lesson 1 Flashcards by Stephen F.

In preparing a market value appraisal with a retrospective date of value, is the appraiser allowed to consider any information after the effective date of value, and why?

a) Yes; as long as there was no appreciation or depreciation in value of the market area.
b) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends.
c)No; potential buyers could not have known about subsequent data on the effective date.
D) No; the use of newer sales and listing information is not permitted due to the difficulty of verifying the information.

B) Yes; the appraiser may use data subsequent to the effective date as a confirmation of trends.

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An appraiser was employed by a bank to value the leasehold interest in a multiple-tenant warehouse on leased land for a mortgage loan in a federally-related transaction. Under what definition of value is the appraiser operating?

A) Use
B) Market
C) Going concern
D) Assessed

B) Market

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Which of the following values would a bank request for a new loan on an established hotel?

A) Liquidation value
B) Value in use
C) Investment value
D) Going concern value

D) Going concern value

Going concern value refers to the value of a business or property as an operate into the foreseeable future

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What economic principle is represented by the power trend line graph of the price per unit of local apartment complex sales?

A) Decreasing marginal return
B) Anticipation
C) Contribution
D) Surplus Productivity

A) Decreasing marginal return

This is because as the trend continues upwards price per unit will have diminishing returns.

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Which of the following demand-side economic factors creates value?

A) Desire and utility
B) Scarcity and effective
purchasing power
C) Scarcity and utility
D) Desire and effective
purchasing power

D) Desire and effective
purchasing power

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An appraiser concluded a market-derived 9% overall capitalization rate within the income capitalization approach. The user of the appraisal asked the appraiser to render a second value based upon the user’s required 8.75% overall rate. What definition of value applies to the secondary value conclusion?

A) Use value
B) Special purpose
C) Going concern value
D) Investment value

D) Investment value

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If a co-owner in tenancy in common agreement is dissatisfied with the ownership arrangement, what remedies are available to the co-owner?

A) Sell the partial interest, seek voluntary partition, or demand the court sell the property.
B) Seek voluntary partition, demand partition by the court, of demand buyout by the other co-owners.
C) Seek voluntary partition, demand partition by the court, or request a court appointed referee sell the property
D) Sell the partial interest, seek voluntary partition, or demand partition by the court.

D) Sell the partial interest, seek voluntary partition, or demand partition by the court.

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What influence on value is illustrated when a property’s value increases due to a water right being approved by an oversight board?

A) Governmental
B) Geographic
C) Economic
D) Social

A) Governmental

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Which of the following methods of cost estimation is the most comprehensive and accurate?

A) Marshall and Swift
B) Quantity survey
C) Comparative unit
D) Unit in place

B) Quantity survey

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The “as vacant” highest and best use is for retail and the as improved highest and best use is for single-tenant office. Retail uses will support a $10 per sf land value whereas office uses will support a $5 per sf land value. The appraiser values the land $10 per sf and the improvements are valued at their interim contribution to value. What principle underlies this valuation process?

A) Consistent use
B) Diminishing returns
C) Increasing returns
D) Anticipation

D) Anticipation

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What additional steps, if any, are considered in the investigation of a use that is currently a legal permissible use?

A) Conduct a marketability analysis
B) No further investigation is necessary for an existing improvement
C) Determine maximal return and assume a zoning change
D) Investigate reasonable probability of a change to a permissible use

D) Investigate reasonable probability of a change to a permissible use

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An appraiser is preparing a feasibility study of a distribution center and needs to consider interstate highway accessibility. The appraiser also considers air and rail transportation available in the area. All of items considered collectively would be and example of what relationship?

A) Location
B) Linkage
C) Siting
D) Environmental

B) Linkage

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An appraiser is contacted by a property manager to appraise a large and complex non-residential property. The property manager requires the appraiser to pay $3000 to procure the assignment. How can the appraiser accept the assignment and still comply with USPAP?

A) The appraiser must prepare a separate invoice for the property manager clearly showing the commission paid for the assignment.
B) The appraiser must reject the assignment since the payment of commissions or things of value to procure an assignment is unethical.
C) The appraiser must contact the property owner and make them aware of the commission requested by the property manager.
D) The appraiser must disclose the commission in the certification and any letter of transmittal that includes conclusions

D) The appraiser must disclose the commission in the certification and any letter of transmittal that includes conclusions

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As a part of an analysis of an income producing property, three alternative investment possibilities were analyzed and compared. The alternatives were the subject, a government bond fund, and a collateralized mortgage obligations fund. Which of the following appraisal principles serves as the foundation of the analysis?

A) Opportunity cost
B) Utility
C) Effective purchasing power
C) Supply and demand

A) Opportunity cost

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The analysis of comparables sales of office buildings indicates that after the land value and depreciated direct indirect costs are subtracted from the sales price, there is still an increment of value remaining. What term describes the increment value?

A) Contractor’s incentive
B) Entrepreneurial incentive
C) Entrepreneurial profit
D) Project return

C) Entrepreneurial profit

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What construction class of buildings has wood or light steel frames and roof?

A) Class C
B) Class D
C) Class A
D) Class B

B) Class D

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The building capitalization rate for a commercial building is 11.0%. The rate of land appreciation is 3.0%, and the yield rate is 7.0%. What is the useful life of the building?

A) 10 years
B) 30 years
C) 14 years
D) 25 years

D) 25 years

Subtract the yield rate from the building capitalization rate:
11.0% − 7.0% = 4.0
The yearly depreciation rate is 4%.
Divide 1 by the yearly depreciation rate.
1 / .04 = 25 years

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What term describes the lump sum benefit an investor receives upon termination of an investment or at the intermediate analysis period during the term of an investment?

A) Return of capital
B) Equity dividend
C) Return on capital
D) Reversion

D) Reversion

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A staff appraiser, employed by a local bank for 5 years, plans to leave the bank to open a independent appraisal business. Must the appraiser remove all work files for assignments completed for the bank?

A) No; the appraiser may make arrangements with the bank to access or retrieve the files
B) Yes; the appraiser must remove all files from the bank.
C) No; they were completed for the bank and are the property of the bank.
D) Yes; the appraiser must remove the files and destroy them.

