1.1 A step-by-step procedure that can be applied to any type of appraisal assignment is
a. the income approach
b. the valuation process
c. discounted cash flow analysis
d. multiple regression analysis
b. the valuation process
1.2 True or False: The effective date of the valuation must be the date on which the appraiser inspected the subject property.
a. True
b. False
b. False
Note: In many cases, the effective date is the date the appraiser inspects the subject property. But that is not always the case. The effective date can be any date, whether past, present, or future.
1.3 True or False: There is one universal definition of market value used in real property appraisal.
a. True
b. False
b. False
1.4 "The interests, benefits, and rights inherent in the ownership of real estate" is the definition of
a. life estate
b. scope of work
c. ownership
d. real property
d. real property
1.5 True or False: An appraiser's client must always directly engage the appraiser.
a. True
b. False
b. False
1.6 What is the final step in the valuation process?
a. determine highest and best use
b. estimate value by the three approaches
c. report the final opinion of value
d. estimate the land value
c. report the final opinion of value
1.7 What is the first step in the valuation process?
a. determine scope of work
b. define the problem
c. estimate land value
d. gather, record, and verify data
b. define the problem
1.8 "An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions" is the definition of
a. extraordinary assumption
b. hypoth
a. extraordinary assumption
1.9 Who is responsible for identifying the intended use of an appraisal?
a. the client
b. the intended users
c. the appraiser
d. the appraisal management company
c. the appraiser
1.10 "Documentation necessary to support an appraiser's analyses, opinions, and conclusions" is the appraiser's
a. workfile
b. scope of work
c. assignment conditions
d. extraordinary assumption
a. workfile
1.11 True or False: HUD/FHA requires an appraiser to verify all comparable sales data used in an appraisal.
a. True
b. False
a. True
1.12 What appraisal term is defined as "the type and extent of research and analyses in an assignment"?
a. assumption
b. hypothetical condition
c. scope of work
d. workfile
c. scope of work
1.13 An appraisal report must contain sufficient information to allow ________ to understand the scope of work.
a. other appraisers
b. state enforcement agencies
c. anyone
d. intended users
d. intended users
1.14 True or False: All three approaches to value must be used in every real property appraisal.
a. True
b. False
b. False
1.15 In highest and best use analysis, which criterion is applied LAST?
a. physically possible
b. legally permissible
c. maximally productive
d. financially feasible
c. maximally productive
1.16 An appraiser must be prepared to demonstrate that the scope of work is sufficient to produce
a. credible assignments results
b. a value conclusion that is within 10% of the sale price
c. the exact, true value of the subject property
d. the same resul
a. credible assignments results
1.17 True or False: Real property appraisal reports may be written or oral.
a. True
b. False
a. True
1.18 True or False: A workfile must be in existence prior to the issuance of a written or oral report.
a. True
b. False
a. True
1.19 The effective date of value can be
a. a present date only
b. a past date only
c. a present or past date, but not a future date
d. a present, past, or future date
d. a present, past, or future date
1.20 An appraiser encounters an underground storage tank. If there is no evidence of any observable leaks, the appraiser could indicate a value opinion based on the ______________ that the tank is indeed not leaking.
a. assumption
b. hypothetical conditio
c. extraordinary assumption
1.21 "The type and extent of research and analyses in an assignment" is the definition of
a. required data
b. scope of work
c. valuation process
d. appraisal process
b. scope of work
1.22 An appraiser observes that an underground tank is leaking. An appraisal could be done of the property in its "as is" contaminated condition or could be appraised under the _______________ that the property is free of contamination.
a. assumption
b. h
b. hypothetical condition
1.23 The party or parties who engage, by employment or contract, an appraiser in a specific assignment is the
a. intended user
b. lender
c. homeowner
d. client
d. client
1.24 Scope of work applies to
a. appraisals only
b. appraisals and appraisal reviews only
c. Oral reports only
d. Both appraisals and appraisal review assignments
d. Both appraisals and appraisal review assignments
1.25 The intended user of an appraisal is the ________ and any other user, as identified by _________.
a. lender, name
b. client, name
c. lender, name or type
d. client, name or type
d. client, name or type
1.26 The SCOPE OF WORK RULE says that "the appraiser must be prepared to demonstrate that the scope of work is sufficient to produce _________________"
a. credible assignments results
b. demonstrable analysis
c. supportable values
d. verified assignment r
a. credible assignments results
1.27 The valuation process is a systematic procedure employed to provide the answer to a(n) ________ question about the value of __________.
a. appraiser's, real property
b. client's, real property
c. appraiser's, real estate
d. intended user's, an apprai
b. client's, real property
1.28 Each appraisal report must contain two dates, the ____________ and the ______________.
a. date of inspection, effective date of value
b. date of assignment acceptance, date of the report
c. effective date of the appraisal, date of the report
d. date
c. effective date of the appraisal, date of the report
1.29 The objective for an assignment is its
a. intended use
b. purpose
c. definition of value
d. highest and best use
b. purpose
1.30 "A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis" is the definition of
a. hypothetical condi
a. hypothetical condition
1.31 The credibility of assignment results is always measured in the context of the _______________.
a. Intended Use
b. Intended User
c. Appraisal problem
d. Highest and best use
a. Intended Use
Note: SCOPE OF WORK RULE. Each assignment is different. The scope of work must be customized to work with the intended use.
1.32 Which is NOT an appropriate source for a legal description?
a. postal address
b. metes and bounds description
c. rectangular survey description
d. lot and block description
a. postal address
1.33 Which would NOT be a sub-step in defining the problem?
a. definition of value
b. effective date of value
c. identification of the property rights
d. highest and best use
d. highest and best use
2.1 True or False: Government data sources for general data are found on a national level only.
a. True
b. False
b. False
2.2 Information on tax rates in an area would be considered
a. social data
b. general data
c. specific data
d. basic employment data
b. general data
2.3 True or False: General data tends to influence all properties in an area equally.
a. True
b. False
a. True
2.4 When completing an appraisal assignment, comparable sales information that the appraiser gathers would be considered _________ data.
a. secondary
b. general
c. specific
d. economic
c. specific
2.5 The largest source for demographic information is
a. Local Chamber of Commerce
b. National Association of Home Builders
c. U.S. Department of HUD
d. U.S. Bureau of the Census
d. U.S. Bureau of the Census
2.6 Information on employment and unemployment trends in an area would be considered
a. general data
b. specific data
c. governmental data
d. unimportant when appraising a single-family residence
a. general data
2.7 Which influences typically exert the greatest pressure on property values?
a. local influences
b. national influences
c. international influences
d. all influences are equal
a. local influences
2.8 Professional or trade associations offering general data include all of the following EXCEPT
a. Federal National Mortgage Association
b. National Association of Home Builders
c. National Association of Realtors
d. Appraisal Institute
a. Federal National Mortgage Association
Note: NAR, NAHB, and AI are professional or trade associations that offer information about construction and home sales trends and other information. Federal National Mortgage Association (Fannie Mae) is not a trad
2.9 During her research, an appraiser discovers that the annual taxes for the subject property are $5,500. What type of data is this?
a. general data
b. specific data
c. social data
d. secondary data
b. specific data
2.10 Which of these items would NOT be typically found in the deed for the subject property?
a. deed restrictions
b. easements of record
c. zoning classification
d. chain of title
c. zoning classification
2.11 In residential mortgage lending appraisals, it is more common for lenders and AMCs to ask for _________ maps to be included in appraisal reports.
a. zoning
b. demographic
c. aerial
d. toxic hazard
c. aerial
2.12 Which zones are identified by FEMA as Special Flood Hazard Areas?
a. zones A and B
b. zones A and V
c. zones Z and X
d. zones A, B, and C
b. zones A and V
2.13 FEMA stands for
a. Federated Environmental Marshlands Association
b. Federal Endangered species Monitoring Agency
c. Forest, Elevated, or Mountainous Area
d. Federal Emergency Management Agency
d. Federal Emergency Management Agency
2.14 You check the FEMA flood map, and the subject property is located in Zone C. Is this a Special Flood Hazard Area (SFHA)?
a. Yes
b. No
b. No
2.15 Which of the following items would NOT be typically found by reading the deed for the subject property?
a. census tract
b. name of the owner of record
c. deed restrictions
d. legal description
a. census tract
2.16 It is important for an appraiser to research and understand what when doing an appraisal?
a. the zoning map
b. the zoning ordinance
c. both the zoning map and the ordinance
c. both the zoning map and the ordinance
2.17 True or False: The usefulness of MLS information can be dramatically increased through verification with a selling or listing agent.
a. True
b. False
a. True
2.18 Multiple Listing Services can be utilized for gathering ____________ .
a. general data only
b. both general and specific data
c. specific data only
d. flood and topographical maps
b. both general and specific data
2.19 Traffic counts can be obtained from the local
a. Chamber of Commerce
b. Department of Energy
c. Department of Environmental Conservation
d. Department of Transportation
d. Department of Transportation
2.20 Local and regional multiple listing services typically concentrate on ____________ properties.
a. 2-4 unit
b. Commercial
c. Vacant land
d. Single unit residential
d. Single unit residential
2.21 Which would NOT be considered a source for specific data?
a. title companies
b. flood maps
c. U.S. Census Bureau
d. tax maps
c. U.S. Census Bureau
2.22 Extensive research on current construction trends and figures is conducted by
a. HUD
b. NAR
c. NAHB
d. BEA
c. NAHB
2.23 The Google web site can give you _________ maps.
a. street maps only
b. aerial maps only
c. underground mining maps only
d. both street maps and aerial maps
d. both street maps and aerial maps
2.24 Flood maps are prepared by
a. FEMA
b. HUD
c. Fannie Mae
d. NAHB
a. FEMA
2.25 The largest repository of demographic information in the U.S. is the
a. Bureau of Labor statistics
b. Department of Interior
c. Bureau of Economic Indicators
d. Census Bureau
d. Census Bureau
2.26 Which of the following would NOT be considered general data?
a. mortgage rates
b. unemployment rates
c. subject property tax assessment
d. property tax rates
c. subject property tax assessment
2.27 A deed should give you information on all of the following EXCEPT
a. legal description
b. assessed value
c. owner of record
d. easements
b. assessed value
2.28 The zoning of a property is _____________ data.
a. specific
b. general
c. either specific or general
d. demographic
a. specific
2.29 Who is the primary intended user for MLS information?
a. appraisers
b. agents and brokers
c. buyers and sellers
d. tax assessing bodies
b. agents and brokers
2.30 Mapstats is a feature of which federal agency website?
a. HUD
b. Fedstats
c. NAHB
d. BEA
a. HUD
2.31 "Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics" is the definition of
a. specialized data
b. specific data
c. general data
d. neighborhood data
b. specific data
2.32 BEA stands for
a. Board of Economic Advisors
b. Bureau of Economy Advisors
c. British Educational Academics
d. Bureau of Economic Analysis
d. Bureau of Economic Analysis
2.33 It is common in appraisal reports to include a map that shows the location of the ____________.
a. subject property only
b. subject property and support facilities
c. subject property and comparable sales
d. subject property and large employers
c. subject property and comparable sales
2.34 "Items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised" is the definition of
a. market data
b. specialized data
c. generalized data
d. gen
d. general data
2.35 You can obtain topographic maps from
a. Topozone
b. state Department of Transportation
c. FEMA
d. HUD
a. Topozone
3.1 A site has 4.6 acres. You analyze the market and determine it could have four possible uses that would be legally permissible, physically possible and financially feasible. Which one would be the highest and best use of the site?
(Reminder: There are
A. One unit = $175,000
B. 4 units X $45,000 = $180,000
C. 4.6 acres x $40,000 = $184,000
D. 45 x 85 x 2 buildings =
7,650 SF x $25 = $191,250
Therefore option D (office complex) is the highest and best use. It produces the highest return to the site.
3.2 A parcel is valued at $160,000 as a large single-family homesite. Zoning allows it to be subdivided into four lots, and it is estimated that each lot could sell for $50,000.
Site development costs (sewer, grading, road, etc.) would cost $60,000.
What
$50,000 x 4 = $200,000
$200,000 - $60,000 = $140,000 value of property as subdivided into 4 lots
$160,000 = value as single parcel
Leave it alone! It is worth more as it stands as a single parcel. Not every property is ripe for development.
3.3 A 2.3 acre parcel that can be developed into four smaller lots or two larger lots.
Legal considerations: Zoning will allow two lots per gross acre. The subject parcel is 2.3 acres.
Physical considerations: The town allows septic systems if at least on
Small lots:
4 x $65,000 = $260,000
Development costs - 75,000
Value $185,000
Larger lots:
2 x $90,000 = $180,000
Development costs - 15,000
Value $165,000
Given the current value of the lots, it makes sense to go with the first alternative and develop the
3.4 Improvements that could be made to raw land in order to make a site would include
a. permits
b. grading
c. fill
d. any of these
d. any of these
3.5 True or False: Condemnation appraisals often require an appraiser to develop a separate opinion of site value.
a. True
b. False
a. True
3.6 What is another name for the cost approach?
a. the market data approach
b. the multiple regression approach
c. the income approach
d. the summation approach
d. the summation approach
3.7 A parcel of raw land has been improved so that it is ready to be used for a specific purpose. The land has now become
a. an interim use
b. a site
c. land residual
d. under-improved
b. a site
3.8 A 1-acre vacant land parcel is worth $90,000 as a single family homesite, $45,000 per unit as a site for a duplex, or $2.50 per square foot as a site for an industrial building. What is the highest and best use of the property?
a. single-family homesi
c. industrial building site
Note:
Single family: 1 x $90,000 = $90,000
Duplex: 2 x $45,000 = $90,000
Industrial: 1 acre = 43,560 sq. ft.
43,560 sq. ft. x $2.50 = $108,000
3.9 Two similar sites sell within a few months along the same road. One site has many trees, whereas the other has been stripped of trees. The treed site sells for $50,000, and the bare site sells for $45,000.
The subject property has plenty of trees. Sal
The sale is inferior, so the subject should be worth 10% more, or approximately $44,000.
In this simplistic example, it would be easy to derive a difference of $5,000 or 10% attributable to the difference in trees. Once we have derived this factor, we can
3.10 Let's do another example, and let you calculate and fill in the blanks on these lakefront properties. Please type in the indicated values per front foot.
Sale Price Front Feet (FF) $/FF
1 $150,000 120
2 $240,000 200
3 $140,000 120
4 $163,000 150
The answers are:
1 - $1,250
2 - $1,200
3 - $1,167
4 - $1,087
3.11 The most commonly-used method for valuing sites is the _____________ method.
a. land residual
b. sales comparison
c. extraction
d. ground rent capitalization
b. sales comparison
3.12 A rectangular parcel of land has 114 feet of frontage and is 222 feet deep. It sold for $280,000. What did it sell for per front foot?
a. $2,456
b. $1,106
c. $2,228
d. $2,104
a. $2,456
Note: $280,000/114 front ft.
= $2,456 per front foot
3.13 True or False: GPS systems can be used to locate vacant land parcels.
a. True
b. False
a. True
3.14 "An industrial or commercial site that is abandoned or underused because it suffers from real or perceived continuing contamination" is the definition of
a. wetland
b. grayfield
c. brownfield
d. EPA site
c. brownfield
3.15 True or False: A postal mailing address is equivalent to a legal description.
a. True
b. False
b. False
3.16 In the sales comparison method, quantitative adjustments are based on dollars, while qualitative adjustments are based on percentages.
a. True
b. False
b. False
Note: When utilizing sales comparison, adjustments to the comparable sales may be made either on a quantitative or qualitative basis. Quantitative adjustments are usually made on a percentage or dollar basis.
