Chapter 1: Market Fundamentals, Characteristics, and Definitions Flashcards
1
Q
“A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.”
A
Neighborhood
2
Q
“The geographic region from which a majority of demand comes and in which the majority of competition is located. Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market area.
A
Market Area
3
Q
“A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural.”
A
District
4
Q
A study of the market as a whole and the investigation of conditions of a component of that market as reflected for a specific property type
A
Market Analysis
5
Q
"A place where goods and services are exchanged" is the definition of a: retail district market neighborhood store
A
Market
6
Q
"The separation and identification of the parts of the whole" is part of the process of: highest and best use aggregation using the Internet analysis
A
Analysis
7
Q
When an appraiser is analyzing the subject property’s market area, which question is LEAST likely to be asked?
Where is the property located?
What defines the boundaries of the property’s neighborhood?
Who owns the property?
What are the trends for this neighborhood?
A
Who owns the property?
8
Q
Today, if an appraiser has an “oddball” appraisal assignment and there is no local data, the appraiser can:
use the Internet to research data or contact other appraisers for data
make up the data, and use the Internet to make it seem more realistic
use Internet data to create a smaller submarket within the local market
withdraw from the assignment and use the Internet to find another appraiser to do it
A
Use the internet to research data or contact other appraisers for data
9
Q
When an appraiser is analyzing the subject property’s market area, which question is MOST likely to be asked?
Why is the subject property being sold?
What defines the boundaries of the subject property’s neighborhood?
Who owns the subject property?
What is the subject property’s condition?
A
What defined the boundaries of the subject property’s neighborhood?
10
Q
a) Projected income to be received;
b) Using the property as a tax shelter;
c) Probable appreciation of the asset; and
d) Use of the property for a personal business.
These are the benefits of what?
A
From income producing properties
11
Q
Which principle is often associated with the income approach?
A
Anticipation
12
Q
The principle of anticipation is also related to the principles of:
A
Supply and demand
Competition
Change
13
Q
The principle of balance is closely related to the following principles:
A
Four agents of production
Conformity
Contribution
Surplus Productivity
14
Q
The principle of change is related to the following principles:
A
Anticipation
Supply and Demand
Inclining and declining periods
15
Q
The principle of competition relates to the following principles:
A
Anticipation
Supply and demand
Opportunity Cost
16
Q
The principle of conformity is related to the following principles:
A
Balance and regression
17
Q
The principle of contribution is related to the following principles:
A
Balance
Four agents of production
Substitiution
18
Q
The principle of externalities is related to the following principles:
A
Inclining and declining periods
Progression and regression
Supply and demand
19
Q
The four agents or production are:
A
Capital (Buildings and Equipment)
Coordination (Management)
Labor (Wages)
Land
20
Q
The principle of the Four Agents of Production is related to the following principles:
A
Balance
Contribution
Opportunity Cost
Surplus Productivity
21
Q
The value of a single-family home is decreased when a large industrial plant is constructed directly across the street. What economic principle does this best demonstrate? Balance Contribution Externalities Anticipation
A
Externalities
22
Q
Perceived benefits from the ownership of income-producing property would include all of the following EXCEPT: income to be received appreciation physical depreciation tax shelter
A
Physical Depreciation
23
Q
With regard to the four agents of production, which is the last agent to be satisfied? Capital Land Labor Coordination
A
Land
24
Q
The fact that a property's value may be different next week than it is today demonstrates what economic principle? Change Balance Anticipation Competition
A
Change
25
```
When supply and demand are in balance in a market, this produces:
Anticipation
Appreciation
Equlibrium
Depreciation
```
Equilibrium
26
```
People tend to purchase homes in areas with amenities and facilities, and where they feel insulated from adverse property conditions. This is an example of the principle of:
Conformity
Substitution
Change
Competition
```
Conformity
27
```
A property owner constructs a six-car garage at a cost of $80,000. It only adds $40,000 in value to the property. What economic principle does this best demonstrate?
Balance
Change
Contribution
Opportunity Cost
```
Contribution
28
```
The principle of contribution is most closely associated with:
the Income Approach
the Sales Comparison Approach
the Cost vs income Approach
the principle of Opportunity Cost
```
the Sales Comparison Approach
29
```
Finish the sentence: Profit encourages ___________.
profit
declining markets
copycats
competition
```
Competition
30
```
Appraiser Anne wants to convert a property's anticipated income into an indication of value. Which approach to value is best suited for this purpose?
