A comparative market analysis (CMA) must conform to the Uniform Standards of Professional Appraisal Practice (USPAP).
The statement is false. An appraisal report, not a CMA, must conform to the USPAP. A comparative market analysis (CMA) is an informal estimate of market value performed by a real estate licensee for the seller to assist in arriving at an appropriate listi
If an appraisal report involves a federally related transaction, it must be prepared by a state-certified or licensed appraiser.
The statement is true. Appraisal reports involving a federally related transaction must be prepared by a state-certified or licensed appraiser, unless the real estate licensee also holds such certification or license. Federally related transactions includ
The definition of market value assumes that the terms of sale are in cash in U.S. dollars or in comparable financial arrangements.
The statement is true. The definition of market value assumes that (1) market value applies to a specified date and may change with the passage of time; (2) the seller is able to convey a marketable title; (3) buyer and seller are typically motivated, and
Cost can be defined as the amount of money for which a good is actually sold.
The statement is false. Cost is the total expenditure required to bring a new improvement into existence plus the cost of the land. Price refers to the amount of money (or its equivalent) for which a good is actually sold.
If a comparable property is superior to the subject property with regard to size, a downward adjustment is made to the sale price of the comparable.
The statement is true. If a comparable property is superior on a given feature, a downward adjustment is made to the comparable property. Remember: Comp Better = Subtract (CBS).
Chronological age is used in the lump-sum age-life method of calculating accrued depreciation.
The statement is false. The lump-sum age-life method is based on a ratio of a property's effective age to its economic life. Effective age is the age indicated by a structure's condition and utility.
Which type of cost is calculated using similar, but NOT identical, building materials, resulting in equal utility as compared with the subject property?
The answer is replacement. Replacement cost is the amount of money required to replace a structure having the same use and functional utility as the subject property but using modern, available, or updated materials.
Using income capitalization, what is the result of holding the capitalization rate constant and increasing the net operating income?
The answer is present value increases. If the net income goes up and the capitalization rate remains constant, the present value will increase.
An appraiser is calculating the reproduction cost new of a home using the comparative square-foot method. The appraiser measured the exterior dimensions of the home, which were 30 feet by 55 feet, plus a detached garage measuring 22 feet by 24 feet. The a
The answer is $179,949. The solution is 30 feet � 55 feet = 1,650 square feet living area � $90.50 = $149,325; 22 feet � 24 feet = 528 square feet garage area � $58.00 = $30,624; $149,325 + $30,624 = $179,949 reproduction cost new.
Which principle states that an informed purchaser will NOT pay more for real estate than the cost of acquiring an equally desirable alternative property?
The answer is substitution. The principle of substitution means that a prudent buyer or investor will pay no more for a property than the cost of acquiring, through purchase or construction, an equally desirable alternative property.
An income-producing property has a potential annual gross income of $98,500. Vacancy and collection losses are estimated at 10% of potential gross income. Expenses are estimated at $45,000. The estimated value of the property is $350,000. What is the capi
The answer is 12.47%. The solution is $98,500 PGI � .10 rate = $9,850 vacancy and collection loss; $98,500 - $9,850 = $88,650 EGI; $88,650 - $45,000 expenses = $43,650 NOI; NOI � value = rate; $43,650 � $350,000 value = .1247 or 12.47% cap rate.
An income-producing property has a projected effective gross income of $65,000. Expenses are estimated at 20% of effective gross income. An appraiser has determined that an appropriate capitalization rate is 8%. What is the estimated market value of this
The answer is $650,000. The solution is $65,000 EGI � .20 rate = $13,000 expenses; $65,000 - $13,000 = $52,000 NOI; NOI � Rate = Value; $52,000 � .08 cap rate = $650,000 value.
A home has 2,000 square feet of living area and 485 square feet of garage. The reproduction cost new is $98 per square foot for living area and $55 per square foot for finished garage area. The site measure 75 feet wide by 120 feet deep and is valued at $
The answer is $230,562. The solution is 2,000 square feet � $98 = $196,000 living area; 485 square feet � $55 = $26,675 garage area; $196,000 + $26,675 = $222,675 reproduction cost new; $222,675 � 60 years economic life � 10 years = $37,112.50 accrued dep
What is the result of multiplying the gross rent multiplier by the monthly rent?
The answer is market value. Market value equals the gross monthly rent multiplied by the gross rent multiplier.
A new car has a sticker amount of $31,000. This figure is the car's
The answer is price. Price refers to the amount of money for which a good is actually sold.
A limited partnership plans to purchase an apartment building that has a monthly net income of $5,200 and monthly expenses of $1,400. If the partnership is to get a 12% return on its investment, what should it pay for the property?
The answer is $520,000. The solution is $5,200 monthly net income � 12 months = $62,400 annual NOI; income � rate = value; $62,400 � .12 rate of return = $520,000 target price.
Which type of depreciation is associated with inefficient architectural design?
functional obsolescence. Functional obsolescence is depreciation associated with operational inadequacies, poor design, or changing tastes and preferences.
Which method of estimating building costs relies on the use of cost-calculation publications?
The answer is comparative square-foot. In this method, the cost on a square-foot basis is compared for a similar structure, sometimes using cost-calculation publications.