3.17 The most commonly-used land appraisal report form
a. was created by Fannie Mae
b. is a generic form
c. was created jointly by Fannie Mae and Freddie Mac
d. is not recognized by the major appraisal software companies
b. is a generic form
3.18 When using the sales comparison method in valuing a site, adjustments should be made for differences that are __________ _.
a. more than $1
b. significant
c. more than $100
d. noticeable when driving by the property
b. significant
3.19 A rectangular parcel of land has 114 feet of frontage and is 222 feet deep. It sold for $280,000. What did it sell for per square foot?
a. $12.54
b. $10.88
c. $11.06
d. $24.56
c. $11.06
Note: 114 ft x 228 ft
= 25,308 sq. ft.
$280,000/25,308 sq. ft
= $11.06 per square foot
3.20 A run-down neighborhood grocery store on a good corner location in a desirable older neighborhood recently sold for $400,000.
The reproduction cost of the improvements today would be $250,000 and the total depreciation is estimated to be 80%.
By extr
Extraction Method Solution:
$250,000 x .80 = $200,000. That amount is lost and gone forever. $250,000 - $200,000 = $50,000. Therefore, the present value of the improvements is only $50,000.
You may have realized that if the old clunker of a building lost
3.21 After diligent research, you're unable to come up with vacant land sales in the vicinity of an assignment you have in Old Town. You do uncover a sale of a dilapidated storefront with two apartments upstairs.
The sale price was $250,000. Your investig
Extraction Method Solution:
$280,000 x .60 (depreciation) = $168,000
$280,000 - $168,000 = $112,000 (value of improvements)
$250,000 (sale price) - $112,000 (value of improvements) =
$138,000 (value of land)
3.22 You are having a hard time finding sales of vacant land in an established built-up residential area. You have found some sales of improved property that include sites similar in size to your subject property. Research shows that typically properties
Allocation Method Solution:
Simply multiply $180,000 by .30 and the answer is $54,000. In the real world, the hard part is obtaining that 30% ratio.
3.23 The subject has a total value of $300,000 by the sales comparison approach.
One neighborhood across town has home sales from $260,000 to $270,000, and recent lot sales average $63,000.
Another nearby neighborhood has $340,000 home sales, and recent l
Allocation Method Solution:
In the first neighborhood, let's choose an average of $265,000 for improved property sales. $63,000 divided by $265,000 = .24 or 24%
In the second neighborhood let's divide $70,000 by $340,000 = .21 or 21%
The indication from t
3.24 Let's examine a property where the net operating income (NOI) is $100,000.
Let us assume that through research and analysis we were able to determine that the appropriate cap rate to be applied to the building improvements only was 11%, and the build
Land Residual Method Solution:
Remember the basic income capitalization formula that Value = Income/Rate.
Value = Market value
Income = Net operating income
Rate = Capitalization rate
1) In direct capitalization, we would divide the $100,000 by an appropr
3.25 We have a ground rent of $135,000 and a market derived rate of 9%. What is the value of the land?
Ground Rent Capitalization Method Solution:
1) First, remember that it is a specialized technique that should only be applied in the case where a subject site is rented under a land lease.
2) Use the formula of value equals income divided by a rate. (V =
3.26 Comparable 1 sold for $400,000 and is greatly superior to the subject; Comparable 2 sold for $250,000 and is significantly inferior to the subject; Comparable 3 sold for $300,000 and is slightly inferior. Based on a qualitative analysis of these sale
Relative Comparison Analysis Solution:
The indicated value for the subject would probably be in the range of $300,000 to $350,000.
3.27 Here are six land sales. They varied quite a bit in size, location and utility. Some were not recent sales. They were hard to adjust directly, because of the magnitude of the differences and the lack of market evidence.
However, we looked at the over
Ranking Analysis Solution:
From this ranking, the subject appears to be worth something more than $31,600 per acre and worth less than $37,500 per acre.
Perhaps it belongs more on the bottom end of the range because four of the six sales are less than $31
3.28 An appraiser has valued a subject property at $320,000. The appraiser's research indicates that site values in the subject's area are typically 20% of property values. What is the indicated value of the subject's site by the allocation method?
a. $64
a. $64,000
Note:
$320,000 x .20
= 64,000
3.29 Relative comparison analysis and ranking analysis are __________ methods.
a. qualitative
b. quantitative
c. non-recognized
d. precise numeric
a. qualitative
3.30 An improved property has a net operating income of $75,000. The appraiser estimates that $61,000 of the income is attributable to the building. The land capitalization rate is 8%. What is the estimated land value?
a. $114,000
b. $175,000
c. $222,222
b. $175,000
V (land) = I (land)/R (land)
Net income: $75,000
Income from building: $61,000
$75,000-$61,000
= $14,000 income from land
V (land) = I (land)/R (land)
V(land) = $14,000 / 0.08
V(land) = $175,000
3.31 Another name for the extraction method of site valuation is
a. ground rent capitalization
b. abstraction
c. absorption
d. regression analysis
b. abstraction
3.32 The subdivision development method of land valuation is a variation of
a. the sales comparison method
b. discounted cash flow analysis
c. allocation
d. extraction
b. discounted cash flow analysis
Note: The subdivision development method is a variation of a discounted cash flow analysis. It involves complex calculations over a future time frame and then discounts projected income and expenses back to present worth e
3.33 Appraisal regulatory agencies state that one of the problems with the allocation method is
a. it is not a recognized method or technique
b. appraisers often have no workfile support for the ratio they use
c. clients do not understand the allocation m
b. appraisers often have no workfile support for the ratio they use
3.34 A property sold for $120,000. An old building on the property has a cost new of $300,000 and it is 75% depreciated. What is the indicated site value by extraction?
a. $100,000
b. $50,000
c. $75,000
d. $45,000
Extraction Method Solution:
Depreciation: $300,000 x 0.75
= 225,000
Building Value: $300,000-$225,000
= $75,000
Property = Land + Building
120,000 = Land + 75,000
Land Value = $45,000
3.35 Which method of site valuation is based on a typical ratio of land value to total property value?
a. ground rent capitalization
b. sales comparison
c. extraction
d. allocation
d. allocation
Note: The allocation method is defined as "A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property bein
3.36 True or False: The extraction method of site valuation typically has good applicability in older urban areas.
a. True
b. False
a. True
3.37 A parcel is valued at $450,000 as a single entity. Zoning allows it to be subdivided into 8 lots and it is estimated that each lot could sell for $60,000. Site development costs (sewer, grading, road, etc.) would cost $50,000. What is the highest and
a. Leave it as one parcel
3.38 "Land that is improved so that it is ready to be used for a specific purpose" is the definition of
a. improved land
b. situs
c. site improvements
d. site
d. site
3.39 Ranking analysis is a ___________ method for estimating site value.
a. quantitative
b. qualitative
c. income-based
d. non-recognized
b. qualitative
3.40 The summation approach is another name for the _________ approach.
a. cost
b. market
c. sales comparison
d. income capitalization
a. cost
3.41 Property in built-up urban residential areas is usually valued on the basis of price per
a. square foot
b. acre
c. front foot
d. lot
a. square foot
3.42 GPS stands for
a. Geographic Positioning Satellite
b. Geological Positioning Society
c. Global Positioning System
d. Geographic Positioning Service
c. Global Positioning System
3.43 Which would NOT be considered to be a site improvement?
a. grading
b. sub-soil composition
c. fill
d. permits
b. sub-soil composition
Note: The composition of the sub-soil would be a factor of the site itself - not improvements to the site.
3.44 Property that fronts on a lake is usually valued on a basis of price per
a. acre
b. front foot
c. fish or animal unit
d. buildable unit
b. front foot
3.45 Developers usually value land on a basis of price per
a. acre
b. front foot
c. square foot
d. buildable unit
d. buildable unit
3.46 Condemnation occurs when a municipality exercises
a. eminent domain
b. police power
c. escheat
d. aggregation
a. eminent domain
3.47 Curbs, gutters and grading are examples of
a. site
b. site improvements
c. land improvements
d. attachments
b. site improvements
3.48 The ___________method has good application in valuing land in rural areas and in older, urban areas.
a. extraction
b. subdivision development
c. land residual
d. ground rent capitalization
a. extraction
3.49 The summation approach is another name for the _________ approach.
a. cost
b. market
c. sales comparison
d. income capitalization
a. cost
3.50 The ground rent capitalization method is most applicable when appraising which of the following __________.
a. vacant land
b. subdivision land
c. an office building
d. land under a McDonalds restaurant where McDonalds owns the building
d. land under a McDonalds restaurant where McDonalds owns the building
3.51 Which is NOT a technique for site valuation?
a. cost approach
b. sales comparison
c. allocation
d. subdivision development
a. cost approach
Note: All the others are site valuation techniques, but site valuation is actually part of the cost approach.
3.52 Which type of valuation would typically NOT include a separate site valuation?
a. gross rent multiplier
b. cost approach
c. highest and best use analysis
d. taxes and assessment
a. gross rent multiplier
Note: When calculating a GRM, you would not calculate the site value separately
3.53 A property contains 2.1 acres and is worth: A. $115,000 as single home site B. $40,000 per unit as a site for a triplex and C. $60,000 per acre as a retail site. All uses are physically possible, economically feasible and legally permitted. Which is
c. C
Note:
A. Single home: $115,000
B. Triplex: $40,000 x 3 units
= $120,000
C. Retail: $60,000 x 2.1 acres
= $126,000
3.54 A property sold for $250,000. The reproduction cost of the building was $380,000 and it was 60% depreciated. By extraction, what is the value of the land?
a. $50,000
b. $98,000
c. $125,000
d. $152,000
b. $98,000
Property Value
= Building Value + Land Value
Depreciated Building Value
= $360,000 x 0.60 depreciation
= $228,000 depreciation
Net Building Value
= $380,000 - $228,000
= $152,000
Land Value
= Property Value - Building Value
= $250,000 - $152,00
3.55 Which would NOT be a typical adjustment when preparing a sales comparison approach for a vacant land parcel?
a. topography
b. below-grade living area
c. flood plain
d. zoning
b. below-grade living area
3.56 The ground rent capitalization method is most applicable when appraising a _______ interest.
a. leased fee
b. leasehold
c. fee simple
d. land residual
a. leased fee
3.57 The tax rate per thousand in a municipality is $12.80. If the property taxes are $1,984 for a particular property, what is the property's assessed value?
a. $125,000
b. $155,000
c. $195,000
d. $310,000
b. $155,000
Note: $1,984 � $12.80
= 155 (thousands)
= $155,000.
3.58 The most common source of brownfield contamination is
a. sulphur
b. cyanide
c. lead
d. petroleum
d. petroleum
3.59 A site is currently rented for $600 per month and the ground rent capitalization rate is 7.5%. What is the indicated value of the site?
a. $8,000
b. $80,000
c. $96,000
d. not enough information to determine
c. $96,000
Note:
$600 month X 12 months
= $7,200 per year.
$7,200 � .075
= $96,000
3.60 If a property is assessed at $222,000 and the rate per thousand is $6.20, how much are total property taxes?
a. $1,145.60
b. $1,235.90
c. $1,376.40
d. $1,720.50
c. $1,376.40
Note:
222 (thousands) X $6.20
= $1,376.40.
4.1 The Manufactured Home Construction and Safety Standards is also known as the
a. BOCA Code
b. HUD Code
c. ANSI Standard
d. ISO 9001 Code
b. HUD Code
4.2 The HUD label on a manufactured home
a. is not found in today's new manufactured homes
b. is optional and not important
c. is a metal tag on the outside of the home
d. is a sticker found inside the home
c. is a metal tag on the outside of the home
4.3 The _______ area of the site is used for family activities and is often found in the _______ yard.
a. public, rear
b. private, front
c. public, neighboring
d. private, rear
d. private, rear
4.4 True or False: Modular homes have no permanently attached tags or labels that identify them as modular homes.
a. True
b. False
a. True
4.5 Which architect is known for one-story "prairie style" homes?
a. Mary Mix Foley
b. Frank Lloyd Wright
c. Lester Walker
d. Benjamin Franklin
b. Frank Lloyd Wright
4.6 Fannie Mae states that in calculating the gross living area (GLA) of a detached home, an appraiser must use __________ measurements.
a. interior
b. exterior
c. exact, to 1/10 of an inch
d. estimated
b. exterior
Note: For units in condo or co-op projects, the appraiser must use interior perimeter unit dimensions to calculate the gross living area. In all other instances, the appraiser must use the exterior building dimensions per floor to calculate th
4.7 Which type of home is built to meet the HUD Code?
a. manufactured home
b. modular home
c. both manufactured and modular homes
d. all new homes built in the U.S. since 2005
a. manufactured home
4.8 A bilevel home is also often referred to as a __________ home.
a. two and a half story
b. bungalow
c. cape cod
d. split entry
d. split entry
4.9 The most common roofing material currently used in new construction in the U.S. is
a. wood shake or shingle
b. clay tile
c. composition roll roofing
d. fiberglass composition shingles
d. fiberglass composition shingles
4.10 Footings should be at least _____________ average frost penetration levels.
a. one foot above
b. one foot below
c. level with
d. six feet below
b. one foot below
4.11 The main support beams for a home are called
a. joists
b. girders
c. sill plates
d. pockets
b. girders
Note: Girders are the main support beams and are set in pockets that were formed in the top of the end walls of the foundation.
4.12 In framing, __________ are constructed above window and door openings.
a. cavities
b. fire stops
c. headers
d. joists
c. headers
4.13 In modern construction, the most common subflooring material is
a. insulated steel panels
b. 1" x 6" tongue-in-groove planking
c. plywood or OSB board
d. stone
c. plywood or OSB board
Note: Subflooring used to consist of 1 x 6 tongue and groove boards laid diagonally for more strength. Today it is almost always 4 x 8 sheets of plywood or OSB board.
4.14 True or False: Balloon framing has replaced platform framing as a modern building technique.
a. True
b. False
b. False
Note: Due to fire hazard and code compliance issues (not to mention the difficulty of getting good lumber 20 feet long), balloon framing is rarely used today. It has been replaced by platform framing.
