Rel360 Ch5&7
What are the two values considered during a highest and best use (HABU) analysis?
HABU as improved HABU as though site is vacant
A house sold for $650,485 five months ago. A very comparable house sold yesterday for $670,000. The implied (non-compounded) monthly rate of increase in property prices is ______ percent.
.60
Generally, how many approaches to estimating market value are considered by the appraiser for use in a formal appraisal?
3
In a one dimensional city with all economic activity at a single point (CBD), if there are two types of workers, drivers and walkers, and both types have the same hourly earnings, how will the two types become arranged in the city?
All walkers will be closer to the center of the city
The organization with independent authority over the generally accepted standards of appraisal is the
Appraisal Foundation
In a one dimensional city with all economic activity at a single point (CBD) if there are two types of households/workers with different total costs of commuting per mile, where will the slope of the rent curve be steepest?
Closest to the CBD
It is often necessary to value the site independent of the improvements to the site. Which of the following approach requires a separate site valuation?
Cost approach Highest and best use analysis
Factors that have contributed to the transformation of cities into multi-nuclei forms since the 1930s include:
Creation of circumferential highway systems Arrival of modern, horizontal retail technology Evolution of modern electronic communication Growth of assembly line production
Reasons that the Hoyt sector model of urban form ceased to describe cities well after the 1920s include:
Rise of the automobile in place of rail. Decline of heavy manufacturing.
Consider a bid-rent model of urban land rents with two employment centers, A and B, and thus two competing bid-rent curves. If employment at B increases while employment at A is constant, what happens to land use at the edge of the B employment region?
Land is bid away from workers at A Rent increases
Which of the following steps in the evaluation of an appraisal is the most important?
Make sure the comparables used are appropriate
"MLS" stands for
Multiple Listing Service
The ___________ appraisal report is the longest and most formal report writing format
Narrative
The ________ the subject property the _______ difficult it is to estimate reproduction cost.
Older, more
If you know the value of one share of common stock in Simon Property Group (SPG), you know the value of all SPG shares because
SPG shares trade in a liquid public market the share price is continuously revealed throughout the trading day one share is a prefect substitute for another
Which of the following statements about market value are true?
The fair market value is the most probable selling price The specific bundle of rights associated with the property's ownership affects fair market value
Which of the following statements about market value are true?
Transaction price Investment value to buyer
____________ adjustments focus on the terms of the deal and the motivation or bargaining ability of the participants
Transactional
Step 6 involves applying the three approaches to valuation.
True
TRUE OR FALSE: Whereas almost all employment was in the CBD in 1900, today even the most centralized private economic function, office employment, typically has less than 20 percent in the CBD.
True
USPAP standards require that, when using the sales comparison approach, appraisers use how many comparables?
USPAP has no requirement regarding the number of comparable sales
The rules for making adjustments to the sale prices of comparable properties include which of the following?
Use market-related adjustments Adjust the sale price of the comparable toward the subject property make transactional adjustments in the proper order
Which of these factors influencing where households and firms locate within a city is ignored in a bid-rent model?
Variation in types of housing
The concentric circle model of urban form contradicted the bid-rent model of urban land value by describing a city where wealthier households tended to live farther from the CBD. Economists have explained this as follows:
Wealthier households valued larger lots more than commute savings. It was too costly to convert older houses to modern, larger ones.
A good comparable property is a property that the typical buyer would consider
a close substitute for the subject
The current market interest rate on fixed rate, long-term mortgage for single-family homes is 4%. To help sell her home, the seller of a comparable sale provided long-term, fixed rate financing to the buyer at an interest rate of 3%. (that is, the seller was also the lender). This would required __________ adjustment to the sale price of the comparable
a downward
An adjustment for differences in economic characteristics is not usually required when valuing
a personal residence
Typically, reconciliation of final adjusted sale prices of the comparable properties involves the use of
a weighted average
Both the buyer and seller of a home that recently sold knew the house needed a new roof. The buyer replaced the roof immediately after purchasing the home. An appraiser using this sale as a comparable should
adjust the comparable sale price upward by the cost of the new roof
Adjustments made to the sale price of comparable properties for expenditures made after purchase are
always positive
Factors before the 1930s that contributed to a concentric ring pattern of urban form included
business and production depended almost completely on face-to-face communication transportation was radial, focused on the CBD
In patterns of urban location, new car dealers, night clubs and the stores in shopping malls represent activities that tend to gather together rather than disperse over the city. This type of location pattern is known as a
clustering
Although otherwise very similar to the subject property, the back yard of a comparable sale provides a view of a small, clean lake. The sale price of the ____________ needs to be adjusted ________.
