exam 1

Question 1

Chapter 1: Appraisal is: A) The act or process of telling the client the market value of real estate B) The act or process of developing an opinion of value C) The report conveyed to the client D) A lucrative profession

Answer 1

B) The act or process of developing an opinion of value

Question 2

Chapter 1: Real estate is: A) The rights in realty B) The physical land and appurtenances affixed to the land C) What transfers on the day of closing D) The “bundle of rights”

Answer 2

B) The physical land and appurtenances affixed to the land

Question 3

Chapter 1: Real property includes: A) Any and all buildings on the subject site B) The interests, benefits, and rights inherent in the ownership of real estate C) The physical land and appurtenances affixed to the land D) Property that is not artificial

Answer 3

B) The interests, benefits, and rights inherent in the ownership of real estate

Question 4

Chapter 1: The manner in which a client employs the information contained in the appraisal report is called: A) The intended use B) The purpose of an appraisal C) The base of an appraisal D) The appraisal premise

Answer 4

A) The intended use

Question 5

Chapter 1: Real property consists of: A) Rights in realty B) Land and all improvements thereon C) The right to use or occupy real estate D) One-unit residences

Answer 5

A) Rights in realty

Question 6

Chapter 1: Appraisals are always used: A) To make residential mortgages B) To settle divorces C) To settle lawsuits D) To solve problems that involve real estate valuation

Answer 6

D) To solve problems that involve real estate valuation

Question 7

Chapter 1: An appraiser is appraising a small residential property and observes that it has a clothes washer and dryer. Should these items be included in the appraisal? A) The appraiser should not include these items because they are personal property. B) The appraiser should include these items, but they should be identified as such and their contributory value should be estimated. C) The appraiser should not include these items because they could be taken out when the current owners leave. D) The appraiser should include these items because they were intended to be left with the property.

Answer 7

B) The appraiser should include these items, but they should be identified as such and their contributory value should be estimated.

Question 8

Chapter 1: Items that are built to be permanent and intended to be included with real property are: A) Trade fixtures B) Real estate C) Personal property D) Chattel fixtures

Answer 8

B) Real estate

Question 9

Chapter 1: An appraiser: A) Determines value B) Determines price C) Measures and develops an opinion of value D) Measures price

Answer 9

C) Measures and develops an opinion of value

Question 10

Chapter 1: Easements are another division of property rights. They usually give a party the right: A) To cross over another person’s property without permission B) To access the property to perform a specific service C) To use the property during the term of the lease to a tenant D) To reenter the property if the payments are not made to the lender on time

Answer 10

B) To access the property to perform a specific service

Question 11

Chapter 1: The Fifth Amendment to the US Constitution: A) Requires the government to pay just compensation for land taken for the common good B) Prohibits the consumption of alcoholic beverages C) Limits the terms of the President D) Is called the “Bill of Rights”

Answer 11

A) Requires the government to pay just compensation for land taken for the common good

Question 12

Chapter 2: Land is unique because: A) No two parcels have the same soil composition B) No two parcels have the same owners C) No two parcels have the same tax levies D) No two parcels can occupy the same space on the face of the earth

Answer 12

D) No two parcels can occupy the same space on the face of the earth

Question 13

Chapter 2: The supply of land is: A) Increasing all the time B) Established by the surveyors C) Infinite D) Finite

Answer 13

D) Finite

Question 14

Chapter 2: The concepts of land are: A) Immobile, durable, finite, and useful B) Geographic and environmental, legal, economic, and social C) Land, labor, capital, and entrepreneurialism D) Leasehold, leased fee, and fee simple

Answer 14

B) Geographic and environmental, legal, economic, and social

Question 15

Chapter 2: An example of a governmental force that affects real estate value would be: A) Market demand for mortgage loans B) Population changes in the market C) Changes in decorating styles D) Changes in local building codes

Answer 15

D) Changes in local building codes

Question 16

Chapter 2: Zoning and environmental protection regulations are examples of: A) Clouds on title B) Public use C) Escheat D) Police power

Answer 16

D) Police power

Question 17

Chapter 3: When real property is sold by one person to another, the amount of money used to compensate the seller is called: A) The cost of the real property B) The value of the real property C) The price of the real property D) The income of the real property

Answer 17

C) The price of the real property

Question 18

Chapter 3: A cash-equivalent price: A) Reflects what a seller would accept as if he or she received cash at the closing B) Includes the seller paying no more than 5 points (5%) C) Indicates that the rights in realty can only be fee simple D) Assumes that the buyer did not have to get a mortgage

Answer 18

A) Reflects what a seller would accept as if he or she received cash at the closing

Question 19

Chapter 3: A good’s capacity to satisfy human desires or needs is known as: A) Creative demand B) Utility C) Functional obsolescence D) Effective demand

