Valuation & Market Analysis

Which of the following statements is true? A. Physical life is generally longer than economic life B. Physical life is generally shorter than economic life C. Physical and economic life are generally the same D. It is impossible to tell

A. Physical life is generally longer than economic life

There is a geometric theorem which states that "the whole is equal to the sum of its parts." In real estate, there is a theorem which states that "the whole can be GREATER than the sum of its parts." This is an example of: A. Plottage B. Depreciation C. Accretion D. Progression

A. Plottage

What provides the best estimate of a property's value? A. The amount a lender is willing to lend B. A formal appraisal C. A comparative market analysis D. The market data approach

B. A formal appraisal

The capitalization approach is considered to be: A. A statement of future income B. The present value of property based on present and future income C. The actual cost of the property D. Another name for the GRM (Gross Rent Multiplier)

B. The present value of property based on present and future income

An appraiser is estimating the value of a house. The sellers want to list for $370,000 since it has 4 bedrooms, 3 bathrooms, and a pool. A comparable property recently sold for $350,000 (with 3 bedrooms, 3 bathrooms, and a sun room). In the adjustment process, the appraiser estimates that an extra bedroom is worth $45,000, the pool is worth $4,000, and the sun room is worth $17,000. What is the adjusted sales price of the comparable property? A. $318,000 B. $338,000 C. $382,000 D. $402,000

C. $382,000

Which of the following terms is a formal estimate of property value? A. BOV B. BPO C. Appraisal D. Both B and C

C. Appraisal

The type of value that a local government assigns to a property is the: A. Market value B. Appraised value C. Assessed value D. CMA value

C. Assessed value

An owner builds a beautiful brick colonial house in a neighborhood of contemporary, single level houses. The owner lists his newly constructed house, but is unable to sell. This would be consistent with the appraisal principle of: A. Highest and best use B. Progression and regression C. Conformity D. Substitution

C. Conformity

Which appraisal approach accounts for replacement or reproduction costs? A. Market data B. Income C. Cost D. Gross Rent Multiplier

C. Cost

The construction of a new highway will divert traffic away from an area and cause a decline in property values. This is an example of which type of depreciation? A. Functional B. Physical C. Economic D. None of the above

C. Economic

All of the following terms are economic characteristics of land, except: A. Assemblage B. Scarcity C. Immobility D. Improvements

C. Immobility

Barney owns a lot valued at $84,000. He purchases an adjoining lot for $66,000 and merges the two. The appraised value of the newly formed lot is $177,500. This is an example of: A. Accretion B. Avulsion C. Plottage D. Hypothecation

C. Plottage

The town hall leaders want to restore the town's original church. Marcus the Appraiser has been asked to provide a report for the town's unique and historical church. Which method should Marcus use to estimate the reproduction and replacement costs? A. Capitalization rate method B. Unit-in-place method C. Quantity survey method D. Square foot method

C. Quantity survey method

What information would an appraiser use if he were appraising a house built in 1935? A. Consumer price index for 1935 with annual adjustments B. Current construction costs adjusted by the CPI index C. Replacement or reproduction cost D. Actual costs of construction in 1935

C. Replacement or reproduction cost

Which of the following circumstances is an example of functional obsolescence? A. A house with a leaking water pipe B. Shutters that needed painting C. A house that isn't close to any elementary schools D. A house without indoor plumbing

D. A house without indoor plumbing

Martha is preparing a CMA for a house that has a in-ground pool in the backyard. She located a comparable house down the street, which recently sold for $430,000. Unfortunately, it does not have an in-ground pool. If the value of the pool is $22,000, which of the following adjustments would she need to make? A. Subtract $22,000 from the subject property B. Subtract $22,000 from the comparable C. Add $22,000 to the subject property D. Add $22,000 to the comparable

D. Add $22,000 to the comparable

Which of the following statements is true about the cost approach to estimating value? A. Replacement costs denote property that is replaced by another with similar utility B. Reproduction costs denote property that is replaced by another identical property C. Using the cost approach tends to set the upper limits of value D. All of the above

D. All of the above

What is the economic characteristic which states that a person will purchase based on the expectation of a future benefit? A. Increasing returns B. Highest and best use C. Substitution D. Anticipation

D. Anticipation

The replacement cost of a property is the cost of constructing: A. A new building with the same functional utility as the original B. A new building with the same size, shape, and design as the original C. A new building using the original construction materials D. None of the above

