Certified Appraisal Exam Review
a. an incurable functional obsolescence b. could affect the value of the property if it continues correct! c. can be a condition found internally or externally d. an obsolescence external to the property that is curable incorrect! QUESTION RATIONALE A nuisance could be something temporary and not having long-term impact, or it could be more or less permanent and result in external obsolescence. External obsolescence is usually not curable since the property owner is not in control of elements outside the property boundaries. One cannot be a nuisance to themselves. Thus, a nuisance cannot be internal.
Which best describes a nuisance?
Sale Price / Potential Monthly Gross Income correct! QUESTION RATIONALE GRM = Sale Price / Potential Gross Monthly Income.
Which formula is utilized for calculating a GRM?
land residual technique ground rent capitalization incorrect! quantity survey method correct! sales comparison approach QUESTION RATIONALE The sales comparison approach is most often utilized for developing conclusions of land value. However, the land residual technique and ground rent capitalization are two of the methods that could also be employed for developing opinons of land value. The quantity survey method is a method of determining cost of improvements.
Which is NOT a method for developing the value of land?
size
Which is a physical force in relationship to value?
There are many definitions.
Which is a true statement regarding market value?
RATIONALE Standards Rule 1-6 in its entirety: In developing a real property appraisal, an appraiser must: (a) reconcile the quality and quantity of data available and analyzed within the approaches used; and (b) reconcile the applicability or suitability of the approaches, methods, and techniques used to arrive at the value conclusion(s).
Which is a true statement regarding the reconciliation process as defined by Standards Rule 1-6?
Real estate is indestructible and immobile.
Which is an inefficiency of a real estate market when compared to markets for other products and services?
Accrued Depreciation
Which is known as the difference between the current value of a building and the cost of replacing it?
fixed and variable expenses vacancy and collection loss incorrect! debt service and depreciation miscellaneous income correct! QUESTION RATIONALE A GIM, or Gross Income Multiplier, considers miscellaneous income (e.g., income from coin-operated machines, rented parking spaces, etc). A GRM uses only rental income from units.
Which is taken into consideration when determining gross income and disregarded when determining gross rent?
Extraction Method
Which land valuation method requires development of the depreciated cost of the improvements as a step in developing an opinion of the land?
scarcity and utility. DUST
Which of the following characteristics create value in real estate?
highest and best use incorrect! contribution conformity anticipation correct! QUESTION RATIONALE Investors purchase property in anticipation of receiving future rent to pay for the operations of the property.
Which principle is fundamental to the income capitalization approach?
economic bundle of rights incorrect! transferability correct! value QUESTION RATIONALE Transferability is the only choice representing the vital characteristics of value (D-U-S-T). The right of disposal is one of the rights typically within the bundle of rights, but not a value characteristic. Economic is a broad force. Reminder: Watch for key words/phrases like "vital characteristic."
Which vital characteristic of value is affected when, due to deed conditions, a property's owner is limited to whom they can or cannot sell or lease the property?
Economic Influences
Which would be considered general data needed for an appraisal?
Seller
Who is the mortgagee in a purchase money mortgage?
28 QUESTION RATIONALE First, determine how many square feet the lot contains. A 1/4-mile square is: 5,280 / 4, or 1,320; 1,320 x 1,320 = 1,742,400 gross square feet in the lot. Next, determine the 28% that will be used for the road: 1,742,400 x 28% = 487,872. Now, subtract the road space from the lot: 1,742,400 - 487,872 = 1,254,528 is the net parcel. This, divided by 43,560 equals 28.80, rounded down to the nearest whole lot: 28.
A parcel is 1/4 of a mile square. If roads will take 28% of the lot, and zoning requires building sites to be no less than one acre, how many building sites may be divided from this parcel?
Stability QUESTION RATIONALE When revitalization has concluded, the market or neighborhood will return to stability. Gentrification is a form of revitalization. Balance is a state of supply and demand. Growth is the first stage a neighborhood goes through--property values rise as development activity begins and continues.
