Exam Prep Flashcards

Question

When an appraiser completes a secondary market residential form (such as a Fannie Mae form), the highest and best use as though vacant is - Included on the form and in the analysis - Not included because the form instructions state that the form is only to be used when the highest and best use is to leave the residence on the site; if the highest and best use is to remove the residence from the site, these types of forms should not be used - Included in an addenda only if the site is zoned residential - Not needed, not required, and not permitted

Answer 1

Not included because the form instructions state that the form is only to be used when the highest and best use is to leave the residence on the site; if the highest and best use is to remove the residence from the site, these types of forms should not be used The highest and best use of the site as though vacant is not included on the forms, but the instructions state that the form is not to be used when the highest and best use does not include leaving the residence on site.

Answer 2

Must estimate an alternative use for which a market exists and then find comparable sales of buildings that are similar to the alternative use

Answer 3

Physical or geographical limitations

Answer 4

Refrain from defining a market by demographics such as age, race, religion, etc.

Answer 5

The present worth of future benefits as anticipated by market participants

Answer 6

Increases in the cost of construction

Answer 7

A geographic area from which a retail center draws its customers

Answer 8

All of the above

Answer 9

Increases or decreases in disposable income

Answer 10

The overall demand for housing will decrease

Answer 11

Decreases the demand for apartment rental units

Answer 12

The current comparable listings

Answer 13

Market segmentation

Answer 14

A legal use that does not conform to development standards

Answer 15

Illegal use

Answer 16

Was established by but is now independent of Congress

Answer 17

A corporation’s short-term notes “Commercial paper” refers to short-term notes issued by corporations to generate cash; these notes are not issued by banks (option a) or the Federal Reserve System (option b). This term does not refer to long-term debt (option d).

Answer 18

You don’t need the term of the loan to answer this. The interest alone on the first payment is $583.33, which does not provide for amortization. Amortization of a mortgage requires a payment that covers the interest plus an amount that allows the mortgage balance to go to $0 over the term (option a). The interest only is $583.33, which is not enough to amortize the loan. Assuming a 30-year loan, the interest on the first month plus 1/360th of the amount of the loan is $861.11. If the balance of the mortgage is divided by the term, assuming 360 months, this ignores the time value of money (option d). The mortgage payment must cover the interest ($583.33) plus something to amortize the loan.

Answer 19

The use of borrowed funds to increase equity return

Answer 20

The government has the right to force a sale of the real estate to pay the back taxes.

Answer 21

Value in use

Answer 22

An analysis of the capacity of a property to house economic activities, supply services, and provide amenities to meet human needs

Answer 23

Must be adjusted for in the cost approach The high land value does not change income or expenses, so it will not affect the outcome (option a). The high land value will not be realized until the building is removed and it does not raise the net operation income (IO), so it will not change the market value (VO) (option b). This issue is quite relevant in the cost approach (option d). Note that the cost approach separates the land and buildings, and the land is always valued as though vacant, so the higher land value will come through in this analysis. However, it will not add to the value overall until the land value is more than the improved property value, so there will be functional obsolescence for the wrong improvement on the retail site.

Answer 24

This is an example of a conditional sales contract.

Answer 25

A trade fixture

Answer 26

Recording gives public notice of the transaction and sets the priority of the claims

Answer 27

The rights of property owners to access a lake or ocean

Answer 28

Lose his or her interest in the property

Answer 29

A deed in lieu of foreclosure

Answer 30

Finished areas above grade that are heated and/or cooled

Answer 31

Pneumatically placed concrete that is usually associated with in-ground pools

Answer 32

Material used for electrical wiring

Answer 33

Window with several panes A jalousie is a type of window with several panes that are much wider than they are tall.

Answer 34

The area of a building that is above grade Superstructure refers to the area of a building that is above the ground.

Answer 35

Below the freeze line in most buildings The layout of the buildings’ ground floor is a floor plan, not a footing (option a). The foundation walls of the structure are above the footings (option c). The footings hold up the foundation and the superstructure. The footings are set in the soil. Therefore, the footings need to be wider than the foundation in order to hold up the weight (option d).

Answer 36

Portion of a roof projecting beyond the vertical wall of the building

Answer 37

An impairment of the functional capacity of a building due to design or construction

Answer 38

One of the closely spaced vertical members in a stairway or balcony

Answer 39

Structural members that the ceiling is attached to The structural boards that the underlayment is attached to are called **rafters** (option b). The boards that the gutters are attached to are usually called the gutter boards or **belt boards** (option c). The steel supports under the first floor that run between the basement walls are often called **center supports** (option d).