A) No; the appraiser may make arrangements with the bank to access or retrieve the files

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A) A positive adjustment to the subject for advantageous financing
B) A positive adjustment because the sales is adjusted to the subject
C) A negative adjustment because the sale is adjusted to the subject
D) A negative adjustment to the subject because it will be financed at market rates.

C) A negative adjustment because the sale is adjusted to the subject

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An appraiser has been asked to appraise real property interest of a single-unit residence. The same appraiser performed an appraisal of the residence six months ago and a construction draw inspection two years ago. What disclosure must the appraiser make prior to accepting this assignment?

A) Disclose the prior appraisal assignment and the prior construction draw assignment to the current client
B) Disclose the current assignment to the client who requested the construction draw.
C) Disclose only the prior appraisal assignment to the current client
D) Disclose the current appraisal assignment to the client of the previous appraisal assignment

A) Disclose the prior appraisal assignment and the prior construction draw assignment to the current client

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An appraiser concluded a market derived 9% overall capitalization rate within the income capitalization approach. the user of the appraisal asked the appraiser to render a second value based upon the user’s required 8.75% overall rate. What definition of value applies to the secondary value conclusion?

A) Use value
B) Special purpose value
C) Going concern value
D) Investment value

D) Investment value

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A bumper crop of citrus caused a grower to open an unused storage handling facility. The grower has been trying to sell the old facility but it has not attracted buyers due to its condition and the availability of new facilities in the market to handle an average crop. The grower asked a lender for a loan on the old facility to make repairs and insists the improvements have value. What value is being described?

A) Prospective value
B) Value in exchange
C) Value in use
D) Investment value

C) Value in use

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The appraisal assignment of a building under construction requires a value as of the date of stabilized occupancy. What value is required, and what assignment condition is employed?

A) Prospective market value and hypothetical condition
B) Prospective market value and extraordinary assumption
C) Current market value and extraordinary assumption
D) Current market value and hypothetical condition

B) Prospective market value and extraordinary assumption

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The lender/client requested the appraiser provide a value opinion on a proposed property at stabilized occupancy. What type of value is the client requesting? A) Investment value B) Value in use C) Retrospective value D) Prospective value

D) Prospective value

The appraiser is asked to value a proposed assisted living facility. The appraiser surveys the bed count and occupancy at existing facilities, checks with local authorities on other proposed facilities, and interviews operators about any planned closure of beds. What portion of the market analysis has the appraiser completed? A) Supply analysis B) Demand analysis C) Feasibility analysis D) Investment analysis

A) Supply analysis

A client requests a land valuation assuming a zoning change from agricultural to low-density residential. The subject tract of land is adjacent to city services and lies in the path of growth, under what conditions would the appraiser use a "hypothetical condition" rather than an "extraordinary assumption"? A) The pace of land development has slowed because of a poor economy B) The zoning change process is expensive although most petitions in the area have been approved C) The underlying land use plan calls for eventual residential development D) There have been unsuccessful zoning change applications on this property

D) There have been unsuccessful zoning change applications on this property

What criteria are applied first when conduction a test for highest and best use? A) Physically possible and legally permissible B) Legally permissible and maximally productive C) Physically possible and financially feasible D) Financially feasible and maximally productive

A) Physically possible and legally permissible

A retail space has a net rentable area of 10,000 sf. Market rent is $24 per sf per year. Contract rent is $22 per sf per year. The lease has a percentage rent clause that requires %5 of gross sales volume over $4,400,000 on a natural breakeaven point. Sales volume last year was $5,500,000. A) At a rate higher than minimum base rent B) At a rate equal to the market rent C) At a rate lower than market rent D) At a rate equal to minimum base rent

A) At a rate higher than minimum base rent

A building owner is seeking a loan on an occupied, multiple-tenant retail center on leased land. What property interest should be appraised? A) Fee simple B) Leasehold C) Going concern D) Leased Fee

D) Leased Fee

The assignment is a multi-unit home. Three comparable sales in the area that sold in the last year indicated landlords are having difficulty raising rents. In the last 15 days, the municipality announced a tax increase of 10% to update an aging water system. What is the effect on indication of value, and why? A) Value will decline; the net operating income will decline. B) Value will remain the same; the sales indicate the same value C) Value will remain the same; the sales comparison approach does not include future occurrences. D) Value will rise; the water system is improved

A) Value will decline; the net operating income will decline

What is likely to be reduced as a result of subdivision reforms, conservation easements, special land-use taxation programs, and no-growth local planning areas? A) Social lifestyles B) Neighborhood C) Demand D) Supply

D) Supply

The basic authority given a condominium association is typically set forth in which of following documents? A) Preliminary title report B) Special warranty deed C) Conditions, covenants, and restrictions D) Declaration of title

C) Conditions, covenants, and restrictions

A consumptive water right typically has greater value than a non-consumptive water right. What economic principle accounts for the difference? A) Utility B) Diminishing returns C) Balance D) Effective Purchasing power

A) Utility

What is an example of an economic force on value? A) Office building construction costs B) Buyer preferences C) Household growth D) Rent control laws

A) Office building construction costs

What term refers to a division of a total market based on the preferences of buyers and sellers? A) Broad market B) Secondary market C) Money market D) Submarket

D) Submarket

Which procedure is associated with a market delineation analysis on a potential new development? A) Determine time-distance relationships to employment centers B) Calculating the net excess or shortage of units C) Study current availability of state subsidies for low income tenants D) Identity proposed properties in the area

A) Determine time-distance relationships to employment centers

The assignment is to appraise a residential property which includes an existing dwelling to be demolished and a new dwelling constructed and completed within six months. The letter of engagement requests the appraiser develop an opinion of value as if completed as of today. What assignment condition must used to complete the assignment? A) Extraordinary assumption B) Limiting condition C) Hypothetical condition D) Jurisdictional exception

C) Hypothetical condition

Which of the following supply-side economic factors creates value? A) Utility and scarcity B) Effective purchasing power and scarcity C) Effective purchasing power and desire D) Utility and desire

A) Utility and scarcity

What valuation techniques should be used for a multiple-tenant shopping center with tenants at various lease rates and terms? A) Effective gross income multiplier B) Discounted cash flow analysis C) Direct capitalization D) Band of investment analysis