After a neighborhood has undergone revitalization, the next phase to typically occur is
Allocation: a method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of site value to total property value and this ratio is applied to the property being appraised or the comparable being analyzed. Extraction: a method of estimating land value in which the depreciated cost of the improvement on the improved property is estimated and deducted from the total sale price to arrive at an estimated sale price for the land; most effective when the improvements contribute little to the total sale price of the property.
Allocation method vs. extraction method
5600 QUESTION RATIONALE Simple interest does not take into consideration compounding or periodic reduction. Therefore, the simple interest due in the first year is 10% of the amount borrowed: 70% of $80,000 ($80,000 x 0.70) is $56,000 x 0.10 = $5,600.
An $80,000 property has a first mortgage equaling 70% of its value at 10% interest with annual payments. The owner requires 14% return on equity. In dollars, what is the simple interest in the first year of the mortgage?
Although rental rates in the market have increased, the subject's one-year leases command a rental rate that is less than market. correct! QUESTION RATIONALE Short-term leases are designed to reflect current market rents. Hence, if rental rates have gone up, short-term lease rates would likewise go up.
An appraiser has been requested to appraise a duplex. During review of the subject's historical profit and loss statements, the appraiser found that the potential gross income of the property has decreased over the past three years. Which is most likely NOT a reflection of this loss of income?
competitive supply analysis.
Existing inventory of houses and planned new construction are elements of analysis in
300 QUESTION RATIONALE Cubic feet are determined by multiplying Length x Width x Depth. Six inches is 0.5 feet; So: 20 x 30 x 0.5 = 300 cubic feet.
How many cubic feet are contained in a concrete slab that is 20 feet by 30 feet, and 6 inches thick?
1,000 QUESTION RATIONALE To calculate cubic yards, divide the cubic feet by a cubic yard: 3 x 3 x 3 = 27. Cubic feet is calculated by multiplying the Width x Depth x Height then dividing by 27: 100 x 30 x 9 = 27,000 / 27 = 1,000.
How many cubic yards are in a building that measures 100 x 30 x 9 ft.?
$171,196 RATIONALE The HP 12C keystrokes: 8,500 [PMT], 9 [i], 12 [n], [FV].
If $8,500 is deposited each year into an investment account at 9% annual interest, how much will be in the account at the end of 12 years? (Round your answer to the nearest dollar.)
excess correct! split surplus incorrect! assemblage QUESTION RATIONALE Excess site occurs when its area is beyond what is needed for the current use but could be used for future expansion of the current improvements or sold-off as a stand alone site.
If a parcel of land has more area than is necessary for the highest and best use of the improvements, but could be sold-off and have a highest and best use as a stand-alone site, what type of site is this known as?
not at the highest and best use. correct! in need of repairs. of no value. incorrect! poorly built. QUESTION RATIONALE A zero economic life means that the structure no longer contributes to the value. Therefore, the site has a higher and better use, or the structure should be converted.
If a parcel of real property has a two-year-old structure on it but the structure has a remaining economic life of zero, the real property is
incurable. incorrect! an internal environmental condition. correct! regression. a stigmatism. QUESTION RATIONALE Since the radon was found on the property, it is an internal environmental condition. The condition is usually curable through remediation; although once remediated a stigma of the hazard, which is no longer present, may be perceived.
If radon were found to be present on a particular property, the condition would be considered
If the annual real estate tax on a property is $8,597.75, what is the market value of the property if the millage is 57.8 and the assessment ratio is 35%?
If the annual real estate tax on a property is $8,597.75, what is the market value of the property if the millage is 57.8 and the assessment ratio is 35%?
it could remain in that phase indefinitely. RATIONALE Stability is when buyer interest in the neighborhood remains strong and prices rarely drop. Some neighborhoods remain in this stage and don't experience decline.
Once a neighborhood has reached the phase of stability in its life cycle
effective demand. RATIONALE The characteristic of purchase ability, or affordability, is known as effective demand or effective purchasing power.
