Ch. 16 Appraising and estimating market value

What is the difference between market value and market price, if any?

Market value is an estimate; market price is the price at which a property sold.

The principle underlying depreciation from physical deterioration is that

a property loses the same increment of value each year over the economic life of the property.

One of the strengths of the sales comparison approach is that it

takes into account the competitive value of specific amenities of the subject property.

The steps in the market data approach are

select comparable properties, adjust the comparables, estimate the value.

A property is being appraised using the income capitalization approach. Annually, it has an estimated gross income of $30,000, vacancy and credit losses of $1,500, and operating expenses of $10,000. Using a capitalization rate of nine percent, what is the indicated value (to the nearest $1,000)?

$206,000.

A property is listed for sale at $235,000. A buyer's offer of $220,000 is rejected by the seller. Six months later, the seller reduces the price to $225,000. Another buyer offers $210,000 and the seller accepts. The property is subsequently appraised at $215,000. Which of these figures accurately represents the property's market value?

$210,000

If the monthly rent of a property is $3,000, and the gross rent multiplier (GRM) is 80, what is the value of the property?

$240,000

A house is being appraised using the sales comparison approach. The house has three bedrooms, two bathrooms, and a patio. The appraiser selects a comparable house that has three bedrooms, 2.5 bathrooms, and no patio. The comparable house just sold for $100,000. A half-bath is valued at $5,000, and a patio at $1,000. Assuming all else is equal, what is the adjusted value of the comparable?

$96,000.

Which of the following situations illustrates the principle of contribution?

: A homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,000.

Which of the following statements properly describes the methodology of the cost approach to appraisal?

Add the estimated land value and cost of improvements and subtract the accrued depreciation of the improvements.

The income capitalization approach to appraising value is most applicable for which of the following property types?

Apartment buildings

In which approach to value are the square-foot method, the unit-in-place method, and the quantity-survey method used?

Cost approach

Which of the following statements properly describes how to apply the income capitalization approach to appraisal?

Divide the income a property generates by a desired rate of return.

What is the difference between the appraised value of a property and its mortgage value, if any?

The appraised value is an appraiser's estimate; mortgage value is the value a lender imputes to the property as collateral.

All of the following formulas are correct for the income approach EXCEPT

Value divided by Rate = Income.

In making dollar adjustments in the sales comparison approach, the appraiser

adds value to a comparable that is inferior to the subject property.

A property owner buys an adjacent parcel and combines it with the original parcel to create a property with a higher value than the total of the two separate property values. The operative principle of value in this situation is called

assemblage.

An office building lacks sufficient cooling capability to accommodate modern computer equipment. This is an example of

functional obsolescence.

The principle that maximum value is realized when land use is in harmony with surrounding standards is

conformity.

The first step in the appraisal process, regardless of the appraisal method, is to

define the appraisal problem and the purpose of the appraisal.

The first two steps in the cost approach are to estimate the value of the land and the cost of the improvements. The remaining steps are

estimate depreciation, subtract depreciation from cost, and add back the land

The steps in the income capitalization approach are:

estimate net income, and apply a capitalization rate to it.

A home is located in a neighborhood where homeowners on the block have failed to maintain their properties. This is an example of

incurable economic obsolescence.

Highest and best use of a property is that use which

is physically and financially feasible, legal, and the most productive.

The best comparable property for use in the sales comparison approach is the one that

requires the fewest and smallest adjustments.

A certified appraiser is one who has received certification by

the state in which the appraiser operates.

A notable weakness of the sales comparison approach to value is that

there may be no recent sale price data in the market.

A strength of the income capitalization approach is that it

uses a method that is also used by investors to determine how much they should pay for an investment property.