4.15 A monolithic slabongrade foundation
a. is not permitted anywhere in the U.S. due to building code restrictions
b. requires a separate footing that is usually 4-5 feet deep
c. is very common in the North and Northeast
d. is essentially one giant footi
d. is essentially one giant footing
4.16 Wood foundations are more common in
a. areas of the U.S. with sandy soil
b. Canada
c. the southeastern U.S.
d. the midwestern U.S.
b. Canada
4.17 Roof slope is expressed as ____________ over ___________.
a. feet, inches
b. rise, run
c. area, weight
d. size, strength
b. rise, run
4.18 The most common type of heat system in new construction today is
a. hot water
b. forced warm air
c. geothermal heat pump
d. active solar
b. forced warm air
4.19 An inch of wood has an R-factor of approximately
a. 0
b. 1
c. 6
d. 11
b. 1
4.20 True or false: Heat pumps are essentially reversible air conditioners.
a. True
b. False
a. True
4.21 In electricity, voltage measures __________ , while amperage measures __________ .
a. transfer, resistance
b. volume, pressure
c. resistance, transfer
d. pressure, volume
d. pressure, volume
4.22 The air cavity between window panes is often insulated by filling it with _________ gas.
a. radon
b. hydrogen
c. argon
d. helium
c. argon
4.23 In a home's plumbing system, grey water comes from
a. the home's main water supply lines
b. sinks and laundry
c. commodes
d. plumbing leaks inside the walls
b. sinks and laundry
4.24 Which of these is NOT a disadvantage of hot water heat?
a. water in the pipes is susceptible to air blockage
b. baseboard heat units restrict furniture placement
c. it is inefficient and creates drafts and dust
d. pipes can freeze and burst if the po
c. it is inefficient and creates drafts and dust
Note: Disadvantages are that the baseboard radiators restrict furniture placement and the pipes could freeze and burst if the power goes off. Also, the water in the pipes is susceptible to air blockage and
4.25 Materials that transfer heat and energy more quickly are called
a. organic materials
b. insulators
c. conductors
d. transferors
c. conductors
4.26 What type of wiring is most commonly found in new residential construction?
a. knob and tube
b. plastic coated or Romex
c. armored cable or BX
d. insulated aluminum wiring
b. plastic coated or Romex
4.27 True or False: HVAC is an acronym that stands for Heating, Ventilating, and Air Conditioning systems.
a. True
b. False
a. True
4.28 A __________ home has a permanent steel chassis, wheels and axles.
a. manufactured
b. modular
c. pre-cut
d. panelized
a. manufactured
4.29 Which of these is the most recent type of siding?
a. wood
b. aluminum
c. fiber-cement
d. vinyl
c. fiber-cement
4.30 According to the EPA, ______________systems are the "most energy efficient, environmentally clean, and cost effective space conditioning systems available."
a. electric heat pumps
b. gas hot air burners
c. electric radiant heat
d. geothermal heat exc
d. geothermal heat exchange systems
4.31 The results of a __________ test will determine if there is suitable drainage and the size of the drain field that will be required for a septic system
a. drainage
b. soil
c. absorption
d. percolation
d. percolation
Note: That is called a percolation test - to measure the absorption capacity of the soil.
4.32 Soil maps produced by the Natural Resources Conservation Service are based on
a. percolation tests
b. topographic maps
c. aerial maps
d. flood maps
c. aerial maps
4.33 Which is the most recent type of construction materials?
a. rafters
b. floor trusses
c. floor joists
d. ceiling joists
b. floor trusses
Note: They are the most recent type (the last 20 to 30 years).
4.34 ________________ are used to anchor the sill plate to the foundation.
a. J-bars
b. Rebar
c. J-bolts
d. Glue
c. J-bolts
4.35 Which is NOT part of the foundation system of a house?
a. soil bed
b. joists
c. footings
d. foundation wall
b. joists
Note: The other answers are part of the foundation system; but joists are part of the flooring and ceiling systems.
4.36 Which is not a purpose of sheathing?
a. strengthen the structure
b. provide a nailing surface
c. provide decorative detail
d. form a vapor barrier
c. provide decorative detail
Note: The other choices are functions of sheathing. It is not decorative and is hidden under other finishes.
4.37 Which is NOT a method of ventilation?
a. electric radiant
b. roof vent
c. cupola
d. kitchen fan
a. electric radiant
4.38 Drilled wells need to use __________ until the drilling enters ___________.
a. perforated tile, the house
b. steel casing, bedrock
c. rotary drills, Shale
d. steel casing, sandstone
b. steel casing, bedrock
4.39 Slab-on-grade foundations are most popular in the ______________.
a. South and Southwest
b. North and East
c. Midwest
d. Mid-Atlantic
a. South and Southwest
4.40 The modern "central" heating system with one central furnace didn't appear until around ________.
a. 1830
b. 1850
c. 1880
d. 1930
c. 1880
4.41 When measuring a condominium you should calculate ________ using ___________measurements.
a. GLA, exterior
b. GBA, interior
c. GLA, interior
d. GBA, exterior
c. GLA, interior
4.42 Most new construction today employs ________________ shingles.
a. slate
b. fiberglass
c. wood
d. metal
b. fiberglass
4.43 Which was NOT true of early pipeless furnaces?
a. they had fans
b. they employed ceiling grates
c. they worked by gravity
d. they were not very efficient
a. they had fans
4.44 Marshall & Swift categorizes reinforced concrete frame commercial structures as Class
a. A
b. B
c. C
d. S
b. B
4.45 Freon R-22 was banned from use in HVAC systems in new construction because
a. central air conditioning is no longer permitted in new homes
b. it is inefficient as a refrigerant material
c. it damages the ozone layer
d. it was tested on animals
c. it damages the ozone layer
4.46 A reversible air conditioner is called a(n) _______________.
a. setback system
b. evaporative cooler
c. gravity system
d. heat pump
d. heat pump
4.47 An expansion tank is part of which type of heating?
a. electric baseboard
b. hot air
c. hot water
d. solar
c. hot water
Note: That is part of a hot water heating system. Water expands as it is heated and needs an extra space to go temporarily.
4.48 A factory-built house constructed in compliance with the standards of the applicable regional, state, or local building code is a _________ home.
a. manufactured
b. modular
c. pre-cut
d. panelized
b. modular
4.49 The earliest framing method was
a. platform frame
b. balloon frame
c. steel frame
d. post and beam
d. post and beam
Note: The Post and Beam System has been around for over a thousand years.
4.50 Footings should be __________ as wide as the _______________.
a. at least, foundation wall
b. twice, slab is deep
c. twice, foundation wall
d. three times, sill plate
c. twice, foundation wall
4.51 Keyways are employed in which type of foundation walls?
a. stone
b. brick
c. concrete block
d. poured concrete
d. poured concrete
5.1 True or False: If appraising something other than fee simple interest, an appraiser can make an adjustment to the indicated value by cost approach in order to reflect the value of the property interest being appraised.
a. True
b. False
a. True
5.2 The cost approach is primarily based on which valuation principle?
a. contribution
b. change
c. reconciliation
d. substitution
d. substitution
5.3 After an appraiser estimates cost new, he/she subtracts ____________ then adds _______________ to arrive at an indicated value by cost approach.
a. depreciation, site value
b. site value, site improvements
c. depreciation, entrepreneurial profit
d. si
a. depreciation, site value
5.4 The estimated cost of constructing a building equivalent to the building being appraised, using modern materials and current standards, is _______________ cost.
a. replacement
b. reproduction
c. opportunity
d. depreciated
a. replacement
Note: Replacement cost is defined as "The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, d
5.5 The difference between the cost of an improvement and its market value on the effective date of the appraisal is
a. depreciation
b. cost new
c. recapture rate
d. book loss
a. depreciation
5.6 When is an appraiser required by USPAP to develop the cost approach?
a. in all appraisals of non-residential properties
b. if the subject property improvements are less than 10 years old
c. whenever it is necessary to produce credible assignment resul
c. whenever it is necessary to produce credible assignment results
5.7The estimated cost to construct an exact duplicate or replica of the property being appraised, using the same materials, and embodying all the obsolescence of the subject building, is _______________ cost.
a. replacement
b. reproduction
c. opportunity
b. reproduction
5.8 True or False: Fee simple ownership is not subject to the governmental powers of police power and escheat.
a. True
b. False
b. False
5.9 True or False: If the sales comparison approach cannot be developed because of a lack of sales data, the cost approach cannot be developed either.
a. True
b. False
b. False
5.10 True or False: The cost approach is most applicable in situations where the site value is not well-supported.
a. True
b. False
b. False
5.11 True or False: Cost estimating services do not include an allowance for entrepreneurial profit or incentive.
a. True
b. False
a. True
5.12 When ____________ cost is used, it eliminates any functional obsolescence that may be present in the structure.
a. reproduction
b. replacement
c. book
d. opportunity
b. replacement
5.13 Most fire and casualty insurance policies are based on the ____________ cost of a structure.
a. reproduction
b. replacement
c. opportunity
d. original
b. replacement
5.14 Which of these would be considered an indirect cost when constructing an office building?
a. fire and liability insurance
b. lease-up costs to achieve occupancy
c. security during construction
d. all of these
b. lease-up costs to achieve occupancy
5.15 The most common unit of construction cost in residential properties is cost per
a. cubic foot
b. lineal foot
c. square foot
d. bedroom
c. square foot
5.16 Financing costs and marketing costs necessary to achieve occupancy are examples of ____________ costs.
a. direct
b. depreciation
c. indirect
d. real
c. indirect
5.17 The most popular cost estimating service for residential appraisers is
a. RS Means
b. Marshall & Swift
c. R.L. Polk
d. F.W. Dodge
b. Marshall & Swift
5.18 When a published cost manual is used, the result is ____________ cost.
a. entrepreneurial
b. opportunity
c. replacement
d. reproduction
c. replacement
5.19 Which of these is NOT one of the major cost estimating services used by real property appraisers?
a. F.W. Dodge
b. R.L. Polk
c. Marshall & Swift
d. RS Means
b. R.L. Polk
Note: The three major cost estimating services are Marshall & Swift, F.W. Dodge, and RS Means. R.L. Polk and Company provides automotive data.
5.20 Which type of cost new would replicate a slate roof and a steam heating system in a 100-year-old home?
a. reproduction cost
b. replacement cost
c. book cost
d. opportunity cost
a. reproduction cost
5.21 Direct costs are also called
a. soft costs
b. hard costs
c. entrepreneurial costs
d. opportunity cost
b. hard costs
5.22 Which would be an example of a direct cost when constructing a building?
a. financing costs
b. interest paid on construction loans
c. professional fees
d. building permit
d. building permit
5.23 A house contains 2,826 square feet. It was constructed in 1995 at a cost of $54.18 per SF.
The cost index at that time was 193.4.
The cost index today is 286.3.
What is the estimated cost to build the building today?
Part 1
2,826 sq ft x $54.18 = $153,112.68
Part 2
286.3/193.4 = 1.4803516
Part 3
$153,112.68 x 1.4803516
= $226,660.60
~ $226,661
Part 4
1.4803516 ~ 148.04%
148.04% - 100% = 48.04% increase
Therefore, costs have gone up 48% since 1995, and it would cost $2
5.24 Your research shows the land is worth $65,000 and you project the site improvements will cost $12,000. When completed, it will be brand new with no depreciation. What is the value?
Cost new - Depreciation + Land Value + Site Improvements = Value by Cost Approach
$223,245 - 0 + $65,000 + $12,000 = $300,245, rounded to $300,000.
5.25 A home was constructed in June 2005 at a cost of $195,000. The index for June 2005 was 188.2 and the current index is 218.3. What is the cost to construct the home today? (When dividing the indices, round to two decimal places)
a. $198,900
b. $226,20
b. $226,200
Part 1
218.3/188.2
= 1.16
Part 2
$195,000 * 1.16
= $226,200
5.26 When using Marshall & Swift, adjustments need to be made for construction costs in various locations of the country. This is accomplished through use of
a. quantity surveys
b. local multipliers
c. subjective guessing
d. entrepreneurial factors
b. local multipliers
5.27 A 2,800 square foot new home recently sold for $660,000. The site value was $180,000. The subject home has 2,945 square feet. What was the indicated cost of the subject home?
a. $504,861
b. $515,324
c. $523,887
d. $531,400
a. $504,861
Part 1
Property Value = Cost New - depreciation + site value + site improvements
Cost New = Property Value + depreciation - site value - site improvements
Part 2
Cost New
= $660,000 + 0 - $180,000 - 0
= 480,000
Part 3
$480,000 cost new/2,800 p
5.28 A rectangular-shaped two-story home measures 28 feet by 40 feet. How many lineal feet are there in the foundation?
a. 68
b. 136
c. 148
d. 272
b. 138
Lineal feet = Perimeter
Lineal feet = 28+40+28+40
Lineal feet = 136 ft
5.29 Of the traditional methods of cost estimating, the least complicated and least accurate method is the _________ method.
a. comparative-unit
b. quantity survey
c. unit-in-place
a. comparative-unit
5.30 True or False: Most appraisers do not possess the level of expertise needed to apply the quantity survey method of cost estimating.
a. True
b. False
a. True
5.31 With Marshall & Swift, you can produce a cost estimate using the
a. comparative-unit method only
b. unit-in-place method only
c. comparative unit or unit-in-place method
d. comparative-unit, unit-in-place, or quantity survey method
c. comparative unit or unit-in-place method
Note: It is not possible to create a quantity survey cost estimation using a cost manual. With Marshall & Swift, you can accomplish the two less detailed costing methods (comparative unit and unit-in-place), but
5.32 The unit-in-place method is sometimes called the ____________ method.
a. segregated cost
b. quantity survey
c. comparative unit
d. reproduction cost
a. segregated cost
5.33 You are using the Marshall & Swift Residential Cost Handbook to estimate the cost new of a home built in the early 1900s. What should you do?
a. not use Marshall & Swift because it has no data on homes built before 1966
b. go to the Old Residence pag
b. go to the Old Residence pages in the book
5.34 In producing a cost estimate, Derek has estimated the number of 2x4s, sheets of plywood, and how many pounds of nails would be necessary to construct the home. What cost estimating method has he employed?
a. unit-in-place
b. quantity survey
c. compar
b. quantity survey
5.35 Which of these is NOT one of the traditional cost estimating methods?
a. comparative-unit
b. direct-indirect
c. unit-in-place
d. quantity survey
b. direct-indirect
5.36 A 2,800 square foot new home recently sold for $660,000. The site value was $180,000. What was the indicated cost per square foot of the home?
a. $165.46
b. $168.32
c. $171.43
d. $178.14
c. $171.43
Part 1
Cost New = Property value - depreciation + site value + site improvements
Part 2
Cost New = 660,000-0+180,000+0
Cost New = $480,000
Part 3
480,000 cost new/2,800 sq. ft.
= $171.43 cost new per sq. ft.
5.37 What is another name for "soft costs"?
a. direct costs
b. indirect costs
c. hidden costs
d. overhead
b. indirect costs
5.38 The cost approach has good applicability when the improvements we are appraising are _________________.
a. old
b. old, but remodeled
c. new or relatively new
d. historic
c. new or relatively new
5.39 The most popular cost service among residential appraisers is
a. Adobe Acrobat
b. Apex
c. Marshall & Swift
d. Alamode
c. Marshall & Swift
5.40 You examine a construction contract to build a 2,448 square foot house and the total cost is $197,450. What was the cost per square foot?
a. $78.42
b. $80.66
c. $84.55
d. $86.14
b. $80.66
$197,440/2,448 sq. ft.
= $80.657 per sq. ft.
~ $80.66 per sq. ft.
