Real Estate Appraisal

Question 1

opinion of value based on supportable evidence

Answer 1

Appraisal

Question 2

sets minimum education and experience requirements for licensing or certification

Answer 2

Appraiser Qualifications Board

Question 3

Based on a complete visual inspection of the interior and exterior areas of the subject property, defined scope of work, statement of assumptions and limiting.

Answer 3

Uniform Residential Appraisal Report (URAR)

Question 4

a report by a real estate professional of market statistics, but it is not an appraisal.

Answer 4

comparative market analysis (CMA)

Question 5

may be used in transactions involving home equity lines, refinancing, portfolio management, loss mitigation, and collections.

Answer 5

Broker Price Opinion

Question 6

Value is created by

Answer 6

demand, utility, scarcity, and transferability of property (DUST)

Question 7

most probable price that property should bring in a fair sale, but not necessarily the same as the price asked or paid or the cost to construct.

Answer 7

Market Value

Question 8

basic principles of value

Answer 8

Anticipation
Conformity
Competition
Change 
Contribution

Question 9

A property’s highest and best use

Answer 9

Physically possible, legally permitted, financially feasible, most profitable, maximally productive

Question 10

is in evidence when additional property improvements no longer bring a comparable increase in property value.

Answer 10

Law of increasing and diminishing returns

Question 11

assemblage

Answer 11

process when two or more parcels of land are combined

Question 12

when a property’s value is enhanced because of more valuable properties in the vicinity

Answer 12

progression

Question 13

in effect when a property’s value is lower because of less valuable properties in the vicinity.

Answer 13

regression

Question 14

dictates that prices will rise when demand is high relative to supply, and prices will fall when supply is high relative to demand.

Answer 14

supply and demand

Question 15

makes use of sales of properties comparable to the property that is the subject of the appraisal by adding or subtracting from the sales price of each comp the value of a feature present or absent in the subject property versus the comparable.

Answer 15

sales comparison approach (market data approach)

Question 16

uses the current cost of constructing building and other property improvements and an estimate of accrued depreciation using the straight-line method (economic age-life method), or an estimate of individual items of physical deterioration, functional obsolescence, or external obsolescence.

Answer 16

the cost approach

Question 17

income approach

Answer 17

1. Estimating annual potential gross income
2. Deducting an allowance for vacancy and rent loss to find effective gross income
3. Deducting annual operating expenses to find net operating income (NOI)
4. Estimating the rate of return (capitalization rate or cap rate) for the subject by analyzing cap rates of similar properties
5. Deriving an estimate of the subject’s market value by applying the cap rate to the property’s annual NOI using this formula: net operating income ÷ capitalization rate = value

Question 18

the process by which the validity and reliability of the results of the approaches to value are weighed objectively to determine the appraiser’s final opinion of value.

Answer 18

reconciliation

Question 19

Net Operating Income Formula

Answer 19

Gross income – vacancy and rent losses – operating expenses

Question 20

Value Formula

Answer 20

NOI / Capitalization Rate

Question 21

Change, contribution, plottage, and substitution are some of the basic principles that affect what aspect of real estate?

Answer 21

Value

Question 22

The standards of appraisal practice are

Answer 22

USPAP

Question 23

An appraiser has been hired to prepare an appraisal report of a property for loan purposes. The property is an elegant old mansion that is now used as a restaurant. Which approach to value should the appraiser give the greatest weight when making this appraisal?

Answer 23

Income

Question 24

Growth Rent Multiplier Formula

Answer 24

sales price ÷ gross rent

Question 25

The amount of money a property is likely to command in the marketplace is its

Answer 25

market value.

Question 26

Appraisers are expected to follow

Answer 26

USPAP

Question 27

The market value of a parcel of real estate is

Answer 27

an estimate of the most probable price it should bring.

Question 28

Which would be found in an appraisal but NOT in a CMA?

Answer 28

Description of highest and best use

Question 29

A loss in value as the result of the market's response to an item, rather than a deterioration of the item's physical condition, is

Answer 29

functional obsolescence

Question 30

An appraisal is

Answer 30

an opinion of value based on supportable evidence and approved methods.

Question 31

Appraisal Methods

Answer 31

the Comparison Approach, the Income Approach, and the Cost Approach.

Question 32

Once the appraiser has considered the three methods of valuation of real estate, the final step in the appraisal process is

Answer 32

Reconciliation

Question 33

An appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation by the state as mandated by

Answer 33

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).

Question 34

The property being appraised is called

Answer 34

subject property

Question 35

The cost approach to value is based on the principle of

Answer 35

Substitution

Question 36

A sales associate or appraiser trying to estimate the market value of a property would be seeking

Answer 36

The probable price the property will bring

Question 37

Air pollution from increased automobile traffic near a building with ornate exterior decoration has dissolved much of the intricate detail work. The cost of restoring the front of the building is roughly five times the building's present value. These facts describe

Answer 37

Incurable physical deterioration

Question 38

The data collected by the appraiser for the appraisal process includes

Answer 38

General data and specific data

Question 39

The supposition that no physical or economic condition remains constant is exemplified by the principle of

Answer 39

supposition

Question 40

Appraisals are required for

Answer 40

FHA and federally related loans

Question 41

The characteristics of value include

Answer 41

demand, utility, scarcity, and transferability.

Question 42

Value is created by the expectation that certain events will occur according to the principle of

Answer 42

Anticipation

Question 43

A property use that is physically possible, legally permitted, economically feasible, and maximally productive is

Answer 43

highest and best use