Ch 19: Real Estate Appraisal

The income approach to value would be most important in the appraisal of a(n) a. condominium b. office building c. single-family residence d. vacant residential lot

b. office building

Which of the following is NOT a characteristic of value? a. scarcity b. transfer ability d. obsolescence d. utility

d. obsolescence

The purpose of an appraisal is to a. estimate the value of the property b. set the market price of a property c. determine the projected income of a property d. set the amount of consideration the seller should accept from a purchaser

a. estimate the value of the property

An appraisal report must contain all of the following EXCEPT a. reconciliation of value b. a copy of the sales contract c. the date of the appraisal d. report of final opinion

b. a copy of the sales contract

Who among the following CANNOT obtain appraiser licensure or certification in Illinois a. an individual who wants to appraise only residential properties b. a limited liability company engaged in licensed real estate activities c. a person who wants to appraise all types of property d. an individual who will sign appraisal reports on behalf of a business entity

b. a limited liability company engaged in licensed real estate activities

A 4 bedroom house with 1 bathroom by today's standards would be considered to be a. physically obsolete b. functionally obsolete c. economically obsolete d. diminised

b. functionally obsolete

In the income approach, which of the following is NOT considered when calculating the net operating income? a. real estate taxes b. management fees c. debt service d. utilities

c. debt service

To fine the value of a property using the income approach to value, if the net operating income and the capitalization rate were known, the appraiser would a. multiply the net operating income by the capitalization rate b. multiply the effective gross income by the capitalization rate c. divide the net operating income by the capitalization rate d. divide the capitalization rate by the net operating income

c. divide the net operating income by the capitalization rate

A buyer is considering the purchase of an apartment building in an area where there is a limited multi-family zoning. This situation would be BEST described by the economic characteristic of a. demand b. utility c. scarcity d. transferability

c. scarcity

In the appraisal of an office building, which of the following would be classified as external depreciation? a. termite damage to the structural components of the building b. a poor architectural design resulting in a cluttered floor plan c. an inadequate number of elevators and antiquated restroom facilities d. a law requiring the building to be retrofitted with fire sprinklers

d. a law requiring the building to be retrofitted with fire sprinklers

Reconciliation is best described as a. selecting the highest value given by the three approaches to value b. comparing comparable properties and identifying their amentities c. determining the final value by selecting one value from those given d. analyzing the results obtained from the three approaches to value

d. analyzing the results obtained from the three approaches to value

The income approach as used by an appraiser makes use of which of the following? a. equalization b. depreciation c. appreciation d. capitalization

d. capitalization

The period of time over which an improvement to the property will contribute to its value is known as its a. amortized life b. chronological life c. actual life d. economic life

d. economic life

An appraiser is responsible for a. finding value b. computing value c. determining value d. estimating value

d. estimating value

A house with outmoded plumbing is suffering from a. functional obsolescence b. curable physical deterioration c. incurable physical deterioration d. external depreciation

a. functional obsolescence

An appraiser has been hired to prepare an appraisal on a property that included an elegant old mansion that is now leased to an insurance company. Which approach to value would be the appraiser rely on most? a. income approach b. gross rent multiplier approach c. sales comparison approach d. replacement cost approach

a. income approach

An appraiser who is using the sales comparison approach to value would NOT use which of the following similar homes as comparable properties? One that was a. sold over six months ago b. sold recently but is located in another similar neighborhood c. sold by the owners who were undergoing a foreclosure d. sold recently but is located on a much larger lot

c. sold by the owners who were undergoing a foreclosure

Reconciliation is an appraisal term used to describe: a. the appraiser's determination of a property's highest value b. an average of real estate values for properties similar to the subject property c. the appraiser's analysis and comparison of the results of each appraisal appraoch d. the method used to determine the most appropriate capitalization rate for property

c. the appraiser's analysis and comparison of the results of each appraisal appraoch

