advanced residential app and case studies
An owner-occupied single-family home, located in a commercial area, sells for $175,000. The lot, if vacant and available for commercial development, would be worth $140,000. What is the contributing value of the home?
$35,000
You are appraising a single-family home in an area where there are very few sales, but there are many rentals. The subject property is rented for $1,100 per month, which is market rent. You find two sales that are over one year old. One sold for $96,000 and was rented for $1,200 per month. The other sold for $108,000 and was rented for $1,350 per month. What would be the indicated value of the subject?
$88,000
The test criteria for highest and best use include all of the following EXCEPT
** USPAP Maximally productive Financially feasible Physically possible USPAP compliant
What is another name for the Fannie Mae URAR form?
1004 form
There were 126 sales in the subject's market area over the last 7 months. There are currently 162 properties on the market. What is the monthly absorption rate?
18
A new building is depreciating at an annual rate of 4%. What is its total economic life?
25 years
There were 126 sales in the subject's market area over the last 7 months. There are currently 162 properties on the market. How many months of inventory is currently on the market?
9
An appraiser is valuing a truly unique property for a mortgage lender. The appraiser is careful to follow the lender's guidelines and using only recent sales that are located nearby, even though the properties are not necessarily similar. What is the most likely result of the appraiser's actions?
A bad appraisal
An addition to a home that was completed without permits is an example of:
A building code violation
A legal non-conforming use is sometimes referred to as
A grandfathered use
Which of these is likely to be considered a complex property?
A home with unfinished construction A home located in a transitional neighborhood A home located on a mountaintop with a view of three states (any)
Which of these properties would likely be considered complex?
A house constructed to resemble a shoe A 5,000 square foot home in a neighborhood of 2,000 square foot homes A typical single-family home with a leaking oil storage tank on the property (all)
If the costs are unknown or are difficult to determine, the appraisal can be done using:
A hypothetical condition
An advantage of using older sales located nearby and making market conditions adjustment is
A market conditions adjustment is one of the easiest adjustments to support
Which of these appraisal assignments is MOST likely to require an appraiser to extract and use a bonus value?
A model home
Appraiser Claire is trying to extract and support an adjustment for current market conditions. Which of these is likely to be the best indicator of a market conditions adjustment?
A property that sold one year ago, and re-sold last month
When trying to extract an adjustment for market conditions, what is likely the best indicator for the appraiser?
A sale and re-sale of the same property
It has been announced that there will be a new exit from a freeway, but work has not begun yet. You are appraising some land near the proposed exit. You should
Add value if the market reflects it, even though the proposed exit has not begun
The 1004MC Market Conditions Addendum was created for
All 1-4 family appraisals for loans being sold to Fannie Mae or Freddie Mac
What type of appraisal report is typically requested by clients in mortgage lending situations?
Appraisal Report
Which of these is NOT a factor that can make a property complex?
Assessed value
What is another name for the market survey technique?
Contingent Valuation Method
A single family home situated in a commercial area is worth $80,000. The site value is $70,000. If the home were converted to office use, at a cost of $15,000, it would be worth $92,000. What is the highest and best use of the property as improved?
Continuation as a single-family home
A large detached garage costs $80,000 to construct, but it only adds $25,000 to the value of the property. This is an example of the principle of
Contribution
A single family home situated in a commercial area is worth $165,000, and could be razed at a cost of $12,000. The site value is $175,000. If the home were converted to office use, at a cost of $24,000, it would be worth $195,000. What is the highest and best use of the property as improved?
Conversion to office use
"Worthy of belief" is the USPAP definition for
Credible
When the existing improvements are no longer the highest and best use, it will often be necessary to determine:
Demolition Costs
What two dates must be in every written real property appraisal report, as required by Standards Rule 2-2?
Effective date and date of report
When filling out the 1004MC Market Conditions Addendum, what should an appraiser do if not all of the required information is available?
Explain the attempt to obtain the information
When an appraiser goes outside the local market area to find comparable sales, and makes location adjustments, the report should
Explain the rationale behind location adjustments Explain why the alternate location is considered similar to the subject's area Explain and support the reasons for expanding the search area
Complex properties are always identified by the appraiser and/or the client before the assignment is accepted.
F
Fannie Mae still requires the cost approach on appraisals of complex properties.
F
State enforcement agencies report that one of the most common violations of USPAP is
Failure to properly complete the appraisal of a 2-4 unit property
What is an appraiser's best source for information about conventional residential mortgage underwriting guidelines?
Fannie Mae
Which statement is TRUE regarding the cost approach for residential mortgage lending appraisals?
