Real estate principles chapter 18
A residential lot purchased 3 years ago for $10,000 has doubled in value. The house on the lot cost $40,000 and it increased $20,000 in value. If the house and lot are sold at market value today, how much profit will be realized? a. $30,000 b. $40,000 c. 33 1/3% d. 100%
A
Adjustments for advantageous financing would be made in the a. market comparison approach to appraisal. b. cost approach to appraisal. c. income approach to appraisal. d. revised market price.
A
After all adjustments are made to a comparable property, its comparative value for appraisal purposes is known as its a. adjusted market price. b. indicated market value. c. amended market value. d. revised market price.
A
Depreciation resulting from outmoded design is classed as a. functional obsolescence. b. physical deterioration. c. economic obsolescence. d. social obsolescence.
A
In making an appraisal by the market comparison approach, an appraiser should a. consider the physical and economic features of the subject property. b. consider the yield of the subject's property with competitive rates of return. c. make adjustments to the value of the subject property with competitive rates of return. d. utilize comparable listings withdrawn from the market.
A
The amount of money required to duplicate a property as of a certain date is called a. reproduction cost. b. depreciation cost. c. duplication approach. d. capital improvement.
A
The definition of fair market value requires, among other things, that the a. property is exposed to the open market for a reasonable time. b. seller can convey a fee simple title. c. buyer is qualified for reasonable financing. d. sale was free of high-pressure listing and sales agents.
A
The most commonly used methods of real estate appraisal are a. market approach, income, and cost. b. income, reproduction, and cost. c. residual, cost, and market data. d. comparison, income, and capitalization.
A
The operating expense ratio is a. operating expenses divided by effective gross income. b. operating expenses divided by scheduled gross income. c. operating expenses plus scheduled gross income divided by effective gross income. d. reserves plus collection loss divided by effective gross income.
A
When real property loses value due to social or economic changes, this loss is called a. obsolescence. b. depreciation. c. chattel loss. d. recapture.
A
When the appraiser has decided to use the market approach, which of the following conditions would disqualify a sale as a fair market value transaction? a. Low down payment followed by below-average interest rates on the balance due b. Seller who was not in a hurry to sell c. VA sale d. Neighbor's house sold for a higher amount
A
Which appraisal method would be most useful in appraising an unusual building which has a very limited and specific use? a. Cost approach b. Net income c. Capitalization d. Market comparison
A
An apartment building sells for $600,000 and has a gross rent multiplier of 6.0. how much annual rent does the building produce? a. $60,000 b. $100,000 c. $10,000 d. $36,000
B
If an appraiser felt some comparable sales were better indicators of value than other comparables, he would assign more weight to them in the a. adjusted sales price. b. correlation process. c. 4-3-2-1- rule. d. replacement cost approach.
B
In valuing a fire station, an appraiser would most likely emphasize the a. market approach. b. cost approach. c. income approach. d. capitalization approach.
B
Net operating income on rental property is computed by deducting expenses from a. net cash flow. b. adjusted gross income. c. net gross income. d. rate of return.
B
The American Institute of Real Estate Appraisers issues the a. GRI designation. b. MAI designation. c. CPM designation. d. MIA designation.
B
To apply the market data approach, a real estate appraiser must collect all the following data on each comparable sale EXCEPT a. date of sale. b. marketability of title. c. financing terms. d. sale price.
B
Which of the following in an old commercial building would most likely be a cause of incurable obsolescence? a. Lack of computer wiring b. Widely spaced support walls c. Lack of intercom system d. Unattractive décor
B
Which of the following operating expense ratios indicate one dollar of total operating expenses for every two dollars of effective gross income? a. 33.3% b. 50% c. 200% d. 25%
B
An office building is on a lot valued at $40,000. It would cost $150,000 to replace the building structure today, but the improvements have depreciated 20%. Using the cost approach, what is the value of the property? a. $40,000 b. $120,000 c. $160,000 d. $152,000
C
Depreciation resulting from the closing of a large business in a small town is classed as a. functional obsolescence. b. physical deterioration. c. economic obsolescence. d. political obsolescence..