Answer 19

B) Utility

Question 20

Chapter 3: The city planning department has indicated that a vacant residential lot located in a flood zone cannot be given a building permit. This site: A) Has lost nearly all utility B) Has become scarce C) Has lost all desirability D) Has lost any effective purchasing power

Answer 20

A) Has lost nearly all utility

Question 21

Chapter 3: Demand for real estate may be affected by: A) Increasing population and employment B) The availability of mortgage financing C) Increases in purchasing power D) All of the above

Answer 21

D) All of the above

Question 22

Chapter 4: The three approaches to value are: A) Market analysis, market consensus of opinion, and market research B) Sales extraction, cost replication, and income multiplication C) Sales comparison, cost, and income capitalization D) Graphic analysis, linear regression, and statistical analysis

Answer 22

C) Sales comparison, cost, and income capitalization

Question 23

Chapter 4: Highest and best use: A) Is specified by the client B) Must be considered in all appraisals C) Includes two parts when the property is improved: the highest and best use as though vacant and the highest and best use as improved D) Assumes demand for the property within the existing or proposed use

Answer 23

C) Includes two parts when the property is improved: the highest and best use as though vacant and the highest and best use as improved

Question 24

Chapter 4: Land valuation techniques include: A) Subdivision development, depreciated cost, and consensus B) Sales comparison approach, consensus, and extraction C) Sales comparison approach, allocation, and extraction D) Assessment multipliers, assessor’s opinions, and multiple regression multipliers

Answer 24

C) Sales comparison approach, allocation, and extraction

Question 25

Chapter 4: The valuation technique in which land and building are valued separately is: A) The income capitalization approach B) The sales comparison approach C) Linear regression D) The cost approach

Answer 25

D) The cost approach

Question 26

Chapter 4: The valuation technique in which the income a property earns is considered is: A) The income capitalization approach B) The sales comparison approach C) The cost approach D) None of the above

Answer 26

A) The income capitalization approach

Question 27

Chapter 10: You buy a one-unit home for $200,000 and put down 20% as equity on the deal. How much is the mortgage? A) $240,000 B) $200,000 C) $160,000 D) $140,000

Answer 27

C) $160,000

Question 28

Chapter 10: You purchase a one-unit home for $200,000 and put 25% down. The lender charges three points to get the mortgage. How much do the points cost you? A) $8,000 B) $4,500 C) $2,000 D) $0

Answer 28

B) $4,500

Question 29

Chapter 10: You have a first mortgage of $150,000 and a second mortgage of $70,000 on your home, and the property value is $200,000. What is your equity? A) $50,000 B) $30,000 C) $20,000 D) -$20,000

Answer 29

D) -$20,000

Question 30

Chapter 10: A contract for deed, also known as an installment sales contract or land contract, is: A) A sale of real property with the seller financing the sale and transferring the rights in realty B) A sale of real estate with the seller financing the sale but retaining the deed until the loan is paid off C) A purchase agreement with many conditions D) A sales contract with a mortgage loan

Answer 30

B) A sale of real estate with the seller financing the sale but retaining the deed until the loan is paid off

Question 31

Chapter 10: The US Federal Reserve System: A) Was established and is now controlled by Congress B) Was established by Congress but is now independent of it C) Was established and is controlled by the president of the United States D) Was established and is controlled by the US national banks

Answer 31

B) Was established by Congress but is now independent of it

Question 32

Chapter 11: A neighborhood is: A) A residential subdivision B) An area with similar zoning and density C) A group of complementary land uses D) An area with homes of the same price

Answer 32

C) A group of complementary land uses

Question 33

Chapter 11: A district is: A) An area within a neighborhood where all the properties are vacant B) A type of neighborhood that is characterized by one predominant land use C) The delineation of zoning classifications D) An area where city attorneys reside

Answer 33

B) A type of neighborhood that is characterized by one predominant land use

Question 34

Chapter 11: Neighborhood social influences include all of the following except: A) Population density B) Occupant skill levels C) Occupant age levels D) Vacancy rates

Answer 34

D) Vacancy rates

Question 35

Chapter 11: Economic influences include all of the following except: A) Occupant income levels B) Crime levels C) Property rent levels D) Property value levels

Answer 35

B) Crime levels

Question 36

Chapter 17: Highest and best use analysis is required in: A) All appraisals B) Value-in-use appraisals C) Investment value appraisals D) Market value appraisals

Answer 36

D) Market value appraisals

Question 37

Chapter 17: Highest and best use analysis requires an opinion of the use as though vacant and as improved to: A) Provide an opinion of the value of the improvements B) Ensure that appraisers recognize that the property could be worth more without the buildings than with them C) Provide an opinion of any functional obsolescence caused by inappropriate improvements D) All of the above