B) Discounted cash flow analysis

What are the principal methods for estimating depreciation? A) Age-life method, Marshall and Swift method, effective age method B) Useful life method, age-life method, breakdown method C) Market extraction method, age-life method, effective age method D) Market extraction method, age-life method, and breakdown method

D) Market extraction method, age-life method, and breakdown method

The attorney of an appraiser's client instructs the appraiser to invoke the jurisdictional exception rule to avoid mentioning in the appraisal report and underground storage tank that the appraiser knows to exist in the property. The attorney did not provide any references or citation of law or regulation justifying this action. Should the appraiser follow the instruction from the attorney, and why? A) No; the appraiser's responsibility under USPAP is to verify with the client directly that the attorney's instruction is valid. B) Yes; this is a legal issue and the attorney is presumed to be an expert on the law of jurisdictional exceptions to USPAP C) Yes; the attorney represents the client and his instructions regarding the law are binding on the appraiser D) No; use of JURISDICTIONAL EXCEPTION RULE is triggered by conflict between the requirements of USPAP and the law or regulation

D) No; use of JURISDICTIONAL EXCEPTION RULE is triggered by conflict between the requirements of USPAP and the law or regulation

Homes A and B are in the same subdivision, have the same floor plan and both were built last year, Each sold last week. Home A sold for 15% more than B, which was at market sale price. What would cause Home A to sell for more than home B? A) Home A sold with market financing. B) Home B sold with seller financing C) Home B sold with favorable financing concessions D) Home A sold with favorable financing concessions

D) Home A sold with favorable financing concessions

What is acceleration clause in a mortgage note? A) The lender may demand and increase in the monthly payment B) The lender may demand an increase in the rate of interest if the index rat increases C) The lender may demand payment of a part of the loan to release a portion of the real estate covered by the mortgage D) The lender may demand immediate repayment of the entire balance if the contract is breached

D) The lender may demand immediate repayment of the entire balance if the contract is breached

Which of the following agents of production considers the combination of the other three to develop real property? A) Land B) Entrepreneurial coordination C) Labor D) Capital

B) Entrepreneurial coordination

An appraiser receives an appraisal assignment. The appraiser has not performed any services in connection with this property in the past three years. What disclosures are required under the USPAP? A) The appraiser must disclose the lack of knowledge and /or experience both to the client prior to accepting the assignment and also in the appraisal B) The appraiser must disclose in the report's certification that no prior services have been performed in the last three years C) The appraisers must disclose to the client prior to accepting the assignment and disclose in the report's certification that no services have been preformed in the past three years D) The appraiser must disclose to the client that no services have been performed in the past three years, prior to accepting the assignment

B) The appraiser must disclose in the report's certification that no prior services have been performed in the last three years

An appraisal report allegedly contains misleading information. What entity has the authority to determine if a violation of USPAP has occurred? A) State appraiser regulatory agency B) The appraisal Subcommittee C) Appraisal Standards Board D) Appraiser Qualifications

A) State appraiser regulatory agency

The subject property is a single-unit residence situated on a commercially zoned lot in a transitional neighborhood. The land is value at $60,000 utilizing commercial use land sales in the immediate neighborhood. Overall property value, as a residence, is $80,000. Demolition costs are $5,000. Based on an allocation study, the typical ratio land value to property value for residential property is 20%. Based on the data, what is the highest and best use both as vacant and improved? A) Vacant is residential; highest and best use is improved residential B) Vacant is residential; highest best use is commercial C) Vacant is commercial; highest and best use is residential D) Vacant is commercial; highest and best use is commercial

C) Vacant is commercial; highest and best use is residential Added Value of Improvements = $80,000 − $60,000 = $20,000

An appraisal review assignment includes the client's request that the reviewer either agree with the appraiser's value, or disagree and conclude the reviewer's value opinion in the report as of the date of review. Can the assignment be accepted, and why? A) No; the reviewer may not accept an assignment that requires an alternative value on any effective date. B) Yes; the reviewer may develop an alternative value, but the effective date must be the same as the date of the work under review C) No; the reviewer must replicate the steps of the appraiser to develop an alternative value, but the date can differ from the work under review D) Yes; the reviewer may develop an alternative value and the effective date may be different than the date of the work under review

D) Yes; the reviewer may develop an alternative value and the effective date may be different than the date of the work under review

What type of value reflects the subjective buyer's requirements? A) Going concern B) Market C) Special use D) Investment

D) Investment

An investor developed a shopping center at a total cost of $2,500,000, which includes the cost of the land, direct building cost and associated soft cost. Shortly after construction was completed, the investor sold the property for $2,900,000. What term applies to the difference between the development cost and the sale price? A) Contractor's profit B) Entrepreneurial profit C) Return of capital D) Entreprenurial incentive

B) Entrepreneurial profit

What type of highest and best use is characterized by a life span of three to seven years? A) Interim Use B) Pro Tem Use C) Alternate Use D) Temporary Use

A) Interim Use

A local bank was recently taken over by the FDIC due to a large number of recent foreclosures and under-performing loans. Properties that were estate owned by the bank (REO) were priced below market values to force a quick sale based on a 30 day marketing period in a market that generally sees 180-day marketing times. What influence on value is illustrated when already-depressed real estate values start to drop in response? A) Geographic B) Governmental C) Social D) Economic

D) Economic

When performing a rent survey in an overbuilt market, the appraiser is told that rent levels have not gone down at a particular apartment. What should the appraiser look for to challenge this assertion? A) Free rent of fee waivers B) New carpeting and interior paint C) Lobby remodel and exterior paint D) Leased to buy options

A) Free rent of fee waivers

What influence on value is illustrated by the relationship between a property's proximity to public transportation and the property's value? A) Economic B) Enviromental C) Social D) Governmental

B) Enviromental

The subject is a multi-unit property located on a site which has been down zoned to single-unit use. Using the cost approach, how should the land be appraised? A) As a mixed-use site B) As a single-unit site C) As a multi-unit site D) as a multi-interim use

