Chapter 21 Appraisal Flashcards
(40 cards)
Which of the following statements are TRUE?
A. Real estate appraisers must be licensed in British Columbia.
B. Courts have recognized a margin of permissive error of 25% in assessing damages arising as a result of a negligent appraisal.
C. A licensed real estate representative can give an appraisal of real property.
D. The market value of real property as determined by an experienced appraiser may be greater than the ceiling price of the buyer.
(1) A and B only
(2) B and C only
(3) A and C only
(4) C and D only
4
Sally, an appraiser, has been asked to provide an estimate of the market value of a farmhouse and the surrounding property. Which one of the following would NOT affect her estimate of market value?
(1) One of the pastures on the property has been leased for two years to the owner of a racehorse.
(2) The owner of the farmhouse is anxious to move and would like to sell as soon as possible.
(3) The farmhouse and its surrounding property is located between the main road and the next door neighbour’s property. Therefore, the neighbour gets the benefit of access to his house by means of a road that runs through the farmhouse property.
(4) Homehold Finance Company recently loaned some money, at a below-market interest rate, to the owner of the farmhouse and secured the debt with a mortgage on the farmhouse. This mortgage is assumable.
2
Which of the following statements are FALSE?
A. Form reports often meet the needs of financial institutions, insurance companies and government agencies.
B. An appraiser is only responsible to the person who pays the appraiser’s fees.
C. An appraisal mistake of $3,000 on a $276,000 house is beyond the margin of allowable error.
D. The burden of proof is on the appraiser to explain an apparent over-valuation of a property.
(1) Only statements B and C are false.
(2) Only statements A and C are false.
(3) Only statements A, B, and D are false.
(4) None of the above statements are false.
1
Which one of the following is NOT a method of appraisal?
(1) the residual method
(2) the cost method
(3) the income method
(4) the depreciation method
4
In the context of appraisal, which one of the following properties is most likely to possess latent value?
(1) a 3-storey condominium development which has recently been completed, all units having been sold before completion of construction
(2) a single-family residence which is the only house on the block not yet converted to the commercial use which is permitted by zoning
(3) a large shopping mall/office tower complex which occupies a location at the intersection of two main streets in a B.C. municipality
(4) All of the above properties are equally likely to possess latent value.
2
Which one of the following statements is TRUE?
(1) In order to appraise real property one needs a minimum of a real estate trading services licence.
(2) The complexity of real estate as a product requires the involvement of an expert appraiser.
(3) Real estate can be classified as a homogeneous commodity.
(4) Due to the low turnover of real estate it is easy to collect information regarding recent transactions.
2
Of the following four statements, which are TRUE, and which are FALSE?
A. Appraisers must be licensed in British Columbia.
B. Courts have recognized an acceptable range of error in the determination of market value by appraisers.
C. A licensed trading services representative can give an appraisal of real property.
D. The market value of real property as determined by an experienced appraiser will always be greater than the floor price of the owner.
(1) A and B are true; C and D are false
(2) B and C are true; A and D are false
(3) A and C are true; B and D are false
(4) C and D are true; A and B are false
2
The principle on which the comparative method of appraisal is based is:
(1) indefeasibility.
(2) substitution.
(3) capitalization.
(4) accessibility.
2
The “subject of an appraisal” is:
(1) the market value of the physical property.
(2) a fee simple estate on a cash or cash-to-first-mortgage basis.
(3) a subjective measure of value by an experienced appraiser.
(4) the value of the legal rights of ownership vested in a particular piece of real estate.
2
There are many reasons why a property might sell for a price which is different from its current appraised value. Which of the following could be a reason?
(1) The property is in a state of long-term disrepair.
(2) The property is located beside a fertilizer plant.
(3) The appraisal was done by the cost method.
(4) All of the above
3
For which one of the following properties would an appraiser be MOST justified in employing the cost method to determine market value?
(1) a 40-year old bungalow which represents the highest and best use
(2) a newly-constructed church of contemporary design
(3) a vacant lot which possesses latent value
(4) a high rise office tower located in an outer suburb
2
Under which one of the following conditions is the comparative method of appraisal MOST applicable?
(1) where the volume of sales transactions is very low
(2) where buyers and sellers are well informed about current sales transactions
(3) where the property has redevelopment potential
(4) where the property is unique
2
A real estate appraiser would NOT value:
(1) an existing rental agreement of a warehouse.
(2) the right to use airspace at the top of a highrise office building.
(3) the legal interest in cattle on agricultural land.
(4) a fee simple interest in a two-bedroom apartment.
3
In conducting an appraisal, a background analysis is undertaken covering a range of market factors. Which of the following is a reason for including a background analysis in an appraisal report?
(1) to indicate the current status of the subject property in relation to trends in property values
(2) to confirm that comparable properties have been selected from the same market as the subject property and are, hence, subject to the same market forces
(3) to provide the client with an appreciation of the socio-economic determinants of supply and demand
(4) All of the above are reasons for including a background analysis in an appraisal report
4
Before valuing a house, an appraiser should assume that:
(1) the registered owner is not the ultimate source of data on the property.
(2) the registered owner has a fee simple interest in the land.
(3) “value to owner” equals “market value”.
(4) the property is unencumbered.
1
The cost method of appraisal may NOT be used to value:
(1) airport hangars.
(2) vacant lots.
(3) condominiums.
(4) single-family residences.
2
Which of the following transactions could provide good evidence of market value to an appraiser?
(1) A custom designed home containing an elevator and several ramps is sold by Mr. Smith to his nephew, a paraplegic.
(2) A pre-fabricated home situated in a large subdivision of similar homes is sold after three months on the market.
(3) Miss Jones receives an urgent telegram stating that she has been accepted as a nursemaid to children in Nigeria. In the course of one week, she arranges the sale of her two bedroom condominium and leaves for Africa.
(4) All of the above could be good indications of market value.
2
In which one of the following situations is the residual method of appraisal the MOST suitable method to use?
(1) where the market supply and demand forces are fairly constant
(2) where there is a large volume of available market data and the subject property represents the highest and best use of the site
(3) where the value to be measured is market value expressed as an income flow
(4) where the subject property possesses development potential
4
Of the following methods, which one must be used to determine the market value of an unused vacant site:
(1) the cost method of appraisal
(2) the comparative method of appraisal
(3) the income method of appraisal
(4) the depreciation method of appraisal
2
The market value of a vacant site can be determined by:
(1) the cost method of appraisal.
(2) the comparative method of appraisal.
(3) the accrual method of appraisal.
(4) any of the above three appraisal methods.
2
The market value of a vacant site can be determined by:
(1) the cost method of appraisal.
(2) the comparative method of appraisal.
(3) the accrual method of appraisal.
(4) any of the above three appraisal methods.
2
Which of the following people may require an appraisal of real property?
A. the executor of an estate
B. a property assessment appellant
C. a mortgagee
D. an expropriation authority
(1) C only
(2) A and C only
(3) A, B and D only
(4) A, B, C and D
4
When preparing a market value appraisal of a single family residence, an appraiser may:
(1) rely on the owner’s information as to the type of water supply piping in the property provided that he notes in his appraisal report the source of his information and the fact that it has not been verified.
(2) ignore above-average quality of construction if the buyers and sellers in the neighbourhood do not consider high quality materials important.
(3) disregard the recent sale of a house with same floor plan which is within the same subdivision as the subject property.
(4) do all of the above, depending on the circumstances.
4
A property which is not employed in its highest and best use:
(1) should be renovated.
(2) possesses latent value.
(3) should be rezoned.
(4) should be appraised by the cost method.
2