Fannie Mae does not require the cost approach
When the subject is located in an area that is unique, and it is not possible to find sales from another market area, the only option may be
Going back farther in time
Properties with unique locational characteristics that may require an appraiser to go back in time to find comparable sales might include
Homes located in historic districts Homes located in golf course communities Waterfront properties (all of these)
According to the Scope of Work Rule, for each appraisal or appraisal review assignment, an appraiser must:
Identify the problem to be solved Determine and perform the scope of work necessary to develop credible assignment results Disclose the scope of work in the report
In the application of the cost approach, historical cost data from the subject property may be brought current by
Indexing
Which section of Form 1004MC assists the appraiser in analyzing important supply and demand factors in order to reach a conclusion regarding housing trends and market conditions?
Inventory Analysis
One of the strengths of the cost approach is
It can be performed on any type of property
If the appraiser discovers that the subject property is not in compliance with existing land use regulations
It is likely that the value of the property is negatively impacted
What does the course author mean by the statement "you must be a thinking appraiser"?
It is more important to think than it is to move fast
Which statement is most likely TRUE regarding a property that is sold with special low-interest below-market financing?
Its sale price will probably be higher than its market value
John leases a house to Sarah. Sarah's interest is best described as a
Leasehold interest
Sally, the owner, leases a house to Peter, on a long-term lease. What type of interest does Peter now hold in the property?
Leasehold interest
A grocery store is constructed on a property in 1950. The local municipality passes a zoning ordinance in 1970, and the property is zoned for residential use only. The grocery store is permitted to continue operating, even though it is in a residential zone. How is this situation best described?
Legal non-conforming use
Ramon owns a home. He grants his Aunt Marie, the right to live in and occupy the home as long Ramon's father is still alive. This right is best described as a
Life estate pur autre vie
A simple trend line that shows price change over a period of time is a
Linear regression
With regard to effective age and remaining life, what must an appraiser avoid?
Making an unsupported assumption or premise
The technique in which you interview market participants is called the
Market survey technique
Certain requirements of STANDARD 1, such as requirements to analyze market area trends and develop a highest and best use opinion, are only required when the appraiser is forming an opinion of
Market value
The URAR form is intended for use in reporting
Market value
If an appraiser determines he or she lacks necessary knowledge or experience to competently complete an assignment, the appraiser
May still accept the assignment
If the appraisal of a complex property makes performance of one or more of the valuation approaches impossible or unnecessary, the appraiser
Must explain why he or she did not complete the approach(es)
When appraising a complex property, an appraiser must complete those approaches to value which are
Necessary for credible assignment results
In the appraisal of a four-unit property, which is 100% leased at market rent with the leases transferring to the buyer, what effect would these leases likely have on the market value?
No effect
Appraiser Erin accepts an appraisal assignment from a mysterious client, who instructs her not to disclose his identity. What must Erin do under USPAP regarding this unusual request?
Omit the client's identity from the report, but document the client's identity in the workfile
What must the appraiser do if his/her appraisal client wishes to remain anonymous?
Omit the client's identity from the report, but document the client's identity in the workfile
An appraiser is analyzing the highest and best use of a 10,000 square foot residential lot. The minimum lot size for a single-family homesite is 10,000 square feet. However, the lot is rectangular, long and narrow, and measures 10' x 1000'. Which highest and best use test will likely require the most consideration?
Physically possible
An appraiser is developing a highest and best use analysis on a vacant lot with steep topography. Which highest and best use test will likely require the most consideration?
Physically possible
A single family home situated in a commercial area is worth $395,000, and could be razed at a cost of $15,000. The site value is $420,000. If the home were converted to retail use, at a cost of $50,000, it would be worth $440,000. What is the highest and best use of the property as improved?
Raze the home and redevelop the site
A single family home situated in a commercial area is worth $80,000, and could be razed at a cost of $8,000. The site value is $90,000. If the home were converted to retail use, at a cost of $20,000, it would be worth $98,000. What is the highest and best use of the property as improved?
Raze the home and redevelop the site
A single family home situated in a commercial area is worth $395,000, and could be razed at a cost of $15,000. The site value is $420,000. If the home were converted to retail use, at a cost of $50,000, it would be worth $440,000. What is the highest and best use of the property as improved?
Raze the home and redevelop the site (The highest and best use is to raze the home and redevelop the property. The as-is value of $395,000 plus the cost of razing ($15,000) equals $410,000, and the site will be worth $420,000 when the home is razed. Converting to retail use at a cost of $50,000 would only bring a $45,000 increase in value, so conversion would not be economically feasible.)
