Real Estate Appraisal

Question 1

When working with commercial properties, the appraiser develops an estimate of market rent by ______ and comparing rents across the subject and comparable properties.

Answer 1

Converting rental income to annual dollars per square foot.

Question 2

Which one of the following expenses listed on the appraiser’s operating statement is classified as a fixed expense?

Answer 2

Insurance.

Question 3

Which term means “for another’s life”?

Answer 3

Pur autre vie.

Question 4

Monique is frustrated. The lender is requiring her to use the cost approach to determine her opinion of value, but the property is too old for her to estimate reproduction cost. What options does Monique have?

Answer 4

She can estimate construction cost-new using replacement cost instead.

Question 5

Which economic principle says that a property’s value is determined by what it would cost to purchase a similar property?

Answer 5

Substitution.

Question 6

The local planning and zoning commission is reviewing multiple applications at this week’s meeting. Which of the following new developments is likely to be reviewed relative to a mixed-use zoning ordinance?

Answer 6

A high rise with residential, retail, and entertainment space.

Question 7

When will a lessee realize the benefit of deficit rent by sub-leasing the property?

Answer 7

When the scheduled rent is lower than the market rent.

Question 8

Convert 78% to a decimal.

Answer 8

0.78.

Question 9

To whom may an appraiser reveal a property’s value estimate?

Answer 9

The client.

Question 10

When conducting an appraisal of lease value, how does the appraiser divide the appraised value?

Answer 10

It’s divided according to the parties’ interests as attributed in the lease.

Question 11

Which REITs make money by incurring short-term debt to acquire longer-term mortgage securities, earning the spread between the two rates?

Answer 11

Mortgage REITs.

Question 12

Sam is looking at a residential structure and trying to determine how much longer from that point in time the house can be used as a residence. What’s Sam measuring?

Answer 12

Remaining economic life.

Question 13

When an appraiser is adjusting for differences in a sales comparison approach to value, why is a market timing adjusted before a feature, such as a formal dining room?

Answer 13

Market timing relates to the property, whereas features relate to one line item.

Question 14

If an appraiser needs to make an adjustment for time and an adjustment for the number of rooms, which of the following statements is true?

Answer 14

The appraiser should adjust for time and then adjust for the difference in the number of rooms.

Question 15

Ellen is a state-certified appraiser who’s been hired to perform an appraisal on a home that has an accepted purchase offer. What is the most common purpose for Ellen’s appraisal in this situation?

Answer 15

To inform the buyer’s lender of the value of the property that will be acting as security.

Question 16

The second step of the appraisal process that a qualified appraiser will use is to _______.

Answer 16

Identify data needed.

Question 17

When Shauna looked at the legal description of the property she was interested in purchasing, she read the following: “Beginning at the corner of State Route 61 and Hallowell Road, north for 314 feet, then southwest for 193 feet.” In this description, what does “north for 314 feet” represent?

Answer 17

A mete.

Question 18

The MARIA acronym helps to identify the five tests of a fixture. Which of the following tests refers to how and whether the item is attached to the property?

Answer 18

Method of annexation.

Question 19

Which of the following statements about annuity capitalization is true?

Answer 19

Annuity tables work best for stable investments.

Question 20

An appraisal is being done for an investment property. The total value of the building and land is $200,000, and the value of the building alone is $150,000. The building cap rate is 12% and the land cap rate is 8%. The property earns an annual NOI of $40,000. What’s the land value?

Answer 20

$50,000.

Question 21

Which of the following statements related to the power of taxation is true?

Answer 21

Property tax liens take priority over any and all other liens on the property in most states.

Question 22

This equation, “Value of land = Anticipated sales of finished lots - development costs,” is a simplified version of one used with the ______ method of land valuation.

Answer 22

Subdivision.

Question 23

An appraiser is asked to find the value of a property, but the owner doesn’t hold any interest in real estate. What kind of property is the appraiser most likely appraising?

Answer 23

Cooperative housing unit.

Question 24

Which type of is very durable, corrosion resistant, and can be used for hot-water distribution lines, but doesn’t last as long as copper piping?

Answer 24

Brass.

Question 25

What type of heating system uses a boiler to produce steam, which is transferred to rooms through a pipe?

Answer 25

Steam system.

Question 26

With which of the four methods used to measure depreciation does the appraiser estimate the property’s loss in value for both curable and incurable items of depreciation?

Answer 26

Observed condition.

Question 27

Jane is a licensee whose client is afraid that the house she’s selling won’t appraise for the contracted purchase price. Jane feels the purchase price accurately represents the home’s value in the current market. What can Jane do to appease her client’s fears?

Answer 27

Jane can be present at the appraisal and ensure that the appraiser is fully informed of all the attributes that contribute to the home’s value.

Question 28

Why do both real estate professionals (in their CMAs) and appraisers (in the sales comparison approach) use comparables?

Answer 28

Because of the principle of substitution.

Question 29

Although you’ve told her that the value of a modular home is basically the same as a site-built one and that the quality may even be better, Sandy absolutely refuses to buy a modular home. What tell-tale sign of a modular home should you look for during showings?

Answer 29

A label installed in the cabinet underneath the kitchen sink.