5.41 Contractor's overhead and profit is an example of ____________ cost.
a. direct
b. indirect
c. entrepreneurial
d. capital
a. direct
5.42 A building was constructed in September 2002 for $872,500. The cost index at that time was 174.6. The current cost index is 222.9. What is the indicated reproduction cost of the building today? (Round the index to 2 decimal places)
a. $1,116,800
b. $
a. $1,116,800
Part 1
222.9/174.6 = 1.27663 ~ 1.28
Part 2
$872,500 x 1.28
= $1,116,800
Note:
1.28 = 128%
128% - 100% = 28%
Therefore, prices have increased by 28% since September 2002 and it would cost $1,116,800 to build it new today
5.43 A house contains 2,312 square feet. It was constructed in 1998 at a cost of $72.32 per SF. The cost index at that time was 201.4 and the cost index today is 265.8. What is the estimated cost to build the building today? (Round the index to 2 decimal
b. $220,709
Part 1
265.8/201.4 = 1.3197 ~ 1.32
Part 2
1998 House Cost:
$72.32 per sq. ft. x 2,312 sq. ft
= $167,203.84
Part 3
$167,203.84 x 1.32
= $220,709
5.44 An example of a special purpose property would be a(n)
a. geodesic dome house
b. 8,000 square foot residence
c. 5,000 acre ranch
d. school building
d. school building
5.45 Unless adjustments are made for ownership interest, the cost approach will indicate the value of the ___________ interest.
a. leased fee
b. leasehold
c. fee simple
d. partial
c. fee simple
5.46 A property has a cost new of $345,000, site value of $90,000, and accrued depreciation of $75,000. What is its value by the cost approach?
a. $320,000
b. $360,000
c. $390,000
d. $425,000
b. $360,000
Property Value
= Cost New - Depreciation + Site Value + Site Improvements
Property Value
= $345,000 - $75,000 + $90,000 + 0
= $360,000
5.47 If a property is older or exhibits unusual construction, then perhaps the more accurate method would be to use _______________ cost.
a. replacement
b. reproduction
c. historic
d. replication
b. reproduction
5.48 Appraisal, accounting and legal fees are examples of ____________ costs.
a. direct
b. indirect
c. entrepreneurial
d. capital
b. indirect
5.49 USPAP says a cost approach must be developed when it is necessary for
a. the client's understanding
b. to further the objectives of the intended users
c. the client's satisfaction
d. credible results
d. credible results
5.50 "Expenditures for the labor and materials used in the construction of improvements" is the definition of
a. entrepreneurial profit
b. indirect costs
c. replacement costs
d. direct costs
d. direct costs
5.51 The oldest of the three traditional appraisal approaches is the _________ approach.
a. cost
b. income capitalization
c. sales comparison
d. market
a. cost
5.52 The one universal approach that can be applied to any kind of improved real property is the _______________ approach.
a. market
b. income capitalization
c. sales comparison
d. cost
d. cost
5.53 If a cost manual is used the result is _____________ cost.
a. replacement
b. reproduction
c. either replacement or reproduction
d. insurable
a. replacement
5.54 A building was constructed in August 1995 for $2,340,000. The cost index at that time was 192.3. The current cost index is 302.1. What is the indicated reproduction cost of the building today? (Round the index to 2 decimal places)
a. $2,965,000
b. $3
c. $3,673,800
Part 1
302.1/192.3 = 1.57
Part 2
$2,340,000 x 1.57
= $3,673,800
5.55 The basic cost approach formula is reproduction or replacement cost new, ___________________, __________________, = property value.
a. - site value, - accrued depreciation
b. - accrued depreciation, + site value
c. - physical deterioration, + land va
b.
- accrued depreciation, + site value
5.56 Which would NOT be a typical source of building costs for an appraiser?
a. appraiser's files
b. local contractors
c. the property owner
d. cost estimating services
c. the property owner
5.57 "The amount an entrepreneur expects to receive for his or her contribution to a project" is the definition of
a. risk rate
b. incentive
c. entrepreneurial incentive
d. entrepreneurial risk
c. entrepreneurial incentive
5.58 Fannie Mae says the cost approach _______________.
a. is required
b. is optional
c. may not be used
d. is required only in 2 - 4 unit properties
b. is optional
5.59 All of the following are situations where the cost approach has good applicability, EXCEPT for
a. the land value is well supported
b. the improvements do not represent the highest and best use of the land as if vacant
c. the improvements represent th
b. the improvements do not represent the highest and best use of the land as if vacant
5.60 "The estimated cost to construct, at current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout" is the definition of
a. repro
b. replacement cost
5.61 The most comprehensive and accurate method of cost estimating is the ___________ method.
a. index
b. quantity survey
c. segregated cost
d. comparative-unit
b. quantity survey
5.62 _______________ is defined as "a loss in property value from any cause."
a. Obsolescence
b. Book value
c. Inutility
d. Depreciation
d. Depreciation
5.63 The cost to produce "an exact duplicate or replica of the building being appraised" is called _____________ cost.
a. reproduction
b. replacement
c. reproducible
d. insurable
a. reproduction
6.1 Which type of depreciation is generally considered to be incurable?
a. physical deterioration
b. functional obsolescence
c. external obsolescence
d. all of these
c. external obsolescence
6.2 Which of these is NOT a cause of functional obsolescence?
a. layout problems
b. inadequacies
c. superadequacies
d. deferred maintenance
d. deferred maintenance
6.3 Physical deterioration is best described as
a. factors outside a property that diminish its value
b. always incurable
c. outmoded items
d. wear and tear
d. wear and tear
6.4 True or False: Functional obsolescence may be present in a brand-new structure.
a. True
b. False
a. True
6.5 In most situations, which of these would be considered an example of a superadequacy?
a. gold-plated faucets
b. R-90 insulation in walls and ceilings
c. foundation walls that are 4 feet thick
d. all of these
d. all of these
6.6 Depreciation is defined as a loss in property value from
a. factors inside the property only
b. any cause
c. factors outside the property only
d. ordinary wear and tear
b. any cause
6.7 The difference between the cost of an improvement and its market value on the effective date of the appraisal is
a. depreciation
b. obsolescence
c. effective age
d. opportunity cost
a. depreciation
6.8 True or False: External obsolescence can be shared between building and land.
a. True
b. False
a. True
6.9 A 10-year-old home will always have
a. physical deterioration
b. functional obsolescence
c. external obsolescence
d. all of these
a. physical deterioration
6.10 A new building is expected to remain standing for 80 years. This period is the building's ____________ life.
a. useful
b. economic
c. physical
d. effective
c. physical
Note: "The total period a building lasts or is expected to last" is the definition of physical life.
6.11 A building has an effective age of 25 and a total economic life of 80 years. What is its remaining economic life?
a. 31
b. 55
c. 45
d. not enough information to determine
b. 55
6.12 A building has an effective age of 18 and a total economic life of 60 years. It cost $520,000 new and its site value is $125,000. What is the indicated percentage of age-life depreciation?
a. 15%
b. 18%
c. 25%
d. 30%
d. 30%
6.13 True or False: A building may be obsolete and valueless even though it is still standing and is physically sound.
a. True
b. False
a. True
6.14 True or False: Effective age is the same as chronological age.
a. True
b. False
b. False
6.15 The number of years that have elapsed since a building was constructed is its
a. effective age
b. actual age
c. remaining economic life
d. economic age
b. actual age
Note: "The number of years that have elapsed since a building was constructed" is the definition of actual age.
6.16 "The period over which improvements contribute to real property value" is the definition of
a. effective age
b. economic life
c. useful life
d. physical life
b. economic life
6.17 __________ will lose value over time just because of age.
a. Land
b. Buildings
c. Both land and buildings
d. Land, buildings, and chattel items
b. Buildings
6.18 A building has an effective age of 12 and a total economic life of 60 years. It cost $320,000 new and its site value is $95,000. What is the indicated value by cost approach?
a. $159,000
b. $336,000
c. $351,000
d. $415,000
c. $351,000
Part 1
depreciation
= eff. age/economic life x cost new
part 2
= 12/60 x $320,000
= $64,000
Part 3
Cost New
- Depreciation
= Depreciated Cost
+ Site Value
= Value
Part 4
$320,000
- $64,000
= $256,000
+ $95,000
= $351,000
6.19 The house you are appraising has a total cost of $182,844. It is 22 years old and has an estimated remaining economic life of 28 years.
The cost to cure deferred maintenance items is $1,290.
Short lived items of depreciation have been identified; the
PART A
Total Cost
$182,844
Minus Deferred maintenance cost
- 1,290
Minus Short-lived items cost
- 12,300
Equals Cost of Long-lived items
= $169,254
Total life = 22 + 28 = 50 years
Depreciation = 22 / 50 = .44 or 44%
Long-lived depreciation
= $169,254 x .4
6.20 A roof on a building costs $18,000 to replace. It has an expected life of 25 years, and it is 10 years old. How much short-lived depreciation is attributable to this item?
$7,200
$8,000
$4,500
$18,000
a. $7,200
Part 1
10/25 = 0.4
Thus, it is 40% depreciated
Part 2
$18,000 x 0.4
= $7,200
6.21 A building has a cost new of $400,000. Deferred maintenance items have been identified at a cost of $9,000. Short-lived depreciation has been identified at $15,000; these short-lived items have a total cost of $45,000. The building has an effective a
d. $138,400
Part 1
$400,000 - $9,000 - $45,000 = $346,000 (cost of long-lived items).
Part 2
eff age/economic life = % depreciation
20 / 50 = 40% depreciation.
Part 3
Cost of l-l items x % l-l depreciation
$346,000 x 0.40
= $138,400.
6.22 A hot water furnace in a building costs $22,000 to replace. It has an expected life of 30 years, and it is 24 years old. How much shortlived depreciation is attributable to this item?
a. $4,400
b. $12,800
c. $17,600
d. $19,800
c. $17,600
Part 1
24/30 = 0.8
Thus, it is 80% depreciated
Part 2
$22,000 x 0.8
= $17,600
6.23 Which type of physical deterioration is considered to be curable?
a. deferred maintenance
b. long-lived components
c. short-lived components
d. all types of physical deterioration are curable
a. deferred maintenance
6.24 A property is found to suffer $20,000 in external obsolescence because of its proximity to an industrial plant. The subject's land represents 20% of its value. What is the dollar amount of external obsolescence attributable to the building improvemen
c. $16,000
$20,000 x 0.20 = $4,000
$20,000 - $4,000 = $16,000
6.25 True or False: Physical deterioration can be divided into three categories: deferred maintenance; short-lived components; and long-lived components.
a. True
b. False
a. True
6.26 A home suffers functional obsolescence of $10,000 because it lacks a second bathroom, which could be installed at a cost of $9,500. This type of obsolescence is considered
a. curable
b. incurable
c. economic
d. physical
a. curable
6.27 When estimating depreciation, which of these items is likely to be considered a long-lived item?
a. furnace
b. roof covering
c. girders
d. water heater
c. girders
6.28 What term is defined as "needed repairs or replacement of items that should have taken place during the course of normal maintenance"?
a. functional obsolescence
b. short-lived depreciation
c. long-lived depreciation
d. deferred maintenance
d. deferred maintenance
6.29 An outdated kitchen can be remodeled at a cost of $15,500. After remodeling, the value of the home will increase by $14,000. This item of depreciation is considered
a. curable
b. incurable
c. feasible
d. essential
b. incurable
6.30 "The period of time over which a structure may reasonably be expected to perform the function for which it was designed" is the definition of __________ life.
a. economic
b. physical
c. useful
d. actual
c. useful
6.31 "The age of property that is based on the amount of observed deterioration and obsolescence it has sustained" is the definition of ____________ age.
a. actual
b. historic
c. chronological
d. effective
d. effective
6.32 The subject is a 25 year old building that would cost $180,000 to build new today. It is in good condition and you estimate the effective age to be 20 years. Your estimate of total economic life is 60 years, based on your knowledge of similar propert
b. $120,000
20/60
= 0.33 = 33% depreciation
$180,000 x 0.33
= $60,000
180,000
- $60,000
= $120,000
6.33 A shortlived item is a building component with an ______________ life that is shorter than the _______________ life of the entire structure.
a. economic life, long-lived
b. expected remaining economic, remaining economic
c. physical, remaining econom
b. expected remaining economic, remaining economic
6.34 The subject is a 15 year old duplex that would cost $240,000 to build new today. It is in good condition and you estimate the effective age to be 10 years. Your estimate of total economic life is 50 years. Its land value is $60,000. What is its value
d. $252,000
10/50
= 0.2 = 20% depreciation
$240,000 x 0.2
= $48,000 depreciation
$240,000
- $48,000
= $192,000
+ $60,000
= $252,000
6.35 "The impairment of functional capacity of a property according to market tastes and standards" is the definition of
a. depreciation
b. physical deterioration
c. functional obsolescence
d. external obsolescence
c. functional obsolescence
6.36 A 6 year old water heater with an expected life of 15 years will have experienced depreciation of __________%.
a. 20
b. 25
c. 30
d. 40
d. 40
6/15 = 0.40 = 40% depreciation
6.37 Which type of depreciation occurs off the site?
a. curable
b. short-lived
c. physical
d. external
d. external
6.38 External obsolescence can be
a. marketwide
b. based on an outdated finish item
c. the result of a layout deficiency
d. the result of a construction defect
a. marketwide
6.39 "The ability of a property or building to be useful and perform the function for which it was intended according to current market tastes and standards" is the definition of __________________.
a. functional obsolescence
b. functional utility
c. func
b. functional utility
6.40 Functional obsolescence could be caused by all of the following EXCEPT
a. superadequacies
b. wear and tear
c. layout problems
d. outmoded items
b. wear and tear
6.41 The period over which improvements to real property contribute to property value" is the definition of _______________ life.
a. economic
b. physical
c. useful
d. actual
a. economic
6.42 The amount of depreciation attributed to deferred maintenance is measured by
a. the cost to build a new structure
b. the cost to cure the deferred maintenance item
c. the cost of long-lived items divided by the ratio of effective age to total economi
b. the cost to cure the deferred maintenance item
6.43 An estimate of remaining economic life is required by
a. FHA
b. Fannie Mae
c. Freddie Mac
d. none of the above
a. FHA
6.44 What are the three general types of depreciation?
a. physical, short-lived, and long-lived
b. Curable, incurable and breakdown
c. physical, functional, and external
d. functional, curable, and incurable
c. physical, functional, and external
6.45 Economic feasibility is indicated if the __________ is ______________ the ______________ of the property.
a. cost, greater than, value
b. value, equal to or less than, cost
c. cost to cure, equal to or less than, anticipated increase in value
d. cost
c. cost to cure, equal to or less than, anticipated increase in value
6.46 Which would NOT cause external obsolescence?
a. leaking septic in the back yard
b. statewide recession
c. building moratorium
d. high crime rate
a. leaking septic in the back yard
6.47 The replacement cost new of the improvements is $295,500, the land value is $75,000 and the effective age is 17 years. The total economic life is estimated to be 60 years. The subject has deferred maintenance items that total $5,500. After these repa
c. $292,500
$295,500 - $5,500 = $290,000
15/60 = .25 = 25% depreciation
$290,000 x .75 = $217,500 cost after depreciation
Cost + Depreciation = Value
$217,500 + $75,000 = $292,500.