Answer 40

A type of wood siding Clapboard siding is a type of overlapping wood siding.

Answer 41

The masonry cap put on a wall to provide for watershed A coping is not a tool; it is a cap on a masonry wall.

Answer 42

Legal use that does not conform to development standards The use is not illegal since it was established prior to the change in building standards (options b and d). In this case, the use is not the problem because the property is zoned for commercial use and used for commercial purposes. The property’s use is fine, but its adherence to development standards is not (option c). While this may be poorly labeled as a “legal nonconforming use” in many communities, the development standards are the problem rather than the use.

Answer 43

A type of framing in which the studs extend from the sill to the roof in residential construction; the second floor is supported by a horizontal ribbon or ledger board and joists that are nailed to the studs

Answer 44

Demising partition A structural support may or may not be a demising wall, and demising walls are often not support walls (option a). A curtain wall is an exterior wall that encloses but does not support the structural frame of a building (option b). The wall that separates one tenant from another in a multitenant of office building is called a demising partition (option d).  

Answer 45

Face the side of the door that swings away from you. If the hinges are on the left, the door is left-handed, and if they are on the right, the door is right-handed.

Answer 46

Total economic life minus the remaining economic life

Answer 47

The right to use and occupy her unit and an undivided interest in the common areas

Answer 48

These items can be included in the appraisal, but the appraiser needs to analyze their impact on the property’s value.

Answer 49

**Easements in gross** An **easement by necessity** is an implied easement commonly in favor of a buyer that has no access to his or her land except over other lands owned by the seller (option b). An easement by necessity may be implied when a landowner splits a property and the sold parcel is landlocked. An **easement in gross** is similar to most easements used by utilities; it has no dominant estate since no single property is benefited by the easement. The term easement in gross describes an easement that does not favor a particular property owner. This type of easement is used by utility companies for the maintenance of pipes, cables, etc.

Answer 50

To cross over or access another person’s property without obtaining the current owner’s permission

Answer 51

Fee simple interest in the attached home on a small lot with a mandatory fee

Answer 52

Is located on a leased property This equipment was installed in a permanent manner. It would be considered real estate in most legal classifications but is clearly a trade fixture if it is on leased premises (option a). The third option (“the equipment is owned by the same person who owns the building”) implies that the owner of the building owns the medical equipment, but the equipment would not be considered a trade fixture if the unit was leased or if there was a lease for the machinery in place (option c). The machinery could be included with the sale of the real estate if it were not a trade fixture (option d). It could also be considered as leased equipment in an owner-occupied property.

Answer 53

Hilda and Henry own an undivided interest. If Hilda dies, Henry receives the property. **joint tenancy** If one owner dies, their share automatically passes to the surviving owners. **Tenancy in Common** There is no right of survivorship. If one owner dies, their share passes according to their will or state law. **Tenancy by the Entirety** A special form of joint ownership available to married couples. Protects the property from creditors of one spouse, and upon the death of one spouse, the surviving spouse automatically inherits the property.

Answer 54

The correct calculation is: 0.125 x 0.3333 = 0.04166 = 4.166%

Answer 55

The value, in terms of cash, of a property that is bartered for another asset or assets, cash being the “yardstick” by which the comparative value of each can be assessed (used synonymously with market value in some markets) Value in exchange is used in some markets as a synonym for market value; it is the amount a seller will exchange for cash in a sale.

Answer 56

An industry that generates more income than is consumed in the community A basic industry is one that generates more income than is consumed in the community. For example, education would be a service industry in most communities but a basic industry in a college town. Manufacturing automobiles is nearly always a basic industry in any community (options a and c). A basic industry can represent the two highest employers in the community, but it doesn’t have to (option d).

Answer 57

A full section of land is one square mile, or: 5,280 × 5,280 = 27,878,400 square feet = 640 acres

Answer 58

A heating or cooling system that relies on a refrigerant (such as Freon) for cooling and a reversed cooling system for heating A heat pump is fueled by electricity, not oil or natural gas. It may have a gas auxiliary furnace, but the heat pump only needs electricity (option a). Evaporative cooling is a cooling system that relies on the cooling caused by water evaporation (option b). Heat is created by running electricity through poor conductive material; this is known as an electric resistance heater or furnace (option c).

