual gross income.

The purchase and putting together of several pieces of land is BEST called:

Assemblage/plottage.

An appraisal is needed to judge all of the following EXCEPT: O a. Book value. O b. Replacement value. O c. Market value. O d. Loan value.

Book value.

In an old retail building, which of the following would most likely be a source of incurable functional obsolescence?

Closely-spaced internal support columns

Market value is most closely related to:

Comparable price.

Of the following, which type of value equals the actual market value? O a. Book value. O b. Assessed value. O c. Comparable value. O d. Insurance value.

Comparable value.

Market value could be determined best by considering which of the following?

Comparison, income, replacement.

Capitalization is a process used to:

Convert income into value.

A post office of unique design and construction is BEST appraised by which of the following approaches?

Cost.

In the income approach, which of the following is NOT considered when calculating net operating income? O a. Utilities O b. Real estate taxes OC. Management fees O d. Debt service

Debt service

Which of the following tends to lower a property's value? O a. Excessive demand; O b. Deferred maintenance. O c. Transferability. O d. Neighborhood conformity.

Deferred maintenance.

Four principal determinants of value underlying the price for a product are

Desire, utlity, scarcity, and purchasing power.

An appraisal of real estate does which of the following? O a. Ensures value. O b. Determines value. O c Estimates value. O d. Guarantees value.

Estimates value.

A local government could stimulate the real estate market by

Expanding the sewer system.

What type of reduction in value is present when a hydrogen gas storage tank is located next to a property?

Extemal obsolescence.

An appraiser measuring the area of a house would use the:

Exterior dimensions.

A house with four bedrooms and one bath is an example of:

Functional obsolescence.

A construction boom in a market is an indication that prices

Have been increasing.

An appraiser has been hired to prepare an appraisal on a property that includes an elegant old mansion that is now used as an insurance company office. Which approach to value would the appraiser rely on most?

Income approach

The owners of a modest ranch house in a neighborhood of targer, more expensive homes may find that the value of their home is affected by what principle?

Income approach

Real estate values are MOST affected by:

Location

When estimating the value of property using the cost approach, which of the following would NOT be considered by an appraiser? O a. Loss of value due to uncollected delinquent rent O b. Estimated loss attributable to an outdated heating system O c. Quality of materials and workmanship in the original structure O d. Excessive amount of traffic noise outside the property

Loss of value due to uncollected delinquent rent

The actual selling price of a piece of real property is BEST described as the:

Market value,

A broker usually appraises to determine:

Market value.

The capitalization rate of a property is the ratio between the:

Net income and the market value,

Of the three methods of appraising properties, the replacement cost approach is particularly appropriate and would glve the MOST accurate value in the appraisal of a/n:

New home

Which of the following would be classified as external depreciation O a. Poorly-maintained properties in the neighborhood. O b. A poorly-designed floor plan that could be modified. O C. A leaking roof that needs to be completely replaced. O d. Convenient access to schools and recreational facilities.

Poorly-maintained properties in the neighborhood.

Concerning the valuation of residential property, which of the following is true? O a. Recently sold homes in a neighborhood give a fair indication of the value of similar homes O b. The value of the ordinary single-family residential property should be based on the income it is capable of producing if rented. O c. In valuing a residence, functional accessories such as built-in teak cabinets are seldom taken into consideration. O d. An older home in a neighborhood of newer homes will retain its value and not be affected by the value of the other homes.

Recently sold homes in a neighborhood give a fair indication of the value of similar homes.

The characteristics of value include which of the following? O a. Balance O b. Anticipation O . Competition O d. Scarcity

Scarcity

Which of the following is an important economic characteristic of real estate? O a. The market is centralized. O b. The product is quick to adapt to market changes. O c. The demand must literally come to the supply. O d. Real estate is a highly liquid product.

The demand must literally come to the supply.

If commercial real estate rental prices are falling in a market, it is likely that

The market is over-supplied.

If there is a significant undersupply of homes in a market, construction will tend to increase. This is an example of

The market tending toward equilibrium.

An appraiser's fee is typically based on which of the following? O a. Percentage of value plus a flat fee O b. State regulated fees. O c. Value of property. O d. Time and expense.

Time and expense.

Change, contribution, plottage, and substitution are some of the basic principles that affect what aspect of real estate?

Value

The economic life of a bullding has come to an end when the:

Value of the land and the bullding equals the value of the land only.

The sales comparison appraisal approach wouid be BEST used for:

Valuing vacant land.

To complete the sales comparison approach, the appraiser

Weighs the comparables,

The market value of a parcel of real estate is

an estimate of the most probable price it should bring,

Reconciliation is best described as

analyzing the results obtained from the three approaches to value.

In the income approach, the appraiser makes use of

capitalization rate.

Which of these reports would a salesperson MOST likely research and deliver to a prospective seller?

comparative market analysis.

The principle of value that is the interaction of supply and demand is called

competition.

The principle that maximum value is realized when land use is in harmony with surrounding standards is

conformity.

The characteristics of value include

demand, utility, scarcity, and transferability.

The period of time over which an improvement to the property will remain useful for its original purpose is known as its

economic life.

An appraiser's role is to

estimate value.

A house with outmoded plumbing is suffering from

functional obsolescence.

The appraised value of a residence with four bedrooms and one bathroom would probably be reduced because of

functional obsolescence.

A home with its kitchen next to the master bedroom would be considered

functionally obsolete.

A house sits on the comer of a busy intersection. Two of the comers are occupied by gas stations, and directly across from the house is a fast food restaurant. The house's owners have been told that the property would be worth more if the lot were vacant. This is an example of

highest and best use,

Which of these concepts applies to every appraisal? O a. plottage. O b. highest and best use. O c. diminishing returns. O d. assemblage.

highest and best use.

Air pollution from increased automobile traffic near a building with ornate exterior decoration has dissolved much of the intricate detail work. The cost of restoring the front of the building is roughly five times the building's present value. These facts describe

incurable physical deterioration.

From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents

loss of value due to any reason.

The term depreciation refers to the

loss of value in real estate from any cause.

Defined as a loss in value from any cause, depreciation is generally divided into three categories. The loss of value due to the normal wear and tear on a property is called

physical deterioration.

A woman buys a small house in a highly desirable neighborhood consisting of large homes and pays $390,000. A man buys a nearly identical house in a neighborhood of similarty sized homes and pays $290,000. What economic principle BEST describes the reason why the woman paid more than the man?

progression.

The gross rent multiplier is used as a guideline for estimating value based on the

relationship of sales prices to the rental income.

Which appraisal approach would be BEST to appraise a 25-year-old owner-occupied house in a 30-year-old neighborhood?

sales comparison.

The property being appraised is called the

subject property

Assuming that all of the transactions are federally related, which of these properties would NOT have to be appraised by a state licensed or certified appraiser?

the condominium unit with a sale price of $67,850.

In the cost approach to value, the appraiser makes use of

the estimated replacement cost of the building.

The market price of a parcel of real estate is

the price that was being asked for it.

Which of these is NOT an essential assumption in determining market value? O a. the buyer and seller must be unrelated. O b. the payment must be in cash or its equivalent. O c the buyer and seller must be acting without excessive pressure. O d. the property must be on the market for at least three months.

the property must be on the market for at least three months.