chapter 13 part 1
What event might trigger a bank to order a BPO? A.a foreclosure B.a second mortgage C.a damage loss assessment D.a relocation
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What is the Sales Comparison Approach? A.Sales comparison approach means comparing one property against recent sales of properties in a neighborhood B.Sales comparison approach means you use the price you want to sell the house. C.Sales comparison approach means the maximum dollar you can get for the property. D.How much the house will sell for in five years.
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Which of the following is a reason why the GRM of a comparable property would be heavily compromised? A.If the seller sold it to a family member for half the price it was worth. B.If the seller of the property had not told the buyer that the furnace needed to be replaced. C.If the seller of the property had not previously disclosed that there were vending machines on the property. D.If the seller decided against the planned luxury retrofits prior to selling.
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Which of the following is an example of a long-lived item? A.The crown molding. B.The roof. C.The kitchen cupboards. D.The electrical fixtures.
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Which of the following is an example of an incurable repair? A.A crumbling foundation that is expected to last 20 more years. B.Scuff marks on the floors. C.3 broken windows. D.A crumbling foundation that needs to be replaced immediately.
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Which of the following parties is likely to order a competitive market analysis (CMA)? A.a real estate agent B.a lender C.a bank D.a property tax assessor
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What is the principle of anticipation? A.The benefits the property may offer buyer. B.The benefits the property offers the seller. C.The benefits the property offers the community. D.The benefits the property offers everyone.
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Which of the following situations would complicate an estimator's income calculations? A.If a landlord made one of their tenants the property manager, but instead of paying a salary the landlord waived the cost of rent. B.If the estimator knew that the parking lot would soon need to be repaved. C.If the landlord was planning to install more energy-efficient toilets in the apartment complex and the estimator was unaware of this upgrade. D.If the estimator was unaware that the landlord was planning to scrimp on maintenance costs.
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A builder buys all the lots of a street abutting a neighborhood and builds luxury homes. Property values in the neighborhood increase; what principle applies? A.The principle of progression applies. B.The principle of change applies. C.The principle of regression applies. D.The principle of change applies.
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A builder buys all the lots of a street abutting a neighborhood and builds mobile homes. Property values in the neighborhood drop; what principle applies? A.The principle of regression applies. B.The principle of competition. C.The principle of progression applies D.The principle of change applies.
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A home is up for sale at $275,000. A new home that is similar can be built for $255,000. What principle applies? A.The principle of substitution. B.The principle of competition. C.The principle of progression. D.The principle of change.
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A playground is being built in a neighborhood with primarily senior housing. Is this good for property values? A.No, because it lacks utility. B.Yes, especially if they have grandchildren. C.It will have no impact on value. D.Children from surrounding neighborhoods will use the playground.
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A town has decided to build a school and a playground in a neighborhood. Property values are increasing. Why does this occur? A.In anticipation of the school and playground, more families are interested in homes. B.There is no valid reason for properties to increase in value. C.Because supply of homes is not as great. D.Because there are so few homes available for sale.
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According to this principle, it is the future, not the past, which is of prime importance in estimating value...? A.Principle of change B.Principle of anticipation C.Principle of substitution D.Principle of progression
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According to this principle, the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution? A.Principle of substitution B.Principle of anticipation C.Principle of progression D.Principle of change
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An appraisal comes in at $300,000, and the seller has the property listed for $350,000. What should he do? A.The sales price should be reduced to be in line with the value. B.Nothing, someone will pay the higher price. C.He should take the property off the market. D.The appraiser should review the value for errors.
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Are property improvements always a good idea? A.No, there is the possibility of diminishing returns. B.Yes, all property improvements increase value. C.No, property improvements are never a good idea. D.No, only outdoor improvements increase value.
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Can a residential appraiser ever evaluate a property with five units or more? A.Yes, as long as the transaction value is less than $250,000. B.Yes, as long as the transaction value is less than $1 million. C.No, this would be considered commercial real estate and is thus off-limits to the appraiser. D.Yes, as long as the property is meant for residential use, a residential appraiser can evaluate it.
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Can all property be valued using the sales comparison approach? A.Typically, this approach is used for residential property. B.Yes, it does not matter what type of property it is. C.No, only shopping centers can be appraised this way. D.It depends on the neighborhood.
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Do higher property taxes impact home values? A.Yes, the properties will be less valuable. B.No, people know taxes are needed to provide services. C.Yes, the properties will increase in value. D.No, taxes go up all the time without impact.
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Does a brand new roof make a property more valuable? A.Yes, the new roof should increase the value. B.No, the roof age does not matter. C.Not unless the roof was added on last week. D.No, the buyer does not care how old the roof is.