Regardless of the desire for a property in a particular market, if there is not general purchase ability linked to the desire within the market, the market is lacking
$8,756 RATIONALE HP-12C Keystrokes: [f] [Sigma] [150000] [Sigma+] [165000] [Sigma+] [148000] [Sigma+] [156000] [Sigma+] [163000] [Sigma+] [170000] [Sigma+] [g] [s] gives you a result of $8,756.
Six homes sold within the past few months. What is the standard deviation among the data provided? $150,000, $165,000, $148,000, $156,000, $163,000, $170,000
110,250 QUESTION RATIONALE The proper sequence of adjustments is to adjust for financing, conditions of sale, market condition, and then all physical differences are added together. Hence, the $100,000 is first adjusted for market conditions (date of sale), which is 5% (half year: 10% / 2 = 5%) to $105,000. The size and condition adjustments are combined to net another 5%, or $105,000 x 1.05 = $110,250.
Six months ago, a property sold for $100,000. The market has increased 10% in the last year. If the subject is 5% inferior due to size and 10% superior due to condition, what is the indicated value from this data?
economic, governmental, social, and physical RATIONALE Physical, economic, governmental, and social (PEGS) are the four broad forces that affect value.
The four broad forces that affect value are
Substitution QUESTION RATIONALE A prudent and knowledgeable investor will pay no more for a property than the cost of an equally desirable investment.
The income approach is based on which principle of value?
Modified Age Life Method
When the cost to cure a curable item is known and the effective age is estimated as if the items were cured for the remaining obsolescence, what is this depreciation method known as?
12.30 RATIONALE HP 12C method: 47 [Sigma+], 14 [Sigma+], 37 [Sigma+], 29 [Sigma+], 37 [Sigma+], [g] [s] = 12.2963, or 12.30 rounded. Be sure to clear all registers before beginning entries. The[s]key is the decimal key ('s' in blue on front of key).
Using this number set, find the standard deviation: 47 - 14 - 37 - 29 - 37, rounded to two places.
demographic change.....Correct location. economy. supply and demand. QUESTION RATIONALE Demographic changes include changes within the population affecting population growth and growth rate and are a part of social force. Supply and demand is an economic force. Location is a physical force.
When the general population of an area is diminishing due to people moving out of an area and few individuals relocating there, this trend is recognized within the broad forces affecting value as the force of
Effective Age/Total Economic Life. Total economic life equals effective age plus remaining economic life
What is the formula for calculating depreciation using the Age Life Method?
1. Calculate depreciation % (Effective age/total economic life) 2. Subtract curable depreciation from cost new of structure 3. Calculate total depreciation by: A. Calculate incurable depreciation B. Adding curable and incurable depreciation together
What is the formula for calculating depreciation with the modified age life method?
QUESTION RATIONALE OER stands for operating expense ratio. This is the ratio of total expense to the effective gross income: Operating Expenses / Effective Gross Income = OER.
What is the formula for estimating OER?
$14,693.28 correct! QUESTION RATIONALE HP 12C method: 10,000 [PV], 8 [i], 5 [n], [FV]. Remember to clear the register after each problem. f [CLX]
What is the future value of a lot purchased today for $10,000, if it appreciates at 8% annually for the next five years?
utilize the site as one home site, since the site cannot legally be split
What is the highest and best use of a rural property that has 300 lineal feet of frontage and a depth of 300 lineal feet, when zoning requires a site to be at least two acres for the development of a single-family home?
$555.71 QUESTION RATIONALE HP 12C method: 80,000 [ENTER], 0.90 [X] (or 90 [%]) = 72,000, [CHS] [PV], 8 [g] [i], 25 [g] [n], [PMT]. Remember to clear the register after each problem. f [CLX]
What is the monthly payment for a 25-year loan at 8% if the sale price is $80,000 and the loan-to-value ratio is 90%?
10,805 QUESTION RATIONALE HP 12C method: 20,000 [FV], 8 [n], 8 [i], [PV]. The calculator will show as a negative, because that is what is being paid. Remember to clear the register after each problem. f [CLX]
What is the present value of a note for $20,000 due in 8 years using 8% annually?