Question 30

Which of the following would be considered a specific factor that influences the value of real estate?

Answer 30

The improvements that are present.

Question 31

To determine the estimated reproduction cost of a subject building using the square-foot method, the appraiser takes the ______ and multiples it by the cost per square foot of a recently constructed comparable structure.

Answer 31

Square footage of the subject building’s living area.

Question 32

In which type of framing are the framing members much larger and spaced much farther apart?

Answer 32

Post-and-beam.

Question 33

Which of these items could indicate a potential flaw in an appraisal report?

Answer 33

Adjustments to condition on all comparables is listed as $10,000.

Question 34

What’s the price a property would be expected to sell for after suitable exposure to the market, assuming no exceptional factors are influencing the parties’ decisions or financing availability?

Answer 34

Market value.

Question 35

Tim, an appraiser, is using the cost approach to determine property value. Which of the following property types is Tim most likely appraising?

Answer 35

Newly built commercial property.

Question 36

What is the URAR?

Answer 36

The most widely used appraisal reporting document.

Question 37

Limited liability companies and limited liability partnerships are favorable forms of business because ______.

Answer 37

They don’t require a general partner.

Question 38

An appraiser is assigned to appraise a new manufactured home that hasn’t yet been placed on the site where it will be attached to a foundation. What approach to appraisal is recommended for this assignment?

Answer 38

Cost approach.

Question 39

Which of the four methods used to find the reproduction cost of a structure is considered the second most accurate method?

Answer 39

Unit-in-place.

Question 40

In which of the following situations can the state use its power of escheat?

Answer 40

Nadine died with no heirs and no debt.

Question 41

Donna is about to do an appraisal of a two-story home that’s under contract. Which of the following tasks can she do before her site visit?

Answer 41

Get a copy of the subject property’s purchase agreement.

Question 42

Sunshine Surveyors, Inc. created a lot and block survey for a new residential development, Happy Acres. The first thing the surveyor did when he surveyed the new neighborhood was to reference what type of description?

Answer 42

Metes and bounds description.

Question 43

How is the grid that’s used in the rectangular survey system laid out?

Answer 43

The numbers start in the northeastern corner and follow a zigzag pattern.

Question 44

Which of the following formulas represent the operating expense ratio?

Answer 44

Operating expenses ÷ effective gross income.

Question 45

Denny inherited his uncle’s lakefront home. Denny was excited to sell the home, since there were hardly any similar properties on the market. Denny visited the property and saw that it was in extreme disrepair and uninhabitable in its current state. What effect will this have on its value?

Answer 45

Value will be pushed downward.

Question 46

Maxine’s lease goes up and down based on the consumer price index. Which of these provisions is included in her lease?

Answer 46

Escalator clause.

Question 47

Rohit bought 31 acres of undeveloped and mostly forested land. He is planning a weekend with friends where they’ll camp on the property while scouting good locations to place a cabin. Which right in the bundle of rights allows Rohit to do the camping weekend on undeveloped land?

Answer 47

Possession.

Question 48

Gene and Alex bought a property that backed up to a neighborhood park. The previous owner mentioned that ever since the park was built eight years ago, the next door neighbor who works at the park has cut through the yard to get to the park rather than going around via the streets, which saves about half a mile. What kind of easement is this?

Answer 48

Easement by prescription.

Question 49

What is the purpose behind Appraiser Independence Requirements?

Answer 49

To protect appraisers’ ability to assess an accurate value for a property by avoiding outside pressure or influence.

Question 50

Which of the following resources was developed to improve the quality and consistency of appraisal data for loans delivered to Fannie Mae and Freddie Mac?

Answer 50

Universal Appraisal Dataset.

Question 51

Rico is an appraiser who is performing a valuation on a property. What’s another term for what Rico is doing?

Answer 51

Formal appraisal.

Question 52

Rhonda’s looking at a structure and trying to determine how much longer the building can be expected to remain standing. What’s Rhonda measuring?

Answer 52

Physical life.

Question 53

What’s the lowest pressure at which plumbing will still function?

Answer 53

Minimum pressure.

Question 54

Which of the following is the best definition of a township?

Answer 54

A 36-square-mile square formed when using the rectangular survey system.

Question 55

Which of the following formulas represents the break-even ratio?

Answer 55

(Operating expenses + debt service) ÷ effective gross income.

Question 56

To determine the estimated reproduction cost of a subject building using the index method, the appraiser takes the index factor and multiples it by the ______.

Answer 56

Original construction cost.

Question 57

Because many appraisals use all three approaches to find the appraised value, a final step in the appraisal process is to ______ the values.

Answer 57

Reconcile.

Question 58

Julian and Clara want to leave their real estate holdings to their children. If at all possible, they’d like those holdings to avoid the probate process after they’re deceased. Their attorney recommends a land trust. Is there a type of trust they could establish that would avoid probate?

Answer 58

Yes, a living trust would avoid probate.

Question 59

Which part of the narrative appraisal part is the essential core, containing the appraisal methodology, assumptions and limiting conditions, highest and best use feasibility, and the approach(es) used?

Answer 59

Analysis and opinions.

Question 60

Which of the following could indicate an underground storage tank is present?

Answer 60

Pipe or vent sticking out of the ground.