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Half of the residents are employed by a large employer in a nearby city, and the employer shutters their doors. What happens to the property in the area? A.Typically lower prices because people are moving out. B.Higher prices because the commercial building is gone. C.Higher prices because there are more homes for sale. D.Lower prices because new commercial space is available.
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How do appraisers typically offer their services? A.Appraisers have the option of either freelancing or working for a firm/financing institution. B.Appraisers can only offer their services if they're working for an accredited appraisal firm, bank, or credit union. C.Appraisers work independently on a freelance basis, so they are less likely to be accused of professional bias. D.Appraisers are employed by a licensed broker who will assign them cases in exchange for a steady salary and benefits.
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How does an appraiser identify properties when using the Sales Comparison Approach? A.Public records such as the clerk in the county and MLS services. B.He goes from door to door to see who sold their house recently. C.He asks the homeowner when the last sales were. D.He finds similar homes and asks the owner how much they are worth.
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How does the lack of internet access in remote areas impact property values? A.The values are likely to be lower due to the lack of service. B.The property is more valuable to those who do not care about internet access. C.The property value does not change. D.The value will increase because internet will come eventually.
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How is the GRM primarily used with the income approach? A.As a screening tool. B.As the final word on the value of a property. C.As a viable alternative to NOI. D.As a way to weed out unreliable tenants.
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How is the cap rate defined? A.As the rate of annual return on a property. B.As the average amount of rental income on any given year. C.As the predicted range of value for the property. D.As the lender's percentage of profit from the loan.
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How should a real estate agent use estimates when listing a property? A.They should take the estimate into account while still factoring in other variables that could influence the perception of the property. B.They should keep the numbers as close as humanly possible, otherwise they could be accused of misrepresenting the property. C.They should get at least three other estimates and then take the average of those estimates before settling on a listing price. D.They should only accept BPOs or CMAs. If they're using an appraisal they need special permission from the appraisal subcommittee.
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How should an appraiser handle the estimated value of properties that have not yet been sold? A.They should factor it in, but it should not be considered a major consideration. B.They should not factor it in because the properties have not actually fetched that amount on the market. C.They should weigh the value of unsold properties the same as properties that have already been sold. D.They should consult with their supervisor regarding the true value of the unsold properties.
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How should an estimator treat a capital expenditure according to the income approach? A.They should not factor in capital expenditures because they are not considered necessary to the building. B.They should factor in capital expenditures because they're an integral part of estimating overall revenue. C.It depends on whether the capital expenditure is being used to lure additional tenants to the building. D.It depends on whether the estimator is calculating the GRM of the property.
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If all the homes sold recently have finished basements and the appraised property has an unfinished basement, what happens? A.The appraiser takes the cost of finishing and deducts from the value. B.There is nothing to do, it is only a basement. C.He adds to the property value the cost of a basement because it can be customized. D.He asks the seller to finish the basement before selling the property.
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If the home for sale has more bathrooms or additional bedrooms than the homes sold, what does the appraiser do? A.The value of the subject property will have to be adjusted upwards. B.He subtracts the value of the extra rooms from previously sold properties. C.He guesses at the value of the additional rooms. D.Nothing, it does not matter.
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If three homes used for comparison all have different square footage, what does the appraiser do? A.The appraiser will get the average square feet and cost per square foot for the new property. B.Nothing, it does not matter if they are the same as long as they are close. C.Square footage has nothing to do with value. D.Uses the average value of all three properties.
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Is data from recent sales enough to establish value? A.No, combining recent sales only gives you an estimate. B.No, you need to have a specific number of properties. C.Yes, the bank will accept combined sales. D.Yes, all buyers need is recent sales.
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Is it easier to use a Sales Comparison Approach when the properties are almost the same? A.Yes, style, size, location and age of properties that are similar are easier to compare. B.No, the more differences the easier it is to get a real value. C.It does not make a difference if the properties are similar. D.Since most homes are different it is easier to just compare neighborhoods.
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The seller has a ranch home. There are three ranch homes and three Tudors that have sold in the last six months. What should the appraiser do? A.Using the ranch homes is how he would do the comparison. B.Take the average of all six sales. C.Use one Tudor and two ranches for comparison. D.Use any combination he wants.
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There are 100 three-bedroom homes available, and there are 200 buyers, what happens to the property value? A.The property values increase because of high demand. B.The property values decrease because of demand. C.There is no change in the property values. D.The property value decreases because of supply.
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There are 12 buyers looking for homes in the same neighborhood. There are only 8 homes in the neighborhood. What happens to the property value? A.The value of the properties are higher because of demand. B.There is too much demand, the real estate professional should steer the buyers elsewhere. C.The property value will go down because the buyers will try to get the homes cheaper. D.The buyers will have trouble getting bank financing.