6.48 Assume a house would rent for $1,000 per month in a normal neighborhood. In this neighborhood, which is near a busy interstate highway, it can only rent for $950 per month. The appropriate GRM is 135. How much external obsolescence is caused by the h
d. $6,750
$1000 - $950 = $50
Loss of rent = $50
$50 x 135 = $6,750
6.49 A 12 year old roof with an expected life of 20 years would have experienced depreciation of $__________ if the cost new of the roof is $8,000.
a. $3,200
b. $4,200
c. $4,800
d. $6,000
c. $4,800
12/20 = 0.60
$8,000 x 0.60 = $4,800
6.50 A built-in dishwasher and stove have replacement costs of $350 and $500, respectively. They are both 6 years old and have a remaining life of 9 years. What is the total of short-lived physical depreciation attributable to these appliances?
a. $302
b.
b. $340
6 + 9 = 15
6/15 = .40 = 40% depreciation
$350 + 500 = $850
$850 X .40 = $340
6.51 Which would NOT be a deferred maintenance item?
a. broken window pane
b. older roof showing some wear
c. peeling paint on window trim
d. leaking faucet
b. older roof showing some wear
6.52 Which is NOT an example of a long-lived item?
a. water heater
b. framing
c. foundation
d. underground pipes
a. water heater
7.1 You are conversing with an appraiser who has been in the profession for 40 years, and he mentions the term "market approach". What approach to value is he probably referring to?
a. income capitalization
b. sales comparison
c. cost
d. discounted cash f
b. sales comparison
7.2 An appraiser uses five comparable sales, and gets a differing indication of value from each one. What step of the sales comparison process involves considering these indications and arriving at an indication of value for the subject?
a. select relevan
b. reconcile the value indications
7.3 Traditionally, appraisers have used a minimum of _____ comparable sales in the sales comparison approach.
a. 2
b. 3
c. 5
d. 6
b. 3
7.4 True or False: In an arms-length transaction, the seller is under no duress to sell, but the buyer may be under duress.
a. True
b. False
b. False
7.5 What is the first step in the sales comparison approach process?
a. select relevant units of comparison
b. reconcile the value indications
c. research the market
d. verify the information
c. research the market
7.6 In the sales comparison approach, we adjust
a. the subject
b. the comparable
c. either the subject property or the comparable, depending on the appraiser's discretion
d. comparable listings but not comparable sales
b. the comparable
7.7 An appraiser uses five comparable sales, and gets a differing indication of value from each one. What step of the sales comparison process involves considering these indications and arriving at an indication of value for the subject?
a. select relevan
b. reconcile the value indications
7.8 Two virtually identical houses are offered for sale in a subdivision. House A is listed for $129,900 and House B is listed for $169,000. House A has been shown 12 times and there are 4 offers pending, while House B has been shown twice and there have
a. substitution
7.9 When determining how much to adjust for a two-car garage in the sales comparison approach, which valuation principle is of primary importance?
a. externalities
b. anticipation
c. contribution
d. balance
c. contribution
7.10 For what type of property might the sales comparison approach NOT be an applicable approach to value?
a. a duplex
b. a commercial office building
c. an unusual or one-of-a-kind design home
d. a tract home in a subdivision
c. an unusual or one-of-a-kind design home
7.11 The subject property has 1,200 square feet of GLA, and a comparable sale has 1,400 square feet. What type of adjustment are you likely to make in the sales comparison approach for GLA?
a. a downward adjustment to the comparable
b. an upward adjustmen
a. a downward adjustment to the comparable
7.12 List at least 10 documents or sources from which you might obtain specific data.
Personal inspection
Homeowner
Deed
Lease(s)
Assessment record
Tax bill
Survey
Site plan
Title document
Homeowners Association declaration and bylaws
MLS listing
Sales agreement
Previous appraisal
Home inspection report
Blueprints
Sales brochure
Condominiu
7.13 List at least 10 documents or sources from which you might obtain information on property sales.
Multiple Listing Services
Data Subscription services
Real Estate agents
Other appraisers
Appraisal organizations
Your own files
Courthouse records
Assessor records
Newspaper articles
Newspaper advertisements
Trade journals
The internet
Title reports or ti
7.14 List the 10 basic "elements of comparison" that support a sales price.
- Real property rights being conveyed (fee-simple, easements, air rights, etc.)
- Financing terms (favorable or not)
- Conditions of sale (arm's-length or otherwise)
- Expenditures made immediately after purchase (things not included in age or condition a
7.15 True or False: A market area could encompass an entire state, or several states.
a. True
b. False
a. True
7.16 Specific data is
a. usually gathered from an online source, such as the U.S. Census Burea
b. different for each appraisal assignment
c, not as important as general data
d. the same for all appraisals performed in the same market area
b. different for each appraisal assignment
7.17 "The area associated with a subject property that contains its direct competition" is the definition of
a. neighborhood
b. market area
c. district
d. municipality
b. market area
7.18 Which of these is NOT an element of comparison listed in The Appraisal of Real Estate, 13th Edition?
a. days on market
b. financing terms
c. property rights being appraised
d. location
a. days on market
7.19 True or False: General data includes items of information on value influences that originate outside the property being appraised.
a. True
b. False
a. True
7.20 In applying comparative analysis, an appraiser may employ
a. qualitative techniques only
b. quantitative techniques only
c. quantitative or qualitative techniques, either separately or in combination
d. quantitative or qualitative techniques separate
c. quantitative or qualitative techniques, either separately or in combination
7.21 A 1,600 square-foot home with a double garage sold for $190,000 in February. A home very similar except it had 1,700 square feet of living area and only a single garage, sold for $204,900 in October.
It has been determined that the indicated adjustme
1,700 SF - 1,600 SF = 100 SF
100 SF x $38 = $3,800 size adjustment
Sale price: $204,900
Adjustment for size - 3,800
Adjustment for garage + 4,000
Adjusted price $205,100
Earlier sale 190,000
Difference (time of sale) $ 15,100
$15,100 / $190,000 = .079 or
7.22 A home sells in January for $180,000 and sells again in November for $189,000. When the home resold, it had not been improved at all from the date it was originally purchased. The only change was the time.
What is the indicated adjustment for time or
$189,000 / $180,000 = 1.05
That is an increase of 5.0% over 10 months, or an average of 0.5% (one-half of one percent) per month.
Therefore, if a comparable property sold 6 months ago, we could adjust it on the basis of 0.5% per month or a total of 3%.
7.23 True or False: Qualitative analysis uses percentages adjustments, while quantitative analysis uses specific dollar adjustments.
a. True
b. False
b. False
7.24 True or False: Qualitative analysis is used for elements that cannot be given a numerical value.
a. True
b. False
a. True
7.25 Relative comparison analysis is __________ technique.
a. a cost approach
b. an unrecognized
c. a quantitative
d. a qualitative
d. a qualitative
7.26 An appraiser is using both quantitative and qualitative adjustments in the sales comparison approach. Which statement is TRUE regarding this situation?
a. qualitative adjustments are based on percentage amounts, while quantitative adjustments are bas
b. the quantitative adjustments are usually performed first
7.27 Comp A has three bedrooms and sold for $118,000. Comp B has four bedrooms and sold for $125,000. What is the indicated adjustment for a fourth bedroom, using these two paired sales?
a. $1,000
b. $3,000
c. $7,000
d. $8,000
c. $7,000
$125,000 - $118,000 = $7,000
7.28 What type of analysis is used for elements that cannot be given a numerical value?
a. qualitative
b. quantitative
c. percentage
d. units of comparison
a. qualitative
7.29 A property sold for $129,000. It was not improved or added onto, and it re-sold 12 months later for $141,900. What is the annual change in market conditions indicated by this sale?
a. a 10% increase
b. an 8% increase
c. a 10% decrease
d. an 8% decrea
a. a 10% increase
Part 1
Percent Change
= (Final Price - Initial Price)/Original price
Part 2
$141,900 - $129,000 = $12,900
Part 3
$12,900/$129,000 = 0.1 = 10% increase
7.30 Paired data analysis is also known as
a. qualitative analysis
b. paired sales analysis
c. income capitalization
d. quantity survey method
b. paired sales analysis
7.31 Comp C sold for $127,000 and has 2,450 square feet. Comp D is essentially identical, except that it has 2,675 square feet and it sold for $136,000. What is the indicated adjustment per square foot?
a. $8
b. $32.50
c. $38
d. $40
d. $40
Part 1
$136,000 - $127,000 = $9,000
Part 2
2,675 SF - 2,450 SF = 225 SF
Part 3
$9000/225 SF = $40 per SF
7.32 ______________ is "the process by which a value indication is derived in the sales comparison approach".
a. Comparative analysis
b. Bracketing
c. Adjustment analysis
d. Quantitative analysis
a. Comparative analysis
7.33 The primary principle upon which the cost and sales comparison approaches are based is the principle of ________________.
a. substitution
b. change
c. externalities
d. supply and demand
a. substitution
7.34 "A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises" is the definition of
a. neighborhood
b. district
c. market area
d. market
a. neighborhood
Note: The key phrase here is "complementary uses".
7.35 Which of the following would NOT be considered a source of comparable sale data?
a. MLS
b. appraiser's own files
c. BEA
d. the internet
c. BEA
7.36 Which analysis technique employs only plusses and minuses?
a. quantitative analysis
b. comparison analysis
c. paired data analysis
d. relative comparison analysis
d. relative comparison analysis
7.37 "In the sales comparison approach, the process of making numerical adjustments to the sale prices of comparable properties, including data analysis techniques (paired data analysis, grouped data analysis, and secondary data analysis), statistical ana
d. quantitative
7.38 Which approach is most widely used in the appraisal of residential properties?
a. income capitalization approach
b. cost approach
c. sales comparison approach
d. discounted cash flow analysis (DCF)
c. sales comparison approach
7.39 We never adjust the _______________.
a. comparable sales
b. sale prices
c. subject property
c. subject property
7.40 The only limitation of the sales comparison approach is that _____________.
a. it only works for residential properties
b. it only works for income producing properties
c. it doesn't work the way people think
d. you need a sufficient number of reliab
d. you need a sufficient number of reliable sales
7.41 The last step in the sales comparison approach is
a. verify the information
b. research the market
c. reconcile the value indicators
d. identify differences and make adjustments
c. reconcile the value indicators
7.42 "A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural" is the definition of ____________.
a. neighborhood
b. district
c. market area
d. market
b. district
7.43 The first step in the sales comparison approach is
a. verify the information
b. research the market
c. select relevant units of comparison
d. identify differences and make adjustments
b. research the market
7.44 Besides properties that have recently sold, other value indications might include all of the following EXCEPT
a. listings
b. offers to purchase
c. option to purchase
d. offers to lease
d. offers to lease
7.45 In the URAR, concerning verification, you are asked to provide the ____________ and the __________.
a. data source, verification source
b. verification source, verification date
c. data source, date of data
d. verification source, email address of so
a. data source, verification source
7.46 Adjustments should be made for __________ differences between the subject property and a comparable property.
a. all
b. at least three
c. significant
d. no more than three
c. significant
7.47 Paired data analysis is an example of _______________ analysis.
a. quantitative
b. statistical
c. cost-benefit
d. qualitative
a. quantitative
7.48 Which of the following would NOT be considered a source of specific data?
a. census bureau
b. personal inspection
c. deed
d. tax bill
a. census bureau
7.49 Price per square foot of Net Leasable Area is a common unit of comparison when appraising
a. offices
b. 2-4 unit properties
c. vacant land
d. one-unit residences
a. offices
7.50 A market area boundary might be indicated by a change in all of the following EXCEPT
a. age of structures
b. type of use; single family, commercial, etc.
c. topography
d. income levels
c. topography
7.51 Comparable 1 sells for $222,000 and contains 1,900 SF. Comparable 2 is similar in all aspects, except it contains 2,100 SF, and it sells for $234,000. How much should we adjust another comparable sale, per square foot?
a. $30
b. $40
c. $50
d. $60
d. $60
Part 1
$234,000 - $222,000 = $12,000
Part 2
2,100 SF - 1,900 SF = 200 SF
Part 3
$12,000/200 SF = $60 per SF
7.52 Which of these is NOT another name for the sales comparison approach?
a. direct sales comparison approach
b. sales capitalization approach
c. market approach
d. market data approach
b. sales capitalization approach
7.53 Price per square foot of Gross Living Area is a common unit of comparison when appraising
a. offices
b. 2-4 unit properties
c. vacant land
d. one-unit residences
d. one-unit residences
8.1 True or False: According to the Fannie Mae Selling Guide, an appraiser must make dollar-for-dollar adjustments for the amount of the sales concession.
a. True
b. False
b. False
8.2 "The order in which quantitative adjustments are applied to the sale prices of comparable properties" is the definition of
a. reconciliation
b. conditions of sale
c. property rights conveyed
d. sequence of adjustments
d. sequence of adjustments
8.3 The acronym UAD stands for
a. Unfortunate Appraisal Decision
b. Universal Appraiser Description
c. Uniform Appraisal Dataset
d. Unconfirmed Appraisal Delivery
c. Uniform Appraisal Dataset
8.4 In a UAD-compliant appraisal report, how would the date October 30, 2013 be formatted?
a. 30-OCT-2013
b. 30/10/13
c. 10/30/2013
d. 10-30-13
c. 10/30/2013
8.5 True or False: Every difference between a subject property and a comparable sale requires an adjustment.
a. True
b. False
b. False
8.6 When valuing real property, the value of the whole _______________ the sum of the estates or parts.
a. is always equal to
b. may be less than or equal to, but not greater than
c. may be equal to, greater than, or less than
d. is always less than
c. may be equal to, greater than, or less than
8.7 When adjusting a comparable sale for financing terms in an FHA appraisal, FHA instructs the appraiser to adjust
a. upward
b. downward
c. by no more than 10%
d. by no less than 3%
b. downward
8.8 According to Fannie Mae, all of the following are unacceptable appraisal practices EXCEPT
a. not supporting adjustments in the sales comparison approach
b. selection and use of inappropriate comparable sales
c. use of comparables that are over six mon
c. use of comparables that are over six months old
8.9 Susan owns a home on leased land. Which term best describes her ownership interest in the property?
a. condominium
b. fee simple
c. leased fee
d. leasehold
d. leasehold
Note: This is a leasehold interest, held by a tenant.
8.10 A VA mortgage is an example of
a. a predatory loan
b. a conventional mortgage
c. a guaranteed mortgage
d. an insured mortgage
c. a guaranteed mortgage
8.11 Tenancy in severalty means the property is owned by
a. one person
b. two people
c. spouses
d. a corporation
a. one person
8.12 Bob grants his aunt, Mary, the right to occupy a property he owns for the rest of her life. In this situation, Mary is the
a. remainderman
b. temporary owner
c. life tenant
d. owner of record
c. life tenant
Note: Mary is the life tenant. Assuming the right of occupancy transfers back to Bob upon Mary's death, Bob is the remainderman.
8.13 What kinds of situations might cause duress? What might cause a transaction to be something other than arm's-length?
1. Job Transfer
2. Death of a spouse or close relative
3. Sale to a relative
4. Sale to a friend or business partner
5. Sale by an unknowledgeable buyer or seller
6. Desire to buy and control an adjoining property
7. Desire to purchase a property for an a
8.14 What indicators can help you determine if market conditions are changing?
Here is a list of some factors that can help you analyze changes in market conditions:
1. Changes in the area's demographics
2. Changes in typical exposure time on the market
3. Foreclosure rates in the area
4. Increases or decreases in residential rents
8.15 True or False: Adjustments for market conditions are always negative.
a. True
b. False
b. False
8.16 True or False: An appraiser can adjust a comparable sale to account for differences in the motivation of the buyer or seller in the transaction.
a. True
b. False
a. True
8.17 An appraiser uses a comparable sale that sold as a result of the owner's bankruptcy, and the appraiser adjusts the sale because it is not an arms-length transaction. This is an example of ___________ adjustment.
a. a cash equivalency
b. a conditions
b. a conditions of sale
8.18 Market conditions adjustments are referred to by some appraisers as _________ adjustments.
a. location
b. financing
c. time
d. capitalization
c. time
8.19 The second phase of the neighborhood life cycle is
a. decline
b. revitalization
c. stability
d. growth
c. stability
8.20 A buyer purchases a home, knowing that it needs a new roof. The buyer offers $104,000 and anticipates the cost of the roof to be $4,000. The roof actually ends up costing $8,000 because of unforeseen circumstances. How much should this sale be adjust
b. +$4,000
8.21 A property was put on the market on January 10th, and an agreement of sale was signed on February 8th. Due to issues with the home inspection, the sale did not close until July 15th. An appraiser is using this property as a comparable sale on an appr
c. February 8th and October 19th
8.22 A property sold for $183,950, and the purchaser made no significant improvements. One year later it sold again for $195,000. What is the percentage of increase indicated by this sale?
a. 4%
b. 5.6%
c. 6%
d. 7.1%
c. 6%
$195,000 - $183,950 = $11,050
% change = (Final-Initial)/Initial
$195,000 - $183,950 = $11,050
% change = $11,050/$183,950
% change = 0.0600 = 6.00%
8.23 When completing an appraisal using the Uniform Appraisal Dataset, in the "Age" section of the sales comparison grid, the appraiser is required to enter
a. effective age only
b. actual age only
c. both actual and effective ages
d. either actual or eff
b. actual age only
Note: The Uniform Appraisal Dataset (UAD) requires that only the chronological age of the subject and comparables be entered into the "Age" field on the sales comparison grid.