Anticipation Approach
Income Approach
Sales Comparison Approach
Cost Approach
```
Income Approach
31
Four stages of the life cycle:
Growth, Stability, Decline, Revitalization
32
Integration and Disintegration are sometimes referred to as _____ and ____ periods
Inclining, declining
33
Opportunity costs relates to
the advantages of an alternate investments
34
The consistent use theory recognizes:
a property's componenets
35
```
The value of a fair quality home will be enhanced if it is located in a neighborhood of all good quality homes. What economic principle does this demonstrate?
Substitution
Progression
Anticipation
Regression
```
Progression
36
```
If there are not enough homes available in a market to satisfy demand, this is known as __________.
a buyer's market
seller's market
equilibrium
contribution
```
Seller's Market
37
```
The principle of surplus productivity states that after paying the costs of the first three agents of production, any residual income is attributed to ________.
capital
coordination
labor
land
```
Land
38
```
What is another name for the principle of inclining and declining periods?
ups and downs
Externalities
Anticipation
Integration and Disintegration
```
Integration and Disintegration
39
Which of these is an example of the principle of progression?
Average quality home in average quality neighborhood
A manufacturing facility located in a residential neighborhood
A good quality home in a neighborhood of average quality homes
Fair quality home in a neighborhood of good quality homes
Fair Quality home in a neighborhood of good quality homes
40
```
When analyzing the life cycle for a neighborhood, which stage is characterized by a strong demand and rising values?
Externalities
Decline
Growth
Stability
```
Growth
41
If there are not enough homes available in a market to satisfy demand, what will happen to home prices?
they will increase
they will decrease
they will stay the same
They will increase
42
When analyzing the life cycle for a neighborhood, what problem is often faced by appraisers?
the entire life cycle happens quickly, usually over a period of a few months
the growth cycle may have passed before they realize it
a neighborhood may be in decline and still experience high demand and rapid price appreciation
some clients believe analysis of a neighborhood life cycle is discriminatory, and do not permit appraisers to do it
The growth cycle may have passed before they realize it
43
An informed buyer is considering two properties, but will only purchase one of them. They are substantially equivalent, and each has an annual net operating income of $18,000. Property A has a listing price of $199,000, while Property B is listed at $189,000. Which property is the investor MOST likely to purchase?
Property A
Property B
There is not enough information to determine
Property B
44
```
The principle of surplus productivity is associated with which approach to value?
Cost Approach
Income Approach
Sales Comparison Approach
none of the above
```
Income Approach
45
he most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interests; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.
An annoying long ass definition of Market Value
46
This value is the amount of money that the financial institution is willing to lend the borrower to purchase a particular property. Usually this value is a percentage of the appraised value or market value.
Loan Value
47
This value is also known as "ad valorem" value. This is the type of value that is used to calculate the property owner's real estate taxes.
Assessed Value
48
This is the value of a particular property to a specific investor. Investors look at a variety of data in making the decision of whether to invest in a property.
Investment Value
49
The value of the property as it is presently being used. This value does not consider the highest and best use of the property or the market value as of the effective date of the assignment.
Value in use
50
This type of value recognizes the cost to replace the improvements and generally does not consider the value of the site.
Insurance Value
51
Equates to market value. This type of value signifies the property's worth in an open and competitive market, either in exchange for money or other goods.
Value in Exchange
52
This is actually an accounting term. This type of value is associated with the depreciated value of the improvements for accounting and income tax purposes.
Book Value
53
When there is no more remaining life for the improvement, it will have been fully depreciated, and the only remaining value will be in the
Land
54
This value is an operating business with an indefinite future life. For some established businesses, the real estate assets are an essential part of the business.
Going Concern Value
55
This type of value identifies a tenant's interest in a lease. When the tenant's right to use the property is greater than the rent being paid for the actual use of the property, there is a
Leasehold Value
56
The price a property will sell for, if required to be sold very quickly, to convert the asset into money. This is the appraiser’s opinion of what discount would be required to dispose of the property in a very short time frame.
Liquidation Value
57
How is the type of value used in an appraisal assignment determined?
all appraisals are for market value
the client must supply the value definition to the appraiser
it does not matter what type of value is used
the appraiser identifies the type of value, based on the intended use of the appraisal
The appraiser identifies the type of value, based on the intended use of the appraisal
58
```
What type of value recognizes the cost to replace the improvements but does not include the land value?
investment value
value in use
market value
insurance value
```
Insurance Value
59
```
Most real property appraisal assignments are intended to develop an opinion of:
value in use
liquidation value
market value
assessed value
```
Market Value
60
```
The market value of a property is $255,000 and the loan-to-value ratio is 70%. What is the loan value for this property?