The expression "more buildings are torn down than fall down" refers to a. curable physical deterioration b. incurable physical deterioration c. the enforcement of building codes d. functional and external depreciation

d. functional and external depreciation

It is necessary to calculate a dollar value for depreciation when using which of the following? a. the sales comparison approach to value b. the cost approach to value c. the income approach to value d. gross rent multipliers

d. gross rent multipliers

Using which of the following would require the value of the land to be calculated separately from the value of the improvements? a. the income approach b. the cost approach c. the sales comparison approach d. the gross rent multiplier

d. the gross rent multiplier

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would NOT included reference to a. the highest and best use of the parcel b. the listed price of the parcel c. the most probable price the parcel will bring d. the physical dimensions of the parcel

d. the physical dimensions of the parcel

The market price of real estate is generally the same as: 1 Sales Price 2 market value 3 Highest and best use 4 the assessed value

1 Sales Price

In an old retail building, which of the following would most likely be a source of incurable functional obsolescence? a. deficient and inadequate lightning b. closely-spaced internal support columns c. an unattractive store front d. a decrease in the area's population

b. closely-spaced internal support columns

When appraising a commercial investment property, the appraiser is most concerned with: a. accrued depreciation on the property b. income generated by the property c. sales prices of comparable properties d. total debt service on the property

b. income generated by the property

In the income approach, the appraiser makes use of a. reproduction cost b. capitalization rate c. depreciate schedules d. replacement cost

b. capitalization rate

The term depreciation refers to the a. value of real estate after the expiration of its useful life. b. loss of value in real estate from any cause. c. costs incurred to renovate or modernize a building. d. capitalized value of lost rental income.

b. loss of value in real estate from any cause.

A building is valued at $215,000 and contains four apartments that rent for $470 each per month. The owner estimates that the net operating income is 65 percent of the gross rental receipts. What is the capitalization rate? A) 3.7 percent B) 6.8 percent C) 10.5 percent D) 14.2 percent

B) 6.8 percent

When estimating the value of property using the cost approach, all of the following would be considered by the appraiser EXCEPT the a. lost of value due to uncollected delinquent rent b. estimated loss attributable to an outdated heating system c. quality of materials and workmanship in the original structure d. excessive amount of traffic noise outside the property

a. lost of value due to uncollected delinquent rent

The sales comparison approach to value would be most important when estimating the value of a(n) a. existing residence b. apartment building c. retail location d. new residence

a. existing residence

In the cost approach, an appraiser uses which of the following? a. sales price of similar properties b. the owner's original cost of construction c. an estimate of the building's replacement cost d. the property's depreciated value as used for income tax purposes

c. an estimate of the building's replacement cos

The steps in the appraisal process do NOT include a. gathering specific data on the subject property b. gathering general data for the area of the subject property c. considering the seller's estimate of the property's value d. applying the three approaches to value to the collected data

c. considering the seller's estimate of the property's value

The subject property has three bedrooms and two baths. A comparable property has two bedrooms and one bath. Which of the following is TRUE? a. the value of the subject property will be adjusted upwards b. the value of the subject property will be adjusted downwards c. the value of the comparable will be adjusted upwards d. the value of the comparable will be adjusted downwards

c. the value of the comparable will be adjusted upwards

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 a. external depreciation b. physical deterioration c. functional obsolescence d. economic deterioration

b. physical deterioration

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

b. poorly maintained properties in the neighborhood

In the cost approach to value, the appraiser makes use of: a. the owner's original cost of the building b. the estimated replacement cost of the building c. the sales prices of the similar buildings in the area d. the assessed value of the building

b. the estimated replacement cost of the building

In the valuation of a large apartment complex, the most weight would be given to which of the following approaches to value? a. the cost approach b. the income approach c. the sales comparison approach d. all the approaches equally weighted

b. the income approach

The gross rent multiplier is used as a guideline for estimating value based on a. the ratio of the gross rents to the net rents after expenses b. the proportion of rents due to the actual rents collected c. the capitalization of the annual gross rental income d. the relationship of the sales prices to the monthly rental income

d. the relationship of the sales prices to the monthly rental income