Ch 18 Appraisal
Assuming the facts below, calculate the indicated value of the property using the cost approach. Depreciated value of improvements = $125,000 Land value = $25,000 a. $127,500 b. $150,000 c. $122,500 d. $100,000
$150,000
Calculate the value of the property using the cost approach. Land value= $30,000 Cost to reproduce or replace improvements = $180,000 Depreciation = $60,000 a. $90,000 b. $150,000 c. $127,000 d. $210,000
$150,000
Your cost manual suggests a local base cost of $75.00 per square foot on the date of value for a good quality 2,000 S.F. house being appraised. Additive costs amount to $15,000. The garage is figured at $25/S.F. for 400 S.F. Assuming no other adjustments, what would the total improvement cost be? a. $150,000 b. $175,000 c. $165,000 d. $200,000
$175,000
A drawing shows a house that has a living area 32 feet by 85 feet. There is an attached garage that is 20 feet by 20 feet and also an unheated sunroom 10 feet by 12 feet. Estimated costs of replacement are as follows: Living area.........$60 per square foot Garage...............$32 per square foot Sunroom............$26 per square foot What the total replacement cost estimate? a. $102,960 b. $179,120 c. $190,320 d. $179,600
$179,120
Assuming the facts below, calculate the indicated value of the property using the cost approach. Land value = $27,000 Cost to reproduce or replace improvements = $200,000 Depreciation = $40,000 a. $133,000 b. $187,000 c. $213,000 d. $267,000
$187,000
Calculate the net operating income Annual gross income = $33,600 Vacancy and Collection losses = $3,600 Expenses = $10,000 a. $23,600 b. $30,000 c. $20,000 d. $12,600
$20,000
The ground floor of a home measures 38' x 48', the second floor has the same measurements, and the basement is half that size. If the ground floor improvements are valued at $62 a square foot, the second floor improvements are valued at $48 a square foot, and the basement area is valued at $21 a square foot, what is the value of the improvements? a. 239,654 b. $219,792 c. $209,987 d. $199,123
$219,792
Calculate the net operating income. Potential gross income = $35,000 Vacancy and Collection losses = $3,600 Other income = $1,000 Fixed expenses = $3,000 Variable expenses = $5,000 Reserves = $2,000 a. $29,600 b. $20,400 c. $42,400 d. $22,400
$22,400
By the cost approach, estimate the value of a 40-year-old, 2,000 square foot house, based on the following: House replacement cost: $80/SF Garage cost (400 square feet): $30/SF Patio and Yard improvements cost: $15,000 Physical deterioration: $27,000 Functional obsolescence: $20,000 Land value from comparable sales: $100,000 a. $260,000 b. $287,000 c. $200,000 d. $240,000
$240,000
An apartment building has 48 apartments renting for $700 per month, and it has a 2% vacancy rate. The operating expenses amount to 26% of the effective gross income. Using a capitalization rate of 9%, what is the value? a. $3,248,896 b. $5,531,875 c. $5,578,496 d. $3,202,304
$3,248,896
Calculate the property value using the income approach. Net operating income = $35,000 Cap rate = 10% a. $35,000 b. $250,000 c. $350,000 d. $25,000
$350,000
An apartment building has 48 apartments renting for $700 per month, and it has a 2% vacancy rate. The operating expenses amount to 26% of the effective gross income. What is the effective gross income? a. $102,735.36 b. $292,400.64 c. $395,136.00 d. $366,458.00
$395,136.00
Your 10-unit property has a gross income of $90,000. What is its probable value if the GIM is 8.5, based on comparable sales? a. $765,000 b. $1,058,823 c. $500,000 d. $720,000
$765,000
A comparable home sold for $118,000. It has a full basement estimated to be worth $9,000. The subject property has no basement. To make your adjustment: a. $9,000 will be added to your subject property b. $9,000 will be subtracted from your subject property c. $9,000 will be added to your comparable property d. $9,000 will be subtracted from your comparable property
$9,000 will be subtracted from your comparable property CBS -9000
A property sold 12 months ago for $210,000. It sold again, this month, the current date of appraisal for $216,400. What is the monthly rate of increase? a. .37% b. .25% c. 3.1% d. 2.5%
.25% 1 -(210,000/216,400) =.029 .029/12 = .0025
An income property renting for $50,000 per year before expenses just sold for $500,000 cash. What was the gross income multiplier? a. 1/10 b. 5 c. 10 d. none of the above
10
