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TEST 4
1. An appraisal is which of the following?
(A) A scientific approach to valuation (B) The price in a contract to purchase
(C) A reasonable estimate of value (D) An exact value arrived at by averaging of appraisal methods
2. "Market Value" in the appraisal field can be defined as:
I.
II.
the price at which a willing seller would sell and a willing buyer would buy, both knowing all the facts, and
neither being abnormally motivated
the highest price in money which a property will bring if exposed for sale for a reasonable time, both
buyer and seller having knowledge of all uses to which it is adapted, and neither acting under compulsion
(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II
3. The four essential elements of value are:
(A)
(B)
(C)
(D)
income, capitalization, comparison, market data
utility, scarcity, demand (implemented with purchasing power), transferability
physical, social, economic, governmental
physical, fundamental, social, functional
4. The appraisal method most often used on vacant ground and amenity properties is:
(A) market data
(B) cost approach
(C) capitalization
(D) income
5. Which of the following statements is true with respect to the appraisal of a single family residence?
(A) The capitalization of net income will yield the most accurate appraisal
(B) You should appraise the property by at least three methods, total the results and divide by three
(C) The replacement cost method is a valid method on new properties where the cost of replacement of the
building and value of the land can be ascertained
(D) The direct sales comparison (market data) approach to value is the most accurate for newly constructed
properties
6. An appraiser who is using the comparison method to appraise a single family residence should not use the
selling price of which of the following?
(A)
(B)
(C)
(D)
A similar home that sold over six months ago
A similar home that sold recently but is in another neighborhood
A similar home that was sold by owners who were forced because of financial difficulties
A home of similar size but situated on a corner lot
7. All of the following should be considered by an appraiser in valuing real property, EXCEPT:
(A) the market data (direct sales comparison) approach (B) cost of reproduction
(C) the owner's purchase price (D) the income approach
8. If you are called on to appraise an old public building, the method you would most likely use would be:
(A) comparison
(B) market data
(C) income
(D) cost
9. The formula used in the cost approach to estimating value is:
(A) reproduction cost new, less depreciation, plus land (B) replacement cost plus land
(C) land plus improvements (D) cost less accrual for depreciation
10. The cost approach is most appropriate for appraising:
(A) commercial property
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(B) raw land
(C) libraries
(D) apartments
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TEST 4
11. What is the market value of a five year old commercial property that had an estimated life when new of fifty
years, if replacement costs are currently running at $75 per square foot, it has a building area of 5,000 square
feet and the land is worth $150,000 today?
(A) $487,500
(B) $375,000
(C) $525,000
(D) $337,500
12. The cost approach uses which of the following in estimating market value?
(A) Gross income
(B) Depreciation
(C) Comparable sales
(D) Expenses
13. Which of the following statements concerning "costs" is true in the replacement cost approach to value?
(A) The typical cost used is the cost to reproduce the improvements today with an exact duplicate
(B) Replacement cost is the cost of construction today of a "utility equivalent" to the property being appraised
(C) Cost is the amount it would take today to construct improvements in the same condition as the property
being appraised
(D) Cost is the total of each depreciated element of the improvements
14. Which of the following best expresses "finality" as it applies to property?
(A) Economic life
(B) Useful life
(C) Effective life
(D) Physical life
15. The economic life of improved property is which of the following in relation to the physical life of the property?
(A) Longer
(B) Shorter
(C) The same
(D) Depends on the type of improvements
16. What is the proper method of measuring the area of a home for listing purposes?
(A)
(B)
(C)
(D)
Outside dimensions of walls including interior finished space
Inside dimensions plus half the thickness of walls
Dimensions of foundations times the number of levels
Dimensions of the eave lines, less exterior balconies and decks
17. Depreciation most nearly means which of the following?
(A) Wear and tear from normal use (B) Loss of value brought about by any cause
(C) Utility loss due to any cause beyond the owner's control (D) Loss of value due to the elements
18. Which of the following are the three causes of depreciation?
(A)
(B)
(C)
(D)
Wear and tear, negligent care and dry rot
Misplacement of improvements, changes in demand and unreasonable tax rates
Governmental controls, small rooms and deferred maintenance
Physical deterioration, functional obsolescence and external obsolescence
19. Which of the following is a cause of physical depreciation?
(A) Lack of modern facilities (B) High tax rates
(C) Severe changes in temperature (D) Changes in utility demand
20. Which of the following would result in loss of value due to functional obsolescence in a residential property?
(A) Negligence (B) Detrimental changes in supply and demand
(C) Changes in construction materials (D) Adjacent apartment construction
21. Physical deterioration is associated with which of the following?
(A) Eccentric design (B) Soil subsidence
(C) Poor architectural planning (D) Adjacent commercial construction
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TEST 4
22. Which of the following is an example of external obsolescence?
(A)
(B)
(C)
(D)
Loss of value brought about by sudden changes in climate
Loss of value brought about by deferred maintenance
Loss of value due to changes in construction standards
Loss of value due to misplaced improvements
23. Which of the following forms of depreciation would be most difficult to correct?
(A) Physical deterioration
(C) Deferred maintenance
(B) Functional obsolescence
(D) External obsolescence
24. In an old store building, which of the following would most likely be a cause of incurable functional
obsolescence?