$150,500
$188,500
$178,500
$255,000
```
$178,500
255,000 x .70
61
```
What type of value is generally considered equivalent to market value?
book value
value in exchange
insurance value
loan value
```
value in exchange
62
```
The amount of money that a financial institution is willing to lend the borrower on a particular property is the:
loan value
market value
liquidation value
assessed value
```
loan value
63
```
What type of value is based on a specific investor's needs and desires?
market value
assessed value
loan value
investment value
```
investment value
64
```
What type of value includes an operating business with both tangible and intangible assets?
going concern value
book value
insurance value
market value
```
going concern value
65
```
What type of value is based on the property's current use?
assessed value
value in use
market value
investment value
```
value in use
66
What does USPAP say about market value?
appraisers are cautioned to use the same market value definition in every assignment
appraisers are cautioned to identify the exact definition of market value and its authority
only the market value definition specified in USPAP should be used
the client must supply the market value definition to the appraiser
appraisers are cautioned to identify the exact definition of market value and its authority
67
"The Bundle of Rights" or property interests are commonly considered to include:
```
(SLUGER)
The right to Sell the property
The right to Lease or rent the property
The right to Use or demolish the property
The right to Give it away
The right to Enter or leave the property
The right to Refuse any of these rights.
```
68
Forces that create value
Scarcity
Desire
Effective Purchasing Power
Utility
69
Four large general forces that effect value
Social
Environmental
Economic
Governmental
70
Characteristics of land
Immobility
Indestructability
Heterogeneity
71
Economic Characteristics of land:
Type of improvements
Permanence of improvements and capital
Location preferences
Scarcity
72
Gov't restrictions on land
taxation
police power
eminent domain
escheat
73
known as sole owner. This type of ownership indicates that one person owns and holds title to the property.
Sole Proprieter
74
A legal vehicle for partial ownership interests in real estate in which independently owned properties are conveyed to a trustee; may be used to effect a profitable assemblage or in some cases to facilitate the assigning of property as collateral for a loan
Land Trust
75
A corporation or trust that combines the capital of many investors to acquire or provide financing for all forms of real property.
REIT
| Real Estate Investment Trust
76
This type of ownership is not recognized by all states. It is primarily a form of ownership used for estate planning purposes. The ownership of the property is transferred into a living trust, with the property owner assuming the role of trustee.
Individual Trusts
77
```
If a party has all their ownership rights intact, what type of ownership is this?
Leasehold
Fee simple
Leased fee
Going concern
```
Fee Simple
78
Which statement is TRUE about real property value?
Value is not created; it is inherent.
Appraisers create value.
Market participants create value.
Real property is worth more than personal property.
Market Participants create value
79
```
When a property is leased, what is the owner's interest called?
individual trust
condominium
leasehold
leased fee
```
leased fee
80
With regard to the four forces that create value, what is meant by utility?
a property must have usefulness in order to have value
availability of gas, electric, water, and sewer services
a property must be able to grow crops
someone must be using the property at the time of the appraisal
a property must have usefulness in order to have value
81
```
If a property has significant liens or clouds on the title, and the owner is unable to sell it because of these issues, the property can be said to lack ___________.
scarcity
utility
transferability
property rights
```
transferability
82
What is meant by "escheat"?
the government illegally raises taxes
the government can claim a property upon the death of the owner if there is no will and no heirs
the government can take a property for the public good with just compensation
the government can push aside the rightful heirs and claim a property when the owner dies
the government can claim a property upon the death of the owner if there is no will and no heirs
83
```
One of the characteristics of land is heterogeneity. What does this mean?
each parcel of land is the same
each piece of land is unique
land cannot be moved to another location
land cannot be destroyed
```
each piece of land is unique
84
```
A change in local employment and income levels would be considered a(n) ___________ force affecting values.
environmental
economic
social
governmental
```
economic
85
```
Governmental restrictions on use of land include:
eminent domain
taxation
escheat
all of these
```
all of these
86
```
Three people own a property together. When one person dies, his undivided share of property ownership goes to the other two owners. What type of ownership is this?
ownership in severalty
joint tenants
tenants by the entirety
none of the above
```
```
Joint tenants
(right to survivorship)
```
87
```
The most probable price that a property should bring in an open and competitive market is part of the:
principle of competition
principle of anticipation
definition of market value
definition of market analysis
```
the definition of market value
88
```
The market value of a property is $200,000 and the loan-to-value ratio is 75%. What is the loan value for this property?
$150,000
$50,000
$160,000
$175,000
```
150,000
200,000x .75
89
Why does insurance value typically not include the value for the land?
land typically cannot be destroyed
most of the property value is in the improvements
this is a tradition that dates back to England in the 1800's
land is worthless without improvements
land typically cannot be destroyed