Allocation Method
What land valuation method is being utilized when a ratio between the land value and the improvements of the comparables is estimated and applied to the property being appraised?
Stigmatism QUESTION RATIONALE A stigmatism or stigma refers to a perception due to something in the past.
What term refers to the perception of market participants' lack of desire for a property due to past ownership, past event occurring or related to the property, or a past environmental hazard affecting the property?
Book Value
What type of value usually reflects a property's acquisition cost minus accumulated depreciation?
Marketability Study
When an appraiser looks at the present and future demand of a specific property and the time it will take to sell or lease the property, the appraiser's analysis is a
Life estate with a reversionary interest RATIONALE A life estate is a freehold estate that lasts only as long as a specified person lives. A life estate with a reversionary interest means that the property will go back (revert) to the grantor or the grantor's heirs.
When an individual has a freehold estate that only lasts as long as a specified person lives and then the interest goes back to the grantor or the grantor's heirs, what type of freehold estate does the individual have?
Low Supply and High Demand = Higher Prices High Supply and High Demand = Stable Prices incorrect! Low Supply and Low Demand = Lower Prices correct! High Supply and Low Demand = Lower Prices QUESTION RATIONALE A low supply and a matching low demand will result in stable prices.
When applying the rule of supply and demand, which formula is NOT valid?
marriages resulting in a new household
When determining the number of households, which would be an element of the analysis?
Effective Gross Income QUESTION RATIONALE Operating expenses are deducted from the effective gross income of a property, after a vacancy and collection loss has been calculated and deducted.
When estimating a proforma for an income-producing property, the operating expenses are deducted from which of the following?
Since external obsolescence is outside the property owner's control, it is most often incurable
When is external obsolescence curable?
exposure time RATIONALE Standards Rule 1-2 of USPAP requires that when reasonable exposure time is a component of the definition for the value opinion being developed, the appraiser must also develop an opinion of reasonable exposure time linked to that value opinion.
When it is a component of the definition for the value opinion being developed, what analysis and opinion, related to market conditions, must an appraiser also develop?
as a percentage of effective gross income correct! QUESTION RATIONALE Management fees are often designed to encourage the company to maximize potential gross income and minimize vacancy and collection losses. If the management company keeps rent at market level and vacancy and collection low, they will increase effective gross income. That is why fees are often based on EGI.
Whether the owner of the property manages his own real estate or hires a management company to oversee this function, a management fee must be reflected in the stabilized operating statement. How is a management fee most typically calculated?
highest and best use RATIONALE Standards Rule 1-3 of USPAP requires the appraiser, when necessary to obtain credible results, to develop an opinion of highest and best use for the real estate when the opinion of value being developed in an assignment is market value. The concept of highest and best use is often not applicable with other value types.
Which analysis is important and required when necessary for credible results by Standards Rule 1-3 of USPAP for a market value assignment that may not be applicable with other types of value?
Lender
A mortgagee is another term for a
$34,155 correct! QUESTION RATIONALE Gross living area is defined as the outside measurements of the house, excluding the DETACHED garage: 22.5' x 46' = 1,035 sq. ft. x 33 = $34,155.
A Ranch-style house with a 320 sq. ft. DETACHED garage and a full basement measures 22.5' x 46'. At a total building cost of $33 per square foot of gross living area, how much would the house cost to build?
52.7833 RATIONALE The HP 12C keystrokes: 24,000 [FV]; 11 [g] [i], 15[g] [n], [PMT]. (Note: The blue key [g] is used when monthly payments, or compounding, are noted in the question. When you press the blue key [g], it is "times 12," indicating that the payments are paid monthly or the compounding is monthly.)
A client's building will need a new roof in 15 years. The estimated cost at that time will be $24,000. If the client can invest at 11% annually, how much should the client deposit each month to have the required funds at the end of 15 years? (Round your answer to the nearest penny.)