What is defined as the cost to construct a building of similar utility, using modern materials and current standards and design?
Replacement cost
Appraisal involves two processes. The first is appraisal development. What is the second?
Reporting
On the URAR appraisal form, which approach or approaches is/are required?
Sales comparison approach
An appraiser might overcome a lack of necessary knowledge or experience by
Seeking the assistance of another appraiser
A property is zoned R-3, and is suitable for construction of up to three residential units. A single-family home can be built at a cost of $125,000, which will be worth $200,000 when complete. A duplex can be built at a cost of $250,000, which will be worth $310,000 when complete. A three-unit can be built at a cost of $325,000, and it will be worth $375,000 when complete. What is the maximally productive use?
Single-family home
Which of these is NOT one of the test criteria for highest and best use?
Socially acceptable
A home with a relatively unusual type of construction, such as a berm home (built into a hill) is
Sometimes a complex property
What rule requires the appraiser to use methods and techniques that are recognized by appraisers and users of appraisal service?
Standards Rule 1-1
If a client-requested appraisal report form does not contain sufficient information for the report to be properly understood, what should an appraiser do?
Supplement the form with the required information
Which type of classification applies to the appraisal of one to four residential units without regard to transaction value or complexity?
The Certified Residential Real Property Appraiser Classification
In a typical residential appraisal, the most emphasis is usually placed on:
The Sales Comparison Approach
The COMPETENCY RULE is relevant to
The appraisal of all kinds of properties
In the appraisal of a complex property, who is responsible for making appropriate decisions necessary to produce a credible appraisal?
The appraiser
If an appraisal assignment cannot be completed competently
The appraiser must turn down or withdraw from the assignment
An appraiser is engaged to value a single-family home for a mortgage refinance. When the appraiser arrives at the property, she realizes it is an operating restaurant. The appraiser contacts the client. What is the MOST likely outcome?
The assignment will be cancelled
Fannie Mae will purchase a loan on a property with an illegal dwelling unit if
The borrower qualifies for the mortgage without considering the rental income from the illegal unit The appraisal report must state that the use is illegal Three comparable properties must have the same illegal use (all of these)
The scope of work is acceptable when it meets or exceeds:
The expectations of parties who are regularly intended users for similar assignments What an appraiser's peers' actions would be in performing the same or a similar assignment (both)
Scope of work includes
The extent of the property inspection The type and extent of data research The type and extent of analyses applied
The intended user of a URAR appraisal report is
The lender/client
A property is suitable for the construction of either a 1,700 square foot manufactured home, or a 2,000 square foot two-story site-built home. The cost to construct the manufactured home is $105,000, and it will be worth $150,000 when it is completed. The two-story home will cost $175,000 and it will be worth $210,000 when completed. Which is the highest and best use?
The one-story manufactured home, because it produces the greatest land value
The appraiser's scope of work can be determined only through completion of
The problem identification process
The appraiser's scope of work is acceptable when it meets or exceeds what his/her peers' actions would be in performing
The same or similar assignment
In highest and best use analysis, what is meant by the term "maximally productive" use?
The use that produces the greatest residual land value
What appraisal principle states that land cannot be valued on the basis of one use while the improvements are valued on the basis of another?
Theory of Consistent Use
You are appraising a unique home, which was constructed to resemble a lighthouse. The owner provides you a copy of the construction contract from 8 years ago stating that the home was built for $880,000. What is probably your BEST option for estimating cost new today?
Use cost index trending
Market conditions which might make a property complex include
Values increasing at an exceptional rate Values decreasing at an exceptional rate No sales due to a depressed local economy (any)
If the appraiser determines that he/she cannot complete an assignment competently, the appraiser must:
Withdraw from the assignment.
How is the credibility of assignment results measured?
Within the context of the intended use
What happens if you are appraising a property and you find there aren't any suitable comparable sales?
You may be able to develop the cost and/or income approaches
What does the course author mean by the statement "you must be a glass half full appraiser when dealing with complex properties"?
You must concentrate on the data you have, rather than the data you do not have
You are appraising a single-family home for a local mortgage lender. When inspecting the property, you discover that the inside of the home has been gutted down to the studs. When should you notify your client about the condition of the property?
as soon as you discover it
The SCOPE OF WORK RULE states that each appraiser must:
identify the problem to be solved determine and perform the scope of work necessary to develop credible assignment results disclose the scope of work in the report (all)
When appraising a complex property, you must utilize the valuation approaches
in ways that go beyond normal practice
