Real Estate Final: Chapter 7

A homeowner receives a tax bill that includes an amount for the library district, taxed at $1.00 per $1,000, and the fire protection district, taxed at $2.00 per $1,000. How much does the taxpayer have to pay for these two items if the property's taxable value is $470,000?

$1,410.00

A property was originally purchased for $160,000. The land portion is 25% of total value. If depreciation totals $20,000, what is the value of the property using the cost approach?

$140,000

A building has a potential gross rental income of $145,000 with vending receipts of $5,000 and a vacancy rate of 5%. The annual expenses of the building are $15,000 in taxes, insurance $4,000, maintenance $10,000, utilities $6,000, repairs $3,500, legal fees $1,500, management fees @ 4% of Effective Gross Income. What is the Effective Gross Income of the property?

$142,750

A property valued at $340,000 has a Gross Rent Multiplier of 148. What is this property's monthly income?

$2,297

A new home sold for $350,000. The tax rate is $.825 per hundred or fraction thereof. How much will the annual taxes be on this property?

$2,887.50

Mike wanted a capitalization rate of 14% if he bought Joe's property. If three units rented for $450 per month, two units @ $550, and one unit @ $600 per month, what is the maximum amount Mike could pay in order to net the cap rate he wants?

$261,429

A property's land-to-improvements value ratio is 20% - 80%. The property was purchased 10 years ago, and depreciation has averaged $1,200 per year on the 3,000 SF house. If the improvements were built @ $120 / SF what is the current value of the property using the cost approach?

$3,000 x $120 = $360,000, $360,000 divided by .80 = $450,000, $450,000 - $360,000 = land value $90,000, $1,200 x 10 = $12,000, $360,000 - $12,000 = $348,000, $348,000 + $90,000 = $438,000

A property has been depreciated @ $3,000 for 15 years. The land, which comprises 20% of total value is worth $20,000. What was the original value of the property?

$3,000 x 15 = $45,000, $20,000/ 0.20 = $100,000, $100,000 + $45,000 = $145,000

You as a broker sold a TRIANGULAR piece of land for $900 per acre. What is the approximate amount of your commission at 7% if the land had a base of 1500 feet and a height of 600 feet?

$651

An office building has a Potential Gross Income of $12,600 per year. The vacancy rate is 5% and the annual expenses are $3,600. What is the market value if the capitalization rate is 12%?

$69,750.00

A 20-unit apartment building rented for $750 per unit, per month. The annual Gross Income Multiplier was 9. What is the value of the property?

$750 x 20 = $15,000, $15,000 x 12 = $180,000, $180,000 x 9 = $1,620,000

An income producing property rents for $1,000 per month and the GRM is 84. What is the estimated market value of the property?

$84,000

How many acres are there in the S 1/2 of the N 1/2 of the SW 1/4 of a section of land?

1 section = 640 acres, 640 ÷ 4 = 160, 160 ÷ 2 = 80, 80 ÷ 2 = 40 Acres

A tri-plex generates $700 rent for each of its three units per month. The property has been recently appraised for $413,000. What is this property's GIM?

16.4

A development company owned property that the city wanted so it could extend the runways at the municipal airport. If the company refuses to negotiate with the city, then the city may acquire the property by:

Eminent domain.

An investor's return on an income property appraisal is based on which of the following?

Gross Income less expenses

Commercial income producing property is best appraised using which method?

Income Approach

Which of these controls would be used to prevent a neighboring lot owner from violating the recorded deed restrictions in a subdivision?

Injunction.

What is a unique characteristic of a special assessment tax?

It applies only to properties which will benefit from the public improvement.

A property owner installs a new air conditioning system. How does this affect the property's effective age?

It decreases it.

Which of the following types of value is the type most often sought by an appraiser?

Market

A tire company has a manufacturing plant located in an area that has just been re-zoned for residential usage. The company is allowed to continue operating the plant under the new zoning classification. However, if the plant is destroyed by fire, the tire company:

May not construct another plant in the neighborhood without first applying for a zoning variance.

How is a homeowner's total tax bill derived?

Multiply each district's tax rate times the taxable value of the owner's property.

A property owner in a recently zoned area was permitted to continue to use his property in a manner that did not comply with the zoning requirements. This use is described as which of the following?

Nonconforming use.

A developer put two lots together and sold them as one large lot. The increase in value is referred to as:

Plottage.

Public land use controls in the form of building ordinances are an exercise in the form of:

Police Power.

Functional obsolescence is due to:

Poor design or floor plan.

A CMA is performed when:

Pricing property

A $175,000 house was built next to a $75,000 house. Which of the following principles of value would apply?

Progression and Regression.

Which method of determining cost adds estimates of material and labor costs to indirect costs to arrive at the total cost of a structure?

Quantity Survey

One way for an appraiser to account for a property's deterioration is to

Raise the effective age of the property.

Which of the following are not forms of public land use control?

Restrictive Covenants

The Monroe family elects to purchase a property on Elm Street that is virtually identical to the property on Maple Street due to the fact that the Maple Street property had a similar price. This is an example of which value principle?

Substitution

The premise of the Sales Comparison Approach rests on the principle of:

Substitution

What is a critical characteristic of a metes and bounds description?

The Point of Beginning and Point of End MUST be the same.

The concept of economic life is best characterized as

The anticipated period of time an improvement will last for depreciation purposes.

One important characteristic of environmental protection legislation is that it

can require affirmative action on the part of owners and developers.

If a comparable has one more bedroom than the subject, an adjustment is made by

deducting value from the comparable.

A millage rate is derived by

dividing the tax requirement by the tax base.

The Unit-in-Place method of estimating costs is best described as

estimating costs on item-by-item basis.