Answer 59

Outside covering that protects the structure from the elements Option b describes the structural framing. Option c describes the foundation system, and option d describes the roof system—e.g., trusses.

Answer 60

A home that has a permanent chassis to provide for transportability initially and thereafter

Answer 61

Air density and weight to move the warm air throughout the building

Answer 62

Include small strips of wood (lath) covered with a wet plaster that provide a surface for the walls when dried

Answer 63

Interior walls that are built into the roof line of the second floor A 1.5-story home uses the attic area for the second floor living area (options a and c). The roof pitch must be steep enough to allow for living area below it. The roof pitch usually needs to be more than 5/12 (option d).

Answer 64

The sales comparison approach

Answer 65

Probably attached homes on small lots that are equal to the foundation; each person has sole ownership of his or her unit as well as membership in the HOA, which is responsible for maintenance

Answer 66

Littoral rights A property that abuts a navigable body of water has littoral rights to access the water but does not normally include the right to modify the shoreline or build over the body of water (options a and b). Riparian rights refer to properties next to navigable bodies of water that lead from property to property—e.g., streams and rivers (option c).

Answer 67

Extend to the high watermark of the riverbank nearest the property

Answer 68

Crops produced annually by the labor of a tenant; this property belongs to the tenant and upon his or her demise will pass to the tenant’s heirs Emblements are the crops produced by a tenant. They are considered the property of the tenant until harvest is possible.

Answer 69

Adverse possession **Eminent domain** is used by governments to acquire property but not to settle disputes between property lines (option a). **Easement by prescription** is defined in The Dictionary of Real Estate Appraisal (5th ed.) as “The right to use another’s land, which is established by exercising this right openly, hostilely, and continuously over a statutory period of time.” This does not involve ownership but rather the right to use. Easement by prescription is possible, but the owner is claiming the property rather than a right to cross over it (option b). The claim of the owner to the south is not based on flawed thinking due to adverse possession rules (option c). Note that appraisers should not make assertions about the ownership of real estate in scenarios such as this. This scenario would probably be decided in a courtroom or by a private settlement agreement.

Answer 70

$50,000 The site is always valued as though vacant. There is probably also an increment of value in the legal nonconforming use, but that is not land value.

Answer 71

The differences between the motivations of the seller and buyer on the date of sale of a comparable and the motivations of buyers and sellers as described in the definition of value

Answer 72

Quantitative analysis

Answer 73

Divide the reconciled land-to-property value ratio by the improved property value range in the subject market to get a land (site) value opinion. Option **a** describes part of the **first** step of allocation. Option **b** describes part of the **fourth** step of allocation. Option **d** describes **part of the second** step of allocation. Option c is not part of the allocation method; it is **incorrect because it involves division when multiplication should be involved**.

Answer 74

The construction of the building lowers the risk to the owner of the leased fee

Answer 75

The subject is probably worth less than $429,900. If the owner of the property has tried without success to sell it for a reasonable period of time for $429,900 and higher, it is logical to conclude that the market has rejected this price.

Answer 76

A sale in which the lender’s loan balance is more than the net proceeds from a sale A short sale describes a sale in which the proceeds are not sufficient to pay off the loan balance and the lender agrees to accept less than the balance to release the lien.

Answer 77

bilateral monopoly

Answer 78

$200,000 less the cost of removal of the building if it can be removed for less than $50,000; otherwise, it is $150,000

Answer 79

Age of the improvements Elements of comparison are reasons why the prices of real estate vary. The incorrect answer options are all units of comparison rather than elements of comparison.

Answer 80

0, 0, 0 The subject’s financing does not affect the value. The concessions included in the subject’s price do not make the subject’s value higher. If the subject’s financing did affect the value, the value would depend on the seller’s agreement to pay the buyer’s financing and add it to the comparable’s price. The subject’s value could be 10% higher just based on the seller’s willingness to pay.

Answer 81

When the seller contributions affect the sale price of the property; if the seller pays some expense but this does not affect the price, no adjustment is needed If the seller-paid expense for financing does not affect the price, no adjustment is necessary.

Answer 82

If the seller was motivated and paid financing costs for the buyer, there should be two adjustments: one for the financing concessions and another one for conditions of sale (seller motivations).

Answer 83

Make a financing concessions adjustment for this financing if it affected the sale price A financing concessions adjustment is needed if the sale price was affected by the financial arrangement.

