Texas Real Estate Appraisal CE

Linda is a licensee who represents a seller in a residential transaction. Her client doesn't understand why an appraisal is needed. "Isn't the value of the property whatever the buyer is paying for it?" the client asks. Which of these would be the best answer for Linda to give her client?

"The appraisal tells the lender if the property is valued sufficiently to serve as security for the buyer's loan, in case of foreclosure."

Calculate the front foot price of a lot that has 500 front feet if the value per front foot is $1,200.

$600,000

A four-bedroom, four-bath, 4,875-square-foot house was listed at $445,000. Andreas, the seller, accepted an offer that was 95% of the listing price. What price per square foot did he get for the house?

$86.72 (The price per square foot = price ÷ area. So first, find the sale price. $445,000 × .95 = $422,750. Then, to find the price per square foot, $422,750 ÷ 4875 sq. ft. = $86.7179, or $86.72 per sq. ft.)

What is 800 divided by 30%?

2,666.66

For which of the following purchase-related appraisals must the Appraiser Independence Requirements be followed?

A conventional loan on a four-unit residential property. (AIR applies to conventional loans used to purchase a single-family dwelling or residential dwelling of one to four units. They don't apply to federally insured or guaranteed loans, like FHA or VA loans.)

What is a plat map?

A detailed map of a subdivision that includes boundaries, measurements, and distances between points

Suppose an appraiser tells a seller a ballpark range of value for the listed property. What is this considered, per USPAP?

A formal opinion of value

When Shauna looked at the legal description of the property she was interested in purchasing, she read the following: "Beginning at the corner of State Route 61 and Hallowell Road, north for 314 feet, then southwest for 193 feet." In this description, what does "north for 314 feet" represent?

A mete (Metes (measures) are the direction and distance of a line forming the boundary of the property.)

Related to the legal description of land, what is a monument?

A permanent land marker sometimes used in legal descriptions

What rating scale do appraisers use to indicate the quality of workmanship, materials, and finish of the subject property and comparable properties?

A range from C1 for "like new" to C6 for "major repairs needed" (Appraisers rate the conditions of properties on the URAR with ratings ranging from C1 for new properties to C6 for properties in need of major repairs.)

Which of these items could indicate a potential flaw in an appraisal report?

Adjustments to condition on all comparables is listed as $10,000 (An across-the-board adjustment to comparables is unlikely, and is an item that can be questioned. Spelling errors aren't going to affect the appraised value, and should be ignored.)

What is linear measurement?

Any system for measuring length

Who is responsible for developing the Uniform Standards of Professional Appraisal Practice (USPAP) that licensed appraisers must follow?

Appraisal Standards Board

According to national standards for measuring square footage of a dwelling, which space should be included?

Attached accessory apartment (Garages and unfinished spaces may be included as unfinished square footage only.)

Veronica uses a ______ to show how many homes were sold each quarter of the last year.

Bar chart (A bar chart compares behavior or values between different categories.)

To measure depreciation using the observed condition method, the appraiser estimates the property's loss in value for ______.

Both curable and incurable items of depreciation (Using the observed condition method, the appraiser estimates the property's loss in value for both curable and incurable items of depreciation.)

Which of the following statements about the unit-in-place and square-foot methods is true?

Both methods rely on information provided by cost manuals. (Because the unit-in-place method provides a much more detailed breakdown of the type of structure than the square-foot method, it tends to be more accurate and time-consuming than the square-foot method. Both methods use cost manuals.)

What is another name for a blueprint?

Building plan

When using residual income techniques with a known land value, which technique is used to determine the value of the building(s)?

Building residual (When the land value is known, the building residual technique can be used to determine the value of the building(s), and also provide the amount of residual income the building(s) earn.)

The technique of expressing potential income as current value is called ______.

Capitalization (Capitalization of expected income is the foundation of the income approach to appraisal.)

A prospective buyer has waived the appraisal entirely. Under what conditions is this most common?

Cash sale

If an appraisal comes in low and you want to ensure it was done properly, you can review the appraisal report and ___________.

Check that the appraiser is qualified to appraise the subject property. (Appraisers in a federally related transaction are required to have the appropriate level of licensure and to be acquainted with the area where the subject property is located.)

Eminent domain is the governments' power to take private land for public use. What is it called when the government actually seizes someone's property under eminent domain?

Condemnation (The government's taking of someone's property is called condemnation. Regulatory taking is when the value of the land is diminished due to a governmental regulation.)

The assessed value of a condominium is usually higher than a similar ______ because of outright ownership.