A. A new building with the same functional utility as the original

In anticipation of selling his home, an owner has central air conditioning installed. How would an appraiser best determine the value of the property after installation? A. By making a comparison B. By adding the cost to the unimproved value C. By adding the cost to the depreciated value D. Both B and C

A. By making a comparison

A decline in property values after building an airport near a residential subdivision would be an example of: A. Economic obsolescence B. Physical depreciation C. Functional obsolescence D. None of the above

A. Economic obsolescence

When using the cost approach method, the appraiser subtracts the depreciation amount from the total value of a property. The appraiser would allow for depreciation of: A. Improvements only B. Land only C. Both land and improvements D. None of the above

A. Improvements only

Which method of valuation is the best choice when appraising a 25 unit apartment building? A. Income approach B. Market data approach C. Cost approach D. Comparable approach

A. Income approach

When estimating the value of a 20-year old house, an appraiser would place the greatest emphasis on: A. Market data approach B. Income approach C. Capitalization approach D. Both B and C

A. Market data approach

In the capitalization approach, the appraiser considers all of the following factors, EXCEPT: A. Price of the subject property B. Rate of return on the investment C. Amount of return on the investment D. Estimated future net income

A. Price of the subject property

Tom buys a vacant lot and builds his dream house for $250,000. All of the other neighborhood properties are valued between $100,000 and $125,000. This is an example of: A. Progression and regression B. Assemblage C. Economic obsolescence D. Functional obsolescence

A. Progression and regression

Dan and Dirk are developers. Each have each completed new residential developments in Acme County. Dan and Dirk are also brothers, and each develops a similar plot of land. What could best explain why Dan's development sells out before Dirk's? A. Situs B. Uniqueness C. Reputation D. Style

A. Situs

What would the appraisal of a single-family residence probably NOT take into consideration? A. The potential rental income B. The location of the property C. The floor plan of the house D. The sales price of the house across the street

A. The potential rental income

A property has been appraised, exposed to the market for a reasonable length of time. It finally sells. Who determines the market value of the property? A. Lender B. Buyer C. Appraiser D. Seller

B. Buyer

Lindon purchased a home in a Greenview neighborhood. He later finds out that an industrial site will be build right next to that neighborhood. The negative effect on neighborhood property values is called: A. Environmental deterioration B. External obsolescence C. Functional obsolescence D. Planned obsolescence

B. External obsolescence

Using a property in the most profitable manner is called the: A. Economic life B. Highest and best use C. Principle of conformity D. Reconciliation process

B. Highest and best use

The three approaches to appraisal are: A. Replacement; Market data; Cost B. Income; Cost; Market data C. Capitalization; Replacement; Market data D. Reproduction; Market data; Income

B. Income; Cost; Market data

Dick and Jane build a home for $250,000 in a neighborhood where the other properties are valued around $125,000. Which principle most likely describes the value of their home in relation to the others? A. Plottage and assemblage B. Progression and regression C. Increasing and decreasing returns D. Supply and demand

B. Progression and regression

Which of the following statements best describes the principle of highest and best use? A. Value created by, and maintained in proportion to, the use characterized by nearby real estate B. Property utilized in the most profitable manner C. Future performance, not past performance D. Property attains its highest value when homogeneously developed

B. Property utilized in the most profitable manner

When a salesperson or broker does a CMA, he could be doing any of the following services, EXCEPT: A. Helping a seller set a reasonable price B. Providing an appraisal of value C. Obtaining information about prices of similar properties D. Helping a potential buyer locate suitable property

B. Providing an appraisal of value

The final step in appraising an apartment building is: A. Capitalization B. Reconciliation C. Re-capitalization D. Re-capitalization

B. Reconciliation

Which of the following items would normally be contained in an appraisal for a parcel of real property? A. The income of the prospective buyer B. The highest and best use C. The price the owner paid for the property D. None of the above

B. The highest and best use

Physical depreciation most commonly refers to: A. Obsolescence B. Wear and tear C. Out of date design D. Property over 15 years old

B. Wear and tear

Which of the following values is used to determine real property taxes? A. Market value B. Appraised value C. Assessed value D. All of the above

C. Assessed value

A property owner learns that a poisonous gas plant is going to be built next door. She appeals to a court to stop this construction. The basis for her appeal would be: A. Physical deterioration B. Functional obsolescence C. Economic obsolescence D. Environmental obsolescence

C. Economic obsolescence

If an appraiser tells you that a property "suffers from incurable depreciation," he would most likely be describing: A. Physical obsolescence B. Functional obsolescence C. Economic obsolescence D. None of the above