8.24 For appraisals prepared using the UAD, quality of construction for the subject and comparables is rated using
a. Good, Average, Fair, and Poor
b. N, B, or A
c. a scale from Q1 through Q6
d. whatever scale the client asks you to use
c. a scale from Q1 through Q6
8.25 According to the requirements of the Uniform Appraisal Dataset, an appraiser is required to rate a location as
a. N, B, or A
b. Good, Average, Fair, or Poor
c. satisfactory or unsatisfactory
d. L1 through L6
a. N, B, or A (Neutral, Beneficial, or Adverse)
8.26 Adjustments for physical characteristics could include all of the following items EXCEPT
a. busy street
b. room count
c. construction quality
d. design and appeal
a. busy street
8.27 True or False: Fannie Mae states that below-grade areas can be included in GLA if the area is heated and the quality of finish is sufficient.
a. True
b. False
b. False
8.28 True or False: In a residential appraisal, the comparable sales must always be located in the same market area as the subject.
a. True
b. False
b. False
Note: It is preferable that the comparables be located in the same market area as the subject, but it is not required. This could result in an appraiser making a location adjustment.
8.29 When calculating room and bathroom count in a residential property, how is a "three-quarter bath" typically counted?
a. as a full bath
b. as a half bath
c. as no bath
d. as part of the below-grade finished area
a. as a full bath
8.30 The biggest difference between real estate and other major investments is
a. real estate always appreciates in value
b. real estate is fixed in location
c. other types of investments do not generate income
d. other types of investments must be purcha
b. real estate is fixed in location
8.31 Gross building area (GBA) is used as a unit of measurement for
a. single family detached homes
b. condominium units
c. manufactured homes
d. 2-4 unit properties
d. 2-4 unit properties
8.32 True or False: Adjustments in the sales comparison approach for economic characteristics are typically only made for commercial or income-producing properties.
a. True
b. False
a. True
8.33 A comparable sale required the following adjustments: +8,000, -4,500, +5,000, -2,000, -1,000. What is the gross adjustment total?
a. $5,500
b. $13,500
c. $18,500
d. $20,500
d. $20,500
8.34 Which of these items is NOT required by Fannie Mae to be included as an exhibit in an appraisal report?
a. exterior photographs of the front, rear, and street of the subject property
b. an exterior building sketch of the improvements
c. a copy of the
c. a copy of the deed or legal description
8.35 A comparable sale required the following adjustments: +8,000, -4,500, +5,000, -2,000, -1,000. What is the net adjustment?
a. +4,500
b. +5,500
c. +8,500
d. +20,500
d. +5,500
8.36 Fannie Mae's guideline for net adjustments is _____% of the sale price of the comparable.
a. 10
b. 15
c. There is no set amount
d. 25
c. There is no set amount
8.37 An appraisal of which of these types of properties would NOT be reported using the Fannie Mae URAR form?
a. a unit in a condominium project
b. a unit in a planned unit development
c. a one-unit property with an accessory unit
d. a one-unit property
a. a unit in a condominium project
Note: The URAR form states "This report form is designed to report an appraisal of a one-unit property or a one-unit property with an accessory unit; including a unit in a planned unit development (PUD). This report form
8.38 "The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards" is the definition of
a. obsolescence
b. physical characteristics
c. expenditures made immediate
d. functional utility
8.39 The Fannie Mae URAR form is designed to report an appraisal of
a. a manufactured home
b. a one-unit property with accessory unit
c. a condominium unit
d. a unit in a cooperative project
b. a one-unit property with accessory unit
8.40 Which of these elements in the adjustment process does NOT apply primarily to commercial or income producing properties?
a. economic characteristics
b. expenditures made immediately after purchase
c. use/zoning
d. non-realty components of value
b. expenditures made immediately after purchase
8.41 A mortgage in which a party other than the borrower assumes payment in the event of default is a(n) _____________ mortgage.
a. insured
b. guaranteed
c. conventional
d. assumable
b. guaranteed
Note: That describes a guaranteed mortgage; such as a VA mortgage.
8.42 In your sales grid, you made adjustments of +$4,000, +$3,500, - $1,500, + $7,000, and - $2,000. How much is your net adjustment?
a. +$11,000
b. -$11,000
c. +$18,000
d. -$18,000
a. +$11,000
8.43 Which would NOT be a form of concurrent ownership?
a. tenancy in severalty
b. tenancy in common
c. joint tenancy
d. tenancy by the entirety
tenancy in severalty
8.44 Adjustments should be made when there are ____________ differences between the subject property and a comparable sale.
a. any
b. at least 2
c. significant and measurable
d. obvious
significant and measurable
8.45 USPAP requires a prior sales history of _______ year(s) for the __________.
a. one, subject property
b. three, subject property
c. one, subject and comparables
d. three, subject and comparables
three, subject property
8.46 If you are appraising a multi-unit property, where at least one unit is rented, the property rights appraised consist of a _______________.
a. leased fee estate
b. leasehold estate
c. divided estate
d. condominium interest
leased fee estate
8.47 Fannie Mae says that positive adjustments for sales or financing concessions
a. are acceptable
b. must be explained
c. are not acceptable
d. must be pro-rated
c. are not acceptable
Note: They expect any sales concessions to be a negative adjustment.
8.48 "An element of comparison in the sales comparison approach; comparable properties can be adjusted for differences in the motivations of either the buyer or a seller in a transaction, e.g., when the comparable transaction is not an arm's-length sale
b. conditions of sale
8.49 With real property, the value of the whole __________ the sum of the separate estates or parts.
a. is always equal to
b. is always less than
c. may be equal to, or less than
d. may be equal to, more than, or less than
d. may be equal to, more than, or less than
8.50 GLA includes ___________ but not____________.
a. covered porches, patios
b. above grade heated area, garages
c. finished basements, attics
d. below grade heated area, unfinished basements
b. above grade heated area, garages
8.51 According to Fannie Mae, all of these are unacceptable appraisal practices EXCEPT
a. not supporting adjustments in the sales comparison approach
b. selection and use of inappropriate comparable sales
c. use of comparables that are over six months old
c. use of comparables that are over six months old
8.52 A "point" is equal to _____% of a _______________.
a. 10, mortgage loan amount
b. 1, mortgage loan amount
c. 1, property sale price
d. 10, property sale price
b. 1, mortgage loan amount
8.53 Assume that a house needed a new roof and siding. A buyer has a contractor's estimate of $10,000 to install the roof and siding. An offer of $110,000 for the property was accepted. The work was done immediately after the closing and it wound up costi
c. $10,000
8.54 The third step in the life cycle of a market area is
a. revitalization
b. growth
c. decline
d. gentrification
c. decline
8.55 The first step in the life cycle of a market area is
a. revitalization
b. growth
c. decline
d. gentrification
b. growth
8.56 An appraiser uses a comparable sale that sold due to a divorce, and adjusts it because it is not an arms-length transaction. This is an example of a ___________ adjustment.
a. conditions of sale
b. market conditions
c. property rights conveyed
d. phy
a. conditions of sale
8.57 "The total adjustment to each comparable sale price calculated in absolute terms" is the definition of __________ adjustment.
a. net
b. gross
c. summed
d. absolute
b. gross
8.58 Fannie Mae says the appraiser must base his or her analysis and any adjustments to comparable sales on
a. predetermined dollar adjustments
b. standard formulas
c. personal opinions
d. market data
d. market data
8.59 All of the following are required exhibits for a Fannie Mae appraisal report EXCEPT
a. photographs of the subject property
b. photographs of the comparable sales
c. location map of the subject and comparables
d. a title page and letter of transmittal
d. a title page and letter of transmittal
8.60 A ___________ is a lump-sum payment to the lender that reduces the interest payments of the borrower.
a. concession
b. selldown
c. buydown
d. blanket
c. buydown
8.61 Market condition adjustments to comparable sales should always be calculated from the time of the _________ to the ____________.
a. closing, effective date of the appraisal
b. contract, effective date of the appraisal
c. closing, date of the appraisa
b. contract, effective date of the appraisal
8.62 Condos in your city sold for a median price of $195,320 twelve months ago and the median price of condos for the current month is $219,540. What is the percentage of change in market conditions?
a. 1.0%
b. 10.2%
c. 11.5%
d. 12.4%
d. 12.4%
8.63 If your net adjustments exceed _______% when using a URAR form, Fannie Mae requires an explanation.
a. 10%
b. No explanation is needed
c. 15%
d. 25%
b, No explanation is needed
8.64 "Divided or undivided rights in real estate that represent less than the whole" is the definition of
a. condominium
b. joint tenancy
c. easement
d. partial interest
d. partial interest
8.65 Which would NOT be an example of a sales or financing concession - when the seller
a. pays an interest rate buydown
b. holds a mortgage at a below market rate
c. pays a real estate commission
d. pays loan origination fees
c. pays a real estate commission
8.66 What type of comparison provides the BEST evidence for a market conditions adjustment?
a. sale and re-sale
b. cost-benefit analysis
c. group comparison
d. extraction
a. sale and re-sale
8.67 The first element in the sequence of adjustments is usually
a. physical characteristics
b. market conditions
c. property rights conveyed
d. location
c. property rights conveyed
8.68 A property sold for $200,000, there was a $20,000 down payment and the rest was in the form of a 30 year mortgage at 6% interest. The seller paid 3 points at the closing. How much was that?
a. $540
b. $3,000
c. $5,400
d. $6,000
c. $5,40
Amount paid based on points = Mortgage amount x Points as a percent
= $180,000 ($200,000 - $20,000) x 0.03
= $5,400
9.1 What are the two formulas that can be used to calculate the Income Capitalization Approach?
Value = Income / Rate
Value = Income X Multiplier
9.2 What is the formula used to calculate the Overall Capitalization Rate?
Ro = Io / Vo
Overall Rate = Overall Income/Overall Value
9.3 A subject property has a net operating income (NOI) of $80,000. A comparable sale sold for $525,000. The comparable NOI of $65,000 was verified as being calculated on the same basis as the subject.
PART 1: What is the capitalization rate (Ro)?
PART 2:
PART 1
Ro = I / V
Ro = $65,000 / $525,000
Ro = .1238 (or 12.38%)
PART 2
V = I / R
V = $80,000 / 0.1238 (or 12.38%)
V = $646,203 (or $646,000 rounded)
9.4 The formula for applying the income capitalization approach is
a. value = rate / income
b. value = income / rate
c. value = income + rate
d. value = rate - income + expenses
b. value = income / rate
9.5 When describing rates, what does the little "o" indicate in Ro?
a. operating
b. overhead
c. optimum
d. overall
d. overall
9.6 True or False: If a property is rented, its market rent is always the same as its contract rent.
a. True
b. False
b. False
9.7 A property has an NOI of $40,000 and the appropriate capitalization rate is 8%. What is the indicated value?
a. $32,000
b. $320,000
c. $500,000
d. not enough information to determine
Value = NOI/Capitalization Rate
Value = $40,000/0.08
Value = $500,000
9.8 Converting an estimate of a single year's expected income into an indication of value is
a. yield capitalization
b. direct capitalization
c. cost approach
d. adjustment process
b. direct capitalization
9.9 A property is currently rented for $1,200 per month, however market rent is only $1,000. The $200 difference between the contract rent and the market rent is
a. excess rent
b. deficit rent
c. percentage
d. an operating expense
a. excess rent
9.10 "Any rate used to convert income into value" is the definition of
a. interest rate
b. mortgage rate
c. capitalization rate
d. prime rate
c. capitalization rate
9.11 What is the formula to calculate Net Operating Income (NOI)?
Gross Annual Rental (Potential Gross Income, or PGI)
+ Other Income
- Vacancy/Credit Loss (V&C)
= Effective Gross Income (EGI)
- Operating Expenses (TOE)
= Net Operating Income (NOI)
9.12 If we subtract vacancy and collection loss from potential gross income, we get
a. effective gross income
b. total operating expenses
c. net operating income
d. pre-tax cash flow
a. effective gross income
9.13 Sources of "other income" for a rental property would include
a. rentals of habitable units
b. income from vending machines
c. cash rentals of units that the owner does not report to the IRS
d. money the owner saved by doing repairs and maintenance h
b. income from vending machines
9.14 The primary difference between direct capitalization and yield capitalization is
a. yield capitalization uses rates that are not extracted from the market
b. direct capitalization uses one year's income; yield capitalization uses several years income
b. direct capitalization uses one year's income; yield capitalization uses several years income
9.15 If an apartment building is operating at only 50% occupancy, this should mean that __________ expenses would be lower.
a. fixed
b. variable
c. all
d. no
b. variable
9.16 Which of these would be a fixed expense?
a. maintenance
b. management fee
c. property taxes
d. utilities
c. property taxes
9.17 Which type of expenses do not vary with the occupancy of the property?
a. variable expenses
b. reserves for replacement
c. fixed expenses
c. fixed expenses
9.18 Which of these would be considered an operating expense?
a. financing costs
b. management fee
c. depreciation
d. income taxes
b. management fee
9.19 "The amount by which market rent exceeds contract rent at the time of the appraisal" is the definition of _____________ rent.
a. excess
b. deficit
c. effective
d. percentage
b. deficit
9.20 "The income due under existing leases" is the definition of _______________ rent.
a. contract
b. market
c. effective
d. scheduled
d. scheduled
Note: Scheduled rent is defined as "Income due under existing leases." This is very similar to contract rent except that it refers to the rent due for the entire property not just in one lease. Contract rent refers to the rent in a specific i
9.21 "The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income, but before mortgage debt service and book depreciation are deducted" is the definition of
a. capital
b. effective gross income
c
d. net operating income
9.22 "An income rate for a total real property interest that reflects the relationship between a single year's net operating income expectancy and the total property price or value" is the definition of a(an) ______________ rate.
a. mortgage
b. overall ca
b. overall capitalization
9.23 A management fee usually is based on a percentage of the _________ income.
a. gross
b. net
c. net operating
d. taxable
a. gross
9.24 _______________ income is "the anticipated income from all operations of the real property after an allowance is made for vacancy and collection losses."
a. Effective gross
b. Net operating
c. Potential gross
d. Operating
a. Effective gross
9.25 "An amount paid for the use of land, improvements or a capital good" is the definition of
a. rent
b. contract rent
c. market rent
d. scheduled rent
a. rent
9.26 "A method used to convert future benefits into present value by discounting each future benefit at an appropriate yield rate or by developing an overall rate that explicitly reflects the investment's income pattern, value change and yield rate" is th
c. yield capitalization
9.27 "The total income attributable to real property at full occupancy before vacancy and operating expenses are deducted " is the definition of
a. effective gross income
b. net operating income
c. potential gross income
d. operating income
c. potential gross income
9.28 All of the following are variable expenses, EXCEPT for
a. payroll
b. insurance
c. utilities
d. management
b. insurance
9.29 "The amount by which contract rent exceeds market rent at the time of the appraisal" is the definition of ________________ rent.