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This principle affirms the value is created by anticipated benefits to be derived in the future...? A.Principle of anticipation B.Principle of progression C.Principle of change D.Principle of substitution
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What are the four factors that influence value? A.Social, economic, construction costs, governmental. B.Social, economic, property location, governmental. C.Property condition, economic, property location and governmental. D.Social, available financing, construction costs, governmental.
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What are the qualifications of a Registered Trainee Appraiser? A.They must be at least 18 years old and have a social security number. B.They must be at least 18 years old and have completed 75 hours worth of education. C.They must be at least 21 years old and have some real estate experience. D.They must be 21 years old and have sold both residential and commercial properties.
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What does clean, clear title mean? A.The title can be easily transferred. B.The proper people have signed off the title. C.The restriction put on a title. D.The language in a mortgage loan.
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What does the acronym DUST stand for? A.Demand, utility, scarcity, transferability B.Durability, utility, scarcity, transferability C.Demand, usefulness, scarcity, transferability D.Demand, utility, size, transferability
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What does utility mean? A.The more useful a property, the higher the value. B.The local utilities going to a property. C.The best use of a property. D.The useful life of a property.
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What happens if a seller is going through a divorce and is forced to sell a home? A.The theory of equal motivation would apply; the seller will accept less. B.The seller will hold out for the most money they can get. C.The buyer will offer the seller more money. D.The value of the property is agreed on and no changes are made.
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What happens to property values if lenders freeze lending? A.Property values drop because of a lack of capital. B.Property values increase because people are paying cash. C.There is no change in value. D.More property is available for sale and prices increase.
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What happens when a person adds on two bedrooms to an existing two bedroom home, when all the homes in the neighborhood have three bedrooms? A.Diminishing returns; the property no longer conforms. B.The value of the property significantly increases. C.The home is less valuable to large families. D.There is no change in the value.
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What happens when interest rates increase? A.Fewer people are eligible for mortgages and property values decrease. B.More people rush to purchase homes. C.There is no change. D.More people decide to rent because they don't want the banks to profit.
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What is an appraisal? A.An opinion by a professional about the value of a property. B.The value of a property set by a property seller. C.The value a lender will loan against property. D.The amount a property may be sold for.
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What is an appraisal? A.This is an official opinion of the worth of a property. It can only be completed by a licensed appraiser. B.This is an official opinion of the worth of a property. It can only be completed by a licensed broker. C.This is an official opinion of a real estate agent based on comparable sales in the area. D.This is an official opinion of an appraiser. It can only be provided after first consulting with the selling broker.
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What is depreciation and when does it begin? A.Loss in value for any reason. Depreciation can start at any time. B.Loss in value due to wear and tear. Depreciation can start at any time. C.Loss in value for any reason. Depreciation begins 5 years after completing or renovating a property. D.Loss of value due to a catastrophic event. It can begin at any time.
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What is the basic equation for the cost approach method? A.Cost of construction plus the cost of the land, minus the depreciation. B.Relative depreciation of the property deducted from the cost of the land. C.Cost of the new materials to construct the home plus the value of the land. D.The cost of the original property plus the cost of updated materials.
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What is the effective age of a building? A.The age of the building based on the upkeep and maintenance it has received. B.The chronological age of the building. C.The age at which the building begins to depreciate. D.The age at which the building was renovated.
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What is the insured value? A.The assessment done by an insurance company. B.The amount of insurance on a property. C.The amount of insurance a lender demands. D.The amount an owner gets if the property is destroyed.
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What is the main difference between the market extraction and sales comparison method? A.The market extraction method measures the market's reflection of aging properties relative to the subject property, while the sales comparison method contrasts the prices between comparable properties. B.The market extraction method measures the rate at which a building deteriorates over time, while the sales comparison method measures the overall demand for comparable properties. C.The market extraction method measures how much the neighborhood has appreciated over time while the sales comparison method uses the sales prices from comparable properties. D.The market extraction method is only used for BPOs while the sales comparison method can be used for CMAs, BPOs, or official appraisals.
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What is the market extraction method? A.Using the sales figures of benchmark properties after calculating the NOI of a building. B.Researching general sales in the area and comparing them against the GRM. C.Finding similar properties and comparing sales prices. D.Using the GRM to determine what the operating expenses are of a building.
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What is the point of a cost appraisal? A.Buyers should not have to pay more for a property than the cost to replace the property on the same patch of land. B.Lenders need to know how much income property will generate before approving the financing. C.Sellers should know the value of their property so they can make the necessary repairs. D.Investors need to know if other properties in the area sold for similar prices before they can make the investment.