B) As a single-unit site

In a real property appraisal assignment, what is an appraiser's responsibility under USPAP if a lender refuses to provide a copy of the current agreement of sale of the subject property? A) The appraiser must request a copy of the contract, but if not provided has no further obligations B) The appraiser must state what efforts were undertaken to obtain the information C) The appraiser cannot complete the assignment; when there is a known purchase agreement it must be analyzed D) The appraiser must treat the assignment as a refinance without evidence that there is a transfer of the property

B) The appraiser must state what efforts were undertaken to obtain the information

The owner of a garden center wishes to sell the property to his nephew. The nephew has come to a bank to borrow 80% of the purchase price. The property is a unique property with no truly comparables sales in town. The loan officer has given the appraiser 5 years of income and expense statements of the nursery. The appraiser believes the income approach, based on the income and expense statement provided, is the appropriate approach. If the assignment is to value only the real estate, what other value may be included in the income approach? A) Real estate B) Market C) Intangible D) Building

C) Intangible

An appraiser has been asked to accept a reduced appraisal fee when a mortgage loan does not close, May the appraiser accept this fee arrangement and comply with USPAP, and who or why not? A) yes; the appraiser must disclose the fee arrangement in; the certification B) No; the appraiser must charge clients the same fee for every assignment C) Yes; as long as the loan officer does not stipulate the amount of the value opinion D) No; an appraiser must not accept an appraisal assignment with contingent compensation

D) No; an appraiser must not accept an appraisal assignment with contingent compensation

The appraiser is asked to provide a highest and best use analysis for the subject which currently consists of two storefronts on the first floor and four two-bedroom residential units on the second and third floors. The subject currently generates a net operating income of $5,500 per month. Current value is $550,000. if converted to offices, the estimated monthly net operating income is $8,000 and would be worth $800,000. Cost of conversion is $200,000 and allowed by zoning. Which of the four test will ultimately determine the highest and best use? A) Physically possible B) Legally permissible C) Maximally productive D) Financially feasible

C) Maximally productive

What are the principal methods for estimating depreciation? A) Age-life method, Marshall and Swift, effective age method B) Useful life method, age-life method, breakdown method C) Market extraction method, age-life method, effective age method D) Market extraction method, age-life method, and breakdown method

D) Market extraction method, age-life method, and breakdown method

Why is the neighborhood or market area identified for a residential property often small and typically delineated geographically? A) Location of real estate is fixed B) Large data searches are difficult to analyze and report C) Geographic delineation serves to limit the cost of the assignment to the client D) Lender-required development and reporting guidelines

A) Location of real estate is fixed

What factor of social forces influence real estate values? A) Annual median income B) Zoning density C) Level of education D) Median home prices

D) Median home prices https://arl.colorado.gov/chapter-2-appraisal-process-economic-areas-and-the-approaches-to

Upon confirming a comparable office building sale. the appraiser discovers that the recorded price reflected the purchase of a 50% interest. What element of comparison would be adjusted for this comparable? A) Property rights conveyed B) Financing conditions C) Market conditions D) Conditions of sale

A) Property rights conveyed

What is the most important criteria for selection as a comparable sale? A) A competitive property B) Cash price paid C) Recent in time of sale D) An open market transaction

A) A competitive property

An appraiser receives an assignment to review and appraisal completed six months ago. In the development of the review, the appraiser has gathered the pertinent information and began the reporting process. Which of the following information must be included in the report? A) Identity of the client in the report under review; the closed dates of the pending sales; date review was ordered B) Identity of the person ordering the review; prior three years history of market sales in report under review; intended use C) Identity of the client and intended users; intended use; effective date of the original appraisal D) Identity of the client and intended users; intended use; current sales history if similar

C) Identity of the client and intended users; intended use; effective date of the original appraisal

What term describes the valuation of property to a specific individual but not necessarily to the market as a whole? A) Investment value B) Portfolio value C) Value in use D) Going concern value

A) Investment value

What valuation technique should be used for a multiple-tenant shopping center with tenants at various lease rates and terms? A) Effective gross income multiplier B) Discounted cash flow analysis C) Direct capitalization analysis D) Band of investment analysis

B) Discounted cash flow analysis

What principle describes the ability of an individual or group to participate in a market? A) Effective demand B) Effective purchasing power C) Utility D) Desire

B) Effective purchasing power

A) State appraiser regulatory agency

A property is conveyed by a "deed in lieu." Which of the following imminent events was prevented? A) Inheritance B) Tax Lien C) Foreclosure D) Condemnation

C) Foreclosure

What type of risk is reflected when net operating income will be affected by changes such as shifts in supply or demand influences by property type. Location, or stage in cycle? A) Finacial B) Management C) Market D) Capital market

C) Market

Which influence on value is illustrated by a navigable waterway that has a favorable impact on a market area? A) Environmental B) Social C) Economic D) Governmental

A) Environmental

What principle is illustrated when the resale value of single-family homes declines after the municipality voted to eliminate funding for the local library? A) Austerity B) Anticipation C) Externality D) Balance

C) Externality

As a part of an analysis of an income producing property, three alternate investment possibilities were analyzed and compared. The alternatives were the subject, a government bond fund, and collateralized mortgage obligations fund. Which of the following appraisal principles serves as the foundation of the analysis? A) Opportunity B) Utility C) Effective purchasing power D) Supply and demand

A) Opportunity

May appraisers have assistants sign reports in their absence? A) No; this may never be done, only the appraiser can sign their reports B) Yes; this may be done if the assistant is a licensed appraiser C) No; unless there is a written agreement from the client authorizing this D) Yes; this may be done on a case by case basis provided the appraiser takes due care in protecting their signature from unauthorized use

D) Yes; this may be done on a case by case basis provided the appraiser takes due care in protecting their signature from unauthorized use

All one-to four-unit residential properties are required to undergo a six-month redemption period after foreclosure sale so the borrower might be able to pay any deficiencies and redeem the property. What type of influence on real estate is described by this action? A) Governmental B) Social C) Environmental D) Economic

A) Governmental

Which of the following components of going concern is included in the valuation of tangible property? A) Personal property B) residual income C) Patents D) Contracts