a. excess
b. deficit
c. effective
d. index
a. excess
9.30 ____________ expenses are "operating expenses that generally do not vary with occupancy."
a. Fixed
b. Variable
c. Unvarying
d. Insurance
a. Fixed
9.31 A comparable sale sold for $940,000. It had a verified NOI of $122,500 that was calculated on the same basis as the subject. The capitalization rate (Ro) from the comparable sale is estimated as
a. .08
b. 0.11
c. 0.13
d. 0.15
c. 0.13
Value = Net Operating Income/Capitalization rate
Capitalization rate = Net Operating Income/Value
Capitalization rate = $122,500/$940,000
Capitalization rate = 0.13
9.32 "A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step..." is the definition of
a. capitalization
b. direct capitalization
c. yield Capitalization
d. discount capitalization
b. direct capitalization
9.33 A 32 unit apartment building has 12 units rented at $900 per month, 12 units rented at $1,100, and 8 units rented at $1,300 per month. What is its gross income?
a. $34,400
b. $387,200
c. $412,800
d. $456,900
a. $412,800
Gross Income Per Month
12 x $900 = $10,800
12 x $1,100 = $13,200
8 x $1,300 = $10,400
Total = $34,400
Gross Income Per Year
12 x $34,400 = $412,800
9.34 Typical replacement allowance items would NOT include
a. roof
b. plumbing repairs
c. appliances
d. boiler
b. plumbing repairs
9.35 Income can be capitalized into value by dividing by a ________ or multiplying by a ______________.
a. rate, multiplier
b. multiplier, rate
c. rate, determinant
d. factor, equalizer
a. rate, multiplier
9.36 A 12 unit apartment building has 6 units rented at $900 per month and 6 units rented at $1,050 per month. What is its gross income?
a. $1,950
b. $23,400
c. $86,500
d. $140,400
d. $140,400
Gross Income Per Month
6 x $900 = $5,400
6 x $1,050 = $6,300
Total = $11,700
Gross Income Per Year
12 x $11,700 = $140,400
9.37 With yield capitalization, the overall value is estimated by adding together the _______________ and the _______________of the reversion of capital.
a. present worth of the income, future worth
b. future worth of the income, future worth
c. present w
c. present worth of the income, present worth
9.38 "The periodic expenditures necessary to maintain the real property and continue production of the effective gross income, assuming prudent and competent management" is the definition of _______________ expenses.
a. fixed
b. variable
c. net operating
d. operating
10.1 Sale Sale Price Monthly Rent . GRM
1 $98,500 $750
2 $103,000 $800
3 $91,750 . $725
4 $94,000 $700
5 $100,000 $775
6 $106,000 $800
7 $92,500 $725
1. GRM = 131.3
2. GRM = 128.8
3. GRM = 126.6
4. GRM = 134.3
5. GRM = 129.0
6. GRM = 132.5
7. GRM = 127.6
10.2 GRM assumes there is __________ relationship between rental income and value.
a. no
b. an inverse
c. a direct linear
d. an unlikely
c. a direct linear
10.3 Properties with more than _____ living units are considered to be non-residential properties.
a. 1
b. 2
c. 4
d. 10
c. 4
10.4 True or False: An appraiser would typically not value a 50-unit apartment complex with a gross rent multiplier (GRM).
a. True
b. False
a. True
10.5 In order for an appraiser to appraise a 5-unit property for a federally related transaction, he/she must be a
a. certified residential appraiser only
b. certified general appraiser only
c. certified residential or certified general appraiser
d. state
b. certified general appraiser only
10.6 A property sold for $74,000 and it was rented for $675 at the time of sale. What is the indicated GRM?
a. 107.2
b. 109.6
c. 111.8
d. 114.0
b. 109.6
GRM = Value/Rent
GRM = $74,000/$675
GRM = 109.6
10.7 How is a GRM derived?
a. dividing the adjusted sale price by the annual net operating income
b. dividing sale price by gross monthly unfurnished market rent
c. dividing the annual income by the sale price
d. multiplying sale price by gross monthly un
b. dividing sale price by gross monthly unfurnished market rent
10.8 In order for a comparable to be useful in extracting a GRM, it must have been __________ at the time it __________.
a. new, rented
b. rented, sold
c. vacant, purchased
d. rented, built
b. rented, sold
10.9 How might an appraiser obtain expense ratio information for income properties?
a. reviewing the appraiser's files
b. reading published studies
c. interviewing market participants
d. all of these
d. all of these
10.10 True or False: New single-unit homes are frequently purchased as rental investment properties.
a. True
b. False
b. False
10.11 Why does an appraiser need as much information as he or she can get about rental comparables?
a. the premise of this question is false; an appraiser does not need this information
b. to ensure that an appropriate discount rate is used
c. because thi
d. to make sure that accurate and appropriate comparisons are made
10.12 True or False: Expense ratio information is easier to obtain on single-unit residential properties than commercial properties.
a. True
b. False
b. False
10.13 True or False: GRM analysis should not be used in areas with rent controls.
a. True
b. False
a. True
10.14 Comparable Sales Price Monthly Rental GRM
1 $68,250 $650.00
2 $70,200 $675.00
3 $64,500 . $625.00
4 $74,200 $700.00
5 $71,750 $650.00
6 $68,600 $640.00
7 $62,400 $600.00
8 $71,555 $675.00
9 $76,400 . $725.00
10 $76,500 $750.00
PART 1: Calculate the
PART 1
1. GRM = 105.0
2. GRM = 104.0
3. GRM = 103.2
4. GRM = 106.0
5. GRM = 110.4
6. GRM = 107.2
7. GRM = 104.0
8. GRM = 106.0
9. GRM = 105.4
10. GRM = 102.0
PART 2
110.4 - 102.0 = 8.4
PART 3
Mean = Sum of all GRMs/10
Mean = 1,053.2/10
Mean = 105.3
PART 4
10.15 The Fannie Mae 1007 form is intended to
a. demonstrate support for the appraiser's selection of GRM
b. estimate the market rent of the subject property
c. estimate the market value of the subject property
d. help the appraiser's client understand me
b. estimate the market rent of the subject property
10.16 The primary difference between GRM and GIM is that
a. GRM uses monthly rent, while GIM uses annual income
b. GRM is used on larger properties, while GIM is used on smaller properties
c. GRM uses gross income, while GIM uses net income
d. GRM is used
a. GRM uses monthly rent, while GIM uses annual income
10.17 When developing an appraisal, you calculate the following GRMs from comparable properties: 94.3, 90.1, 95.6, 109.2, 84.5, 100.7, 99.9. What is the median of the GRMs?
a. 95.6
b. 96.3
c. 99.9
d. 94.3
a. 95.6
10.18 The gross monthly unfurnished rent of the subject property is $760. The appraiser reconciles the GRM at 115. What is the indicated value of the subject property by income approach?
a. $66,000
b. $95,500
c. $87,400
d. not enough information to determ
c. $87,400
Value = Income x GRM
Value = 760 x 115
Value = $87,400
10.19 When developing an appraisal, you calculate the following GRMs from comparable properties: 94.3, 90.1, 95.6, 109.2, 84.5, 100.7, 99.9. What is the mode of the GRMs?
a. 96.3
b. 99.9
c. 95.6
d. there is no mode
d. there is no mode
10.20 True or False: Contract rent and market rent are two different concepts.
a. True
b. False
a. True
10.21 A single-unit property has a monthly unfurnished market rent of $1,050. It sold for $98,000. What is the indicated GRM?
a. 93.3
b. 96.6
c. 100.7
d. 107
a. 93.3
Value = Income x GRM
$98,000 = $1,050 x GRM
GRM = $98,000/$1,050
GRM = 93.3
10.22 "The relationship or ratio between the sale price or value of a property and its periodic gross rental income" is the definition of
a. multiplier
b. discount rate
c. gross rent multiplier
d. capitalization rate
c. gross rent multiplier
10.23 GRM analysis is based on the assumption that there is a __________ relationship between income and ________.
a. direct, expenses
b. direct, value
c. inverse, value
d. indirect, expenses
b. direct, value
10.24 Here are five comparable sales. Sale price /Monthly rent: 1. $142,000/$1,025. 2. $133,000/$1,000. 3. $128,500/$975 4. $145,000/$1,050. 5. $135,000/$1,000. What is the mean of the GRMs?
a. 130.6
b. 133.2
c. 135.3
d. 136.4
c. 135.3
1. GRM = 138.5
2. GRM = 133.0
3. GRM = 131.8
4. GRM = 138.1
5. GRM = 135.0
Mean of GRMs = 676.4/5 = 135.3
10.25 Which is a positional average that is not affected by the size of extreme values?
a. mean
b. median
c. array
d. range
b. median
10.26 Here are six comparable sales. Sale price/Monthly rent: 1. $98,000/$800. 2. $102,000 /$850. 3. $89,500/$750. 4. $91,600/$750. 5. $87,500/$750. 6. $105,000/$875. What is the median of the GRMs?
a. 118.0
b. 118.2
c. 119.4
d. 120.0
d. 120.0
1. GRM = 122.5
2. GRM = 120.0
3. GRM = 119.3
4. GRM = 122.1
5. GRM = 116.7
6. GRM = 120.0
Median of GRMs = 120.0
10.27 A single-family residential property sells for $142,000. At the time of sale it is rented for $1,200. What is the GRM?
a. 118.3
b. 121.4
c. 125.5
d. 129.1
a. 118.3
Value = Income x GRM
$142,000 = $1,200 x GRM
GRM = $142,000/$1,200
GRM = 118.3
10.28 An apartment building had 12 units rented for $1,400 per month and 20 units rented for $1,600 per month. It sold for $3,000,000. What was the GIM?
a. 4.9
b. 5.1
c. 5.6
d. 6.2
b. 5.1
INCOME PER MONTH
12 units x $1,400 = 16,800
20 units x $1,600 = 32,000
Total = $48,800
INCOME PER YEAR
$48,800 per month x 12 months/year
= $585,600 per year
VALUE
$3,000,000
Value = Annual Income x GIM
$3,000,000 = $585,600 x GIM
GIM = $3,000,000/
10.29 The Fannie Mae Single Family Comparable Rent Schedule is Form
a. 1004
b. 1007
c. 1020
d. 1025
b. 1007
10.30 _______________ appraisers can appraise a 15 unit residential property without regard to value or complexity.
a. only Certified General
b. Licensed Residential
c. only Certified Residential
d. both Certified Residential and Certified General
a. only Certified General
10.31 A property sells for $95,750. At the time of sale it is rented for $975. What is the GRM?
a. 91.7
b. 96.6
c. 98.2
d. 101.5
c. 98.2
Value = Monthly Income x GRM
$95,750 = $975 x GRM
GRM = $95,750/$975
GRM = 98.2
10.32 When arriving at a value indication utilizing a GRM, one component is the _______________ rent of the subject property.
a. gross contract
b. gross annual rent
c. net monthly
d. gross monthly unfurnished market
gross monthly unfurnished market
10.33 "The relationship or ratio between the sale price or value of a property and its gross annual rental income" is the definition of
a. gross income multiplier
b. gross rent multiplier
c. mortgage rate
d. discount rate
a. gross income multiplier
The relationship or ratio between the sale price or value of a property and its gross annual rental income" is the definition of
gross income multiplier
gross rent multiplier
mortgage rate
discount rate
a. gross income multiplier
10.34 "The sum of values for a variable in a sample or population divided by the number of items in the sample or population" is the definition of
a. range
b. mean
c. median
d. mode
b. mean
10.35 To appraise a non-complex 6-unit property for a federally-related transaction, you need to be a _______________
a. Licensed Residential Appraiser
b. Licensed Residential Appraiser with at least two years' experience
c. Certified Residential Appraise
d. Certified General Appraiser
10.36 Which statement is generally true in a market with rent control?
a. Rents are subject to more rapid fluctuations than sale prices.
b. Sale Prices are subject to more rapid fluctuations than rent.
c. Rents and sale prices usually move in opposite dir
b. Sale Prices are subject to more rapid fluctuations than rent.
10.37 Which can be affected by extremes at either end of the distribution?
a. mean
b. median
c. mode
d. range
a. mean
10.39 "A measure of central tendency identified as the middle value in an ordered array of numerical values ..." is the definition of
a. range
b. mean
c. median
d. mode
c. median
10.38 When the property being appraised is a one-unit property that will be used as an investment property, Fannie Mae requires that the appraiser must prepare a
a. market analysis
b. Form 1004 only
c. Form 1004 and Form 1007
d. Form 1025
c. Form 1004 and Form 1007
10.40 An expense ratio is the ratio of
a. expenses to cost
b. expenses to income
c. rent to expenses
d. expenses to utilities
b. expenses to income
10.41 Residential properties are considered to be ________ unit(s).
a. one
b. one and two
c. one, two, and three
d. one to four
d. one to four
10.42 "A measure of central tendency consisting of the numerical value or categorical characteristic that occurs most frequently in a sample or population" is the definition of
a. mean
b. median
c. mode
d. range
c. mode
10.43 Here are three comparable sales. Sale 1 with a Sale price of $127,000 and a monthly rent of $950. Sale 2 with a sale price of $132,000 and a monthly rent of $1025. Sale 3 with a sale price of $122,700 and a monthly rent of $1,000. What is the range
d. 11
1. GRM = $127,000/$950 = 133.7
2. GRM = $132,000/$1,025 = 128.8
3. GRM = $122,700/$1,000 = 122.7
Range of GRMs = 133.7 - 122.7 = 11
10.44 A gross income multiplier is most likely to be used for _______ property units.
a. only one
b. one or two
c. two to four
d. more than four
d. more than four
10.46 A single-family residential property sells for $142,000. At the time of sale it is rented for $1,200. What is the GRM?
a. 118.3
b. 121.4
c. 125.5
d. 129.1
a. 118.3
GRM = Value/Monthly Rental Income
GRM = $142,000/$1,200
GRM = 118.3
10.45 GRMs are derived by dividing the _______________ by the _______________ at the time of sale.
a. monthly rent, sale price
b. sale price, gross monthly unfurnished market rent
c. contract price, gross annual income
d. potential gross income, operating
b. sale price, gross monthly unfurnished market rent
10.47 "In statistics, the difference between the highest and lowest values in a set of numbers" is the definition of
a. range
b. spread
c. distribution
d. array
a. range
11.1 True or False: The indicated values in the sales comparison approach should ideally be within 10% of each other.
a. True
b. False
b. False
11.2 The process of reconciliation
a. is not important in a real property appraisal
b. only applies to the final value conclusion
c. means the appraiser selects a value opinion that is higher than the pending sale price
d. occurs in several places through
d. occurs in several places throughout the appraisal process
11.3 True or False: Good appraisal practice dictates brief boilerplate statements in the reconciliation section of an appraisal report.
a. True
b. False
b. False
11.4 If an appraiser uses three comparable sales in the sales comparison approach
a. this should be enough to arrive at a credible value conclusion in all appraisals
b. statistical analysis will be of little use
c. the appraiser needs to calculate the mea
b. statistical analysis will be of little use
11.5 USPAP says that an appraiser must correctly complete research and analyses necessary to produce a ________ appraisal.
a. credible
b. good
c. cost-effective
d. all of these
a. credible
11.6 True or False: Reconciliation involves taking the indicated values of the comparable sales and averaging them.
a. True
b. False
b. False
11.7 In reconciliation, an appraiser needs to address both the ________ and the _________ of the data.
a. quality, quantity
b. amount, quantity
c. age, size
d. accuracy, portability
a. quality, quantity
11.8 Which of these is NOT a conclusion in an appraisal report that may require an appraiser to employ a reconciliation process?
