REE 4103 exam 2 bailey

The subdivision development analysis technique is

Group of answer choices

More accurate than a well-prepared sales comparison analysisLess accurate than the allocation method

Is very applicable when the main criteria of value is the number of lots that can be developed out of a parcel of land

Is not an accepted technique for the valuation of land

Is very applicable when the main criteria of value is the number of lots that can be developed out of a parcel of land

You are asked to appraise a vacant building lot. The neighborhood is about 75% built up. Most lots in the area are from 55 to 65 feet wide; the lot under appraisal is 60 feet. Comparable sales indicate that lots are selling at $120 to $150 per front foot. What is a good estimate of the price range for this lot?

$9,000 - $11,000

$7,200 to $9,000

$5,400 to $6,750

$6,600 to $11,250

7,200-9000

Residential sites are often valued usingA price per square foot

A price per animal unit month

A price per room

A price per cubic meter

price per square foot

Price per front foot is

a physical unit of comparison

not as accurate as price per acre

rarely used in residential site analysis

an accurate guide to site marketability

a physical unit of comparison

If the site represents 40% of the total value in a particular neighborhood, how much land value would be allocated from a $200,000 sale of a single family home?

$120,000.00

$8,000.00

$80,000.00

$200,000.00

80,000

In the subject property's neighborhood, improved properties are selling for prices in a range of $140,000 to $160,000. Research reveals a typical land value-to-total property value ratio of 20%. What is the range of value for a similar site in this neighborhood?

Group of answer choices

$14,000 to $16,000

$16,000 to $20,000

$22,000 to $25,000

$28,000 to $32,000

28,000-32,000

To estimate its market value, the land under an improved property is best compared to sales of vacant land that

Have the same or similar highest and best use

Have the same type of building on them (after the sale)

Show the maximum value for the subject property

Show the minimum value for the subject property

Have the same or similar highest and best use

Land is always valued considering

Its highest and best use as improved.

Its highest and best use as though vacant.

The improvements thereon

The likelihood of conversion to commercial zoning

PreviousNext

highest and best use as though vacant

The land valuation technique that relies on an analysis of ratios of land value to property value is

Allocation

Extraction

Interpolation

Land residual

allocation

Land can be valued by

Group of answer choices

Sales comparison, allocation, extraction, and abstraction

Sales comparison, land residual, ground rent capitalization, and determination

Sales comparison, land residual, allocation, and extraction

Highest and best use, sales comparison, and asset management

Sales comparison, land residual, allocation, and extraction

Current listings that have been exposed to the market for a reasonable time

Tell the appraiser what the subject's market value cannot exceed

Tell the appraiser what the subject's market value is

Tell the appraiser what the subject's value in use is

Tell the appraiser what the subject's investment value is

Tell the appraiser what the subject's market value cannot exceed

For a property to be considered as a comparable:

It must have sold within five years

It must be a competitive property

It must be an open market transaction

Both (b) and (c)

both b and c

Which approach would be best to use when appraising a 15-20 year old house?

Group of answer choices

Cost

Feasibility study

Sales comparison

Income capitalization

sales comparison

An open market transaction would not be one:

Listed for at least 30 days

Listed on a multiple listing service

Advertised in local newspapers

Sold to a relative

sold to a relative

Physical units of comparison are a substitute for adjusting for:

Location

Terms of financing

Age

Size

size

The principle of _____________ states that a buyer will not pay more for a site than for another equally desirable one:

Anticipation

Imbalance

Substitution

Balance

substitution

Which approach is usually the most applicable for appraising residences?

Cost

Sales Comparison.

Income capitalization

Cost and income capitalization

sales comparison

Units of comparison

Rates are difficult to estimate

Classifications are difficult to estimate

Are items that represent a breakdown of the price based on a significant variable

Are the characteristics that cause the prices paid for real estate to vary

Are items that represent a breakdown of the price based on a significant variable

Comparable sales that require no adjustment to the subject are usually sales:

Within two years

Of properties equal in square footage

In the same neighborhood

In new developments with nearly identical properties

In new developments with nearly identical properties

Property sale prices

Are negotiated by appraisers

Are negotiated between buyers and sellers

Are set by brokers

Are opinions

are negotiated between buyers and sellers

A market conditions adjustment is applied in some situations because

Financing terms have altered prices

The market has changed since the comparable property sold

It allows the appraiser more flexibility in the indication of value

All real estate values increase on a regular basis

Next

The market has changed since the comparable property sold

A conditions of sale adjustment reflects

The difference in the market on the effective date of the appraisal and the dates of sale of the comparables

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

The differences in the sale prices of properties that sold for cash and the ones that sold with financing