comparable, downward
If an important characteristics of the comparable property is superior to the subject property, the sale price of the __________ property must be adjusted _______.
comparable, downward
A comparable property sold 5 months ago. Sales prices in the market have increased over those five months. The sale price of the ___________ must be adjusted ___________
comparable, upward
The sale of the comparable property included a clause that stated that legal title to the property would revert back to the seller in 20 years. If this comparable is used by the appraiser, the sale price of the __________ would have to be adjusted _________
comparable, upward
Repeat-sale analysis is the process of
comparing the sale prices of properties that have sold twice
Reliable sources of construction cost estimates include:
construction cost estimating firms experienced builders
The goal of the numerous required adjustments to comparable sale prices is to
convert each comparable sale into a closer approximation of the subject
Conventional approaches to estimating the market value of real estate include the
cost approach sales comparison approach income approach
Reproduction Cost
cost of an EXACT replica
Replacement Cost
cost to create something of equal utility
If a comparable property sale included some valuable personal property, the sale price of the comparable is usually adjusted ______ by the ______ of the personal property
downward, current market value
The central idea of industry economies of scale and clustering is that by locating in proximity firms in the same industry achieve mutual
efficiencies
Examples of secondary or local activities generally include
elementary school staff and teachers automotive service stations movie theaters
According to the text, the main difficulty is using the cost approach to valuation is
estimating the dollar amount of accrued depreciation
The effect of technological change upon urban form historically has followed quickly after the change has been introduced
false
True or false: A location adjustment is not required when the comparable property has a superior location than the subject.
false
True or false: The fact that the last sale of a house was made by the seller to avoid an almost certain default and foreclosure likely had no effect on the sale price.
false
True or false: The required adjustment for difference in legal estates is typically a relatively simple adjustment.
false
You recently purchased a home that included a new, (very) large TV that incorporated all the latest technology and also included a large number of high quality speakers. If an appraiser uses your sale as a comparable sale in a appraisal assignment, the sale price of your home will likely
have to be adjusted downward
As locational rent is higher the density (height) of buildings tends to increase. This is because:
higher rent is incentive to build more rentable space on a site, even with higher construction cost
Unless the characteristics of the comparable property are ______ to the subject property, adjustments must be made to the sale price of the comparable property
identical
The formal appraisal process involves eight steps, the first of which is to
identify the appraisal problem
Major events that explain an abrupt change in urban form between 1925 and 1945 from a CBD oriented city to a multi-nuclei city are:
improved telephones conversion to horizontally oriented factories sweeping spread of motor vehicles
Favorable nonmarket financing concessions provided by the seller to the buyer generally ______ the negotiated sale price of the subject property.
increase
The required number of comparable sales
increases as the reliability of comparable sale information decreases decreases if those comparables already selected are very similar to the subject property
The value of a property to a particular individual or entity is known as
investment value
The text argues that successful market analysis and research
is a process
The cost approach to valuation
is generally relied on most when data on comparable sales or the income producing ability of the subject property are not available
In order for the sale price of a property to be considered a good comparable for the subject,
it must have been an arms-length transaction it must be a property that typical buyers would consider a substitute
Valuation of real estate is complicated by the
lack of perfect substitutes immobility of real estate lack of observable transactions
The highest and best use of a property must be
legally permissible physically possible financially feasible
The seller of a comparable property purchased a new home just days after the sale of the comparable was completed. The seller needed cash from the sale of the comparable to purchase the new home. An appraiser using the comparable sale might need to be concerned that seller agreed to sell the comparable for ________ its market value, which would require _________ adjustment to the sale price of the comparable.