108.655 QUESTION RATIONALE HP 12C method: 64,000 [FV], 8 [g] [i], 20 [g] [n], [PMT]. (Note: The blue key [g] is used when monthly payments, or compounding, is noted in the question. When you key the blue key [g] it is "times 12," indicating that the payments are paid monthly or the compounding is monthly.) Remember to clear the register after each problem. f [CLX]
A client's building will need a new roof in 20 years. The estimated cost at that time will be $64,000. If the client can invest at 8% annually, how much should the client deposit each month to have the required funds at the end of 20 years? (Rounded your answer to the nearest dollar.)
RATIONALE 1. First, calculate the cubic feet of the concrete patio: 20 (Length) x 26 (Width) x 0.3333 (Depth, four inches is 1/3 of a foot) = 173.316 Cubic Feet. 2. Convert cubic feet to cubic yards by dividing by 27: 173.316 cubic feet / 27 = 6.4191 Cubic Yards. 3. Now, determine the cost of concrete needed: 6.4191 Cubic Yards x $37.85 = $242.96, or rounded $243.
A concrete patio measures 20' x 26'. The concrete slab is four inches thick. If concrete costs $37.85 per cubic yard, what would be the cost of the concrete? (Round to nearest dollar.)
QUESTION RATIONALE The cost new of the improvements would equal the cost new of the home plus the cost new of the garage: 1,500 x $32.75 = $49,125 cost to build the home new; 500 x $17.50 = $8,750 cost to build the garage new. Add the two together for a combined total of $57,875.
A home contains 1,500 square feet of GROSS LIVING AREA and 500 square feet of attached garage area. If the garage costs $17.50 per square foot and the living area costs $32.75 per square foot to build new, what is the total cost new for the improvements?
$469 $639 $317 correct! $552 QUESTION RATIONALE 1. $100,000 x 35% = $35,000 Assessed Value; 2. $35,000 / 1,000 = 35; 35 x 9.07 = $317.45, rounded down to $317. Mills are per $1,000 so divide assessed value by 1000 to get 35. Then multiply my 9.07 mills to get the levy amount
A house that has a market value of $100,000 is assessed at 35% of market value. The school board has asked the taxpayers for a 9.07 mill levy. In dollars, how would an appraiser calculate the annual cost of the levy in order to describe its potential impact in the appraisal? (Round your answer to the nearest dollar.)
$146,500 correct! QUESTION RATIONALE Step 1. Calculate the cost to build the house new; 2,500 x $54 = $135,000 Step 2. Calculate depreciation 5 (Effective Age) / 50 (Total Economic Life) = 1/10, or 10% ; Step 3. Calculate value of improvements $135,000 x 90% = $121,500 value of the improvements; Step 4. Calculate total value $121,500 + $25,000 (land) = $146,500 indicated value of the property.
A house with a living area of 2,500 square feet would cost $54 per square foot to reproduce new. It has a total economic life of 50 years and is estimated to have an effective age of five years. The lot has a market value of $25,000. What is the indicated value of the property, using the COST APPROACH?
Parcel
A lot or piece of real estate, particularly a specified part of a larger tract.
QUESTION RATIONALE Step 1. Calculate improvement value minus site value $192,000 (Improved value) - $27,000 (Site value) = $165,000 Step 2. Calculate total depreciation ($257,000 (replacement cost) - $165,000 (Structure - site value) = $92,000 (total depreciation) Step 3. Calculate annual depreciation Total depreciation of 92,000/actual age of 65years (actual age) = $1,415.38 (depreciation per year); Step 4. Calculate economic life of the house: Replacement Cost of $257,000/$1,415.38 = 181.58 or rounded, 182 years.
A property includes a renovated residential dwelling which is 65 years old. The current market value of the improved property is $192,000. The site value developed by the appraiser is $27,000. The effective age is 25 years. Replacement cost of the house is $257,000. What is the indicated economic life of the house (rounded)?