Answer 37

D) All of the above

Question 38

Chapter 17: Highest and best use of the site as though vacant: A) Is required in all market value appraisals of real property B) May require a change in zoning classification, if possible C) Assumes the site is vacant or could be made vacant by demolishing the improvements D) All of the above

Answer 38

D) All of the above

Question 39

Chapter 18: When a property's highest and best use is likely to change in the near future, the prevailing highest and best use is called a(n): A) Pending use B) Temporary use C) Interim use D) Alternative use

Answer 39

C) Interim use

Question 40

Chapter 18: A common interim use for a property is use as a: A) Surface parking lot B) High-rise parking lot C) Small office building with short leases D) New car automobile dealership

Answer 40

A) Surface parking lot

Question 41

Chapter 18: A legally nonconforming use is: A) A use that was legally established and maintained but no longer conforms to existing zoning B) A use that was illegally established and maintained C) A use that was not legally established and maintained and still does not conform to existing zoning D) A use that was not legally established and maintained but for which the government is not enforcing the law

Answer 41

A) A use that was legally established and maintained but no longer conforms to existing zoning

Question 42

Chapter 17: Which of the following is not a criterion for highest and best use? A) Legally permissible B) Physically possible C) Financially feasible D) The maximum size improvement

Answer 42

D) The maximum size improvement

Question 43

Chapter 17: A property use meets the criteria of legal permissibility if it complies with all of the following except: A) Deed and plat restrictions B) Zoning requirements, building codes, and historic district controls C) Lease provisions D) Supply and demand criteria

Answer 43

D) Supply and demand criteria

Question 44

Chapter 17: The concept of consistent use requires an improvement to be valued based on a use that is consistent with the site's highest and best use. In other words: A) The highest and best use of the site as though vacant must always consider the improvements thereon B) The highest and best use as improved would always be consistent with the "as vacant" analysis C) The improvement value must be adjusted down if the land's highest and best use is different than the improved highest and best use D) The vacant land value can never exceed the improved value

Answer 44

C) The improvement value must be adjusted down if the land's highest and best use is different than the improved highest and best use

Question 45

Chapter 17: Land values are never penalized due to the functional problems in existing buildings because: A) Buildings can be removed or altered B) Buildings do not contribute value C) Land can change D) All of the above

Answer 45

A) Buildings can be removed or altered

Question 46

Chapter 17: To be considered the highest and best use, a use must be: A) Physically possible, legally permissible, financially feasible, and maximally productive B) Physically correct and legally possible C) Already in existence and legal D) Physically possible and appropriate

Answer 46

A) Physically possible, legally permissible, financially feasible, and maximally productive

Question 47

Chapter 17: A property includes a one-unit residence on the southeast corner of a five-acre parcel with 467 feet of frontage on each of two roads. The house alone (without land) would be worth $200,000. It was never platted, and there are no deed restrictions. The local zoning ordinance only requires two acres with 200 feet of road frontage. The market for houses with up to five acres is good. Excess land, not required by zoning, sells for only $6,000 per acre. A buildable pad in this market is worth $60,000. The site is far enough from the northern property line to allow for an almost perfect split of the parcel in half. What is the highest and best use of the site as though vacant and as improved? A) Highest and best use as though vacant = One parcel with five acres. Highest and best use as improved = One house on five acres. B) Highest and best use as though vacant = Two parcels with ±2.5 acres each. Highest and best use as improved = Leave the house and sell off the other site. C) Highest and best use as though vacant = One parcel. Highest and best use as improved = One house on ±2.5 acres and a vacant lot with ±2.5 acres. D) Highest and best use as though vacant = Two parcels with ±2.5 acres. Highest and best use as improved = Tear down the house.

Answer 47

B) Highest and best use as though vacant = Two parcels with ±2.5 acres ($60,00 each or 120,000) Highest and best use as improved = Leave the house and sell off the other site ($260,00 for the parcel w/ the house, plus $60,000 for the site)

Question 48

Chapter 18: The land value of a five-acre parcel in a prestigious residential area is estimated at $50,000 per acre based on comparable sales in the area. Improved comparable sales with homes like the subject property show that this property should be worth $225,000 if sold as a house. The demolition cost is $5,000. What is the value of the land? A) $240,000 B) $245,000 C) $250,000 D) $255,000 Chapter 18: The market value of the fee simple rights for this parcel is: A) $250,000 B) $245,000 C) $230,000 D) $225,000 Chapter 18: The market value of the improvement is: A) $225,000 B) $175,000 C) -$25,000 D) -$5,000