C
That a dollar should be invested only when it will return more than a dollar's worth of benefits is called the principle of a. conformity. b. supply and demand. c. contribution. d. highest and best use.
C
The added value resulting from the combination of two or more parcels of land is called a. replacement value. b. liquidation value. c. plottage value. d. subjective value.
C
The method used to compute a gross rent multiplier is a. averaging the net operating income of the subject property. b. the sale price of the subject property divided by its original cost. c. the sale price of similar properties divided by their rental income. d. the maximum rent times twelve months.
C
Which of the following is NOT one of the three standard approaches to value? a. Income approach b. Cost approach c. Price approach d. Market approach
C
An office building is on a lot valued at $50,000. It would cost $150,000 to replace the building structure today, but the improvements have depreciated 10%. Using the cost approach, what is the value of the property? a. $50,000 b. $152,000 c. $160,000 d. $185,000
D
The best definition of fair market value is the a. value as determined by a fee appraisal. b. highest price a seller can get for his property. c. tax assessed value. d. price a willing buyer will pay and a willing seller will accept, given a reasonable amount of time to effect the sale.
D
The value of vacant land is commonly stated in any of the following terms EXCEPT value per a. square foot. b. acre. c. front foot. d. square yard.
D
When an appraiser has a property to evaluate, which of the following would he need to know first? a. Comparable properties b. Amount of his fees c. Assessed valuation d. Highest and best use
D
buyers market
a market where there are few buyers and many sellers
income approach
a method of valuing property based on the monetary return it is expected to produce
market approach
a method of valuing property based on the prices of recent sales of similar properties
Gross Rent Multiplier (GRM)
a number that is multiplied by a property's gross rents to produce an estimate of its worth
____________________ are made for price changes since each comparable was sold, as well as for differences in physical features, amenities, and financial terms.
adjustments
The process of combining two or more parcels of land into one larger parcel is called ____________________.
assemblage
A market where there is an excess of supply over demand is known as a ____________________ market.
buyers
In the market approach, houses with similar physical features and amenities that have sold recently under market value conditions are called ____________________.
comparables
The principle that holds that maximum value realized when a reasonable degree of homogeneity is present in a neighborhood is known as the principle of ____________________.
conformity
The relationship between added cost and the value it returns is known as the principle of ____________________.
contribution
adjustments
corrections made to comparable properties to account for differences between them and the subject property
reproduction cost
cost at today's prices of constructing an exact replica of the subject improvements using the same or similar methods
functional obsolescence
depreciation resulting from improvements that are inadequate, overly adequate, or improperly designed for today's needs
physical deterioration
depreciation resulting from wear and tear of the improvements
curable depreciation
depreciation that can be remedied at a reasonable cost
incurable depreciation
depreciation that cannot be remedied at a reasonable cost
____________________ obsolescence is he loss of value due to external forces or events.
economic
operating expense
expenditures necessary to maintain the production of income
Net Operating Income (NOI)
gross income less operating expenses, vacancies, and credit losses
cost approach
land value plus construction costs less depreciation
depreciation
loss in value due to deterioration and obsolescence
A popular market comparison method that is used when a property produces income is the gross rent ____________________, or GRM.
multiplier
comparables
properties similar to the subject property that have sold recently
____________________ cost is the cost at today's prices of constructing an exact replica of the subject improvements using the same or very similar materials.
reproduction
The property to be appraised is known as the ____________________ property.
subject
highest and best use
that use of a parcel of land that will produce the greatest current value for the parcel
scheduled gross income
the estimated rent a fully occupied property can be expected to produce on an annual basis
subject property
the property that is being appraised
capitalize
to convert future income to current value
appraisal
to estimate the value of something