Cooperative

What must an appraiser provide about the data for each comparable sale so the information can be verified?

Data source (The appraiser must provide the data source(s) used to obtain the data for each comparable sale.)

The ______ method converts a single year's expected income (or an annual average) into a market value.

Direct capitalization

Which of the following accounts for the cost of inflation and the time value of money?

Discounting (Discounted cash flow analysis is a form of yield capitalization that discounts future income value to a present value.)

If an appraisal comes in low, what can you look for in the appraisal report to identify potential issues that would allow you to contest the appraised value with the lender?

Discrepancies or anomalies in the comparables section of the report

An appraiser deducts vacancy and collection losses to determine the ______ income of an income property.

Effective gross (Effective gross income is the potential gross income minus a percentage determined to represent expected loss from vacancy or uncollectable rent.)

Because of the topography of Elsie's and Lawrence's respective yards, Elsie had to install her fence at the top of a hill, which is actually two feet over Lawrence's property line. What word or phrase best describes Elsie's fence?

Encroachment

What's the main purpose of building codes?

Ensure a safe, properly functioning environment for the building's occupants

To determine the total reproduction cost new of a subject building using the quantity survey method, the appraiser takes the sum total of the direct and indirect costs and adds them to the ______.

Entrepreneurial profit (The formula for the quantity survey method is: Direct costs + Indirect costs + Entrepreneurial profit = Total reproduction cost new.)

Which type of depreciation is nearly always considered incurable?

External obsolescence (Because there's nothing the property owner can do to fix undesirable or hazardous influences that exist outside the property, external obsolescence is considered incurable)

Which section of the appraisal contains facts that affect the appraisal, including state, local and federal economic information, and local infrastructure challenges and projects?

Factual data (The factual data section includes local infrastructure challenges and projects and local real estate market conditions, especially those specific to the subject property.)

Joe gave land to a school, but still wanted to have some control over its use, so a deed was prepared that gave the school title as long as the land is used for educational purposes. What type of interest does the school have?

Fee simple determinable (A fee simple determinable has limitations as to what can or can't be done with a property. It uses phrases such as "so long as," "while," or "during" to describe the required condition.)

The income approach to valuation is used ______.

For some single-family houses and two- to four-family units (The income approach is used for single-family houses and for two-to-four family units. Properties with more than four units are considered commercial properties and must be appraised by a certified general appraiser.)

Which type of appraisal report makes use of pre-printed documents?

Form report (The form report makes use of a pre-printed appraisal form with a checklist for describing and rating the property and its characteristics. This form is also called a summary report.)

Tony is an appraiser and is performing a valuation on a property. What's another term for what Tony is doing?

Formal appraisal

Which of the following reports involves the most rigorous process for establishing a property's market value?

Formal appraisal

Houses that have bedrooms on a level without any bathrooms, or where the access to one bedroom is through another bedroom, are examples of which of the following depreciation types?

Functional obsolescence

The ______ influencers of value include: physical, geographic, economic, social, and governmental.

General (Real estate value is influenced through general factors that affect all properties in an area.)

When a land trust expires, the trustee must either extend the trust term or sell the real estate and ______.

Give the proceeds to the beneficiary (When a land trust term expires, the trustee must either extend the trust term or sell the real estate and provide the proceeds to the beneficiary.)

Billie (Wilhelmina) Silva was just licensed as a broker, and she plans to hang out a shingle and go into business for herself. As a sole proprietor, which of the following business names can she NOT use?

Happy Homes Realty (Sole proprietors can use their names or their names in some combination with a business name. However, using"Real Estate" in the business name is not allowed.)

What's the name of the nationwide codes that provide standards for residential construction across the country?

I-Codes® (The International Codes®, or I-Codes®, provide standards for residential construction across the country. The ICC revises these standards every three years to account for new construction materials, techniques, and safety concerns.)

Identifying the purpose of the appraisal leads the appraiser to do what next?

Identify data needed.

An undesirable house design that can only be fixed by knocking down walls and starting from scratch, but would not return value commensurate with that expense is an example of which type of depreciation?

Incurable functional obsolescence

Which one of the following expenses listed on the appraiser's operating statement is classified as a fixed expense?

Insurance (Insurance on the property will remain a fixed expense regardless of the level of use that property has.)

Which of the following is the cost of replacing a building in the case of total loss?

Insured value (Insured value should be the cost of replacement in the event the property's destroyed.)