A) Personal property

What principle describes the ability of a product to satisfy a human want or need? A) Scarcity B) Supply and demand C) Effective demand D) Utility

D) Utility

Census data indicates that average household size has dropped steadily from 2.2 to 1.7 during the last decade. What influence on real estate values is illustrated when developers build apartments with fewer three-bedroom units? A) Economic B) Social C) population D) Governmental

B) Social

Upon a farmer's death, a $1,000,000 farm is left to his 65-year old wife for her use, and upon her death it goes to his son. What are the technical describe the interest of the wife and son? A) Primary heir and secondary heir B) Primary heir and tenant in common C) Life tenant and secondary heir D) Life tenant and remainderman

D) Life tenant and remainderman

Which of the following techniques should be used to perform a qualitative analysis? A) Regression B) Graphic C) Ranking D) Paired sales

C) Ranking

What construction class of buildings has masonry exterior walls, and wood or exposed steel floor and roof structures? A) Class C B) Class A C) Class B D) Class D

A) Class C

Which of the following components is an example of a building's structure? A) Framming B) Plumbing system C) Insulation D) Foundation walls

D) Foundation walls

A school building is for sale. An industrial user anticipates using the facility after renovating the space at a cost of $1 million. A college is looking for a larger facility and willing to pay $4 million. The typical buyer in this market would pay $2 million for a building and adapt it for storage or similar use. What is the value in use? A) $2 million B) $3 million C) $1 million D) $4 million

D) $4 million

A subject has an actual age of 25 years, and effective age of 15 years and a remaining useful life of 45 years. What is the total economic life of the subject? A) 40 years B) 55 years C) 60 years D) 70 years

C) 60 years

A commercially-zoned 5,000 sf parcel improved with a two unit residence was built prior to a zoning change. The current zoning requires a minimum site size of 2,500 sf. The subject could be rebuilt if destroyed, but otherwise vacant sites cannot be developed with residential uses. What is the status of the property? A) Illegal nonconforming B) Legal conforming C) Illegal conforming D) Legal nonconforming

D) Legal nonconforming

What is an example of an economic force on value? A) Office building construction costs B) Buyer preference C) Household growth D) Rent control

A) Office building construction costs

The lender/client requested the appraiser provide a value opinion on a proposed property at stabilized occupancy. what type of value is the client requesting? A) Investment value B) Value in use C) Retrospective value D) Prospective value

D) Prospective value

A lot can physically and legally accommodate a shopping center or an apartment building. The current selling price of apartment land is $2.90 per sf with a 13% discount rate for a holding period. Shopping center land is selling at $5.00 per sf with a 12% discount rate for holding period. There is an immediate demand for apartment buildings. A new shopping center will not have demand for another 5 years. What is the maximally productive use of the site? A) Interim use as vacant, eventual development as shopping center B) Develop as an apartment building C) Interim use as vacant, eventual development as an apartment building D) Develop as a shopping center

B) Develop as an apartment building

The appraiser developed an opinion of market value and analyzed all sales of the subject property that occurred within three years prior to the effective date. The appraiser did not analyze prior sales of the comparables sales used in the sales comparison approach. What does USPAP require regarding the analysis of prior sales? A) Three-year history of the subject and comparables are required to be analyzed B) Only a one-year history of the subject and comparable sales are required to be analyzed C) Three-year sales history of the subject and one-year sales history of the comparable properties are required to be analyzed D) Only a three-year sales history of the subject it required to be analyzed

D) Only a three-year sales history of the subject it required to be analyzed

The terms of a subject sale include the seller retaining title, possession and use of the subject property until his death. Which of the following parties would be identified as having a remainder interest? A) The beneficiary identified on the financing deed of trust B) The heirs of the seller's C) The buyer D) The seller

C) The buyer

An appraiser was asked to update an appraisal performed by another appraiser who works at a different firm. May the appraiser accept this assignment, and why? A) Yes; this is an update only, and therefore it is not a new assignment B) No; the appraiser would be violating confidentiality by considering the work from a different firm C) Yes; the appraiser may prepare a new report and incorporate the original report D) No; the appraiser must not rely on the work of another and must perform all new research and analysis

C) Yes; the appraiser may prepare a new report and incorporate the original report

An appraiser recently utilized several extraordinary assumptions in an appraisal of a proposed dwelling. What are the appraiser's obligations under USPAP with regard to communicating the assignment results? A) State that their use might have affected the assignment results B) State assumptions were used for purposes of reasonable comparison C) State the client concurred with the assignment results D) State the use negatively affected the assignment results

A) State that their use might have affected the assignment results

What items should be omitted to reconstruct an operating statement for real estate appraisal purposes? A) Depreciation, amortization, income taxes and mortgage B) Real estate taxes, insurance, CAM and management C) Income taxes, ad valorem taxes, personal property taxes and administration D) Capital expenditures, maintenance, repairs and reserves

A) Depreciation, amortization, income taxes and mortgage

Sales data from investment-grade properties indicate equity capitalization rates from 1% to 3%. What do these very low equity rates indicate about the market? A) Investors are expecting sale prices to decrease B) Investors are profiting from rental income C) Investors are expecting sale prices to increase D) Investors are taking advantage of low interest

C) Investors are expecting sale prices to increase

In an appraisal assignment, the definition of market value includes exposure time as a component. What USPAP requirement is relevant to this assignment? A) An opinion of reasonable marketing time must be developed and reported B) An opinion of reasonable exposure time must be developed, but not reported C) An opinion of reasonable exposure time must be developed and reported D) An opinion of reasonable marketing time must be developed, but not reported

C) An opinion of reasonable exposure time must be developed and reported

Upon confirming a comparable restaurant sale, the appraiser discovers that the recorded price includes the transfer of equipment and inventory. What element of comparison would be adjusted for this comparable? A) Property rights B) Intangible assets C) Conditions of sale D) Non-realty components

D) Non-realty components

An appraiser is preparing a feasibility study of distribution center and needs to consider interstate highway accessibility. The appraiser also considers air and rail transportation available in the area. All of these items considered collectively would be an example of what relationship? A) Location B) Linkage C) Sitting D) Environment

