General Appraiser Market Analysis Highest and Best use - CH - 3
When choosing a trendline, the best fitting line will have an R-squared value that is closest to: 0 1 100 The mean value of the dataset
1 The data analyzed determines the appropriate type of trendline along with its R-squared or R2 value, which is most correct at or near 1. Microsoft® Excel automatically calculates its R-squared value for all types except for the moving average. (Chapter 3 - Choosing a Trendline)
Berry Developers leased 25,000 square feet in their new 80,000 square foot retail complex last year. In the local market area, 200,000 square feet of retail space was leased. What is the capture rate for Berry Developers? 12.5% 40% 31.25% 8%
12.5% A capture rate is defined as the estimated percentage of the total potential market for a specific type of property that is sold or leased (i.e. "captured") by one entity or development. 25,000 divided by 200,000 equals 12.5%. The amount of square footage in their complex (80,000) does not enter the equation. (Chapter 3 - Capture Rates)
In the Oakdale market area, there were 80 new condominium units sold last year. The Leaf Estates development sold 15 units. What is the capture rate for Leaf Estates? 95% 53% 18.75% 5.3%
18.75% 15/80 = 18.75%
If 200 new homes are sold in Newtown in a single year, and XYZ Homes sold 50 of them, what is XYZ's capture rate? 50% 25% 4% Cannot determine from the information provided
25% 50/200=.25
In the town of Woodlake, 60,000 square feet of Class A office space is leased per year. The Cedars, a Class A office building, just opened with 48,000 square feet of space to lease. It is projecting a 20% capture rate. How long will it take this building to reach 100% occupancy? 1.25 years 5 years 4 years 4 months
4 years 60,000/20%= 12,000 (per year) 48,000/12000=4 yrs
In the town of Woodlake, 60,000 square feet of Class A office space is leased per year. The Pines, an older Class A office building, has 36,000 square feet of space for lease. It is projecting a 10% capture rate. How long will it take this building to reach 100% occupancy? 6 years 3 years 5 years 10 years
6 years 10% of 60,000 = 600 (per year). 36,000/600= 6 years
In the local market, there have been 18 sales of building lots within the last year. Lakeview Estates just opened up with 120 lots for sale. Assuming this is the only subdivision selling lots in the area, how long will it take for the lots at Lakeview Estates to sell out? 15 years 6.7 years 1.5 years 7 months
6.7 years 120/18 = 6.7
What is the mode of this set of gross rent multipliers: 77, 88, 72, 69, 77, 91? 77 79 91 There is no mode
77
Demand-wise, which is generally a better investment? A good quality property in a poor location A poor quality property in a good location Neither - the lack of quality will cancel out the location difference None of the above
A poor quality property in a good location
An appraiser's research indicates that 200 condominium units will be sold in the subject's market within the next year. This number refers to: Absorption Inventory Economies of scale Market share
Absorption
The _______________ is the rate at which properties for sale have been sold or rented within a specific market area. Capture rate Absorption rate Capitalization rate List-to-sale ratio
Absorption rate
Measures of demand that are often used in the appraisal process include: Cost source references Availability study Capital appreciation rate Absorption rate
Absorption rate The capture rate and absorption rate are measures of demand that are often used in the appraisal process. The relationship of supply and demand affects the prices in a real estate market and is a determining factor when assessing the feasibility of new construction. (Chapter 3 - Introduction)
Market segmentation defines and subdivides a large homogenous market into segments, such as: Office Residential Lodging All of these
All of these
Members of NCREIF include: Investment managers CPAs Consultants All of these
All of these
What tool on the Census Bureau's website provides three different tables and thematic map functions? American Analyst American Fact Finder National Community Survey Census QuickTool
American Fact Finder
According to NCREIF, which is NOT a step in demand analysis? Determine major market demand factors Define the unit of demand for the property type Base local demand projections solely on U.S. macroeconomic factors Present historic and projected demand data
Base local demand projections solely on U.S. macroeconomic factors
The ability to determine household income, affordability of housing, and purchasing power is very important when considering the development or redevelopment of an area with: Commercial properties Residential properties Both of these Neither of these
Both of these
According to NCREIF, in completing a supply analysis, the total office space inventory is described by: Quality only Quantity only Both quality and quantity Internationally accepted rating criteria
Both quality and quantity
What is the term used to describe the estimated percentage of the total potential market that is sold or leased by one entity or development? Absorption rate Expected growth rate Future demand Capture rate
Capture rate
One measure of demand that is often used in the appraisal process is: Availability study Capital appreciation rate Capture rate Zoning analysis