Glen is a skilled carpenter, and he is building his own home on the unimproved lot he and his wife Sandy purchased. Sandy takes responsibility for handling the permitting and inspection process. Which part of their custom home will Glen and Sandy NOT need to have a permit and inspection for?

Interior design

What benefit is provided by grading a building site?

It can improve drainage. (Grading is the process of directing the site for proper runoff of water, away from the foundation.)

Which of the following statements is true about the allocation method?

It provides a broad indicator of market value. (The allocation method provides a broad indicator of market value and works best for new construction.)

Which of the following is an advantage of using the sales comparison approach to valuation?

It shows what the market is doing. (The sales comparison approach, if sufficient accurate sales data is available, can give a "snapshot" of the market value of a property)

Jane is a licensee whose client is afraid that the house she's selling won't appraise for the contracted purchase price. Jane feels the purchase price accurately represents the home's value in the current market. What can Jane do to appease her client's fears?

Jane can be present at the appraisal and ensure that the appraiser is fully informed of all the attributes that contribute to the home's value.

Which of the following might a builder use to conceal unsightly areas, reduce noise levels, define space, and prevent soil erosion?

Landscaping (All of these are benefits of proper landscaping, including aesthetic appeal.)

What determines a plumbing system's structure and the materials used to construct it?

Local building codes (Local building codes dictate the rules about plumbing systems' structure and what materials go into building them. For example, the system must be set up so that incoming and outgoing water don't mix.)

If an appraiser were using three comparables, which factor would weigh most heavily?

Location (Location is a key factor in appraisal value.)

Which of the following is true about a lender-enabled appraisal waiver?

Most transactions won't qualify for an appraisal waiver.

How is net operating income used in an income-based approach to appraisal?

NOI is divided by a cap rate to find estimated property value. (NOI is used to complete the capitalization formula V = I/R.)

Which type of appraisal report is lengthy and often used for complex properties?

Narrative report

A capitalization rate is applied to the ______ when using an income capitalization method of appraisal.

Net operating income (Net operating income represents the future income that must be capitalized in order to find a present value.)

Tim, an appraiser, is using the cost approach to determine property value. Which of the following property types is Tim most likely appraising?

Newly built commercial property (The cost approach is most often used with newly constructed properties, unique properties, and special purpose use properties. The approach isn't used with condos or co-ops, and isn't used as often with older properties, because it's difficult to accurately estimate depreciation.)

Which line item in the Cost Approach section in the URAR form is used to capture the appraiser's total cost estimate for the site alone?

Opinion of Site Value

A life estate can best be described as ______.

Ownership, possession, and control for someone's lifetime

What's a percent?

Part of 100

As a landowner, Myron has the right to draw and use water from a well that is located on his property. What is the name of this right?

Percolating

The presence of neighborhood amenities, such as shopping and schools, is an example of which real estate value influencer?

Physical (Physical amenities and their quality can cause the value of properties in the neighborhood to go up or down.)

What material is screwed directly to wall studs in order to create the partitioning between rooms?

Plasterboard

The government's authority at all levels to ensure the health, safety and welfare of its citizens, which includes the control of public land use is the definition of ______.

Police power

Rohit bought 31 acres of undeveloped and mostly forested land. He is planning a weekend with friends where they'll camp on the property while scouting good locations to place a cabin. Which right in the bundle of rights allows Rohit to do the camping weekend on undeveloped land?

Possession

A(n) ______ fraction is where the numerator is less than the denominator.

Proper (A proper fraction is one in which the numerator is less than the denominator. For instance, 4/5 is a proper fraction, whereas 3/1 would be an improper fraction because the numerator (3) is more than the denominator (1).)

Which of the following properties would require the fewest adjustments in comparison with a split-level subject property that has been well-maintained with limited depreciation due to normal wear and tear and was built 10 years ago?

Property D is a one-and-a-half-story home built 15 years ago. (The one-and-a-half-story house is most similar to the split-level subject property, and has potential as a comparable property.)

Which house style is characterized by flat roofs, earth-toned stucco walls, and Native American and Spanish Colonial influences?

Pueblo

Sandy is looking at the median square footage of all single-family homes in River Heights so she can compare it to the size of the homes she tends to work with. Luckily for her, the state REALTOR® association provides statistics like this, so she's able to find the data about square footage taken from a _________ of single-family homes.

Random sample (Statistical samples are only valid if they are randomly selected from the total population, which provides the greatest chance that the sample represents the population as a whole.)

A ______ is a ratio that compares two quantities.

Rate

When an appraiser is using an income approach, which one of the following will be listed on both the accountant's operating statement and the appraiser's statement?