B) Linkage

The subject is a residentially-zoned vacant parcel located near a commercial zone that has been seen several new buildings added in the last year. The appraiser determines a zoning change is possible. In the verification process, the appraiser learns that a similar property was able to obtain a zone purchase paid $1,250,000 for the property with the approved zone change. The subject residential zoning allows up to 12 residential lots. Residential lots in the area sell for $100,000 each. It costs $25,000 up front in engineering and legal fees to rezone the property. All the lots would be accessible by existing roads, so there are no infrastructure costs. The time needed to sell out the lots isa estimated to be 2 years. What is the highest and best value? A) Residential B) Mixed commercial and residential C) Commercial D) Interim vacant, then commercial

C) Commercial

An industrial site contains land not needed to support the existing improvements. It can be sold off separately and developed to its own highest and best use. What term describes the additional land? A) Excess land B) Raw land C) Overage land D) Surplus land

A) Excess land

The subject was purchased 10 years ago with a combination of cash and borrowed funds. The loan has been fully paid. What leverage situation currently applies to the subject? A) Positive leverage B) Negative leverage C) No leverage D) Neutral Leverage

C) No leverage

Which of the following methods of cost estimating is the most comprehensive and accurate? A) Marshall and Swift B) Quantity survey C) Comparative unit D) Unit in place

B) Quantity survey

Typical market capitalization rates reflect 10% for going-in rates and 9% terminal rates. A client has asked to determine feasibility rents based on a 12% going-in rate, and 7.5% terminal rates. What type of value is the client asking for? A) Value in-use B) Market value C) Liquidation value D) Investment Value

D) Investment Value

What term refers toa division of a total market based on the preferences of buyers and sellers? A) Broad market B) Secondary market C) Money market D) Submarket

D) Submarket

The leased fee interest in the subject property includes below market rents. What procedure is necessary to properly account for this in the valuation of leased fee estate? A) Comparables would be adjusted for the difference between their rents and terms with those of the subject B) Comparables with below market leases would be adjusted to market rent, while those with market rents would not be adjusted C) No adjustments would be needed as market value always reflects the fee simple interest at market rent. D) No adjustment would be necessary as long as the sales were also leased fee interest

A) Comparables would be adjusted for the difference between their rents and terms with those of the subject

An appraiser has been engaged to perform a real property market value appraisal assignment. The client informs the appraiser that adequate site configuration exists to expand a proposed building addition as of the effective date of the appraisal. The appraiser is unable to verify this information. If the appraiser completes their assignment as requested, what assignment condition must be identified and report? A) hypothetical condition B) Jurisdictional exception C) Extraordinary assumption D) Feasibility analysis

C) Extraordinary assumption

A manufacturing business requires and extremely high roof and several pit areas in the foundation of their owner-occupied building. The appraiser is requested to value the property including the physically depreciated cost of these items, even though the are not typical in the industrial market. What type of value would be defined in the report? A) Fair value B) Used value C) Leased value D) Market value

B) Used value

The buyer of one of the comparable sales in an appraisal of an industrial building assumed a mortgage at below market rates. Analysis of the other comparables indicates that a financing conditions adjustment is necessary. What is the direction of the adjustment to the sale, and why? A) A positive adjustment to the subject for advantageous financing B) A positive adjustment because the sale is adjusted to the subject C) A negative adjustment because the sale is adjusted to the subject D) A negative adjustment to the subject because it will be financed at market rate

C) A negative adjustment because the sale is adjusted to the subject

What interdependent economic factors create value? A) Amenities, plottage, desire, and supply/demand B) Utility, scarcity, desire, and plottage C) Utility, scarcity, desire, and effective purchasing power D) Amenities, assemblage, scarcity, and effective purchasing power

C) Utility, scarcity, desire, and effective purchasing power

An appraiser completed an assignment about 2 months ago. This appraiser has recently been contacted by someone who claims to be a review appraiser hired by the appraiser's client. The reviewer wanted to ask questions about the report. Are there any conditions under which the appraiser may discuss the appraisal with the reviewer, and why? A) No; authorization is not needed since the reviewer represents the client B) Yes; if the reviewer is considered to be the appraiser's peer C) No; appraisers must never discuss report content with reviewers D) Yes; if the appraiser receives authorization from the client

D) Yes; if the appraiser receives authorization from the client

An appraiser prepared an appraisal in 2007 and provided testimony on it in 2011. How long must an appraiser retain the workfile? A) 5 years following the date of preparation of the assignment B) 5 years following the date of final disposition of the judicial proceeding C) 2 years following the date of final disposition of the judicial proceeding D) 2 years following the date testimony was provided

C) 2 years following the date of final disposition of the judicial proceeding

What valuation technique should be used for multiple-tenant shopping center with tenants at various lease rates? A) Effective gross income multiplier B) Discounted cash flow analysis C) Direct capitalization analysis D) Band of investment analysis

B) Discounted cash flow analysis

What interdependent supply factors create value? A) Effective purchasing power and scarcity B) Desire and effective purchasing power C) Utility and scarcity D) Utility and desire

C) Utility and scarcity

Why should household growth be studied in a residential subdivision valuation? A) Household growth is the foundation of all real estate demand B) An area analysis is not complete without a listing of household growth patterns C) The rate of household growth influences the value of residential real estate D) All appraisals require an analysis of household growth

C) The rate of household growth influences the value of residential real estate

A governmental agency is taking private land and giving it to a developer to build a reginal retention pond. What is this process? A) Redevelopment B) Eminent domain C) Eshceat D) Condemnation

B) Eminent domain

What technique can be utilized to value a leasehold estate? A) Present worth of reversion B) Present worth of the rent advantage C) Present worth of the contract rent D) Present worth of the overage rent

B) Present worth of the rent advantage

What type of value includes all tangible assets of an established and operating business? A) Assessed value B) Use value of the real estate C) Investment value D) Market value of the going concern

D) Market value of the going concern

What term describes a study of the cost-benefit relationship of an economic endeavor? A) Marketability B) Market study C) Investment analysis D) Feasibility analysis

D) Feasibility analysis

Which of the following influences on property value is considered in an appraiser's analysis of age composition of a neighborhood heavily population by state government workers? A) Environmental B) Economic C) Governmental D) Social

