Flashcards in Real Estate Course Chapter 15 Deck (57)
A comparative market analysis (CMA) must conform to the Uniform Standards of Professional Appraisal Practice (USPAP). True or False?
Replacement cost is the amount of money required to build an exact duplicate of the structure. True or False?
False. That would be Reproduction Cost
Name the four characteristics of Value.
Demand (this also implies ability to obtain)
Utility (the ability to provide useful benefits)
Scarcity (supply and demand)
Transferability (legal ability to transfer title)
What is the formula for obtaining Present Value?
Net Operating Income (NOI) ÷ Overall Capitalization Rate (OAR)
What is the value for obtaining Net Operating Income?
Overall Capitalization Rate (OAR) x Present Value
What is the value for obtaining Overall Capitalization Rate (OAR)?
Net Operating Income (NOI) ÷ Present Value
If a comparable property is superior to the subject property with regard to size, a downward adjustment is made to the sale price of the comparable.
True. Remember: Comp better = subtract
Comp better = ?
Comp inferior = ?
Comp better = subtract (CBS)
Comp inferior = add (CIA)
In the cost-depreciation approach, the maximum value of a property can be measured by determining the cost to acquire an equivalent site and to reproduce a structure as if new, and then subtracting accrued depreciation?
The cost-depreciation approach is based on....
the theory that a knowledgeable purchaser will pay no more for a property than the cost of acquiring a similar site and constructing an acceptable substitute structure
Chronological age is used in the lump-sum age-life method of calculating accrued depreciation.
FALSE. The lump-sum age-life method is based on a ratio of a property's effective age to its economic life. Effective age is the age indicated by a structure's condition and utility.
If an appraisal report involves a federally related transaction, it must be prepared by a state-certified or licensed appraiser?
Cost is the total expenditure required to bring a new improvement into existence plus the cost of the land.
Price refers to the amount of money (or its equivalent) for which a good is actually sold.
Which method of estimating building costs relies on the use of cost-calculation publications?
A limited partnership plans to purchase an apartment building that has a monthly net income of $5,200 and monthly expenses of $1,400. If the partnership is to get a 12 percent return on its investment, what should it pay for the property?
The solution is: Income ÷ Rate = Value;
$5,200 monthly net income × 12 months = $62,400 annual NOI; $62,400 ÷ .12 rate of return = $520,000 target price.
A comparable property has one more bathroom than does the subject property. The appraiser estimates the value of an extra bath at $30,000. How should the adjustment be entered on the reconciliation?
A)Decrease the value of the subject property by $30,000
B)Increase the value of the comparable by $30,000
C)Decrease the value of the comparable by $30,000
D)Increase the value of the subject property by $30,000
C) DECREASE THE VALUE OF THE COMPARABLE BY $30,000.
Remember: Comp better = subtract (CBS)
What is Assemblage?
Assemblage is the combining of two or more adjoining properties into one tract: the process of consolidating properties
Which type of depreciation is associated with inefficient architectural design?
C) FUNCTIONAL OBSOLESCENCE. Functional obsolescence is depreciation associated with operational inadequacies, poor design, or changing tastes and preferences.
How do you figure the GRM (gross rent modifier) for a property?
Sale price ÷ gross monthly rent = GRM
Which type of value is associated with an income-producing property that has been operating successfully for some time?
Going Concern. Going concern value is the value of an income-producing property characterized by a significant operating history.
The price per square foot for three comparable lots is as follows: Lot 1: $5.25; Lot 2: $6.00; and Lot 3: $6.30. Based on inspection of the properties and considerations such as shape and location, the appraiser decides to use a weighted averaging technique of 20 percent weight for Lot 1 and 40 percent weight each for Lots 2 and 3. What is the average price per square foot?
The answer is $5.97. The solution is: $5.25 × .20 = $1.05; $6.00 × .40 = $2.40; $6.30 × .40 = $2.52; $1.05 + $2.40 + $2.52 = $5.97 per square foot.
For which feature does an appraiser make an adjustment if it is determined that there was a business relationship between the buyer and seller that may have influenced the sale price?
CONDITIONS OF SALE. Appraisers research the conditions of sale to determine if the buyer or seller was under abnormal pressure to buy or sell or if there was a special relationship between the parties to the transaction.
The four characteristics of value do NOT include which characteristic?
D) SURPLUS. The four characteristics of value are: demand, utility, scarcity, and transferability
A new car has a sticker amount of $31,000. This figure is the car's
Which type of age is MOST relevant in the cost-depreciation approach?
Effective.Effective age is the age indicated by a structure's condition and utility.
Using income capitalization, what is the result of holding the capitalization rate constant and increasing the net operating income?
PRESENT VALUE INCREASES. If the net income goes up and the capitalization rate remains constant, the present value will increase
Which type of value is personal to a particular investor based on the investor’s investment objectives, risk tolerance, and so forth?
INVESTMENT. Investment value is the price an investor would pay, given the investor’s own financing requirements and income tax situation.
Which principle states that an informed purchaser will NOT pay more for real estate than the cost of acquiring an equally desirable alternative property?
SUBSTITUTION. The principle of substitution means that a prudent buyer or investor will pay no more for a property than the cost of acquiring, through purchase or construction, an equally desirable alternative property.