The differences in sale prices of properties that sold from non-related parties

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

Qualitative analysis is based on

Adjusting the sale prices of comparables on a percentage basis

"Inferior" or "superior" ratings

Dollar ratios

Price per square foots

"Inferior" or "superior" ratings

The preferred sequence of adjustment is

Property rights, conditions of sale, expenditures after sale, financing, market conditions, and physical attributes

Property conditions, financing, conditions of sale, expenditures after sale, market conditions, and physical attributes

Property rights, conditions of sale, physical attributes, expenditures after sale, financing, and market conditions

Property rights, financing, conditions of sale, expenditures after purchase, market conditions, and physical attributes

Property rights, financing, conditions of sale, expenditures after purchase, market conditions, and physical attributes

Comparative analysis is

A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach

The tool used in the cost approach to estimate depreciation to the buildings

A tool used to convert income to value in the income approach

A term used to describe levels that support construction costs

A general term used to describe the process by which qualitative or quantitative techniques are used to derive a value opinion in the sales comparison approach

Adjustments for financing terms compensate for

A comparable that sold with financing below the current market rate

A comparable that sold with financing terms that were different than the terms defined in the appraisal report

A comparable that sold with financing provided by a commercial bank

A comparable that sold with cash to the seller

A comparable that sold with financing terms that were different than the terms defined in the appraisal report

Adjustments for the property rights conveyed, financing, conditions of sale, and the date of sale are often made to the _______________ of the comparable property.

Unit price

Actual sale price

Square foot price

Gross income multiplier

Actual sale price

The appropriate time adjustment is concluded to be an increase of 7% per year compounded. The time adjustment for a comparable sale that sold for $40,000, 2 years ago is:

-5796

+$5,796

-2800

5600

+5796

When an appraiser researches the market directly with participants and the data has not been previously collected, it is called

Secondary data

Primary data

Useful data

Quantitative data

primary data

You are analyzing a sale in which the mathematical calculation of cash equivalency calls for a $10,000 downward adjustment. However, by use of several paired data sets, you find that the market only recognizes a $4,000 downward adjustment. What is the adjustment for financing?

$4,000

$7,000

$10,000

$14,000

4,000

Quiz 19 II

Comparable sale sold for $150,000 with down payment of $30,000· Seller financed mortgage for a 30-year term @ 7% interest compounded monthly.· Homes in area are typically held for 30 years· Market derived interest rate is 9% compounded monthly.(Implicit in this method is the assumption that the difference between the market interest rate and the contract rate will remain constant for the entire 30 years)What is the adjusted sale price after taking into consideration financing terms?

$107,615.52

$129,222.04

$99,222.04

$170,777.95

None of the above

129,222.04

Valuation assignment for the subject property is for both the building and land.· A Comparable Office Bldg owned and sold separately from its site (land), which is subject to a 99-year ground lease.· The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or $50/sf.· Assume the annual ground rent is $250,000, which is consistent with the market · Market Land Capitalization rate is 11%.If no other adjustments were made except for the value of the land, what would be the final adjusted sales price of this comparable?

$2,272,727.27

$4,000,000

$2,636,363.64

$6,272,727.27

None of the above

$6,272,727.27

A comparable sale included the seller taking back a purchase-money mortgage at 3% under the market rate for 10 years. The appraisal was based on the cash-equivalent market value. The adjustment for this factor would be called a

Financing terms adjustment

Conditions of sale adjustment

Expenditures made immediately after purchase adjustment

Real property rights conveyed adjustment

Financing terms adjustment

In a market value appraisal assignment, the appraiser found prices were increasing at about 3% per year compounded annually. The appraiser found several comparable sales but they were not very recent transactions. She decided to make an adjustment to compensate for price increases in this market. These adjustments are called

Financing terms adjustments

Conditions of sale adjustments

Market conditions adjustments

Real property rights conveyed adjustments

Market conditions adjustments

Valuation assignment for the subject property is for both the building and land.· A Comparable Office Bldg owned and sold separately from its site (land), which is subject to a 99-year ground lease.· The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or $50/sf.· Assume the annual ground rent is $150,000, which is consistent with the market· Market Land Capitalization rate is 11%.If no other adjustments were made except for the value of the land, what would be the final adjusted sales price of this comparable?

