Unit 19: Real Estate Appraisal

Which of these appraisal methods uses a rate of investment return?

A) Income approach

B) Sales comparison approach

C) Cost approach

D) Gross income multiplier method

A) Income approach

The characteristics of value include:

A) progression.

B) anticipation.

C) scarcity.

D) balance.

C) scarcity.

Two adjacent vacant lots are each worth $50,000. However, if they are sold as a single lot, the combined parcel is worth $120,000. What principle does this illustrate?

A) Substitution

B) Regression

C) Progression

D) Plottage

D) Plottage

The amount of money a property commands in the marketplace is its:

A) intrinsic value.

B) subjective value.

C) market value.

D) book value.

C) market value.

A homeowner constructs an eight-bedroom brick house with a tennis court, greenhouse, and indoor pool in a neighborhood of modest two- and three-bedroom frame houses on narrow lots. The value of this house is likely to be affected by what principle?

A) Progression

B) Assemblage

C) Change

D) Regression

D) Regression

A homeowner constructs an eight-bedroom brick house with a tennis court, greenhouse, and indoor pool in a neighborhood of modest two- and three-bedroom frame houses on narrow lots. The owners of the lesser-valued houses in the neighborhood may find that the values of their homes are affected by what principle?

A) Increasing returns

B) Progression

C) Competition

D) Regression

B) Progression

For appraisal purposes, depreciation is NOT caused by:

A) accelerated capitalization.

B) functional obsolescence.

C) physical deterioration.

D) external obsolescence.

A) accelerated capitalization.

The term reconciliation refers to:

A) loss of value due to any cause.

B) analyzing the results obtained by the different approaches to value to determine a final estimate of value.

C) separating the value of the land from the total value of the property to compute depreciation.

D) the process by which an appraiser determines the highest and best use for a parcel of land.

B) analyzing the results obtained by the different approaches to value to determine a final estimate of value.

If a property’s annual net income is $24,000 and it is valued at $300,000, what is its capitalization rate?

A) 10.5%

B) 12.5%

C) 15%

D) 8%

D) 8%

Certain figures must be determined by an appraiser before value can be computed by the income approach. Which of these is NOT used by an appraiser applying the income approach to value?

A) Annual net operating income

B) Capitalization rate

C) Accrued depreciation

D) Annual gross income

C) Accrued depreciation

An appraiser who is asked to determine the value of an existing strip shopping center would probably give the MOST weight to which approach to value?

A) Cost approach

B) Income approach

C) Sales comparison approach

D) Index method

B) Income approach

The market value of a parcel of real estate is:

A) an estimate of its future benefits.

B) an estimate of the most probable price it should bring.

C) the amount of money paid for the property.

D) its value without improvements.

B) an estimate of the most probable price it should bring.

Capitalization is the process by which annual net operating income is used to:

A) determine cost.

B) estimate value.

C) establish depreciation.

D) determine potential tax value.

B) estimate value.

From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents:

A) the remaining economic life of the building.

B) remodeling costs to increase rentals.

C) loss of value due to any cause.

D) costs to modernize the building.

C) loss of value due to any cause.

The effective gross annual income from a property is $112,000. Total expenses for this year are $53,700. What capitalization rate was used to obtain a valuation of $542,325?

A) 9.75%

B) 10.25%

C) 10.75%

D) 10.5%

C) 10.75%

Which factor is important in comparing properties under the sales comparison approach to value?

A) Active listings

B) Date of sale

C) Property rent roll

D) Depreciation

B) Date of sale

A building was purchased five years ago for $240,000. It currently has an estimated remaining useful life of 60 years. What is the property’s total depreciation to date?

A) $14,364

B) $20,000

C) $18,462

D) $54,000

C) $18,462

Which of these is the act of analyzing and effectively weighing the findings from the three approaches to appraisal?

A) Reconciliation

B) Reintegration

C) Benefit analysis

D) Appraisal analysis

A) Reconciliation

The appraised value of a residence with four bedrooms and one bathroom would probably be reduced because of:

A) functional obsolescence.

B) external obsolescence.

C) curable physical deterioration.

D) incurable physical deterioration.

A) functional obsolescence.

An individual wants to be an appraiser in the northwest suburbs of Chicago. While she is willing to appraise residential properties, her real interest is in appraising commercial properties. If she wants to be qualified to conduct appraisals under FIRREA, this individual must:

A) become a certified general real estate appraiser.

B) become an associate real estate trainee appraiser.

C) become a certified residential real estate appraiser.

D) do nothing because individuals who wish to conduct appraisals under FIRREA must receive federal appraisal certification rather than state licensing.

A) become a certified general real estate appraiser.