Answer 84

$100,000 / 1.1 = $90,909

Answer 85

State that the opinion of value is based on non-market financing or financing with unusual conditions or incentives, describe the assumed concessions for the property being appraised, and report the impact on value of the concessions USPAP states that if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, the terms of such financing must be clearly identified and the appraiser’s opinion of their contributions to or negative influence on value must be developed through the analysis of relevant market data. There is no circumstance in which an upward adjustment would be made.

Answer 86

The correct calculation is: $5,000 / 100 = $50

Answer 87

The cash-equivalent sale price is $425,000.

Answer 88

The appraiser is making each adjustment independent of the others; an adjustment or lack of adjustment for one element of comparison does not affect the next adjustment

Answer 89

All of the above

Answer 90

The order of these adjustments will affect the final answer because prior adjustments raise or lower the subsequent adjustment amounts

Answer 91

Functional obsolescence The loss in value in this case is due to the placement of the improvements on the site and is functional obsolescence, not external obsolescence (option a). Physical depreciation is an appraisal term, but physical obsolescence is not (option c). The term obsolescence indicates that something is wrong, but physical depreciation is normal (option d).

Answer 92

Building the improvements exactly as they would appear if they were new on the effective date of appraisal

Answer 93

Architect’s fees All of the incorrect answer options (b, c, and d) describe items that would be included in the builder’s contract and would be considered direct or “hard” costs.

Answer 94

To eliminate some functional obsolescence from the cost approach

Answer 95

The cost of a component of the building, including all labor and materials— e.g., linear feet of a wall, sections of the roofing, etc.

Answer 96

Discounted because some of the measured loss would likely be attributable to a lower land value due to proximity to the railroad tracks

Answer 97

The **comparative-unit** method involves using a cost per square foot estimate from a cost service. **Cost index trending** is a technique by which the appraiser bases a more contemporary cost of construction estimate on the actual cost of construction at a prior date. The **unit-in-place** method is a modification of the quantity survey method. Cost of labor, materials, overhead, and profit are combined into a unit cost for each portion of the building. Cost per square foot for roofs and walls, and linear foot costs of foundation walls are examples of the unit-in-place method The **quantity survey method** requires that the appraiser create a detailed inventory of every item of material, equipment, labor, overhead, and fees involved in the construction of a property. This method is not routinely used by appraisers because it is extremely time consuming

Answer 98

It is not reflected in the site value or improvement value, so it requires another increment of value to be added A legal nonconforming use does not overvalue the land. The land value is always at the highest and best use as though vacant. Buyers will usually pay for a legal nonconforming use, which in the cost approach leaves out a portion of the property value (option a). A legal nonconforming use does not undervalue the building (option b) or affect the sales comparison analysis (option d). The land is always valued as though vacant, so legal nonconforming uses can mean that the value of the land as though vacant and at the highest and best use may be less than what the value of the land would be considering the legal nonconforming use. The value of the land assumes that a highest and best use is legally allowed. This means that the market value of the property will be the value of the land (with legal use), the value of the building and site improvements, and the value of the grandfathered zoning, which allows the owner to use the property for more than what the zoning allows.

Answer 99

$10,000 It would be classified as functional incurable because it only costs $10,000 in value but costs $25,000 to remedy, so the prudent buyer would endure the loss rather than fix the problem

Answer 100

Functional curable obsolescence The cost to cure is $5,500, and the value added is $10,000. Because it would be logical to cure the problem, this means it is curable.

Answer 101

Initial equity investment The equity dividend rate (also known as the cash-on-cash return) is a measure of the return on the equity invested in a property. It’s calculated by dividing the cash flow after debt service by the initial equity investment.

Answer 102

The value developed by one of the methods or techniques commonly used in the income capitalization approach

Answer 103

It raises them. Capitalization rates are the ratio of the first year’s income to value. Therefore, if the future is better than the present, buyers will pay more, which is facilitated by a lower capitalization rate. If the value is decreasing, buyers will pay less, which shows a higher capitalization rate.

Answer 104

It is calculated by dividing the equity cash flow (Ie) by the down payment (the value of the equity).

Answer 105

"in arrears" means that payments are made after the period to which they apply. So, if annual rental payments are made "in arrears," the tenant pays the rent at the end of the rental period rather than at the beginning.