C. Economic obsolescence

Jane decides to update the bathrooms before selling her home. By renovating the outdated bathroom fixtures, she has actually increased the value of her home. The outdated fixtures are an example of: A. Physical obsolescence -- curable B. Physical obsolescence -- incurable C. Functional obsolescence -- curable D. Functional obsolescence -- incurable

C. Functional obsolescence -- curable

The costs for utilities, professional management, and replacing worn out appliances and furniture are most likely to be used in which appraisal approach? A. Market data B. Comparable C. Income D. Cost

C. Income

Which method would an appraiser most likely use in estimating the value of an office building? A. Comparative market analysis B. Cost approach C. Income approach D. Market data approach

C. Income approach

Which appraisal approach is best suited to appraising vacant land? A. Cost B. Income C. Market data D. Residual

C. Market data

Real estate salespersons often prepare a CMA when making listing price recommendations. Which principle is a CMA primarily based upon? A. The principle of conformity B. The principle of contribution C. The principle of substitution D. The principle of highest and best use

C. The principle of substitution

A property is valued using the income approach to valuation. If the capitalization rate remains the same, but the NOI increases, will the property value be affected? A. Yes, the property value will decrease B. No, the property value will remain the same C. Yes, the property value will increase D. There is not enough information to choose an answer

C. Yes, the property value will increase

The principle of substitution is used with the: A. Income approach B. Cost approach C. Market data approach D. Both B and C

D. Both B and C

A comparable for a property has a pool and sun roof, but the subject property does not. The price of the: A. Subject property will be adjusted higher B. Subject property will be adjusted lower C. Comparable property will be adjusted higher D. Comparable property will be adjusted lower

D. Comparable property will be adjusted lower

When appraising a public library, which of the following appraisal approaches would be considered most reliable? A. Market data B. Capitalization C. Income D. Cost

D. Cost

For a property to hold value, it must hold which four elements? A. Title; Time; Interest; Possession B. Anticipation; Regression; Conformity; Substitution C. Possession; Control; Excludability; Disposability D. Demand; Utility; Transferability; Scarcity

D. Demand; Utility; Transferability; Scarcity

What is the first step in the appraisal process? A. Locate comparables B. Do a correlation study C. Physically inspect the property in order to gather data D. Determine the purpose of the appraisal

D. Determine the purpose of the appraisal

One property has lower taxes, new fixtures, and conforms to the style of other properties in the neighborhood. Another nearby property does NOT have any of these benefits. The latter property would have: A. Economic desirability B. Functional desirability C. Economic obsolescence D. Functional obsolescence

D. Functional obsolescence

Which of the following factors would have the LEAST affect on an appraisal? A. The real estate market B. Income to be derived from the property C. Location of the property D. Livelihood of the prospective buyer

D. Livelihood of the prospective buyer

An appraiser is estimating the value of a house. The sellers want to list for $370,000 since it has 4 bedrooms, 3 bathrooms, and a pool. A comparable property recently sold for $350,000 (with 3 bedrooms, 3 bathrooms, and a sun room). In the adjustment process, the appraiser estimates that an extra bedroom is worth $45,000, the pool is worth $4,000, and the sun room is worth $17,000. What is the adjusted sales price of the subject property? A. $338,000 B. $382,000 C. $402,000 D. None of the above

D. None of the above

Seeing that a property is in need of a really good paint job, an appraiser would say that the property suffers from: A. Neglect B. Economic obsolescence C. Functional obsolescence D. Physical deterioration

D. Physical deterioration

A buyer looked at four similar houses for sale in the same neighborhood. The buyer purchased the house with the lowest asking price. This decision is an example of: A. Highest and best use B. Contribution C. Supply and demand D. Substitution

D. Substitution

Which of the following principles of value would a real estate salesperson consider first when preparing to do a CMA? A. The principle of conformity B. The principle of contribution C. The principle of substitution D. The principle of highest and best use

D. The principle of highest and best use

To properly calculate the effective gross income (EGI) on a 16 unit apartment building, the appraiser should allow for: A. The amount of property taxes B. The amount of income tax paid C. Principal and interest paid on the mortgage D. Vacancy rate and collection loss

D. Vacancy rate and collection loss

Which pair is the most appropriate means of estimating value? A. Bob's house -- Cost approach B. The Raymond Civic Center -- Income approach C. Rookie Apartments -- Market data approach D. Valley View Mall - Income approach

D. Valley View Mall - Income approach