7-B: APPRAISAL COST AND INCOME APPROACHES

Which represents the cost approach to appraisal?
A. Replacement cost minus depreciation plus land value
B. Replacement cost minus depreciation minus land value
C. Reproduction cost plus depreciation plus land value
D. Reproduction cost plus depreciation minus land value

A. Replacement cost minus depreciation plus land value

An agent evaluating a residential property for a listing presentation would MOST likely use:
A. direct sales comparison approach
B. replacement cost approach
C. cost approach
D. income approach

A. direct sales comparison approach

The greatest weight would be given to the cost approach when appraising a(an):
A. apartment building
B. church
C. old residence
D. old commercial building

B. church

In preparing an estimate of value for a 30-year old house, an appraiser will MOST likely use which of the following approaches to value?
A. Replacement cost
B. Reproduction cost
C. Market data
D. Income

C. Market data

The appraisal approach which uses the replacement cost less depreciation, added to the land value is:
A. market data
B. cost
C. income
D. capitalization

B. cost

An appraiser would MOST likely use the market data approach in estimating the value of a(an):
A. oil refinery
B. gas station
C. municipal building
D. parcel of vacant land

D. parcel of vacant land

Which of the three appraisal approaches takes into account depreciation?
A. Cost
B. Income
C. Market
D. Highest and best use

A. Cost

The difference between a building's replacement cost and its present value is:
A. used value
B. market value
C. regression
D. depreciation

D. depreciation

In the cost approach, when figuring depreciation, which does NOT qualify as a depreciation item?
A. Roof
B. Air conditioner
C. Land
D. Fixtures

C. Land

For which property would you expect the cost approach method to be LEAST useful?
A. A new home in a relatively new subdivision
B. An older home in a neighborhood with high turnover
C. A school building
D. A home with many unique features

B. An older home in a neighborhood with high turnover

The letters in IRV represent which of the following terms?
A. Net income, rate, and value
B. Net income, rate, and cost
C. Gross income, rate, and cost
D. Gross income, rate, and value

A. Net income, rate, and value

All of the following items are used in the income approach EXCEPT:
A. market rents
B. expenses
C. rate of return
D. accrued depreciation

D. accrued depreciation

The approach MOST heavily relied on in estimating the value of a 20-unit apartment building is the:
A. cost approach
B. market data approach
C. FNMA guidelines
D. income approach

D. income approach

The rate of return that an investor expects to receive or that the property is producing is known as:
A. interest rate
B. capitalization rate
C. annual percentage rate
D. gross income multiplier

B. capitalization rate

Capitalization is a process used to:
A. convert income into value
B. determine cost
C. establish depreciation
D. determine potential future value

A. convert income into value

The income approach would be relied on MOST heavily in estimating the value of:
A. an office building
B. a cooperative apartment
C. a municipal building
D. vacant land

A. an office building

17. In using the income approach, an appraiser must establish a(an):
A. discount rate
B. capitalization rate
C. interest rate
D. expense rate

B. capitalization rate

When developing a cap rate, one would NOT consider:
A. replacement cost
B. comparable sales and income
C. investment alternatives
D. risk

A. replacement cost

If interest rates rise, what effect would this have on commercial property with a long-term, fixed rent lease?
A. The cap rate would decrease
B. Property value would increase
C. Net operating income would decrease
D. Property value would decrease

C. Net operating income would decrease

The gross rent multiplier is calculated by:
A. dividing gross rents by the sales price
B. dividing the net income by the sales price
C. dividing the sales price by the net income
D. dividing the sales price by the gross rents

D. dividing the sales price by the gross rents