A zoning variance is obtainable in a municipality provided that

it is obtained prior to the commencement of the varying use.

A parcel's street address is an insufficient legal description because

it lacks permanence and sufficient data for a surveyor to locate it.

In the appraisal process, looking at a shopping center, the distances to schools and availability of shopping is called

neighborhood analysis.

Prior to preparing the report, the last step in the appraisal process involves

reconciling the values derived from the three approaches.

Ad valorem taxes are based on

the assessed value of property

What are ad valorem taxes based on?

the assessed value of property

Market value is defined by all of the following EXCEPT

the broker's opinion of value.

Economic life is best defined as

the length of time during which an improvement will contribute to the value of a property.

Private land use control is primarily exerted by

the owner of the controlled property via deed restrictions.

The capitalization rate is best described as:

the relationship between net operating income and estimated value or cost.

The ad valorem tax base of a municipal jurisdiction is equal to

the total of all assessed values of properties minus exemptions.

One characteristic of a Planned Unit Development is

to cluster homes in smaller lots to allow for more common area.

The purpose of a building permit is

to regulate minimum construction standards.

An apartment building contains twenty units. Each unit rents for $900 per month. The vacancy rate is 5%. Annual expenses are $17,500 for maintenance, $7,200 insurance, $7,500 taxes, $6,400 utilities, $7,500 mortgage debt and 10% of the gross effective income for the management fee. What was the investor's rate of return for the property if she paid $1,170,000 for the property?

20 units x $900 monthly rent = $18,000 x 12 months = $216,000 gross potential income; $216,000 x 95% occupancy = $205,200 effective gross; $205,200 x 10% = $20,520 mgmt fee; $205,200 effective gross income -$20,520 mgmt fee -$17,500 maint. - $7200 insurance - $6,400 utilities - $7500 taxes = $146,080; (do not include mortgage debt of $7,500); $146,080 /$1,170,000=12.485% (12.48%)

A scale drawing shows a room to be 3 inches by 4 ½ inches. Carpet is $15 per square yard is to be installed in the room. If the scale is 1 inch to 4 feet, how much would it cost to install the carpet?

3 x 4 = 12, 4½ x 4 = 18, 12 x 18 = 216, 216 ÷ 9 = 24, 24 x $15 = $360

An acre contains:

43,560 square feet.

A property sold for $2100 per acre. The front of the property measured 640' the rear measured 570' and the depth of the property was 720'. What was the sale price of the property?

640 + 570 = 1,210, 1,210 ÷ 2 = 605, 605 x 720 = 435,600, 453,600 ÷ 43,560 = 10, 10 x $2,100 = $21,000

Which of the following is an example of economic obsolescence?

A house abutting a closed factory.

The definition of depreciation is

A loss in value.

The purpose of a buffer zone is to accomplish which of the following?

A neutral zone between differing forms of land use.

The metes and bounds method of surveying is based primarily upon:

A point of beginning.

The best definition of an appraisal is:

An estimate of value.

Which principle of value holds that a property can increase or decrease in value in expectation of something in the future?

Anticipation

An investor combines two parcels of land, after which the value increases on the overall property. This is an example of which of the following?

Assemblage

The primary intent of zoning ordinances is to:

Assure the health, safety and welfare of the community.

The primary survey line running east and west in the rectangular survey system is the:

Base Line.

For which of these properties would an appraiser most likely choose to use the cost method of appraisal?

Church

One business attracts another business of similar type and together they may make more money than they would have singularly. This is an example of what principle of value?

Competition

Burger King locates a franchise across the street from a McDonalds. At play here is the principle of

Competition.

A house is constructed in a neighborhood that is substantially larger than the existing houses. Based on the value principle of ___________________, the larger house's value will therefore be adversely affected.

Conformity

Public land-use regulations may regulate all of the following except

Construction Costs.

Which principle of value holds that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from the whole?

Contribution

Which of the following approaches to value figures the land separately from the value of the improvements?

Cost Approach

Public land use controls include all of the following except

Deed Restrictions

Functional and economic obsolescence are aspects of

Depreciation

To find the value of a property using the Income Approach to value, if the Net Operating Income and capitalization rate were known, the appraiser would:

Divide the Net Operating Income by the capitalization rate.

The depreciation most difficult to remedy would be:

Economic

Which aspect of depreciation is almost always incurable?

Economic Obsolescence.

Which of the following best defines reproduction cost?

The cost to replace an improvement with original materials

An appraiser deducts $5,000 for a property that has defective wiring. This defect is curable obsolescence, provided that

The repair costs $4,000 to complete.

Which of the following is an accurate statement?

To derive Net Operating Income, deduct the annual operating expenses from Annual Gross Income to derive Net Operating Income.

What is the fundamental purpose of a building permit?

To ensure that improvements comply with codes

What is the purpose of a homestead tax exemption?

To offer some amount of tax relief on an owner's principal residence

An appraiser, using the Cost Approach method would do which of the following?

Use replacement cost minus depreciation.

Using a 12% capitalization rate, an apartment complex is valued at $480,000. Find the value of the same property if a 10% cap rate is used.

Value = income ÷ cap rate, so $480,000 x 12% = $57,600 income, $57,600 income ÷ 10% cap rate = $576,000

A permitted deviation from the standards of a building ordinance is called:

Variance

What is the principal mechanism for implementing a master plan?

Zoning

An improvement to a local restaurant does not comply with the zoning ordinances because it was constructed prior to the adoption of the zoning laws, and its use is one that clearly differs from current zoning. This is known as

a legal nonconforming use.

A plat of survey is best described as

a survey of an entire subdivision.

The essential criteria for an acceptable legal description is that it

accurately locates the parcel in the opinion of a court.

The tax base in a jurisdiction is derived by subtracting exemptions from

assessed values