Capture rate The capture rate and absorption rate are measures of demand that are often used in the appraisal process. The relationship of supply and demand affects the prices in a real estate market and is a determining factor when assessing the feasibility of new construction. (Chapter 3 - Introduction)
What two measures are typically used in descriptive statistics? Pie charts and doughnut charts Standard deviation and variance Mean and median Central tendency and dispersion
Central tendency and dispersion
Within the market delineation process, the appraiser identifies: The type and definition of value to be used in the appraisal The approaches to value to be used in the appraisal Competing and complementary properties All of these
Competing and complementary properties Market delineation determines the geographic demand for a specific property and also identifies the competing and complementary properties. (Chapter 3 - Demand and Market Segmentation)
What is the study of methods and tools for collecting data and mathematical models to describe and interpret data? Descriptive Statistics Inferential Statistics Measures of dispersion Stacked column charts
Descriptive Statistics
What are the two categories of statistics? Numerical and graphical Charts and graphs Descriptive and inferential Mean and median
Descriptive and inferential
How can census data be used in appraising restaurant properties? Determine whether sales will support the rent Determine which nights of the week will be busiest Determine capitalization rates for properties in large metropolitan areas None of these
Determine whether sales will support the rent
According to NCREIF, what is the purpose of demand analysis? Develop historical relationships as a basis for forecasting future demand Use current demand to determine what the supply should have been at a given retrospective point in time Develop current trends that correlate to historical relationships between price and value All of these
Develop historical relationships as a basis for forecasting future demand
How often is a complete U.S. Census conducted? Every year Every four years Every ten years At odd intervals, as mandated by Congress
Every ten years
Census data should be analyzed according to standard methodology. True False
False To realize the census' full potential, simply having the raw data is not enough. It also must be analyzed according to each client's needs. (Chapter 3 - Required Reading, Where the People Are)
An analysis to determine the best possible location for a condominium development, which includes a cost versus value analysis, would be called a: Feasibility study Market survey Property inspection Consultant report
Feasibility study
In reference to categorizing business and office space, the acronym FIRE stands for: Finance, Insurance, and Real Estate Financial Incentives for Real Estate A destructive natural force that can quickly decimate a building Financial Institution Risk Equity
Finance, Insurance, and Real Estate FIRE (finance, insurance, real estate): The study of capital and income that characterizes the financial services industries as part of the SIC/NAIS breakdown of types of industry: finance, insurance, and real estate. (Chapter 3 - Definitions)
The appraiser must not only assess the level of demand at the time of the appraisal, but also: Forecast future demand Forecast the value of the property for a five-year holding period Consider the possibility that the property will be foreclosed Assess historic demand for at least the previous three years
Forecast future demand
A demand analysis might typically include all of these activities, EXCEPT: Forecasting revisions to building codes Forecasting future occupancy and rental rates Identifying market participants Determining the financial return for a property
Forecasting revisions to building codes
What method compares the subject share of the market, adjusts the subject to the competition using quantifiable rating techniques, calculates the subject historical capture rate, and other factors? Quantitative inventory analysis Fundamental capture method Quantity survey method Contingent valuation method
Fundamental capture method
Market delineation defines the _____________ demand for a specific property. Geographic Economic Optimum Expected
Geographic
A demand analysis might include all of these activities, EXCEPT: Understanding alternative uses Identifying market participants Identifying seller motivations Forecasting future occupancy and rental rates
Identifying seller motivations A demand analysis identifies a market segment for specific property types by identifying the market participants, understanding the alternative uses, selecting similar comparable sales and rentals, forecasting future occupancy and rental rates, and determining the financial return for the property. Identifying seller motivations would be important in a supply analysis. (Chapter 3 - Keys to Demand Analysis)
According to NCREIF, development of demand analysis for industrial properties: Is not required if the property is owner occupied Is not necessary unless the appraiser's client demands it Is the same as office demand analysis Is the same as residential demand analysis
Is the same as office demand analysis