(A) Deficient lighting (B) Closely spaced internal columns
(C) Unattractive store front (D) Lack of air conditioning
25. The method most often used in the valuation of commercial property is which of the following?
(A) Comparison
(B) Capitalization
(C) Market data
(D) Cost
26. Which of the following is NOT used in the income approach to value?
(A) Net income
(B) Expenses
(C) Capitalization rate
(D) Depreciation
27. Which of the following is a definition of capitalization?
(A) The process of discounting anticipated future income into a value at a rate which is presently attracting
capital to like investment
(B) Return "of" an investment
(C) Return "on" an investment
(D) The value of a property divided by its income
28. If you were to divide net income produced by a property by the capitalization rate, you would obtain the:
(A) net income before capital recapture (B) value of the land
(C) value of the improvements (D) value of the property
29. Which of the following is correct in order to find the net income of an apartment building?
(A) Divide the gross income by the number of units in the apartment building, then divide the gross rent
multiplier
(B) Subtract vacancy rate and collection losses from gross income, add miscellaneous income and subtract
expenses
(C) Divide expenses into gross income
(D) Subtract expenses, debt service and depreciation from gross income
30. Net spendable income is also called which of the following?
(A) Gross income
(B) Net income
(C) Cash flow
(D) Effective gross income
31. Thompson wishes to buy Baron's property located at 1126 Belmont. It is a 24 unit apartment house with gross
income of $122,400 and expenses totaling $58,250. What is the approximate value of the property if the cap
rate is 11%?
(A) $70,600
(B) $134,600
(C) $583,200
(D) $640,750
32. In itemizing expenses in the income approach to value, provision can be made to allow for the "return of"
investment in personal property. This expense would be:
(A) interest
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(B) reserve for replacement
(C) principal payments
(D) depreciation
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TEST 4
33. A residential subdivision survey should contain all of the following, EXCEPT:
(A) the subdivision and owner's name (B) approval of local officials
(C) the mailing address for each lot (D) the numbering system for lots and blocks
34. All of the following would have to be listed in an appraisal report, EXCEPT:
(A) description of the property (B) the property's original cost
(C) the property value (D) any present or future interest of the appraiser
35. The principle of highest and best use is best defined as:
(A)
(B)
(C)
(D)
that use which generates the greatest income on the money invested
scarcity of a product which develops into increased production
that use which makes full site utilization of improvements
that property use which generates the greatest net return to the owner
36. Which of the following is true concerning the principle of highest and best use of real property?
(A)
(B)
(C)
(D)
It considers that use which results in the highest present property value
It considers potential uses in all zoning categories
It considers only those uses that produce the highest gross income
It considers only the present use of the property
37. Economic (external) obsolescence is usually classified as which of the following?
(A)
(B)
(C)
(D)
curable
incurable
curable or incurable, depending on the circumstances
curable, unless the cost to cure is greater than the building value
38. Which of the following describes a zoning ordinance provision that allows a property owner to legally violate
zoning due to the owner's hardship?
(A) Non-conforming use
(B) Deviation
(C) Variance
(D) Amended use
39. A properly prepared appraisal report on a property will be valid:
(A)
(B)
(C)
(D)
as of the date of the appraisal only
for a period of three months after the appraisal date
for a period of six months after the appraisal date
for a period of one year after the appraisal date
40. Which of the following would be used to appraise a 15 year old house?
(A)
(B)
(C)
(D)
An analysis of currently listed properties
An analysis of listed properties which have been removed from the market
An analysis of offers on listed properties
An analysis of similar properties which sold in the last three months
41. In looking for a new home, the most important feature to a purchaser is:
(A) location (B) community tax structure
(C) condition of improvements (D) restrictive covenants
42. Which of the following is necessary to appraise a single family residence using the cost approach to value?
(A)
(B)
(C)
(D)
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The terms of recently sold homes in the area
Rents collected on similar homes in the area
An estimate of the current cost to replace the improvements
The adjusted present value of similar homes
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TEST 4
43. Due to the action of the sun, which of the following is generally the most preferred street intersection corner by
clothing merchants?
(A) Southeast
(B) Southwest
(C) Northeast
(D) Northwest
44. A separate value for the land must be computed in which of the following approaches to value?
(A) Replacement cost approach (B) Market data approach
(C) Income approach (D) Competitive market analysis
45. If an appraiser puts an age of fifteen years on a twenty year old property since it has been kept up like new, this
is an example of:
(A) chronological age
(B) effective age
(C) economic age
(D) actual age
46. All of the following are true regarding development of real estate and land use regulation, EXCEPT:
(A)
(B)
(C)
(D)
most urban residential lots are described by metes and bounds
referring to a residential parcel by lot number and plat map constitutes a legal description
residential developments are subject to both zoning and health codes
setting aside land for public use, such as for streets and schools, is known as dedication
47. A variance is best described as which of the following?
(A) A court restraining order against certain property uses
(C) A height limitation (D) An exception to zoning laws
(B) A zoning ordinance
48. A legal description of a property would best be obtained from which of the following?
(A) A property survey (B) The electric company
(C) The listing broker's records (D) The multiple listing exchange
49. In all of the following a variance from zoning has been granted, EXCEPT:
(A)
(B)
(C)
(D)
a height limitation is waived so that a three story house can be built
permission is given to build a free standing restaurant in an area zoned for a mall shopping center
permission is given to allow a grocery to remain in an area just rezoned single family residential
a rear setback is reduced to allow construction of a garage
50. Which of the following is the purpose of zoning commissions?
(A)
(B)
(C)
(D)
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To exercise the power of eminent domain in condemning property for public use
To regulate brokers and attorneys specializing in zoning matters
To control growth in areas of rapid expansion
To assure conforming land use through regulation and enforcement