Answer 48

C) $250,000 B) $245,000 D) -$5,000

Question 49

Chapter 18: If asked to appraise a municipal library, an appraiser: A) Must find comparable sales of libraries B) Must estimate an alternative use and then find comparables of buildings that are similar to the alternative use C) Must find comparable arm's-length sales of library buildings from one governmental organization to another D) Must find comparable sales of bookstores

Answer 49

B) Must estimate an alternative use and then find comparables of buildings that are similar to the alternative use

Question 50

Chapter 18: An improved residential property has the following characteristics: - The land as if vacant is valued at $85,000 - The value of the property as improved (with the house) is $75,000 - The cost of removing the house would be $5,000 What is the market value of the rights to this property? A) The property value is $85,000. B) The improvement value is -$15,000. C) The property value is $80,000. D) The property value is $75,000.

Answer 50

C) The property value is $80,000.

Question 51

Chapter 10: The secondary mortgage market: A) Is where second mortgages are bought and sold B) Has historically been dominated by investors like Fannie Mae and Freddie Mac who buy and sell mortgage loans C) Is located in Chicago D) Is where inferior credit (B paper) loans are bought and sold

Answer 51

B) Has historically been dominated by investors like Fannie Mae and Freddie Mac who buy and sell mortgage loans

Question 52

Chapter 10: A mortgage is: A) A document that makes a borrower promise to repay money B) A document that indicates the interest rate and terms of a loan C) A pledge of collateral for a real estate loan D) A share of stock in a company

Answer 52

C) A pledge of collateral for a real estate loan

Question 53

Chapter 10: If a 5% annual rate mortgage has quarterly payments, the effective interest rate is: A) 5% per annum B) 2.50% per month C) 1.25% per quarter D) 2.50% per half

Answer 53

C) 1.25% per quarter

Question 54

Chapter 10: A deed of trust is: A) A document that makes a third party responsible for the money B) A document that gives a third party the deed until the mortgage loan is paid off C) The same as a contract for deed D) Used as a tool to make foreclosure more efficient

Answer 54

B) A document that gives a third party the deed until the mortgage loan is paid off

Question 55

Chapter 10: What is the periodic payment of a fully amortized mortgage with quarterly payments, an initial loan amount of $250,000, a loan term of 25 years, and an interest rate of 4.75% per year? A) $4,284.68 B) $2,152.34 C) $2,500.00 D) $12,854.04

Answer 55

A) $4,284.68

Question 56

Chapter 10: What is the periodic payment of a fully amortized mortgage with annual payments, an initial loan amount of $250,000, a loan term of 25 years, and an interest rate of 4.75% per year? A) $4,284.68 B) $2,152.34 C) $17,296.28 D) $12,854.04

Answer 56

C) $17,296.28

Question 57

Chapter 10: What is the future value in two years of a single cash payment of $1,000 received today at 10% interest per year? Assume annual accounting. A) $1,210.00 B) $826.45 C) $1,000.00 D) $900.00

Answer 57

A) $1,210.00

Question 58

Chapter 10: What is the present value of a cash payment of $1,000 that will not be received for two years at 10% per year? Assume annual accounting. A) $1,210.00 B) $826.45 C) $1,011.12 D) $901.33

Answer 58

B) $826.45

Question 59

Chapter 10: An appraiser doing market research found a comparable sale in which the seller took back a mortgage with a 20% down payment at 8% per year with monthly payments based on a 30-year amortization but with a five-year balloon payment. The sale price was $209,000. The current market rate for mortgages is 5% for 30 years. A week after the closing, the seller sold the mortgage for $150,000 to a local real estate broker. What is the cash-equivalent sale price of this comparable sale? A) $159,205.70 B) $191,800.00 C) $201,005.70 D) $209,000.00

Answer 59

B) $191,800.00

Question 60

Chapter 10: What is the periodic payment of a fully amortized mortgage with monthly payments, an initial loan amount of $250,000, a loan term of 25 years, and an interest rate of 4.75% per year? A) $2,850.48 B) $1,425.29 C) $17,102.88 D) $8,551.44

Answer 60

B) $1,425.29

Question 61

Chapter 10: What is the balance in five years of a mortgage with monthly payments, an initial loan amount of $250,000, a loan term of 25 years, and an interest rate of 4.75% per year? A) $220,557 B) $250,000 C) $142,524 D) $205,555

Answer 61

A) $220,557

Question 62

Chapter 10: What is the new payment on a 25-year, monthly payment, adjustable-rate mortgage after five years if the interest rate changes from 4.75% to 3.75%? The original amount of the loan was $250,000, the original term was 25 years, and there are 20 years left on the mortgage. Round your answer. A) $1,000 B) $1,300 C) $1,600 D) $1,900

Answer 62

B) $1,300