a. GRM
b. site value
c. sale price
d. market rent
c. sale price
11.9 Which of these final value conclusions is MOST appropriately rounded?
a. $889,500
b. $1,211,000
c. $44,500
d. $87,545
c. $44,500
11.10 "The process of reducing a range of value indications into an appropriate conclusion" is the definition of
a. review
b. reconciliation
c. gross rent multiplier
d. data analysis
b. reconciliation
11.11 When reconciling the sales comparison approach, an appraiser should pay closer attention to
a. adjustments made in the lower part of the grid
b. adjustments made in the upper part of the grid
c. adjustments that are small and barely noticeable
d. ad
b. adjustments made in the upper part of the grid
11.12 True or False: A lengthy appraisal report is always more credible than a shorter one.
a. True
b. False
b. False
11.13 True or False: The reconciliation process means simply proofreading the report for typos and math errors.
a. True
b. False
b. False
11.14 Under USPAP, an appraisal may be expressed numerically as
a. a range of numbers
b. a specific amount
c. a relationship to a benchmark
d. any of these
d. any of these
11.16 One of the weaknesses of spellcheck is
a. it only works for one-syllable words
b. it will not catch misused words
c. most appraisal reports are not written on computers
d. most appraisal software programs don't have spell-check
b. it will not catch misused words
11.15 True or False: USPAP requires appraisers to be perfect when providing appraisal services.
a. True
b. False
b. False
11.17 An appraiser discovers that the indicated values of her comparable sales, after adjustment, have a range of over 20%. What should the appraiser do?
a. revise the indications so they all come out to the same number
b. revise the indications so that t
d. leave the indications as they are and explain it
FE.1 "The age of property that is based on the amount of observed deterioration and obsolescence it has sustained" is the definition of ____________ age.
a. actual
b. historic
c. chronological
d. effective
d. effective
11.18 Which of these is a reason why appraisers typically use at least three comparable sales in the sales comparison approach?
a. USPAP requires a minimum of three sales
b. if one sale is a bad indicator, it will show up in contrast with the other sales
b. if one sale is a bad indicator, it will show up in contrast with the other sales
FE.2 Price per room is a common unit of comparison when appraising
a. 2-4 unit residential properties
b. offices
c. one unit residences
d. retail stores
a. 2-4 unit residential properties
FE.4 "The process of valuing a universe of properties as of a given date using standard methodology, employing common data, and allowing for statistical testing" is the definition of
a. assessment rolls
b. statistical appraisal
c. universal appraisal
d. m
d. mass appraisal
FE.3 You calculate the following gross rent multipliers for comparable properties: 121.2, 105.3, 111.2, 150.1, 108.3, 105.3, 109.8, 108.8. What is the mean of the GRMs?
a. 105.3
b. 109.3
c. 115.0
d. 117.1
c. 115.0
Mean = Sum/#
Mean = 920/8
Mean = 115.0
FE.5 Extensive research on current construction trends and figures is conducted by
a. HUD
b. NAR
c. NAHB
d. local MLS systems
b. NAHB
FE.6 The method that treats the land value as a percentage of the total value is the __________ method.
a. sales comparison
b. allocation
c. abstraction
d. land residual
b. allocation
FE.7 Segregated cost method is another name for the _________ method.
a. square foot
b. quantity survey
c. index
d. unit-in-place
d. unit-in-place
Note: That is what it is called by Marshall & Swift.
FE.8 Each written appraisal report must contain the date
a. of the report and the effective date of the appraisal
b. of the inspection only
c. of the report only
d. that the client requests
a. of the report and the effective date of the appraisal
FE.9 Early ductless heating systems were called
a. geothermal systems
b. heat pumps
c. gravity systems
d. active solar systems
c. gravity systems
FE.11 "Expenditures or allowances for items other than labor and materials that are necessary for construction, but are not typically part of the construction contract" is the definition of
a. direct costs
b. entrepreneurial incentive
c. indirect costs
d.
c. indirect costs
FE.10 In the sales comparison approach, sales data on __________ sales should be collected.
a. one or two
b. no more than two
c. exactly three
d. at least three
d. at least three
FE.12 Which type of depreciation occurs off the site?
a. curable
b. short-lived
c. physical
d. external
d. external
FE.13 Fannie Mae says the appraiser must base his or her analysis and any adjustments to comparable sales on
a. published tables of adjustments
b. standard formulas
c. personal opinions
d. market data
d. market data
FE.14 Which site valuation methods should only be utilized when the subject property is income-producing by nature?
a. land residual and ground rent capitalization
b. land residual and subdivision development
c. ground rent capitalization and subdivision
a. land residual and ground rent capitalization
FE.16 All of the following could be sources of specific data EXCEPT
a. U.S. Census Bureau
b. Tax maps
c. Deeds
d. Assessor's records
a. U.S. Census Bureau
FE.17 "The tenant's possessory interest created by a lease" is the definition of _______________.
a. leased fee interest
b. leasehold interest
c. fee simple
d. partial interest
b. leasehold interest
FE.18 "Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics" is the definition of
a. specialized data
b. specific data
c. general data
d. neighborhood data
b. specific data
FE.15 __________ occurs within a property; while _________occurs off the site.
a. Physical deterioration, functional obsolescence
b. Functional obsolescence, physical deterioration
c. Physical deterioration and functional obsolescence, external obsolescen
c. Physical deterioration and functional obsolescence, external obsolescence
FE.19 A short-lived item is a building component with an ___________ life that is shorter than the ___________ life of the entire structure.
a. economic life, long-lived
b. expected remaining economic, remaining economic
c. useful, remaining physical
d. a
b. expected remaining economic, remaining economic
FE.21 "The total period a building lasts or is expected to last" is the definition of _________ life.
a. useful
b. economic
c. real
d. physical
d. physical
Note: That defines physical life - the total life span.
FE.20 The ________ approach is particularly applicable in the appraisal of special purpose properties.
a. cost
b. sales comparison
c. income capitalization
d. modified replacement
a. cost
FE.22 Curbs, gutters and grading are examples of
a. site
b. site improvements
c. personal property
d. temporary improvements
b. site improvements
FE.23 GRMs are derived by dividing the __________ by the property's ___________ at the time of sale.
a. market rent, contract price
b. sale price, gross monthly unfurnished market rent
c. listing price, gross monthly market rent
d. sale price, gross annua
b. sale price, gross monthly unfurnished market rent
FE.24 Modular homes are constructed to meet __________ requirements.
a. HUD
b. State and Local
c. ANSI
d. ICC
b. State and Local
FE.25 A 5 year old water heater with an expected life of 12 years and a replacement cost of $825 will have experienced depreciation of $__________.
a. 318.50
b. 344.03
c. 364.00
d. 396.75
b. 344.03
% depreciation = age/total economic life
% depreciation = 5/12
% depreciation = 0.417
% depreciation = 41.7%
$825 X 0.417 = $344.03
FE.27 "A method of estimating land value in which the depreciated cost of the improvements on the improved property is calculated and deducted from the total sale price to arrive at an estimated sale price for the land" is the definition of the __________
d. extraction
FE.26 If a comparable property sells with atypical financing, we may have to make an adjustment for ___________.
a. market conditions
b. conditions of sale
c. expenditures made immediately after purchase
d. cash equivalency
d. cash equivalency
Note: At that point, the appraiser has two choices. Either discard the sale as being atypical, or use it and make an adjustment for financing terms.
FE.28 Condos in your market area sold for a median price of $195,320 twelve months ago and the median price of condos for the current month is $219,540. What is the percentage of change in market conditions?
a. 1.0%
b. 10.2%
c. 11.5%
d. 12.4%
d. 12.4%
% change = final price/initial price
% change = $219,540/$195,320
% change = 1.124
% change = 12.4% (increase)
FE.29 EIFS is also known as
a. strawbale
b. Hardiplank
c. sandwich panels
d. synthetic stucco
d. synthetic stucco
FE.31 When appraising a 2-4 unit residential property, an appraiser would measure and use _______________ area.
a. buildable
b. gross building
c. gross living
d. net leasable
b. gross building
FE.30 A home sells in January for $240,000 and sells again in November for $252,000. When the home resold it had not been improved at all. What is the indicated adjustment for change in market conditions, per month?
a. 0.05%
b. 0.5%
c. 2.5%
d. 5%
b. 0.5%
% change = difference/initial value
% change = $252,000 - $240,000/$240,000
% change = $12,000/$240,000
% change = 0.05
= 5.00% over the course of 10 months
= 5.0%/10 months
= 0.5% per month
FE.32 A house has a total cost new of $212,340. It is 12 years old and has an estimated remaining economic life of 38 years. The cost to cure deferred maintenance items is $670. Short lived items Cost is $20,000 and depreciation has been identified totali
d. $46,000
PART 1
12 years old + 38 years "remaining" = 50 years TOTAL economic life.
PART 2
Determine Cost of Long-lived Items by subtracting deferred maintenance and short lived items.
Cost from total replacement cost:
$212,340 - $670 - $20,000 = $191,6
FE.34 Depreciation is defined as "a loss in property value from _________. "
a. physical causes
b. causes outside the property
c. causes within the property
d. any cause
d. any cause
FE.33 You examine a construction contract to build a 2,448 square foot house and the total cost is $197,450. What was the cost per square foot?
a. $78.42
b. $80.66
c. $84.55
d. $86.14
b. $80.66
$197,450/2,448 SF
= $80.66 per SF
FE.35 The most complex method of site valuation is the _______________ method.
a. allocation
b. extraction
c. sales comparison
d. subdivision development
d. subdivision development
Note: This is the most complex and involves discounted cash flow analysis.
FE.36 "The actual or anticipated net income that remains after all operating expenses are deducted from effective gross income but before mortgage debt service and book depreciation are deducted" is the definition of
a. capital
b. effective gross income
c
d. net operating income
FE.37 A property contains 3.2 acres and is worth: A. $155,000 as single home site; B. $75,000 per unit as a site for a duplex; or C. $50,000 per acre as a retail site. All uses are physically possible, economically feasible and legally permitted. Which is
C. retail site
A. $155,000
B. $75,000 x 2 = $150,000
C. $50,000 x 3.2 acres = $160,000
FE.39 Fannie Mae requires a single-unit residential appraisal report to include photographs of
a. the subject property only
b. the subject property and the comparable sales
c. the comparable sales only
d. the subject property and nearby schools and employ
b. the subject property and the comparable sales
FE,38 When the property being appraised is a one-family property that will be used as an investment property, Fannie Mae requires that the appraiser must prepare a ______________.
a. comparative market analysis
b. Form 1004 only
c. Form 1004 and Form 1007
c. Form 1004 and Form 1007
FE.40 Footings should be ________ as wide as the ____________.
a. at least, foundation wall
b. twice, slab is deep
c. twice, foundation wall
d. three times, sill plate
c. twice, foundation wall
FE.41 What is the most common type of framing currently being used in new homes?
a. platform frame
b. balloon frame
c. log frame
d. post and beam
a. platform frame
FE.42 The most common type of framing in residential construction today is
a. balloon frame
b. post and beam
c. platform frame
d. modular
c. platform frame
FE.43 Property that fronts on a lake is usually valued on a basis of price per
a. acre
b. front foot
c. fish or animal unit
d. buildable unit
b. front foot
FE.44 A building was constructed in July 2000 for $654,200. The cost index at that time was 138.5. The current cost index is 221.8. What is the indicated reproduction cost of the building today?
a. $1,054,868
b. $1,098,253
c. $1,118,800
d. $1,046,720
d. $1,046,720
(221.8 - 138.5)/138.5 = 0.;60
$654,200 x 0.60 = $392,520
$654,20 + $392,520 = $1,046,720
FE.45 Which cost estimating method is the most detailed and time-consuming to develop?
a, comparative-unit
b. quantity survey
c. unit-in-place
d. index
b. quantity survey
FE.46 An example of a special purpose property would be a(n)
a, log home
b. 8,000 square foot residence
c. 5,000 acre ranch
d. school building
d. school building
FE.47 A management fee usually is based on a percentage of the _________ income.
a. gross
b. reserve
c. net operating
d. after-tax
a. gross
FE.48 Construction materials and workers' wages are examples of __________costs.
a. direct
b. indirect
c. reproduction
d. replacement
a. direct
FE.49 Materials that transfer energy quickly are called _______________.
a. transferors
b. insulators
c. ventilators
d. conductors
d. conductors
FE.50 A ___________ home has a permanent steel chassis, wheels and axles.
a. manufactured
b. modular
c. pre-cut
d. panelized
a. manufactured
FE.52 Which entity produces the most commonly-used land appraisal report form?
a. Fannie Mae
b. HUD/FHA
c. VA
d. it is a generic form
d. it is a generic form
Note: It is a generic form with no sponsor.
FE.51 When developing an appraisal, you calculate the following GRMs for comparable properties: 94.3, 90.1, 95.6, 109.2, 84.5, 100.7, 99.9. What is the mode of the GRMs?
a. 96.3
b. 95.6
c. 94.3
d. there is no mode
d. there is no mode
FE.53 You calculate the following gross rent multipliers for comparable properties: 121.2, 105.3, 111.2, 150.1, 108.3, 105.3, 109.8, 108.8. What is the median of the GRMs?
a. 105.3
b. 109.3
c. 115
d. there is no median
b. 109.3
105.3, 105.3, 108.3, 108.8, 109.8, 111.2, 121.2, 150.1
(108.8 + 109.8)/2 = 109.3
FE.54 Which type of valuation analysis would typically NOT include a separate site valuation?
a. gross rent multiplier
b. cost approach
c. highest and best use analysis
d. taxes and assessment
a. gross rent multiplier
FE.55 A _______________ home is built in accordance with the HUD Code.
a. panelized
b. modular
c. stick-built
d. manufactured
d. manufactured
FE.56 A property sold for $250,000. The reproduction cost of the building was $380,000 and it was 60% depreciated. By extraction, what is the value of the land?
a. $50,000
b. $98,000
c. $125,000
d. $152,000
b. $98,000
Building depreciation:
$380,000 x 0.60 = $228,000
Building Value
$380,000
- $228,000
= $152,000
Land Value = Property Value - Building Value
Land Value = $250,000-$152,000
Land Value = $98,000
FE.57 A house cost $295,000 to build new. It is 5 years old and has sustained a total of 8% depreciation. It sits on a lot worth $45,000. What is its value by the cost approach?
a. $297,200
b. $316,400
c. $318,500
d. $340,000
c. $316,400
Building depreciation:
$295,000 x 0.08 = 23,600
Building Value
295,000
- 23,600
= $271,400
Property Value
= Building Value + land Value
= $271,400 + $45,000
= $316,400
FE.58 Footings need to be _______________ below average frost penetration levels.
a. exactly 6 inches
b. no more than 9 inches
c. at least 12 inches
d. at least 36 inches
c. at least 12 inches
FE.59 A property sold for $2,350,000. The net operating income was verified as $294,640. The capitalization rate indicated by sale is ____%.
a. 11.4
b. 12.5
c. 12.9
d. 13.2
b. 12.5
Value = Income/Capitalization rate
Capitalization Rate = Income/Value
Capitalization Rate = $294,640/$2,350,000
Capitalization Rate = 0.12537
Capitalization Rate = 12.5%
FE.60 In most residential appraisals, the appraiser values
a. site
b. land
c. both site and land
d. improvements only
a. site