Chapter 12 Value and Appraisal

A four bedroom house has only one bathroom. Identify the type depreciation described and determine whether or not it is curable. A. Functional, probably incurable. B. Physical, incurable. C. Physical, curable. D. Economic, curable.

A. Functional, probably incurable.

Which of the following items would not be relevant in the appraisal of an older type property? A. The original cost. B. Current reproduction cost. C. An estimate of accrued depreciation. D. Recent selling prices of comparable properties in the neighborhood.

A. The original cost.

In appraisal, comparable properties are those which A. can be adjusted to reasonably match the subject. B. are exactly like the subject. C. Both A and B. D. Neither A nor B.

A. can be adjusted to reasonably match the subject.

When appraising a property, comparable properties are those which A. can be adjusted to reasonably match the subject. B. are identical to the subject. C. will close the same date as the subject. D. have sold within the past week.

A. can be adjusted to reasonably match the subject.

Adjustments made in utilizing the market data approach are made to the A. comparable properties. B. subject property. C. Both A and B. D. Neither A nor B.

A. comparable properties.

If you were asked to appraise property that had no monthly income and there were no comparables in your market, you would probably use the A. cost approach. B. income approach. C. declining balance method. D. market comparison approach.

A. cost approach.

In appraising a single-purpose building, such as a church, the most reliable approach to an indication of its value would generally be the A. cost approach. B. market data approach. C. income approach. D. Both A and B.

A. cost approach.

Replacement cost is the A. cost of building a property of equivalent utility with modern materials. B. cost of building an exact replica of the subject. C. original cost adjusted for inflation. D. cost of purchasing an equally desirable property.

A. cost of building a property of equivalent utility with modern materials.

Homogeneity A. creates stability in values. B. increases values. C. decreases value. D. has no effect on value.

A. creates stability in values.

The value of a piece of land A. is an estimate of the present worth of future benefits. B. includes a measure of past expenditures. C. Both A and B. D. Neither A nor B.

A. is an estimate of the present worth of future benefits.

When figuring square footage of a house for appraisal purposes, use A. outside measurements. B. inside measurements. C. Both A and B. D. Neither A nor B.

A. outside measurements.

In the comparison approach to appraisal, after adjustments are made for each comparable, the result is A. the adjusted market value. B. an absolute value. C. a SWAG. D. the market price.

A. the adjusted market value.

The power of a good or service to command other goods or services in exchange is A. value. B. economic perfection. C. utility. D. need.

A. value

An appraiser was hired to prepare a feasibility study for a 24-unit apartment building in which the owner was considering putting in a swimming pool. What basic principle of appraising would be used? A. Regression. B. Contribution. C. Competition. D. Substitution.

B. Contribution.

Plaster on the ceiling of an apartment is cracked and in some places pieces have fallen. Identify the type depreciation described and determine whether or not it is curable. A. Physical, incurable. B. Physical, curable. C. Economic, incurable. D. Functional, probably incurable.

B. Physical, curable

Which of the following is true? A. Appraising is an exact science. B. Since appraising is an art rather than a science, the credibility of an appraisal report depends upon the experience and training of the appraiser. C. The cost approach is the most reliable. D. Both A and C.

B. Since appraising is an art rather than a science, the credibility of an appraisal report depends upon the experience and training of the appraiser.

The rate of return that an investor expects to earn on invested money is the A. effective gross income. B. capitalization rate. C. quantity return. D. net operating income.

B. capitalization rate.

A neighborhood which maintains high property values because of its similar but not identical architectural styles is benefiting from the principle of A. change. B. conformity. C. substitution. D. progression.

B. conformity.

When changing tastes and standards cause an existing house to lose value, there is A. physical deterioration. B. economic obsolescence. C. functional obsolescence. D. sociological deterioration.

B. economic obsolescence.

Capitalization is the process by which the estimated future annual net income is used as the basis to A. determine value. B. estimate value. C. establish depreciation. D. calculate potential tax liability.

B. estimate value.

The forces beyond the control of the property owner that affect the value of the property are called A. approaches to value. B. externalities. C. increasing and decreasing returns. D. depreciation.

B. externalities.

The direct sales comparison approach to appraising may be unreliable in a(n) A. period of hyper-inflation. B. inactive market. C. "bedroom community:" D. are where there is new construction.

B. inactive market.

The economic value of situs is directly related to A. cost. B. location. C. method of calculating depreciation. D. reproduction cost.

B. location.

When using the cost approach to value, an appraiser would consider all of the following items EXCEPT the A. reproduction or replacement cost. B. price the seller paid for the property. C. value of the land parcel. D. depreciation from all sources.

B. price the seller paid for the property.

To arrive at the estimate of value of property in an old neighborhood, an appraiser would rely more heavily on an estimate that A. figures cost to rebuild, less depreciation, plus land. B. reviewed similar or comparable properties in the same area that have sold recently. C. processed income flow to value. D. none of these.

B. reviewed similar or comparable properties in the same area that have sold recently.

An appraiser who is using the comparison method to appraise a single-family residence would never use the selling price of which of the following? A. A similar home tat sold over six months ago. B. A similar home that sold recently but is located in another neighborhood. C. A similar home that was sold by owners who were forced to sell at any price because of financial difficulties. D. A home of similar size, situated on a corner lot.

