chapter 10

Excess supply causes present values to _______. Multiple choice question. stay the same drop rise multiply

drop

The cost approach to valuing properties values the cost of _______ and the value of ______ separately. Multiple choice question. marketing; land construction; land land; structure construction; leases

construction;land

Oversupply and falling interest rates have what effect on cap rates? Multiple choice question. increase no effect decrease

decrease

Which of the following are methods to compute gross income? Multiple select question. effective gross income net gross income potential gross income gross income multiplier

effective gross income potential gross income

Comparable property values ______ when cap rates go up. Multiple choice question. divide fall rise don't change

fall

Property values will change in what direction when excess supply is expected? Multiple choice question. remain unchanged fall rise

fall

One would expect that the cap rates for comparable properties would ______. Multiple choice question. fall over a range of values be tied to each other be irrelevant be the same

fall over a range of values

What must be estimated under the discounted cash flow method of property valuation? Multiple choice question. current NOI comparable properties future NOI

future NOI

Which methods of valuation focus on the income producing aspect of comparable properties? Multiple select question. gross income multiplier direct capitalization sales comparison

gross income multiplier direct capitalization

The GIM is used in conjunction with the _____. Multiple choice question. cost approach sales comparison approach income approach comparable approach

income approach

The __________ to property valuation is based on the principle that the value of a property is related to its cash flow. Multiple choice question. income approach comparable approach cost approach sales comparison approach

income approach

The principle that the value of a property is related to its ability to produce cash flow defines what valuation approach? Multiple choice question. sales comparison approach cost approach comparable approach income approach

income approach

Excess demand causes present value to: Multiple choice question. drop by half remain unchanged increase decrease

increase

Excess supply causes cap rates to: Multiple choice question. fall increase remain unchanged

increase

Excess supply causes cap rates to: Multiple choice question. fall remain unchanged increase

increase

Oversupply and rising interest rates have what effect on cap rates? Multiple choice question. no effect increase decrease

increase

When analyzing real market forces and interest rates, it is important to analyze the __________ amongst the real market forces.

interactions

The capitalization method of valuation can not assure a property will be a good _______

investment

The _________ value is the most probably price a property would sell for in a competitive market.

market

The most probable price a property would sell for is referred to as which of the following? Multiple choice question. book value market value comparable price intrinsic value

market value

The effects of interest rates on value __________. Multiple choice question. are short term in nature are tied to net operating income do not affect value may persist for a long time

may persist for a long time

When choosing comparable properties, one wants ______. Multiple choice question. as few properties as possible to choose from properties that require minor adjustments properties that require major adjustments properties that are exactly the same or they're useless

minor

An informed investor would never pay ________ for a property than what recent comparable properties have sold for.

more

The _________ is an estimated value that takes into account the requirements of the mortgage lender and the equity investor. Multiple choice question. mortgage equity value mortgage equity capitalization equity capitalization mortgage capitalization

mortgage equity capitalization

Effective gross income is ________. Multiple choice question. the same as potential gross income potential gross income less effectiveness potential gross income less vacancies potential gross income plus vacancies

potential gross income less vacancies

Fill in the blank question. Under the discounted cash flow method of valuation, investors will pay no more than the _________ value of all future cash flows.

present

The mortgage-equity capitalization method says the property value is equal to the expected mortgage financing plus what? Multiple choice question. present value of other debts present value of equity investment present value of tax liabilities the mortgage rate

present value of equity investment

When choosing comparable properties, one wants ______. Multiple choice question. as few properties as possible to choose from properties that are exactly the same or they're useless properties that require major adjustments properties that require minor adjustments

properties that require minor adjustments

When long-run growth in NOI is expected to be level or zero, the terminal cap rate should be: Multiple choice question. r r - g r+g g

r

When long-run growth in NOI is expected to be negative, the terminal cap rate should be: Multiple choice question. r+g g r - g r

r+g

When long-run growth in NOI is expected to be positive, the terminal cap rate should be: Multiple choice question. r - g r r+g g

r-g

The sales comparison approach uses which of the following to value a property? Multiple choice question. recently sold comparable properties recently sold properties future cash flows

recently sold comparable properties

The sales comparison approach uses which of the following to value a property? Multiple choice question. recently sold properties future cash flows recently sold comparable properties

recently sold comparable properties

An alternative method to estimating the terminal cap rate is to estimate the _________ value.

resale

Given the implied land value for the following property types, which property should you build?Office: $750,000Retail: $1,800,000Apartment: $1,100,000Warehouse: $900,000 Multiple choice question. Warehouse Apartment Office Retail

retail

Any cash flows beyond projections will be represented by: Multiple choice question. reversion value NOI mortgage rate terminal cap rate

reversion value

The discount rate is the required return based on the _________ of the investment.

risk

A key input to calculating the discount rate is the _____. Multiple choice question. internal rate of return risk premium mortgage rate net operating income

risk premium

Which methods of valuation focus on adjusting for physical and locational differences of comparable properties? Multiple choice question.

sales comparison

Which of the following determines values based on comparable properties recently sold? Multiple choice question. sales comparison approach cost approach income approach

sales comparison approach

A property that is very _________ in quality, size, age, and location would make a good comparable property.

similar

Estimating the resale value is an alternative to using the _______ cap rate.

terminal

Changes in expected NOI cause ______ in land prices.

volatility

True or false: When purchasing properties with existing leases, the comparable property should have a similar lease.

TRUE

To calculate the present value of an investment, one needs _______. Multiple choice question. a forecast of NOI, a holding period, and a reversion value. a holding period, a discount rate, and a reversion value. a forecast of NOI and a holding period a forecast of NOI, a holding period, a discount rate, and a reversion value

a forecast of NOI, a holding period, a discount rate, and a reversion value

Which parties use appraisals in real estate finance decision making? Multiple choice question. borrowers neither lenders nor borrowers both lenders and borrowers lenders

both lenders and borrowers

An appraisal is an ________ of value.

estimate

When purchasing a leased fee estate, the comparable property for valuation should have which similar characteristics? Multiple select question. lease contents occupant income location

lease contents location

Due to age and depreciation, older properties will produce ______ income as a new property. Multiple choice question. less the same more a lot more

less

The cost approach is most desirable with _______. Multiple choice question. properties that are 10 years old properties that are less than 10 years old properties that are 20 years old properties that are 30 years old

properties that are less than 10 years old

The gross income multiplier is defined as: Multiple choice question. Sales price + Gross income Sales price / Gross income Sales price x Gross income Sales price - Gross income

Sales price / Gross income

True or false: The capitalization rate method of valuation guarantees a property will be a good investment.

FALSE

___________ reports are required by lenders.

appraisal

The cost approach is less desirable in what situation(s)? Multiple select question. newer construction comparable land sales are easy to find comparable land sales are difficult to find older properties

comparable land sales are difficult to find older properties

In general, cap rates on older properties will be _______. Multiple choice question. the same lower irrelevant higher

higher

changes in expected growth rate cause volatility in _______ prices

land

Any cash flows beyond projections will be represented by: Multiple choice question. NOI reversion value terminal cap rate mortgage rate

reversion value

Properties that are comparable are _________ Multiple choice question. very similar have very different lease terms impossible to find not at all similar

very similar

One method of valuation is that the value of a property is equal to: Multiple choice question. NOI / (1 + R) R NOI / R NOI x R

NOI / R