Answer 106

**the same**, because R = Y − Δn

Answer 107

The reciprocal of the net income multiplier is the capitalization rate: 1 / 16.55 = 0.0604 or 6.04%

Answer 108

Debt Coverage Ratio = NOI / ADS NOI - Net Operating Income ADS - Annual Debt Service

Answer 109

Equity Dividend Rate (RE)= Annual Cash Flow After Debt Service / Initial Equity Investment

Answer 110

Determine the Initial Equity Investment Purchase Price of the Property = $1,235,000 Mortgage Amount = 75% of the Purchase Price, aka 926,250 **Initial Equity Investment = Purchase Price - Mortgage Amount** Initial Equity Investment=1,235,000−926,250=308,750

Answer 111

Annual Net Operating Income (NOI) = $96,000 Monthly Mortgage Payment = $6,546.54 Annual Debt Service = Monthly Payment × 12 Annual Debt Service=6,546.54×12=78,558.48 Annual Cash Flow After Debt Service = NOI - Annual Debt Service Annual Cash Flow After Debt Service=96,000−78,558.48=17,441.52

Answer 112

To calculate the present value and rate of return

Answer 113

The yield rate generally represents the annual rate of return on an investment based on **expected or required** returns the IRR is the discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero. It represents the **actual** rate of return based on the timing and magnitude of all future cash flows, including both positive (income) and negative (expenses) ones.

Answer 114

The investor thinks property values are declining.

Answer 115

Market Value = NOI / (DSCR * Loan-To-Value-Ratio * Mortgage Constant) DSCR - Debt service coverage ratio

Answer 116

Purchasers have three alternative options available Purchasers have three alternative options available: they can choose to build a new property (cost approach), rent an existing property (income capitalization approach), or buy an existing property (sales comparison approach).

Answer 117

Preparing and delivering the report with the defined value

Answer 118

date the completed report was transmitted to the client

Answer 119

illustrate the applicability of USPAP in specific situations. Advisory Opinions (AOs) are a form of guidance issued by the ASB to illustrate the applicability of USPAP in specific situations. AOs are not are part of USPAP and therefore do not establish new standards or interpret existing standards.

Answer 120

assignment results The appraiser must not share assignment results and confidential information with unauthorized persons as addressed in the Confidentiality section of the ETHICS RULE.

Answer 121

when the value developed includes reasonable exposure time in its definition

Answer 122

highest and best use

Answer 123

The Appraisal Subcommittee (ASC) maintains a supervisory role over state appraiser regulatory agencies and real property appraisers, and this includes monitoring the activities of the Appraisal Foundation.

Answer 124

five years after preparation and at least two years after the final disposition

Answer 125

intended use AO-36 clearly states that, “the intended use provide[s] the context for the depth of the analysis required in development and the level of detail required in reporting.”

Answer 126

There are distinct levels of trade and each may generate its own data. The Comment to Standard Rule 7-3(b) states that, “the appraiser must recognize that there are distinct levels of trade (measurable marketplaces), and each may generate its own data.”

Answer 127

within a reasonable and applicable time period For personal property, Standard Rule 7-5(b) states the appraiser must, “analyze all prior sales of the subject property that occurred within a reasonable and applicable time period if relevant given the intended use of the appraisal and property type.” Of course, this assumes such information is available to the appraiser in the normal course of business.

Answer 128

when required by law, regulation, or agreement with the client The PREAMBLE states that, “an appraiser must comply with USPAP when either the service or the appraiser is required by law, regulation, or agreement with the client.”

Answer 129

SCOPE OF WORK RULE The SCOPE OF WORK RULE applies only to appraisal and appraisal review. Since collecting general market data would not be identified as an appraisal or appraisal review, the SCOPE OF WORK RULE would not apply.

Answer 130

The two would not be defined as appraiser’s peers of each other. The DEFINITIONS section defines an appraiser’s peers as, “other appraisers who have expertise and competency in a similar type of assignment.” Therefore, the two appraisers would not be defined as appraiser’s peers of each other given their specialization.

Answer 131

real and personal property

Answer 132

- Calculate cap rate: - N = 10 - I = 11 (the yield rate) - PV = -1 - FV = 0.9 (1-10%) - Solve for PMT = 0.11598 => 11.598% is the cap rate - - Apply cap rate to the lease $ and you get $474,219 value

Answer 133

1) Mortgage Value ($468,384) = Annual Debt Service / Mortgage constant 2) Mortgage is 75% of the value, therefore Value = 468,384/0.75=624,512 3) NOTE – You don’t need NOI!