less than, an upward
The creation of a new secondary activity in a city, such as a new supermarket
likely diminishes or displaces less competitive similar stores
Potential sources of data from public records include
local property tax assessors many agencies of the federal government cities and counties
The Appraisal Foundation
maintains the USPAP
The concept of market value in formal appraisal practice includes
most probable selling price buyer and seller acting prudently a competitive market
The value that real estate appraisers generally estimate is market value, which is synonymous to
most probably selling price
To the extent the comparable property is physically lacking in some respect to the subject, the sale price of the comparable
must be adjusted upward
The sale of a single-family, detached home that is currently rented to a music studio should not be used as a comparable property if the subject property is a single-family, detached home
occupied by the owner
Although there are multiple approaches to estimating market value, there is only ________ true market value
one
Physical deterioration may result from
ordinary wear and tear neglect weathering from the elements
The text argues that the most significant errors in appraisal reports typically result from
poor selection of comparables
Required sale price adjustments are divided by USPAP into two major categories including
property adjustments transactional adjustments
As the final step in arriving at the indicated value of the subject property based on the sales comparison approach, the appraiser must
reconcile the final adjusted sale prices of the comparable properties
To complete the sales comparison approach, the appraiser ______ the adjusted sale prices of the comparable properties to obtain a single indicated value for the subject.
reconciles
The estimated cost to build a structure with equal functionality (utility) as the existing structure using modern methods is generally referred to as the
replacement cost
Examples of industry economies of scale that result in clustering include
research universities suburban office parks
In a one dimensional city with all economic activity at a single point (the CBD) if more households/workers arrive, the edge of settlement is pushed outward; so rent levels _____ and the slope of the rent curve is ______.
rise, unchanged
The approach most relied on to value single-family homes is the
sales comparison approach
The approach typically given the most weight in the appraisal of single-family, detached homes is the
sales comparison approach
The most reliable approach to estimating land values is usually the
sales comparison approach
Examples of physical differences that would require an adjustment to the sale price of the comparable include
structure size the existence of a pool lot size
The economic principle of ______ implies that the value of the subject property is determined by the sale prices of comparable properties.
substitution
Most appraisals of single-family homes are
summary reports
Each required transactional and property adjustment is made to
the adjusted sale price of the comparable after the prior adjustment
Most appraisal assignments entail estimating
the current market value of a property
The sector model of urban form, based on data from 50 years up to 1928, likely reflected
the dominance of radial rail commuter lines in intra urban travel the same influences that shaped the concentric ring model
Which of the following should be included in the identification of the appraisal problem?
the intended use of the appraisal the type of value to be estimated the effective date of the valuation
From the appraiser's point of view, replacement cost estimates are preferred over reproduction cost estimates because
they are less time consuming to obtain it is often impossible to build an exact replica of the subject property
If all three approaches to value are used by the appraiser, the appraiser must reconcile ________ indicated values.
three
Reproduction cost is defined as the cost
to build an exact replica of the subject property
In patterns of urban location, grocery anchored shopping centers, coffee shops, and sandwich shops, all of which tend to spread out evenly over a city, are referred to as convenience activities.
true
TRUE OR FALSE A: main reason that a simple bid-rent model cannot fully describe urban locational patterns is that it is based on a single linkage (commuting for one worker) while in reality every household and firm has multiple , linkages, or demands for access
true
TRUE OR FALSE: Since 1920 in manufacturing the arrival of motor vehicles and better communications, along with a shift away from heavy manufacturing, gave rise to production no longer tied to rail heads, ports or natural resources. These new activities were called footloose industries.
true
TRUE OR FALSE: The ability to move materials and goods within cities was most changed over the 20th century by advances in the truck.
true
True or false: A comparable property having a different legal estate than the subject property should generally not be used as a comparable.
true
True or false: Although most appraisal assignments involve the valuation of properties with improvement (buildings) on the land, appraisers often must separately value the land.
true
True or false: Replacement cost estimates are typically easier to obtain than reproduction cost estimates
true
True or false: The final value number produced by reconciliation of the resulting estimates from two or more approaches to value is termed the final estimate of value.
true
True or false: The goal of market analysis is generally to develop an understanding of the factors that affect demand and and supply in a particular market and use that knowledge to forecast how values in that market are likely to change over time.
true
True or false: USPAP addresses the ethical obligations of appraisers and provides the minimum appraisal standards that most be followed by all appraisers
true
Generally, a current estimate of land value plus the reproduction or replacement cost of the building will set the ______ value of the property.
upper limit to the
Each approach to valuation has its strengths and weaknesses. In arriving at a final opinion of value, the appraiser should
weight the strengths and weaknesses of each approach, as well as the reliability of the data collected for each approach