Using the table below, what would the adjusted price of a comparable that lacked a bathroom that the subject property had if a comparable sold for $135,500? Bedroom -- $1,000 Bathroom -- $1,500 a. $134,000 b. $134,500 c. $137,000 d. $136,500
137,000 CIA +1500
A comparable home sold for $ 165,000. The subject property has a masonry fireplace valued in the market at $4,500. The comparable property has no fireplace. After making your fireplace adjustment, the comparable home's adjusted sales price will be: a. $160,500 b. $169,500
169,500 CIA +4500
Using the table below, what would be the adjusted price of a comparable that h ad a bedroom that the subject property did not have if the comparable sold for $172,000? Bedroom -- $1,000 Bathroom -- $1,500 a. $173,500 b. $173,000 c. $170,500 d. $171 ,000
171,000 CBS -1000
Property 1 recently sold for $228,000, and Property 2 sold at the same time for $214,500. Property 1 is 10 years old and Property 2 is 14 years old. Apart from this age difference, the properties are substantially similar. What is the dollar adjustment amount per year for the age difference? a. $13,500 b. $6,750 c. $3,375 d. $2,550
3,375
In a government survey legal description, the land is divided into townships. Each township is further divided into sections. Approximately how many acres are in a section? a. 620 b. 640 c. 660 d. 680
640
If the site represents 40% of the total value in a particular neighborhood, how much land value would be allocated from a $200,000 sale of a single family home? a. $120,000 b. $8,000 c. $80,000 d. $200,000
80,000 =200,000*.4
A property valued at $500,000 generates a net operating income of $45,000. What is the rate of return? a. 12 % b. 40.5% c. 9% d. 18%
9%
The USPAP require: a. That the appraiser identifies the problem to be solved and the scope of work necessary to solve it, and do the research necessary to produce a credible appraisal b. That the appraiser communicates the value conclusion in a matter that is not misleading c. A only d. A and B
A and B
People turn to professionals for appraisals in order to: a. Get a more reliable estimate of value than their own b. Get an unbiased and disinterested estimate of value c. Obtain a document capable of being reviewed d. A and C only e. A, B, and C
A, B, and C
In adjusting a sale, the appraiser should always a. Adjust the sale to the subject b. Adjust the subject to the sale c. Adjust only for market influences d. Consider all of the above rules
Adjust the sale to the subject
Income capitalization is the broad term used to describe the process of estimating the value of income by studying the economic relationship between income and value. This process: a. Converts the net income of a property into its equivalent capital value b. Reflects the time value of money by reducing or discounting future income to its present worth c. Focuses on the present worth of future benefits d. All of the above
All of the above
Market data sources available to the appraiser include a. Public records b. Multiple listing services c. Profit and non-profit data services d. All of the above
All of the above
The Ethics Rule of USPAP covers which of the following general areas of appraisal practice: a. Conduct b. Management c. Confidentiality and Record Keeping d. All of the above
All of the above
The criteria for the highest and best use of land as if vacant include: a. Legally and physically possible b. Economically feasible c. Maximally productive d. All of the above
All of the above
The sales comparison (or market) approach is a. The most direct of the value approaches b. The most easily understood approach c. Based on the principle of substitution d. All of the above
All of the above
Which of the following aspects of future income are considered in performing income capitalization? a. Quantity b. Quality c. Duration d. All of the above
All of the above
Value is said to be the present worth of future benefits. This defines the principle of: a. Substitution b. Change c. Diminishing return d. Anticipation
Anticipation
Accrued depreciation can be subdivided into two parts, curable and incurable, depending on: a. The cost to cure b. The increase in value resulting from the cure c. Both a and b d. Neither a nor b
Both a and b
Of the four methods of estimating cost, which is the most often used by appraisers? a. Index method b. Unit-in-place method c. Comparative square foot method d. Quantity survey method
Comparative square foot method