4.36% QUESTION RATIONALE HP 12C method: 238,000 [ENTER], 0.80 [X] (or 80 [%]) = 190,400, [CHS] [PV], 20 [g] [n], 1,190.22 [PMT], [i], 12 [x] = 4.36%
A property is being purchased for $238,000. An 80% loan has been acquired with a monthly debt service of $1,190.22, based upon a 20 year amortization period. What is the annual rate of the loan?
.2009 QUESTION RATIONALE When dealing with a 45 degree angle, the height of the area will equal width. The difference of the east call (150 feet) and the west call (200 feet) is 50 feet. Therefore, when viewed as a square the area of the triangular portion is 50' wide x 50' high = 2,500 sq. ft. / 2 = 1,250 sq. ft. Next the area of the rectangular portion of the area must be found. It is recognized through the first analysis that the distance of the north boundary call is 50 feet. Thus, the area of the rectangular portion is 50 feet x 150 feet = 7,500 sq. ft. Add the two areas together to find the total square feet and divide by 43,560 (conversion of square feet to acres). 7,500 + 1,250 = 8,750/43,560 = 0.2009 acres.
A property is described as commencing at a POB and continuing east 150 feet to a pin, then S 45 degree bearing E 70 feet to a pin, then west 200 feet to a pin, then north to the POB. What is the total land area in acres?
3.099
A property is described as commencing at a POB and continuing east 450 feet to a pin, then south 300 feet to a pin, then west 450 feet to a pin, then north to the POB. What is the total land area in acres?
5.25% QUESTION RATIONALE HP 12C Calculator steps: 610,000 [CHS] [PV], 30 [g] [n], 3,368.44 [PMT], [i], 12 [x] = 5.25% Remember to clear the register after each problem. f [CLX]
A property purchase is being financed with a $610,000 mortgage, 30 year mortgage. If the monthly debt service is $3,368.44, what is the annual rate of the loan?
Utility QUESTION RATIONALE Utility is the only choice representing the vital characteristics of value (D-U-S-T). Physical and governmental are broad forces. The government police power of enacting and enforcing building codes is part of the governmental broad force.
A residential building site does not have adequate site area on which to construct a house while observing the minimum building size per zoning. Therefore, the value of the site will be most affected by which vital characteristic of value?
Extraction Method
A site valuation method takes an estimated value of improvements and subtracts that from the total sales price to derive a figure for the land value.
Allocation Method
A site valuation method that separates the value of the land from the structures that sit on it by taking a ratio of the land or site value to the total property value, based on a typical property in the area.
QUESTION RATIONALE Age life depreciation is the effective age divided by the total economic life. Total economic life equals effective age plus remaining economic life: 15 (Effective Age) / 80 (Total Economic Life: 65 + 15) = 0.1875, or 18.75%.
A subject property has an actual age of 25 years, an effective age of 15 years, and a remaining economic life of 65 years. Using the "AGE-LIFE METHOD for estimating depreciation, what percentage of depreciation would be used for the subject property?
52% RATIONALE \First, determine the square footage of the three areas needing carpet: 12 x 14 = 168 sq. ft., 15.5 x 17.25 = 267.375 sq. ft., and 12.3 x 17.5 = 215.25 sq. ft. Next, add the three areas together: 168 + 267.375 + 215.25 = 650.625 sq. ft. To convert square yards to square feet, divide by 9: 650.625 / 9 = 72.291666, or 73 full square yards. Now, determine the cost of the carpet: 73 square yards x $14.50 = $1,058.50. The next step is to determine the installation cost: 650.625 sq. ft. x $1.50 = $975.94. Thus, the total cost for carpet and installation would be $2,034.44 ($1,058.50 + $975.94). $1,058.50 (cost of carpet) / $2,034.44 (total cost) = 0.52, or 52%. ID: 10027
An appraiser must determine the cost of carpet in a residential dwelling. The areas needing carpet measure 12' x 14', 15.5' x 17.25', and 12.3' x 17.5'. If the carpet must be purchased in full square yards and will cost $14.50 per square yard, and the installation is $1.50 per square foot, what percent of the total cost is for the carpet?
non-residential units.