Real estate tax (Some items on the accountant's operating statement aren't used by the appraiser, such as personal income tax and depreciation charges.)

Information shown in this area of the Uniform Residential Appraisal Report includes the conditions of the appraisal, the numbers for all of the values developed, and the final value decision made by the appraiser.

Reconciliation (This area of the URAR is the reconciliation. It's where the appraiser must enter the numbers for all of the values developed, the conditions of the appraisal, and the final value determination made by the appraiser.)

Which legal description method is regulated by the U.S. Department of the Interior's Bureau of Land Management?

Rectangular government survey

With a cooperative, the transfer of ownership ______.

Requires board approval

What information is needed to complete both a CMA and an appraisal?

Sale prices for comparable properties

What data will appraisers need to gather to use the sales comparison approach?

Sales prices on recently sold properties similar to the subject property

A real estate appraisal may be used to ______.

Set a value for property that's part of an estate

Monique is frustrated. The lender is requiring her to use the cost approach to determine her opinion of value, but the property is too old for her to estimate reproduction cost. What options does Monique have?

She can estimate construction cost-new using replacement cost instead.

Changes in demographics and population growth are examples of which type of real estate value influencer?

Social (As the general make-up of residents in an area changes, this can affect the types of properties that are in demand, influencing value.)

Based on accepted national standards, how should square footage be reported in residential buildings?

Square footage should be reported to the nearest whole square foot. (Measurements are rounded to the nearest inch or 10th of an inch; square footage is reported as the nearest whole square foot.)

These windows fit on either the inside or outside of the main window. What are they?

Storm (Storm windows add energy efficiency and protection by fitting either inside or outside of the main window.)

Your first-time buyer, Abigail, is extremely nervous that she won't be able to afford the loan payments on her new home. Although she has a job that pays well, she's not great with numbers and she's never had to live within a budget. Which of the following could you use to present Abigail with a sample amortization schedule?

Table (Tables make use of columns and rows to allow comparison of many different bits of data, which is necessary in an amortization chart.)

Which government agency is one of the primary enforcers of green regulations on a national scale?

The Environmental Protection Agency (The EPA is one of the primary agencies enforcing green regulations and standards.)

In the data source field in the sales comparison grid of the URAR, what would "DOM 80" indicate?

The comparable property was on the market for 80 days before it had an accepted offer that resulted in the sale.

Which of the following land valuation methods uses this formula: Income ÷ capitalization rate = value?

The ground rent capitalization method (The ground rent capitalization method uses this formula, and can be used to estimate land value when a ground lease exists or when the land is vacant.)

The capitalization process uses a capitalization rate, which is based on what?

The performance of comparable properties (The capitalization rate is based on the performance of comparable properties. It's the expected rate of return on an investment and can be calculated using the formula of: NOI ÷ V = R, or net operating income ÷ value = rate.)

Your cash buyer decides to waive the appraisal to sweeten his full-price offer. What risk is involved here?

The property may be worth less than the list price.

When using the sales comparison approach to value, what might it mean if there's a large total adjustment needed for a comparable property?

The property may not be a reliable comparable for the subject property.

Which of the following is included in an appraisal?

The property's probable monetary value on the open market

Alice is a real estate licensee who is really steamed about a recent transaction that fell apart due to the property not appraising at the value she expected. She feels it's due to an unethical appraiser who didn't do a quality job, and wants to lodge a complaint. Where should Alice register her complaint about this appraiser?

The state where the appraiser is licensed. (States bear responsibility for ensuring that real estate appraisals are done by qualified personnel who use the standards set forth in the USPAP.)

You're acting as the buyer's agent in a residential transaction. Your client's lender has hired an appraiser to determine the mortgage value of the property. How is the appraiser paid?

Through a fee typically paid by the buyer

To measure depreciation using the age-life method, the appraiser divides the effective age by which of the following?

Total economic life (Using the age-life method, the appraiser divides the effective age by the total economic life. The resulting percentage is applied to the reproduction/replacement cost to determine the total cost of accrued depreciation.)

A lot measuring 108,900 square feet is for sale. How many acres is this?

Two-and-a-half (An acre is 43,560 square feet, so 108,900 square feet is equal to two-and-a-half acres.)

Lessee Margo is paying rent that's above market rent to her landlord, Wayne. This is a benefit to ______.

Wayne

Can police power ever be used in a way that restricts citizens' freedom?

Yes, if it's for the public good.

Which of the following is part of the eave system?

fascia (The frieze board, soffit, and fascia are all part of the eave system.)