Maximum value results where there is a similarity in the use, size and style of properties. This follows the principle of: a. Anticipation b. Highest and best use c. Contribution d. Conformity
Conformity
Which of the following is ineffective without purchasing power? a. Utility b. Supply c. Demand d. Level of wages
Demand
Which income capitalization technique is considered to be the simplest and most reliable? a. Building residual b. Direct capitalization c. Land residual d. Equity residual
Direct capitalization
The income remaining after vacancy and collection losses are deducted from potential gross income is known as a. Net to operations b. Net income c. Effective gross income d. None of the above
Effective gross income
The measure of depreciation for appraisal purposes is different from that used in accounting. Which of the following best defines depreciation as used in appraisals? a. Deductible from book cost b. Estimated loss in value c. Proportionate to age d. None of the above
Estimated loss in value
To qualify as a comparable, a sale must be all of the following except a. A competitive property b. An open market transaction c. Exactly equal to the subject property d. Recent in time of sale
Exactly equal to the subject property
When applying the sales comparison approach to appraisal, you always add the land value and subtract the depreciation of the property a. True b. False
False
Which type of value loss is attributed to causes lying within the property? a. Functional obsolescence b. Incurable depreciation c. Economic obsolescence d. None of the above
Functional obsolescence
Economic or external obsolescence is generally ... a. Curable b. Incurable c. Less than typical d. The same for all properties
Incurable
The last step before reconciling to an indicated value conclusion under the cost approach is to add the value of the ___________ to the depreciated cost new of the property.
Land
A market study shows that prices have been increase 1% per month recently. The appropriate type of an adjustment to apply to the sales price is a. Percentage adjustment b. Unit of comparison adjustment c. Lump-sum adjustment d. None of the above
Percentage adjustment
Real estate supply factors include all of the following EXCEPT: a. Population b. The volume of new construction c. Availability of vacant land d. The housing supply
Population
Estimating costs by detailed breakdown of labor, materials and indirect costs is using which of the following method? a. Index method b. Quantity survey method c. Comparative square foot method d. Unit-in-place method
Quantity survey method
_____________________ is the cost of constructing new the existing building at today's construction standards using today's materials.
Replacement cost
_______________________ is the cost of reproducing an exact duplicate of the existing building using the exact materials and the construction standards of the original construction.
Reproduction
Of the following sources of information used in the sales comparison approach, which source is typically the most useful in estimating the market value of the subject property'? a. Sales b. Listings
Sales
With the _________________ method, the replacement/reproduction cost new is broken down into a square foot unit of comparison.
Square-foot
To adjust the sales price of a comparable sale with a 10% better location, you should a. Subtract 10% from the price b. Add 10% to the price c. Multiply the price by 10% d. None of the above
Subtract 10% from the price
The final indicated value by the sales comparison approach should consider all of the following EXCEPT: a. The average price of the comparables b. The number and size of adjustments required c. How the individual sales cluster or spread out between the high and low extremes d. The range of indicated values
The average price of the comparables
As distinguished from reproduction cost, replacement cost refers to a. The cost of an exact replica building b. The cost of a building that will serve the same purpose as the oe being appraised c. The cost of reproducing the subject building d. None of the above
The cost of a building that will serve the same purpose as the oe being appraised
For appraisal purposes, market value generally may be defined as: a. The most probable selling price b. The amount of the loan commitment c. The asking price d. The highest offer
The most probable selling price
Under the _____________________ method, the appraiser costs the major components of a structure, such as the flooring, roof, wall structure and foundation.