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What is the principle of change? A.Changing market conditions such as supply and demand, interest rates, and property conditions. B.Based only on changing property conditions. C.Based only on changing interest rates. D.Based only on neighborhood demographics.
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What is the principle of conformity? A.The more unique new homes are, the lower the value. B.The more unique the home, the higher the value. C.Having a variety of homes in a neighborhood is good for the neighborhood. D.Mixing different types of property means all properties are worth more.
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What is the principle of contribution? A.When the amenities work for the target home buyer. B.When there are many unique features in a home. C.When every home has a gourmet kitchen it is good for everyone. D.When all homes are identical and have no unique features.
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What is the principle of progression? A.When lower valued properties increase in value because of their association to higher valued properties. B.When new properties of lesser quality decrease local property values. C.When the property abutting a property remains undeveloped. D.When local government adds services in a neighborhood.
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What is the principle of regression? A.When higher valued properties lose value because of their association to lesser valued properties. B.When new properties of better quality increase local property values. C.When the property abutting a property remains undeveloped. D.When local government adds services in a neighborhood.
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What is the principle of substitution? A.The ability to acquire another property that is both desirable and similar in a short period of time. B.When a more valuable property can be substituted for a lesser value. C.When it takes a long time to find a similar home. D.When building a home costs more than moving into one.
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What is the purpose of an appraisal? A.To arrive at a market value of a given property. B.To list a property for sale. C.To provide the seller a value. D.To get the value of a neighborhood.
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What is the replacement method? A.An appraisal of the cost of reconstructing the home with modern materials. B.An evaluation of the cost of replicating the property as-is. C.An evaluation of comparable sales properties. D.An evaluation of the income generated from the property.
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What is the reproduction method? A.An evalulation of the cost of replicating the property as-is. B.The cost of reconstructing the same property but with modern materials. C.An evaluation of the cost of labor for new construction. D.An estimate of the materials needed to reconstruct the property.
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What occurs when a subdivision built 10 years ago suddenly has a brand new home added? A.The newer home will have a lower value because the other homes are not as new or modern. B.All the homes in the neighborhood increase in value. C.No property values change. D.The newer home will have a higher value because it is new.
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What should estimators consider when calculating the monthly or yearly income revenue of a property? A.Estimators must factor in the likelihood of the tenants' ability to pay the monthly required rent. B.Estimators are to assume that tenants will be able to pay their rent. C.Estimators must assume that the property owner will default if tenants cannot pay some or all of their rent. D.Estimators must talk to the lender to determine whether rental default is likely to occur.
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What value is most commonly used for commercial property? A.Value in use B.Mortgage Value C.Investment Value D.Insured value
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What value is used for establishing taxes? A.Assessed value B.Value in use C.Mortgage value D.Insured value
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What will happen to the value of a property when using the replacement method relative to a property using the reproduction method? A.The value of the property should go up. B.The value of the property should go down. C.The value of the property should remain the same. D.The value of the property will depend on the economic conditions that affect the neighborhood.
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When should an estimator rely on market data from properties that are still in use? A.When there are no comparable sales data available. B.When the seller requests it. C.When the NOI approach cannot be used. D.When the building is worth less than $250,000 (Dollars).
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Which of the following is an example of economic obsolescence? A.A college shutters its doors. B.The property needs another bathroom to make it more functional. C.A prospective owner is likely to lose their job. D.The seller chooses not to sell the property at the last minute.
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Which of the following parties would be most likely to order a cost approach appraisal? A.An insurance auditor. B.A broker. C.A real estate agent. D.A developer.
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Which of the following properties would likely be appraised using the cost approach? A.A library. B.An apartment complex. C.A single-family home. D.A commercial store.
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Which of the following statements is true regarding cost approaches? A.Cost appraisals are generally not as reliable as sales comparison or income appraisals. B.Cost appraisals make it easy for appraisers to estimate depreciation. C.Cost appraisals help buyers estimate their rental income. D.A curable version of functional obsolescence is one with a solution that's worth the price of the investment. Replacing the insulation would be a simple fix, especially considering the high ROI of this home improvement measure. However, adding an extra bathroom or redesigning a custom kitchen would require far more effort and would not be considered worth the investment by the appraiser.
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Who can perform the income approach for an official appraisal? A.Appraisers only. B.Appraisers and non-provisional brokers. C.Non-provisional brokers and provisional brokers. D.The seller's broker.
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Who regulates appraisers in the State of North Carolina? A.A combination of federal and state agencies. B.State agencies only. C.The Appraisal Subcommittee. D.The official firm of the appraiser.
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Who uses the information contained in an appraisal? A.The buyer, seller, lender and insurance company. B.Only the real estate professional. C.Only the lender. D.Only the seller.
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