$1,363,636

$4,000,000

$2,636,363.64

$5,363,636.36

None of the above

D. $5,363,636.36

A comparable sale included the seller taking back a purchase-money mortgage at 3% under the market rate for 10 years. The appraisal was based on the cash-equivalent market value. The adjustment for this factor would be called a

Financing terms adjustment

Conditions of sale adjustment

Expenditures made immediately after purchase adjustment

Real property rights conveyed adjustment

Financing terms adjustment

When reconciling the adjusted sales price of comparables, the greatest emphasis should be given to:

The average

The median

The mode

None of the above

None of the above

The owner of a two-acre commercial site insists that her property has appreciated by at least 5% per year since she bought it four years ago. As the appraiser, you are asked to factor this into the appraisal or refute her contention. Research in this market revealed the following sales and reseals of comparable properties:

Date Price Annual Appreciation Rate1Price 1 month ago= $200,000 Price 3 years and 1 month ago=$195,000 %2Price 3 months ago=$195,000 Price 2 years and 4 months ago=$187,000 %3Price 1 month ago= $210,000 Price 2 years and 4 months ago=$210,000 %4Sale 2 months ago= $192,000 Sale 1 year ago= $187,000 %

What is the average annualized reconciles appreciation rate on a straight- line basis? Use annual accounting.

1.53%

.86%

2%

3.2%

1.53%

Consider a 10,000 sf strip shopping center that sold five years ago for $300,000 and then sold again recently for $345,000.The indicated average annual appreciation of the shopping center would be?

$9,000

$45,000

-$45,000

-$9,000

$9,000

In the same market, a 12,000 sf shopping center with similar characteristics sold for $323,000 five years ago, and another 12,000 sf property sold last year for $365,000.What is the average annual change per unit (sf) for those comparable properties?

$42,000 sf

$10,500 sf

$0.87 /sf

$3.50 / sf

0.87/SF

Consider a corner vacant lot being appraised and two sales of vacant lots similar to the subject in most respects except for location.Comparable A, a corner lot with frontage on two streets, was sold for $12/sf.Comparable B, an interior lot with frontage on only one street, was sold for $9/sf.What is the adjustment for Comparable B?

+33%

The current reproduction cost

Includes all items at their historical cost when they were installed new

Includes all items at today's prices and with modern materials, including none of the deficiencies caused by changes in building techniques

Includes the estimated cost of all items as of the effective date of appraisal with materials as they were installed

Includes long-lived items only

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Includes the estimated cost of all items as of the effective date of appraisal with materials as they were installed

The cost approach is based on the assumption that:

the cost to produce a building plus the cost of the site are an indicator of its value.

the cost to produce a building is often more than its value.

there is little relationship between cost and value.

none of the above.

the cost to produce a building plus the cost of the site are an indicator of its value.

The cost appraoch is not useful for

checking value approaches

estimating the value of new property

appraising older homes in an active market

appraising institutional or special-use properties

checking value approaches

Which of the following tends to set the upper limit of value?

Replacement cost new of the improvements plus the market value of the land.

Market data approach

Income approach

Gross rent multiplier

Replacement cost new of the improvements plus the market value of the land.

A building that is too large for the neighborhood is an example of functional obsolescence in the form of overimprovement. Another example of functional obsolescence is:

a sound building with a worn-out heating system

an awkwardly shaped floor plan in an office building

a residence abutting a new freeway

an older building with modernized elevators

an awkwardly shaped floor plan in an office building

In the cost approach, the valuation of land involves the principle of:

conformity

Contribution

Highest and Best use

variable proportions

highest and best use

Which method of estimating cost considers each building component, as installed, including the material and labor?

Comparative-unit, also known as price per square foot

Unit-in-place

Quality survey

Contractor trending

Next

unit in place

Reproduction or replacement cost includes all of the following except

direct or hard costs

indirect or soft costs

fixed and variable expenses of operations

elevator shafts

fixed and variable expenses of operations

The most detailed, complex, costly and time-consuming method of cost estimation is the:

quantity survey

unit-in-place

comparative-unit method

unit breakdown

quantity survey

Based on the following cost estimates, what is the reproduction cost of a 2,350-sq.-ft. house with a 1,100-sq.-ft. basement, a 650-sq.-ft. attached garage, and a 300-sq.-ft. wood deck?· Above-grade residence cost = $77 per square foot; · Basement area cost = $18 per square foot; · Garage cost = $18 per square foot; · Wood deck = $11 per square foot

$215,750

$212,450

$200,750

$180,950

215750

Cost index trending is

Estimating current cost based on the original cost extended to the effective date

Estimating the reproduction cost of an improvement based on an extraction from a new property sale

Estimating the cost of an improvement based on rent

Estimating the reproduction cost of an improvement based on statistical inference from grouped data of sales of existing properties

Estimating current cost based on the original cost extended to the effective date

A 30-year-old buidling with an effective age of 20 years has a total life expectancy of 50 years. How much depreciation has occurred?

10%

20%

40%

60%

40%

A property sold for $125,000 in a cash sale. It was 12 years old and had a site value of $30,000. The reproduction cost of the building improvements was $102,350. What is the amount of depreciation overall?