Unit in place
When should the appraiser adjust sales prices for the effects of seller financing? a. In all cases b. In no cases c. Whenever financing has influenced the price d. Only when required by the lender
Whenever financing has influenced the price
To calculate the total percent change for comparables when calculating an adjustment for market conditions, the appraiser must first determine the ___________ of each comparable sale. a) % change between previous and current sales price b) Mortgage payments made for the comparable c) Annual percentage rate of the mortgage d) Sales price of the subject property
a) % change between previous and current sales price
Industrial properties may be more valuable when near a ____________. a) Freeway b) Public park c) Town center d) Shopping mall
a) Freeway
Commercial properties such as retail properties may be more valuable if the location provides __________. a) High visibility b) Access to local shopping c) A variety of uses d) Entertainment
a) High visibility
Close proximity to schools and shopping is most likely to influence the values of ____________ properties? a) Residential b) Industrial c) Commercial
a) Residential
Of the following sources of information used in the sales comparison approach, which source is typically the most useful in estimating the market value of the subject property? a) sales b) listings
a) sales
Property 1 recently sold for $325,000, and Property 2 sold at the same time for $319,000. Property 1 is 22 years old and Property 2 is 25 years old. Apart from this age difference, the properties are substantially similar. What is the dollar adjustment amount per year for the age difference? a)$2000 b)$6000 c)$5000 d)$3000
a)$2000 [(325,000 - 319,000) / (25 - 22)] [6000 / 3]
In the cost approach, the value of the land is a. reduced by depreciation b. not used c. added to the value of the improvements d. subtracted from the value of the improvements
added to the value of the improvements
Which of the following would be considered a change in market conditions? a) Location b) Increased or decreased supply c) Legal status d) Financing terms
b) Increased or decreased supply
Usually, a minimum of ____________ comparable sales are required for an appraisal. a) Four b) Three c) Five d) Six
b) Three
When using a sales comparison approach, an appraiser is likely to obtain more data during a(n) a) inactive market b) active market
b) active market
Of the following sources of information used in the sales comparison approach, which source is more likely to set the upper limit when estimating the value of the subject property? a) sales b) listings
b) listings
Property 1 and Property 2 are identical except for size. Given the following information, calculate the per square foot size adjustment using a paired data analysis. Property 1: 1300 square feet, $99,000 sales price Property 2: 1500 square feet, $110,000 sales price a)$73.33 b)$55.00 c)$76.15 d)$66.00
b)$55.00 [(110,000 - 99,000) / (1500 - 1300)] [11,000 / 200]
Which of the following formulas would you use to determine a percentage change in the market for a property that has sold more than once in short period of time? a. 100% + (previous price / new price) b. 100% - (previous price /new price) c. 100% + (previous price * new price) d. 100% - (previous price * new price)
b. 100% - (previous price /new price)
Generally, adjustments for changing market conditions are ____________ adjustments. a) Cash equivalency b) Financing c) Date of sale d) Subject property
c) Date of sale
Proximity to the freeway may ________ the value of a residential property. a) Increase b) Stabilize c) Decrease d) Normalize
c) Decrease (notes say stabilize?)
Appraisers can site _________ to show current market trends and attitudes when the market is uncertain. a) Liens in the immediate area b) Dissimilar comparables c) Listings and offers d) Commercial comparables
c) Listings and offers
An area made up of a variety of complementary land uses is called a a) commune b) community c) neighborhood d) market area
c) neighborhood
A comparable sold for $100,000 with a $90,000 loan. The seller paid 3% for discount points. Seller paid points are not typical for the market area. The amount of the adjustment for the seller paid points is a)$3000 b)$4000 c)$2700 d)$3600
c)$2700 [interest for discount points only apply to the loan amount] [90000 * .03]
Property 1 recently sold for $224,000 and Property 2 sold at the same time for $239,000. Property 1 is 1900 square feet and Property 2 is 2400 square feet. Apart from size, the properties are substantially similar. What is the dollar adjustment amount per square foot? a)$15,000 b)$33.33 c)$30.00 d)$50.00
c)$30.00 [(239,000 - 224,000) / (2400 - 1900)] [15,000 / 500]
A property sold 6 months ago for $250,000. It sold again, the current date of appraisal for $252,000. What is the total % change? a) 0.13% b) 0.08% c) 0.80% d) 1.01%
c)0.80% [(old - new) / old] or [100% - (old / new)]
A property sold 12 months ago for $200,000. It sold again, the current date of appraisal for $205,900. What is the total % change? a) 2.1% b )0.18% c) 2.9% d) 0.24%
c)2.9% [(old - new) / old] [(200,000 - 205,900) / 200,000]
A property is being appraised using the sales comparison approach. The appraiser discovers a similar property that was sold 1 year ago for $200,000. Since that time, the market has increased by 5%. In this situation, the appraiser will probably need to adjust the price by ________. a)adding $5000 b)subtracting $10,000 c)adding $10,000 d)subtracting $5000
c)adding $10,000 [market increase = CIA+] [200,000*.05]
In the sales comparison approach, adjusting for differences may be expressed as: a)percentages only b)dollar amounts only c)either dollar amounts or percentages d)neither dollar amounts or percentages
c)either dollar amounts or percentages
Of the following types of properties, which would most likely be compared using "gross living area" as the unit of comparison? a)income producing properties b)vacant land c)houses d)office buildings
c)houses
The cost approach to appraisal is often used when: a. vacant lots are appraised. b. comparable sales are readily available. c. comparable sales are not available.
comparable sales are not available.