Why is the absorption rate useful in an appraisal? It demonstrates the principle of anticipation It helps determine supply and demand trends None of these It supports the appraiser's estimate of accrued depreciation
It helps determine supply and demand trends
In calculating a capture rate, what must an appraiser consider if the subject property is superior to its competition? It should have a lower asking price to attract more buyers It should be redesigned to be more like its competition The calculation should be based on the assumption that the subject property offers only standard features and amenities It will "steal" occupants from existing facilities
It will "steal" occupants from existing facilities
According to NCREIF, additional knowledge leads to a better appraisal product, and also to: Increased income A greater market share Less liability All of these
Less liability
In the valuation of a local convenience store near a residential subdivision, the _________ would be the most significant factor in the valuation. Local economy National economy Price of gasoline Local and national economies would be of equal importance
Local economy
How might an appraiser explain the extent to which individual data values have departed from the mean? Measures of central tendency Median Mode Measures of dispersion
Measures of dispersion Measures of dispersion explain the extent to which individual data values have departed from the mean. The most common measurement of dispersion is the variance. (Chapter 3 - Measures of Central Tendency and Dispersion)
NCREIF is the: Nationwide Council for Reform, Enforcement, Independence, and Freedom National Committee for Real Estate Information Funding National Council of Real Estate Investment Fiduciaries National Committee on Real Estate Investment Fraud
National Council of Real Estate Investment Fiduciaries
Market analysis should relate and focus the ___________ to the value of the subject property. Current use Definition of value National, regional, and local information Comparable sales
National, regional, and local information
An appraiser is studying absorption rates for retail space in a market. She notes that over the last several years, more space is becoming vacant than is being leased. What is this phenomenon called? Negative capture Negative net absorption Upside-down absorption Zero sum absorption
Negative net absorption
An appraiser's analysis indicates that 250,000 square feet of retail space will be leased in a market in the next year, but during that same period 25,000 square feet of currently occupied retail space will become vacant. What concept does this analysis demonstrate? Police power Recession Net absorption Zero net growth
Net absorption
When analyzing an apartment building, an appraiser notes that it is located in a busy urban location, near a bus line. This is an example of _______ data. Meaningless Quantitative Qualitative Confirmed
Qualitative
When analyzing an industrial building, an appraiser notes that it has 25,000 square feet. This is an example of _______ data. Qualitative Quantitative Unverified Inferential
Quantitative
What kind of data is measured? Quantitative data Class data Qualitative data Division data
Quantitative data
A ____________ is a subset of the population. Sample Conclusion Anomaly Standard deviation
Sample
When using the U.S. Bureau of Labor Statistics as a source for employment and wage estimates, an appraiser should be aware that ____________ are not included in the estimates. Self-employed persons Minimum-wage workers Finance, Insurance, and Real Estate workers Underemployed persons
Self-employed persons
According to NCREIF, what is an example of "hidden" space? Sublet space Space that is not listed in the MLS Space that is not visible or accessible from a major highway All of these
Sublet space
To make accurate predictions based on census data, real estate professionals should: Use the data as raw and unfiltered Take local and economic impacts into consideration Make sure the predictions agree with the client's projections Go back at least 20 years when developing trends
Take local and economic impacts into consideration
In market analysis, what should the economic and demographic trends ideally support? The appraiser's highest and best use conclusion The property's current use The cost source The definition of value used in the assignment
The appraiser's highest and best use conclusion
If there are 50 condominium units for sale in a market area, and units are selling at a rate of five per month: There is a 10-month supply of inventory currently on the market There is a 10-year supply of inventory currently on the market All of the current listings are overpriced A quick sale value should be provided in the appraisal
There is a 10-month supply of inventory currently on the market
Consideration of rumors can be important in the valuation of real property. True False
True
An appraiser's analysis indicates that 125,000 square feet of office space will be leased in a market in the next year; however during that same period, 50,000 square feet of currently occupied office space will become vacant. What would this analysis indicate? a net absorption of 175,000 square feet a net absorption of 75,000 square feet a net absorption of 125,000 square feet a real estate market in recession
a net absorption of 75,000 square feet