D) Social

An appraiser completed an appraisal assignment on a property for sale with $30,000 of furniture included in the contract price of $453,000. The appraiser concluded the market value of the real property was $423,000 as of the date of valuation. Upon review of the report, the client later requested the appraiser provide a separate market value opinion of the furniture. Which of the following requirements apply to the valuation of the furniture? A) Personal property appraisal development and reporting requirements in USPAP B) The client's appraisal requirements if they are less stringent than USPAP C) Real property appraisal development and reporting requirements USPAP D) Appraisal consulting development and reporting requirements in USPAP

A) Personal property appraisal development and reporting requirements in USPAP

What value is used when a property, encumbered by a long-term lease with a proven below-market contract rent, is actually valued assuming a market rent? A) Market value is subject to extraordinary assumption B) Extraordinary value subject to market rent C) Market value subject to hypothetical condition D) Hypothetical value subject to market rent

C) Market value subject to hypothetical condition

The subject property is superior to others in the neighborhood in terms of quality and size. The appraiser learned that the buyer considered the subject a good deal due to the inferior properties in the neighborhood which the buyer felt was affecting the price. What factor is affecting the sale price? A) Balance B) Surplus Productivity C) Progression D) Regression

D) Regression

The subject property is a mobile home park located on a site which is zoned "commercial". Other uses in the immediate area include a shopping center, apartment complex, and grocery store. The property generates a net operating income of $30,000 per year. The site contains 10 acres. Land values are at $0.50 per sf and have been increasing at a modest 2% per year. Assuming and overall rate of 13.5%, is the continued use as mobile home park a financially feasible use, an why? A) No; because it is only an interim use B) Yes; because it produces a positive return on all investment C) No; because the land value is increasing and will son exceed the whole property D) Yes; because it is the existing use

B) Yes; because it produces a positive return on all investment

In what context is the credibility of assignment results measured? A) The context of reliability B) The context of the accuracy of the results C) The context of the intended use D) The context of the client needs

C) The context of the intended use

The assignment is to appraise a local retail center. The appraiser decides that the correct valuation method is a discounted cash flow analysis. the appraiser uses published sources for the discount rate. What is the responsibility of the appraiser according to USPAP? A) Obtain discount rates from a minimum of three local knowledgeable brokers B) Gives attribution rate source in the certification of appraiser C) Ensure that the controlling input consistent with market evidence and prevailing market attitudes D) Include a disclaimer about the source of the discount rate in the assumptions and limiting conditions.

C) Ensure that the controlling input consistent with market evidence and prevailing market attitudes

Which of the following terms is synonymous with the term Grantor? A) Buyer B) Seller C) Tenant D) Lessee

B) Seller

An appraiser has been asked to accept a reduced appraisal fee when a mortgage loan does not close. May the appraiser accept this fee arrangement and comply with USPAP, and why or why not? A) Yes; the appraiser must disclose the fee arrangement in the certification B) No; the appraiser must charge clients the same fee for every assignment C) Yes; as long as the loan officer does not stipulate the amount of the value opinion D) No; and appraiser must not accept an appraisal assignment with contingent compensation

D) No; and appraiser must not accept an appraisal assignment with contingent compensation

What are the principle methods for estimation depreciation? A) Age-life method, Marshall and Swift method, effective depreciation age method B) Useful life method, age-life method, breakdown method C) Market extraction method, age-life method, effective age method D) Market extraction method, age-life method, and breakdown method

D) Market extraction method, age-life method, and breakdown method

An appraiser was engaged by an owner of a small apartment complex to provide an appraisal for estate planning. What type of value should the appraiser provide? A) Use B) Assessed C) Going concern D) Market

D) Market

What type of property has a structure with a unique design and a special construction method or layout that limits the use to which it was built? A) Intangible B) Special purpose C) Speculative D) Chattal

B) Special purpose

Upon confirming a comparable office building sale, the appraiser discoveres that the recorded price reflected the purchase of a 50% interest. What element of comparison would be adjusted comparable? A) Property rights conveyed B) Financing conditions C) Market conditions D) Conditions of sale

A) Property rights conveyed

The subject of an appraisal of residential cooperative? A) Limited partnership shares B) Referral partnership shares C) Shares of stock D) Shares in real property

C) Shares of stock

What are the four factors that create value? A) Utility, desire, supply, demand B) Scarcity, desire, effective purchasing power, utility C) Effective purchasing power, utility, supply, demand D) Supply, demand, desire, scarcity

B) Scarcity, desire, effective purchasing power, utility

What are the workfile requirements for a Restricted Use Appraisal Report? A) A workfile must be sufficient for the appraiser to produce a Summary Appraisal Report and must be available for inspection by the client, upon request B) A workfile must be sufficient for the appraiser to produce a Self-Contained Appraisal Report C) A workfile must be sufficient for the appraiser to produce a Summary Appraisal Report D) A workfile must be sufficient for the appraiser to produce a Summary Appraisal Report and be available for inspection by all intended users, upon request

D) A workfile must be sufficient for the appraiser to produce a Summary Appraisal Report and be available for inspection by all intended users, upon request

The main employer in the market area has reduced its number of employees by 20% and the unemployed workers have yet to find new employment. What economic principle is immediately impacted in this scenario? A) Substitution B) Effective purchasing power C) Supply D) Regression

B) Effective purchasing power

What type of report contains consideration for the need of special pilings or foundations is proposed construction? A) Title report B) Enviromental report C) Topographical survey D) Soil analysis

D) Soil analysis

An appraiser is aware that the borrower in a mortgage transaction will receive a copy of the appraisal report. Must the appraiser identify the borrow as an intended user to comply with USPAP, and why? A) No; the fact that the borrower receives a copy does not cause the borrower to become an intended user B) Yes; if the borrower is known to receive a copy of the report in a mortgage transaction then the borrower must be identified as an indented user C) Yes; the borrower paid for the appraisal therefore must be identified as an intended user D) No; the borrower in a mortgage transaction may never be identified as an intended user

A) No; the fact that the borrower receives a copy does not cause the borrower to become an intended user