The approach that is typically given the most weight when appraising a school, fire station or other special purpose property is the _____ approach. a. cost b. income c. sales comparison d. gross rent multiplier
cost
When making price adjustments using the sales comparison approach, what adjustments do you make if the comparable is inferior to the subject? a) subtract the adjustment amount from the price of the comparable b) add the adjustment amount to the price of the subject c) subtract the adjustment amount from the price of the subject d) add the adjustment amount from the price of the comparable
d) add the adjustment amount from the price of the comparable
A transaction in which a buyer and seller are not related and are considered equal in terms of bargaining power is referred to as a(n) ___________________ transaction. a) duress b) related parties c) handshake d) arm's length
d) arm's length
An area in which similar properties compete with one another is called a a) commune b) community c) neighborhood d) market area
d) market area
A comparable has a 2 acre lot, whereas the subject property has a ½ acre lot. What adjustment do you make? a) add the adjustment amount to the price of the comparable b) subtract the adjustment amount from the price of the subject c) add the adjustment amount to the price of the subject d) subtract the adjustment amount from the price of the comparable
d) subtract the adjustment amount from the price of the comparable
A property is being appraised using the sales comparison approach. The appraiser discovers a similar property that was sold 1 year ago for $100,000. Since that time, the market increased by 2 ½ %. What is the price of the comparable adjusted for market conditions? a)$104,000 b)$97,500 c)$96,000 d)$102,500
d)$102,500 [market increase = CIA+] [(100,000*.025) + 100,000]
What would be the adjusted sales price of a comparable that is located in a neighborhood that is superior to the subject property's neighborhood if the comparable sold for $120,000 and the appropriate neighborhood adjustment is 5%. a)$120,600 b)$126,000 c)$119,400 d)$114,000
d)$114,000 [CBS-] [120,000 - (120,000*.05)]
Using the table below, what would be the adjusted sales price of a comparable that had a garage that the subject property did not have but lacked a bedroom that the subject property had, if the comparable sold for $175,000? Garage = $2000 Bedroom = $1500 a)$175,000 b)$179,500 c)$176,000 d)$174,500
d)$174,500 [175,000-2000+1500]
The estimated cost to build a new privacy fence is $4000. If this particular privacy fence is considered to be 40% depreciated, what is the depreciated cost of the fence? a)$1600 b)$1000 c)$4000 d)$2400
d)$2400 [4,000 - (4,000*.4)]
The estimated cost to build a new pool is $15,000. If this particular pool is considered to be 75% depreciated, what is the depreciated cost of the pool? a)$2000 b)$5000 c)$11,250 d)$3,750
d)$3,750 [15,000 - (15,000*.75)]
In the cost approach, the estimated cost to reproduce or replace the improvements is reduced by a. the value of the land. b. depreciation.
depreciation.
The conversion of an estimate of a single year of income into an estimate of value is called a. direct capitalization b. yield capitalization c. indirect capitalization d. internal capitalization
direct capitalization
The owners of an old. four-story office building are having difficulty selling the property because the building does not have an elevator. This loss of property value is due to a. physical deterioration b. physical obsolescence c. functional obsolescence d. external obsolescence
functional obsolescence
When determining the effective gross income of a property, the appraiser would consider the following items EXCEPT a. potential gross income b. vacancies c. management fees d. collection fees
management fees
When an improvement is new and represents the highest and best use of the property, the cost annually equals the a. mortgage value b. salvage value c. market value d. assessed value
market value
An appraiser is using the cost approach to estimate the value of an historic property. The appraiser will NOT consider the a. reproduction or replacement cost b. price the seller paid for the property c. value of the land parcel d. depreciation from all sources
price the seller paid for the property
The conversion of all expected income into present value is called a. equity capitalization b. revenue capitalization c. yield capitalization d. direct capitalization
yield capitalization