Answer 134

Rate = Yield – Change (per unit). Here the Change is 0 (the estimate in 15 year is same as now) => R = Y = 7% So Value of the lease is $6,000 (annual Lease)/.07 = 85,714 Land lost to the billboard if 0.5 (ac) *10,000 ($ per ac) = 5,000 Total adjustment is $85,714-5000=80,714

Answer 135

We only need the term (40 years), Leasehold yield rate (9.5%) and the fact there are no renewals at the end of the lease, aka the future value is 0. On HP12C: N=40 I=9.5 PV=-1 FV = 0 Solve for PMT = 0.097587 = Cap Rate

Answer 136

NOI – Debt = 50000 – 44000 = 6,000 Equity = 6000/Equity Cap Rate (8%) = 75,000 Add Equity and Mortgage = Value of Property = 75,000 + 400,000 = 475,000

Answer 137

PMT = Annual Rent = $60,000 N = 5 I = 9 FV= 650000 Calculate PV=655,834.48

Answer 138

FV = 25 * 50,000 = 1,250,000 (as there is no change in value indicated in the future) I = 12/12 N=20 PMT = 0 Solve for PV = 1,0244,431

Answer 139

demand side: desire and effective purchasing power

Answer 140

supply side: scarcity and utility

Answer 141

**Functional Incurable** - Caused by a Deficiency: Cost of existing item $ 0 Less depreciation previously charged - 0 Plus value of loss 45,000 Less cost if installed new - 40,000 Equals depreciation for functional obsolescence $ 5,000 Steps 1 and 2 are zero because the item does not exist now. Step 3 is the value of the income lost. Step 4 is what the cost would have been if the docks had been installed when the warehouse was originally built. Step 5 is the amount of incurable functional depreciation because the building was built without an important ingredient.

Answer 142

Also known as the Cash-on-Cash Return Equity Dividend Rate (EDR)=(Net Operating Income (NOI)−Debt Service)/ (Equity Investment) EDR=($3,300,000-$2,475,000)/($296,440-237,000) EDR=7.21% Note: (Net Operating Income (NOI)−Debt Service) also called **Pre-tax cash flow**

Answer 143

D) 25 years Y = R + CR 7% = 11% + CR -4% = CR (building depreciates 4% annually 1/4% = 25 years until building deteriorate fully.

Answer 144

Insurable value

Answer 145

11.0% Rm = annual debt pmt/initial loan amount $55,084/$500,000

Answer 146

Surplus productivity

Answer 147

Cost of existing item $ 6,000 Less depreciation previously charged - 1,800 Plus cost to cure (all costs) 13,000 Less cost if installed new - 10,000 Equals depreciation for functional obsolescence $ 7,200 In Step 2, the depreciation was calculated as .30 x $6,000, or $1,800. In Step 3, the cost to cure will be $12,000 to retrofit the installation plus $2,000 to remove the old system - minus $1,000 that can be reclaimed as salvage value of the old equipment. Essentially Steps 1 and 2 calculate the loss for disposing of equipment that still has 70% of its life left, and Steps 3 and 4 calculate the penalty for not installing the proper system when the building was new.

Answer 148

A) $129,572 Find NPV using blue CF keys and then plug NPV into PV, i = 13% N = 5 and find PMT.

Answer 149

Overall Cap Rate = 10% = Income/Value **0.1 = (40,000 + Ib)/Vo** (Ib= Income from building, Vo = Overall Value) We will split the fraction into two: **0.1=40000/Vo+Ib/Vo** We know site representes 35% of the total value => the building is 65% of the total value. Therefore, we found x for 1=x*.65 so we can write Ib/Vo differently as: *Ib/Vo = Ib/(1.5385*0.65*Vo)* We know cap rate for the building is 11%, so we will replace Ib/(0.65*Vo) for 11% (That is the building income divided by building value, aka cap rate) and we will get **0.1=40000*Vo + 0.11/1.5385** **0.1=40000*Vo+0.071498** **0.0285018 = 40,000*Vo** **Vo=1,403420.75** Land is 35% of the overall value so **~ 491,000**

Answer 150

effective demand

Answer 151

Township = 6 x 6 sections (36 total) Each section 1 square mile = 640 acres Length = 1 mile = 660 x 8 feet = 5280 feet

Answer 152

$2,400 Functional Curable - Requiring an Addition Procedure: Cost of existing item 0 Less depreciation previously charged - 0 Plus cost to cure (all costs) OR value of the loss 12,400 Less cost if installed new -10,000 Equals depreciation for functional obsolescence $2,400 Steps 1 and 2 are zero because the item does not currently exist in the property. In Step 3, the cost to cure is $12,400. In Step 4, the cost, if it had been installed when the building was new, is $10,000. Step 5 represents the excess cost to cure at this point in time. This penalty is curable functional obsolescence.