An existing space inventory is primarily used for
91 years QUESTION RATIONALE Step 1. $249,000 (Improved value) - $35,000 (Site value) = $214,000 (Depreciated improvement value); Step 2. $239,000 (replacement cost) - $214,000 = $25,000 (total depreciation) Step 3. 10 years (actual age)/ $25,000 total depreciation = $2,500 (depreciation per year); Step 4. Rep Cost of $239,000/Dep. per year of $2,500 = 95.6 - 5 (effective age) = 90.6 or rounded, 91 years.
An improved property includes a house that is 10 years old and is currently valued at $249,000. From market data, the site is worth $35,000. The effective age is 5 years. Replacement cost of the house is $239,000. Using the market extraction method, what is the remaining economic life of the house (rounded)?
increases at a decreasing rate. RATIONALE With a fixed frontage, as the depth of the lot increases, the overall value of the lot increases. However, as the lot extends back, the value of the land farther back becomes less and the increase in overall value becomes smaller. Therefore, the front foot rate will increase, but as the lot extends farther back, the amount of increase in rate will decrease.
As the depth of the lot increases, the value per front footage
3000 QUESTION RATIONALE Based on a matched pair analysis utilizing Sales #1 and #3, the half bathroom has a contributory value of $3,000 ($156,000 - $153,000).
Comparable Sale #1 sold for $153,000 and has a gross building area of 2,010 sq. ft. with three bedrooms, two full bathrooms, a two-car attached garage, and a very small deck. Comparable Sale #2 sold for $149,000 approximately two months subsequent to the sale date of Comparable Sale #1. This residence has a total gross building area of 2,000 sq. ft., three bedrooms, two full baths, and a two-car detached garage. Comparable Sale #3 sold two months prior to Sale #1 and sold for $156,000. This property has a total gross building area of 2,045 sq. ft. and encompasses three bedrooms, two and one-half baths, and a two-car attached garage. What is the value of a half bathroom within the subject's neighborhood, assuming no adjustment is warranted for market conditions or size?
four-unit apartment building. correct! multi-tenant office building. 100-unit apartment project. incorrect! neighborhood shopping center. QUESTION RATIONALE Direct capitalization is most relevant when valuing properties with different income levels and different expenses. Similar four-unit apartment buildings in the same area should have similar incomes and expenses and, of the examples given, are most likely valued with the gross rent multiplier.
Direct capitalization is likely most relevant when valuing all of the following properties EXCEPT
Evaluating the feasibility of proposed projects
How is the cost approach useful for highest and best use analysis?
22.14% RATIONAL: 1. Cost new = (2,400 sq. ft. x $85) + (440 sq. ft. x $18) = $211,920. 2. Depreciation Cost = Sale Price $240,000 - Land Value $50,000 - Site Improve $25,000 = $165,000 . 3. Total Depreciation = $46,920 ($211,920 - $165,000). 4. Percentage of Depreciation Depreciation / Cost new (46,920 / 211,920 = 0.2214 or 22.14%).
For the purpose of estimating depreciation via the extraction method, you have utilized Comparable Sale #1, which is a 2,400 sq. ft. home with a two-car, 440 sq. ft. attached garage, having a replacement cost of $85/sq. ft. for gross living area and $18/sq. ft. for the garage area. This property sold for $240,000 and has a chronological age of 10 years. Through your research, the indicated land value is $50,000 and the site improvements have a replacement cost of $25,000. What is the percentage total amount of accrued depreciation indicated by this sale?
