Chapter 8

Question 1

The cost of labor and materials is also referred to as what?

Answer 1

Direct Cost

Question 2

When can land have negative value?

Answer 2

When encumbered with an environmental hazard

Question 3

What must be determined first before a property can be valued using the income approach?

Answer 3

Net Operating Income

Question 4

Which of the following is analyzed during the appraisal process…?
A. The market itself
B. Similar properties
C. The subject property
D. All of the above

Answer 4

D. All of the above

Question 5

Which of the following is NOT an indicator that a market is depreciating…?
A. Supply increases
B. Contractual prices are reduced
C. Offering prices decrease
D. Time on market decreases

Answer 5

D. Time on market decreases

Question 6

Donald hires an appraiser to better understand the value of his warehouse. What value would the appraiser use in his conclusion…?

Answer 6

Value-in-Use

Question 7

A property’s net operating income must be determined before a property can be valued using this appraisal method…?

Answer 7

Income Approach

Question 8

When trying to estimate market value, how far back should sales be researched?

Answer 8

3 months - 1 year

Question 9

What is the formula used to determine value using the cost approach?

Answer 9

Replacement Cost - Depreciation

Question 10

Which of the following may remain static despite a changing market?
A. Value
B. Price
C. Cost
D. Demand

Answer 10

Cost

Question 11

A valuation placed upon property by a public officer or a board, as a basis for taxation is known as what…?

Answer 11

Assessed Value

Question 12

Why is a comparative market analysis (CMA) NOT considered an appraisal…?

Answer 12

A CMA does NOT yield a defensible estimate of value

Question 13

How will someone know if the current building on a property is the highest and best use for the site…?

Answer 13

If modifications to the building do not make economic sense

Question 14

Which of the following uses will demand a value-in-use approach when conducting an appraisal…?
A. Church
B. Warehouse
C. School
D. All of the above

Answer 14

D. All of the above

Question 15

What must an appraiser do before two properties can be compared…?

Answer 15

Find a common unit of comparison

Question 16

A method of estimating the value of real property by calculating a current construction cost, subtracting accrued depreciation and adding a land value obtained from the market is known as what…?

Answer 16

Cost Approach

Question 17

Mark, and his investor group, are looking to purchase an office building. To help in their analysis, they hire an appraiser to determine the value of the property. What value will the appraisal report most likely yield…?

Answer 17

Investment Value

Question 18

A study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required is known as what…?

Answer 18

Evaluation

Question 19

Direct Cost (hard cost)

Answer 19

• Labor
• Materials

Question 20

Indirect Costs (soft cost)

Answer 20

• Architectural fees
• Engineering fees

Question 21

The sales comparison approach is based on what principle…?

Answer 21

Principle of Substitution

Question 22

The loss of value caused by super adequacy, inadequacy or changes in the art inherent in the property itself is known as what…?

Answer 22

Functional Obsolescence

Question 23

A commercial property will most likely yield what type of value by an appraiser…?

Answer 23

Investment Value

Question 24

The market value of a property is determined using what price…?

Answer 24

Most probable price

Question 25

The specific value of an investment to a particular investor or class of investors based on individual investment requirements is known as what...?

Answer 25

Investment Value

Question 26

The price that a property sold during a foreclosure auction is most likely equal to what value...?

Answer 26

Liquidation Value

Question 27

A property evaluation that determines property value by comparing similar properties sold within the last year is known as what...?

Answer 27

Comparative Market Analysis

Question 28

What property types use the income approach to determine value?

Answer 28

Commercial Properties

Question 29

Donald hires an appraiser to better understand the value of his warehouse. What value would the appraiser use in his conclusion...?

Answer 29

Value-in-Use

Question 30

The cost of labor and materials is also referred to as what...?

Answer 30

Direct Cost

Question 31

The total dollar expenditure for labor, materials, legal services, architectural design, financing, taxes during construction, interest, contractor's overhead and profit, and entrepreneurial overhead and profit is known as what...?

Answer 31

Cost

Question 32

What is first in the order of adjustments when utilizing the sales comparison approach...?

Answer 32

Analyze any nights conveyed

Question 33

A property's net operating income must be determined before a property can be valued using this appraisal method…?

Answer 33

Income Approach

Question 34

If offers are quickly being made on current asking prices, what might be happening in the market?

Answer 34

The market is trending upwards

Question 35

Why is a comparative market analysis (CMA) NOT considered an appraisal...?

Answer 35

A CMA does NOT yield a defensible estimate of value

Question 36

James owns a vacant property. By law, he can build the following building types, which generate a return on investment as listed: 1) Office building - 13.5% return 2) Mixed Use building - 10.5% return 3) Hotel - 12.8% return 4) Retail - 6.2% return Which use is the highest and best use for the property...?

Answer 36

Office Building

Question 37

The loss of desirability and usefulness caused by new inventions, changes in design, and improved processes for production, or from the influence of external factors, is known as what...?

Answer 37

Obsolescence

Question 38

The sales comparison approach is based on what principle...?

Answer 38

Principle of Substitution

Question 39

When does the price of a property exceed the cost of construction...?

Answer 39

When demand is high

Question 40

Which of the following may NOT change drastically in a market trending upward...? Value; Demand; Cost; Price

Answer 40

Cost

Question 41

The specific value of an investment to a particular investor or class of investors based on individual investment requirements is known as what...?

Answer 41

Investment Value

Question 42

The estimate worth of a particular asset which is established for the purposes of obtaining financing secured against that asset is known as what...?

Answer 42

Mortgage Value

Question 43

This is a valuation method which compares a subject property’s characteristics with those of comparable properties which have recently sold in similar transactions...?

Answer 43

Sales Comparison Approach

Question 44

An appraisal technique whereby the value of an income producing property is estimated by capitalizing its net operating income using an appropriate capitalization rate is known as what...?

Answer 44

Income Approach

Question 45

The amount a purchaser agrees to pay, and a seller agrees to accept in an arms-length transaction, is also known as...?

Answer 45

Price

Question 46

An appraisal is used when determining the value of what...?

Answer 46

Assessed Value, Value-in-Use, Market Value

Question 47

A loss of utility and this value caused by physical deterioration, functional obsolescence or economic obsolescence or any combination thereof is known as what?

Answer 47

Depreciation

Question 48

A loss in value caused by influences external to the property, such as increasing industrial activity near a residential neighborhood, is known as what...?

Answer 48

Economic Obsolescence

Question 49

A property sold as part of a bankruptcy proceeding is most likely equal to what value...?

Answer 49

Liquidation Value