Answer 153

Cost of existing item Less depreciation previously charged Plus cost to cure (all costs) OR value of the loss Less cost if installed new Equals depreciation for functional obsolescence

Answer 154

D) $36,000 The overall rate of 9.5% is misleading. Calculate Rate using the recent sale,aka: N=3, PMT -12,000; PV=29,000-solve for I=11.64 Used that for calculation for the subject (12-9)*5000=15,000 (Leasehold Income) N=3; I=11.64; Pmt=15,000 solve for PV =36,250

Answer 155

C) 7.2% **Note:** In this case the 7% amortization rate is already after the points were applied! One point = 1% of the loan Calculate monthly payment: N=25 x 12, I=7/12, PV=-250,000, solve for pmt=1,767 Calculate yield rate by inputting the loan amt lender actually gave out (aka $250,000 loan - $5,000 for the points) N=25 x 12, PV=245,000, PMT=1767, solve for i=0.602 **this is monthly(!) yield. Multiply by 12 = 7.2% for annual**

Answer 156

1) Sale price: $300,000 Down payment: 20% of $300,000 = $60,000 Loan amount (balance): $300,000 - $60,000 = $240,000 2)Market value of the note: $250,000 for a face value of $275,000. Calculate the Discount Rate on the Note: Discount rate = (Face value - Market value) / Face value Discount rate = ($275,000 - $250,000) / $275,000 = 0.09091 (approximately 9.09%). 3)Determine the Adjusted Value of the Loan Amount: The seller's loan ($240,000) will be discounted by the same rate. $240,000 × 0.90909 ≈ $218,182. 4)Add the Down Payment to Get the Adjusted Sale Price: Adjusted sale price = Adjusted loan value + Down payment. Adjusted sale price = $218,182 + $60,000 ≈ $278,200. Answer: D) $278,200

Answer 157

- Comparative unit Estimates the cost of construction based on costs per unit area (e.g., square foot) - Unit in place Breaks the building into functional elements (e.g., walls, roof, foundation) and estimates the cost of each element separately. More accurate than comparative unit - Quantity survey it accounts for every material, cost, and labor detail; highly accurate and time consuming (typically not used in appraisals)

Answer 158

Cost of existing item $ 6,000 Less depreciation previously charged - 1,800 Plus cost to cure (all costs) 13,000 Less cost if installed new - 10,000 Equals depreciation for functional obsolescence $ 7,200 In Step 2, the depreciation was calculated as .30 x $6,000, or $1,800. In Step 3, the cost to cure will be $12,000 to retrofit the installation plus $2,000 to remove the old system - minus $1,000 that can be reclaimed as salvage value of the old equipment. Essentially Steps 1 and 2 calculate the loss for disposing of equipment that still has 70% of its life left, and Steps 3 and 4 calculate the penalty for not installing the proper system when the building was new.

Answer 159

standard deviation divided by mean

Answer 160

C) 14.17% $20,000/.10 = $200,000 (Value of FS) $12,500/.085 = $147,059 (Value of LF) $200,000-$147,059 = $52,941 (Value of LH) $20,000-$12,500 = $7,500 (Income of LH) $7,500 (Income of LH) / $52,941 (Value of LH)= .1417

Answer 161

A) Decreasing marginal return

Answer 162

Exposure time precedes the effective date of the appraisal.

Answer 163

The Appraisal Subcommittee (ASC) maintains a supervisory role over state appraiser regulatory agencies and real property appraisers, and this includes monitoring the activities of the Appraisal Foundation.

Answer 164

AO-36 clearly states that, “the **intended use** provide[s] the context for the depth of the analysis required in development and the level of detail required in reporting.”

Answer 165

The **SCOPE OF WORK RULE** applies only to appraisal and appraisal review. Since collecting general market data would not be identified as an appraisal or appraisal review, the SCOPE OF WORK RULE would not apply

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