Steps. 1. Determine Cost New Main house 2400 SF x 85/SF =204,000 Garage 440 x 18/SF = 7920 ====================================== 204,000 + 92 = 211,920 2. Determine Depreciation Cost Sale Price 240,000 - Land Value 50,000 - Improvements 25,000 ======================== 165,000 3. Determine Total Depreciation Cost New 211,920 - Depreciation Cost 165,000 = 46,920 4. Determine Depreciation Percentage Cost New 211,920/Total Depreciation 46,920 = 22.14%
For the purpose of estimating depreciation via the extraction method, you have utilized Comparable Sale #1, which is a 2,400 sq. ft. home with a two-car, 440 sq. ft. attached garage, having a replacement cost of $85/sq. ft. for gross living area and $18/sq. ft. for the garage area. This property sold for $240,000 and has a chronological age of 10 years. Through your research, the indicated land value is $50,000 and the site improvements have a replacement cost of $25,000. What is the percentage total amount of accrued depreciation indicated by this sale?
43,459.69
If your client puts $3,000 into an investment account at the end of each year for the down payment on an investment property, at 8% annual interest, how much will the client have at the end of 10 years? (Round your answer to the nearest penny.)
depreciated cost new of improvements to indicated site value.
In the cost approach to appraisal, an opinion of value is indicated by adding the
If the condition is not adhered to, the title to the property could be forfeited RATIONALE Fee simple conditional provides that the owner may hold the estate only as long as some specified act or condition does or does not occur. Thus, if the condition is not observed, the owner could forfeit title.
Legal interest of a subject property was conveyed to the current owner as fee simple conditional. What can be best said about the estate held by the current owner?
Insurance Value
Replacement cost new minus land value is the typical definition for which type of value?
$95,100 correct! QUESTION RATIONALE This is a 2-step problem, so the order you enter the data is very important. HP 12C method: 100,000 [CHS] [PV], 8 [g] [i], 30 [g] [n], [PMT], [ENTER], 60 [n], [FV]. After you hit [PMT] button you should have 733.76. Final answer is $95,069.86, which rounds to $95,1000.00. Remember to clear the register after each problem. f [CLX]
Rounded to the nearest hundred dollars, what is the balance of a $100,000 loan for 30 years at 8% annual interest after five years of monthly payments?
$49,452.89 correct! QUESTION RATIONALE HP 12C method: 600 [PMT], 8 [g] [i], 10 [g] [n], [PV]. Remember to clear the register after each problem. f [CLX]
Rounded to the nearest penny, what is the present value of a triple-net lease that pays $600 per month for the next 10 years if the targeted yield rate is 8%?
a citation of the source of the definition of value being used in the assignment RATIONALE Standards Rule 2-2 (v) of USPAP requires the appraiser to state the type and definition of value and to cite the source of the definition in order to clearly indicate to intended users how the definition is being applied.
Standards Rule 2-2 of USPAP requires an appraiser to state the type and definition of value and provide what other information relating to the type and definition of value?
Physical deterioration
Termite damage is a type of
takes a ratio of the land or site value to the total improved value. RATIONALE When the ratio of land to total value is calculated for the comparable sales and then applied to the subject, the allocation method is being used.
The allocation method for determining site value
Market Price
The amount paid for a particular property is called its
The Cost Approach
The breakdown method refers to a technique used in statistical analysis.
Each site is unique and must be vacant before proper analysis may be made. Sites should be valued on potential rather than current use. correct! Sites cannot have two uses at the same time. incorrect! Only vacant sites have value to developers. QUESTION RATIONALE Land value is based on its greatest legal, physically possible, and economically feasible use. Therefore, sites should be valued based on these considerations rather than the current use.
The theory for highest and best use states that land should be analyzed as if vacant and ready for development. What is the premise behind this theory?
Value in Use
The value of a particular property to a specific user at a specific point in time is known as its
Strait line depreciation
This depreciation method divides depreciation equally over the life of the property. For example, if a property has an economic life of 80 years, then the straight-line depreciation is 1.25% per year (100% / 80 years).
neighborhood district correct! market area subdivision incorrect! QUESTION RATIONALE The term "district" is the narrowest of definitions used to define the boundaries of a particular area. A district is an area consisting of one particular land use, such as multi-family residential, commercial, and industrial, etc.
This term, used for defining a particular analysis parameter, describes an area consisting of one particular land use. What is the term?
Quantity Survey Method
This type of method is used in determining the cost of improvements.