The subject's long term lease yields an annual net operating income of $40,000. Comparable leases indicate a market-derived, net operating income of $45,000. What type of value is calculated if the subject's actual net operating income is capitalization into present value? A) Market value of the leased fee interest B) Market value of the leasehold interest C) Present value of the fee simple interest D) Present value of the investment interest

A) Market value of the leased fee interest

What term describes the lump sum benefit an investor receives upon termination of an investment or at the intermediate analysis period during the term of an investment? Return on capital A) Return of capital B) Equity dividend C) Return on capital D) Reversion

D) Reversion

An appraiser typically projects full occupancy for new rental construction to occur in five years. However, this project is expected to be fully leased in three years. What will be changed in the discounted cash flow analysis? A) Profit rate B) Vacancy rate C) Absorption rate D) Risk rate

C) Absorption rate

In what part of the appraisal report must prior services be disclosed? A) Summary Salient Facts B) Certification C) Letter of Transmittal D) Scope of Work

B) Certification

What term describes the net income that remains after the cost of various agents of production have been paid? A) Contribution B) Surplus productivity C) Net income return D) Net effective income

B) Surplus productivity

What principle describes the ability of a product to satisfy a human want or need? A) Scarcity B) Supply and demand C) Effective demand D) Utility

D) Utility

In what part of the appraisal report must prior services be disclosed? A) Summary Salient Facts B) Certification C) Letter of Transmittal D) Scope of work

B) Certification

An appraiser has been engaged to perform a real property market value appraisal assignment. The client informs the appraiser that adequate site configuration exists to expand a proposed building addition as of the effective date of the appraisal. The appraisal is unable to verify this information. If the appraiser completed the assignment as requested, what assignment condition must be identified and reported? A) Hypothetical condition B) Jurisdictional exception C) Extraordinary assumption D) Feasibility analysis

C) Extraordinary assumption

An appraiser receives an assignment to review an appraisal completed 6 months ago. In the development of the review, the appraiser has gathered the pertinent information and began the reporting process. Which of the following information must be included in the report? A) Identity of the client in the report under review; the closed dates of the pending sales; date review was ordered B) Identity of the person ordering the review; prior three years history of market sales in report under review; intended use C) Identity of the client and intended users; intended use; effective date of the original appraisal D) Identity of the client and intended users; intended use; current sales history if similar

C) Identity of the client and intended users; intended use; effective date of the original appraisal

The assignment is to value a 9,600 sf church on a 25-acre single family parcel. Residential land is currently selling for $55,000 an acre. However, demand for a new single-family construction is eight years out with a discount rate of 15%. Similar churches have sold recently for between $50 and $55 sf. What type of value is illustrated? A) Market value B) Interim Value C) Value-in Use D) Investment value

A) Market value

A dairy farmer is currently milking 750 cows in the subject facility on 400 acres. The milking facility has stalls for 1,000 cows, but does not have the land base to house that may cows without a manure treatment facility. Amaure treatment facility costs $600,000. Farms with manure treatment facilities sell for $1,600 per cow. Facilities without manure treatment sell for $1,200 per cow. It will be 15 years before the city grows outward enough to consider a subdivision. Subdivision land is currently selling for $5,000 per acre with a 10% discount rate. Dairy farming and residential subdivision are physically possible and legally permissible uses. What is the highest and best use of the subject? A) Interim use is current use, eventually residential subdivision B) Improve with a manure treatment facility C) Residential subdivision D) current use

B) Improve with a manure treatment facility

A parcel in the path of development is zoned for high-density apartment use. It currently has a single-unit owner-occupied dwelling on the site. The improvements do not represent the high and best use of the site but the current use is likely to continue until competing sites are developed. How is the highest and best use of the site as improved described? A) Mixed use B) Value in use C) Interim use D) Special purpose use

C) Interim use

A subject has an actual age of 25 years, an effective age of 15 years, and a remaining useful life of 45 years. What is the total economic life of the subject? A) 40 years B) 55 years C) 60 years D) 70 years

C) 60 years

Which influence on real estate is considered economic? A) Government planning B) Public and private restrictions C) Quality of schools D) Extent of owner occupancy

D) Extent of owner occupancy

In what part of the appraisal report must prior services be disclosed? A) Summary Salient Facts B) Certification C) Letter of Transmittal D) Scope of Work

B) Certification

What type of assignment should be employed to determine general conditions of supply, demand, and pricing for a specific property type? A) Marketability analysis B) Feasibility analysis C) Market analysis D) Highest and best use analysis

C) Market analysis

The subject property is a 6,000 foot by 1,452 foot home with a single-unit dwelling. When the site was plotted, there was no zoning. The current zoning requires a 160-acre minimum site size for a residence. What is the status of the lot? A) External obsolescence B) Excess land C) Legal nonconforming D) Surplus land

D) Surplus land

The appraisal assignment of a building under construction requires a value as of the date of stabilized occupancy. What value is required, and what assignment condition is employed? A) Prospective market value and hypothetical condition B) Prospective market value and extraordinary assumption C) Current market value and extraordinary assumption D) Current market and hypothetical condition

B) Prospective market value and extraordinary assumption

What principle describes the ability of an individual or group to participate in a market? A) Effective demand B) Effective purchasing power C) Utility D) Desire

B) Effective purchasing power

What term refers toa division of a total market based on the preferences of buyers and sellers? A) Broad market B) Secondary market C) Money market D) Submarket

D) Submarket

A) State appraiser regulatory agency

What technique can be utilized to value a leasehold estate? A) Present worth of reversion B) Present worth of the rent average C) Present worth of the contract rent D) Present worth of the overage rent

B) Present worth of the rent average

What type of risk affect operating income due to shifts in demand and/or supply? A) Management B) Financial C) Market D) Capital market

C) Market

What force is represented by the mean and median household income level? A) Social B) Economic C) Governmental D) Environmental

B) Economic

Which of the following techniques should be used to perform a qualitative analysis? A) Regression B) Graphic C) Ranking D) Paired sales

C) Ranking

When potential homebuyers investigate the zoning of nearby properties, what influences on value are they considering? A) Governmental B) Social C) Environmental D) Economic

A) Governmental

lesson 1 Flashcards

(164 cards)