Group of answer choices

6.50%

7.18%

7.56%

8.85%

7.18%

Effective age refers to:

chronological age

average age

apparent age, considering the physical condiion and marketability of a structure

the age depreciation method

apparent age, considering the physical condiion and marketability of a structure

Functional obsolescence is

The difference between what you have and what you should have

The loss in value due to an oversupply in the market

The loss in value due to a property's proximity to an adverse condition

The loss in value from the passage of time

The difference between what you have and what you should have

The three principal methods of estimating depreciation are

Age-life, breakdown, and direct capitalization

Age-life, economic extraction, and direct cost allocation

Market extraction, economic age-life, and physical breakdown

Market extraction, age-life, and breakdown

Market extraction, age-life, and breakdown

This Narrative Applies to the Next Three (3) QuestionsAn appraiser noted the following about a rental home: Needs exterior paint $750 cost to cure; Needs new water heater $250 cost to cure; Has one bath in market for two ($4,000 capitalized rent loss); Has poor floor plan ($2,500 capitalized rent loss); Is located next to a convenience store ($1,200 capitalized rent loss).How much is curable physical deterioration?

$250

$750

$4,000

None of the above

none of the above

Based on the data in the following example, what is the approximate average annual rate of depreciation?Apartment house sale price $450,000Estimated site value $ 50,000Estimated Reproduction cost $500,000Effective age 20 years

1.5% per year

2.0% per year

1.0% per year

10% per year

1% per year

Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age.Using the age-life method, what is the total percentage depreciation of the building?

10%

5%

.05%

50%

10%

Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age.Using the age-life method, what is the total dollar amount of depreciation?

10%

$80,000

$720,000

$10,000

$80,000

Depreciation The reproduction cost of a commercial building is estimated to be $800,000. The building should have an economic life of 50 years, and it is now five years old, which is also its effective age.Using the age-life method, what is the depreciated value of the building?

$800,000

$80,000

$720,000

$10,000

$720,000

Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is the dollar amount of depreciation associated with deferred maintenance?

$10,000

$60,000

$40,000

None of the above.

$10,000

Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is the dollar amount of depreciation for all short-lived items.

$10,000

$60,000

$40,000

Not enough information to answer the question.

not enough information to answer the question

Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is the cost new of all short-lived items.

$120,000

$60,000

$40,000

Not enough information to answer the question.

$120,000

Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is the cost new of all the long-lived items?

$120,000

$700,000

$570,000

Not enough information to answer the question.

570,000

Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is the amount of depreciation of the long-lived items?

$199,500

$700,000

$570,000

Not enough information to answer the question.

199,500

Depreciation Bldg with a total cost of $700,000. It is 35 years old. Total useful life expectancy of 100 years. The cost of deferred maintenance is $10,000. Short-lived components include the boiler, roof cover, and floor covering. The cost to replace the boiler is $40,000, the cost to replace the roof covering is $60,000, and the cost to replace the floor finish is $20,000. There are no other short-lived items.What is depreciated value of the long-lived items?

$199,500

$370,500

$570,000

Not enough information to answer the question.

370,500`

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the total dollar amount of deferred maintenance?

$5,000

$10,000

$800,000

None of the above or not enough information to determine the answer.d

5,000

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the percentage depreciation of the roof?

25%

5%

20%

None of the above or not enough information to determine the answer.

25%

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the percentage depreciation of the decorations?

25%

5%

20%

None of the above or not enough information to determine the answer.

None of the above or not enough information to determine the answer.

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the total dollar amount of depreciation for all of the short-lived items?

$5,000

$75,000

$163,250

None of the above or not enough information to determine the answer.

75k

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the total cost new of the long-lived items?

Group of answer choices

$163,250

$243,000

$653,000

None of the above or not enough information to determine the answer.

653,000

25 year old bldg. Bldg in average condition. Cost is $800,000. Overhead door damaged $5,000 to replace. Roof was replaced 5 years ago and has a 20-year guarantee; the cost to replace it is $60,000. HVAC components should last another five years and were installed when the building was built. The cost to replace the HVAC is $72,000. The offices were just redecorated at a cost of $10,000, and will not need redecorating for another 5 years. The life of the long-lived items is 100 years. What is the total physical deterioration?What is the total depreciated value of the long-lived items?

Group of answer choices

$489,750

$243,000

$653,000

None of the above or not enough information to determine the answer.

489,750

Suppose the subject is a three-story officebuilding that has no elevator in a market that demands an elevator. The cost of the elevator if installed new when built was $75,000, but the cost to install it today is $210,000. Similar properties with the same problem in this market generally sell for $200,000 less than properties with elevators. The improvement is 14 years old, and the physical depreciation would be 2% per year.What is the present value of the loss associated with not having an elevator?

Group of answer choices

$200,000

$210,000

$75,000

None of the above or not enough information.