C. A similar home that was sold by owners who were forced to sell at any price because of financial difficulties.

Physical deterioration results from A. action of the elements. B. normal wear and tear. C. Both A and B. D. Neither A nor B.

C. Both A and B.

Value is described as which of the following? A. The utility of an object in satisfying a person's need. B. The worth of an object in exchange. C. Both A and B. D. Neither A nor B.

C. Both A and B.

Obsolescence in real property has two forms, functional and economic. With regard to these forms, which is true? I. Functional obsolescence is the result of factors within the property itself. II. Economic obsolescence is caused by factors outside the property. A. I only. B. II only. C. Both I and II. D. Neither I nor II.

C. Both I and II.

A chain store has been enjoying a good business. A new expressway cuts off access to the store. Identify the type depreciation described and determine whether or not it is curable. A. Physical, incurable. B. Economic, curable. C. Economic, incurable. D. Functional, curable.

C. Economic, incurable.

Which of the following should have no influence on an appraisal compensation? A. The complexity of the appraisal. B. The time required to make the appraisal. C. The value estimated in the appraisal. D. The expenses of the appraiser.

C. The value estimated in the appraisal.

The principle of value that reflects the fact that the present use of a property may be different from its use ten years from now is the principle of A. competition. B. substitution. C. change. D. conformity.

C. change.

The loss in property value because of the lack of sufficient parking facilities in a four bedroom home would be called A. physical deterioration. B. physical obsolescence. C. functional obsolescence. D. external obsolescence.

C. functional obsolescence.

It is accurate to say that it is better to use the reproduction cost approach on a new building instead of an older one because A. land values change so rapidly. B. local codes change over the years. C. it is easier to estimate depreciation. D. it is too difficult to put a price on historical value.

C. it is easier to estimate depreciation.

With the cost approach to value, the most common method of cost estimation is the A. quantity survey method. B. unit-in-Mace method. C. square-foot method. D. index method.

C. square-foot method.

The first thing appraisers should know in undertaking an appraisal is A. how they are to be paid. B. the selling price of the property. C. the purpose of the appraisal. D. what property has sold for recently in the area.

C. the purpose of the appraisal.

The elements necessary for property to possess value include A. demand. B. utility. C. transferability. D. All of the above.

D. All of the above.

The principal factors for which adjustment must be made in using the market data approach include A. location and physical features. B. date of sale. C. terms and conditions of sale. D. All of the above.

D. All of the above.

Which of the following types of depreciation is always incurable? A. Physical deterioration. B. Physical obsolescence. C. Functional obsolescence. D. External obsolescence.

D. External obsolescence.

The decision as to what the highest and best use to which a particular property could he put is determined by which of the following? A. What similar building lots are being sold for. B. How tall a building the neighborhood would warrant. C. What use would presently produce the largest net income. D. That use which would produce the greatest amount of amenities or net income in future years.

D. That use which would produce the greatest amount of amenities or net income in future years.

Depreciation may occur from A. economic obsolescence found in the neighborhood where a property is located. B. loss of functionality due to the basic construction techniques used in a building. C. loss in value due to anything affecting the property and the area around it. D. all of the above.

D. all of the above.

All of the following are correct statements concerning depreciation, EXCEPT A. a loss of value from any cause. B. the subject of wear and tear on investment property or property used in a trade of business. C. includes all of the influences that reduce the value of a property below its replacement cost new. D. always concerned with intrinsic value and not concerned with factors outside.

D. always concerned with intrinsic value and not concerned with factors outside.

Market price is the A. true market value. B. price at public sale. C. price asked for the property on an open market. D. amount, in terms of money, paid for the property.

D. amount, in terms of money, paid for the property.

The usefulness of the cost approach may be limited if the subject is A. a new structure. B. in an inactive market. C. proposed construction. D. an old structure with many functional deficiencies.

D. an old structure with many functional deficiencies.

Quality appraisals require expertise and experience. Anyone who works as an appraiser is required to A. hold an active Oklahoma real estate broker's license. B. have a minimum of six months training under a recognized senior appraiser. C. be an active and certified member of any one of the recognized appraisal societies. D. do none of the above.

D. do none of the above.

"The value of the best property in a neighborhood will he adversely affected by the proximity of substantially less valuable property:" This is an element of the principle of A. balance. B. contribution. C. anticipation. D. progression-regression.

D. progression-regression.

Joe Ego has his "dream house" constructed for $250,000 in an area where most new constructed homes are not as well-equipped and typically sell for about $180,000. The value of Ego's house is likely to be affected by the principle of A. progression. B. assemblage. C. change. D. regression.

D. regression.

The statement that no prudent person would pay more for a parcel of real property than the price of a reasonably close alternative which is available without undue delay, refers to the principle of A. balance. B. competition. C. conformity. D. substitution.

D. substitution.

A builder developed a subdivision in which the demand for homes was great. The last lot in the subdivision was sold for a much higher price than the first lot purchased in the area. This example illustrates the principle of A. highest and best use. B. substitution. C. conformity. D. supply and demand.

D. supply and demand.

Highest and best use is A. single-family property zoned for industrial use. B. property purchased for owner use. C. the use which the purchaser intends when the property is purchased. D. the reasonable, possible, and probable use of the property that will yield the highest return on investment.

D. the reasonable, possible, and probable use of the property that will yield the highest return on investment.