Chapter 22 Quiz

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Chapter 22 Quiz

Appraising

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Loss of value brought about by physical deterioration or functional or economic obsolescence. 22-447

1 point

Depreciation

Reproduction Cost

Deterioration

Economic Obsolescence

Clear selection

With respect to an appraisal, which of the following is NOT correct?

1 point

(A) It is the appraiser's opinion of market value.

(B) It is the appraiser's conclusion of market value.

(D) It is the appraiser's determination of market value.

Clear selection

The highest price a ready, willing and able buyer, not forced to buy, will pay to a ready, willing and able seller, not forced to sell, allowing a reasonable time for exposure in the open market. 22-443

1 point

Net Income

Capitalization Rate

Market Price

Market Value

Clear selection

In appraising a house, the appraiser finds that Comparable A is similar to the subject property and sold for $180,000. Comparable B is also similar except it has one additional bedroom and sold for $200,000. In regard to the extra bedroom, what adjustment is made?

1 point

(A) Add $20,000 to the subject property.

(B) Add $20,000 to Comparable A.

(D) Subtract $20,000 from Comparable B.

Clear selection

The formula used in direct capitalization of income property valuation is:

1 point

(A) value equals cap rate divided by income.

(B) value equals annual net income divided by cap rate.

(D) value equals income divided by net assets.

Clear selection

A homogeneous community has what effect on real estate values?

1 point

(A) Stabilizes them.

(B) Causes the value to increase.

(D) Doesn't have any effect.

Clear selection

Estimating the value of a piece of property by adding to the estimated land value the estimate of the replacement cost or reproduction cost of the building less depreciation. AKA "summation" or "reproduction cost" approach. 22-447

1 point

Cost Approach

Capitalization Rate

Income Approach

Net Income

Clear selection

Of the three methods of appraising properties, reproduction cost approach is particularly appropriate and would give the most accurate value in the appraisal of a(n):

1 point

(A) new home.

(B) multiple dwelling.

(D) medium-age home.

Clear selection

The actual price paid in a given transaction. Contrast with market value. 22-443

1 point

Market Value

Depreciation

Market Price

Reproduction Cost

Clear selection

Market value is most closely related to:

1 point

(A) selling price.

(B) replacement price.

(D) reproduction price.

Clear selection

In estimating value, the before and after method is used most often with:

1 point

(A) condemnation.

(B) exchange.

(D) option.

Clear selection

All but one of the following is used to estimate value:

1 point

(A) Improvements.

(B) Deterioration.

(D) Economic life.

Clear selection

A number which is used to determine approximate selling price for income property by multiplying the gross income times this number (income x multiplier = selling price). 22-446

1 point

Cost Approach

Market Value

Gross Multiplier

Income Approach

Clear selection

Which of the following statements is true?

1 point

(A) Market price and market value are interchangeable terms.

(B) An appraiser would most likely use the cost approach to estimate the value of a church.

(D) The cost approach is used to estimate the value of vacant land.

Clear selection

In estimating the value lost by a structure due to physical deterioration, the appraiser places greatest emphasis on:

1 point

(A) the condition of the surrounding buildings.

(B) the zoning of the neighborhood.

(D) the observed condition of the subject building.

Clear selection

Loss in value brought about by wear and tear. 22-447

1 point

Deterioration

Market Price

Depreciation

Economic Obsolescence

Clear selection

Real estate values are most affected by:

1 point

(A) location.

(B) availability of money.

(D) national trends.

Clear selection

The cost of exactly duplicating a structure using the same material and design.

1 point

Replacement Cost

Market Price

Reproduction Cost

Depreciation

Clear selection

In regard to the capitalization rate:

1 point

(A) as it increases, value of property increases.

(B) as it decreases, value of property decreases.

(D) changing capitalization rate has no effect on value of the property.

Clear selection

Used in the income approach in estimating value. Effective gross income is found by subtracting an allowance for vacancies and collection losses from potential gross income. 22-446

1 point

Income Approach

Functional Obsolescence

Effective Gross Income

Economic Obsolescence

Clear selection

The most widely used approach to appraisal of real properly is the:

1 point

(A) income approach.

(B) sales comparison approach.

(D) SWAG approach.

Clear selection

The method most frequently used to determine value for a fire insurance policy is:

1 point

(A) sales comparison.

(B) cost approach,

(D) declining balance.

Clear selection

Loss of value caused by factors outside the property, such as zoning; AKA "external obsolescence". 22-449

1 point

Depreciation

Deterioration

Economic Obsolescence

Functional Obsolescence

Clear selection

The sales comparison approach to value gives:

1 point

(A) indication of the lowest value.

(B) indication of the highest value.

(D) range of probable value.

Clear selection

The economic life of a building has come to an end when:

1 point

(A) the building ceases to represent the highest and best use of the land.

(B) the value of the land and the building equals the value of the land only.

(D) the reserve for depreciation equals the cost to replace the building.

Clear selection

The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.

1 point

Accrued Depreciation

Highest and Best Use

Replacement Cost

Reproduction Cost

Clear selection

The use of the gross multiplier to assist in appraising real property leased to various tenants is based upon:

1 point

(A) gross income in relation to capitalized value.

(B) relationship between rental value and sale price of property.

(D) scheduled gross income and expected net income.

Clear selection

The act of converting future income into current equivalent value. 22-446

1 point

Reproduction Cost

Capitalization

Capitalization Rate

Market Price

Clear selection

Which of the following factors would have little or no effect in estimating the value of a commercial property?

1 point

(A) Purpose of the appraisal.

(B) Income from property.

(D) Zoning.

Clear selection

Original cost of property plus value of any improvements put on by the seller and minus any depreciation taken. 22-443

1 point

Appraisal

Replacement Cost

Basis

Cost

Clear selection

With reference to property, the sum derived after a vacancy allowance and expenses have been deducted from the gross income; generally described as net income before depreciation, and usually defining the income a property will earn in a normal year's operation. 22-446

1 point

Cost Approach

Capitalization Rate

Market Value

Net Income

Clear selection

An estimate of value of real estate; the report stating and supporting the estimated value of realty. 22-443

1 point

Appraisal

Depreciation

Comparables

Market Price

Clear selection

Accrued depreciation may be defined as:

1 point

(A) future depreciation.

(B) the total depreciation from the time of construction to the date of appraisal from all causes.

(D) none of the above.

Clear selection

That legal use which at the time of an appraisal is most likely to produce the greatest net return over a given period of time. 22-444

1 point

Accrued Depreciation

Economic Obsolescence

Replacement Cost

Highest and Best Use

Clear selection

Lack of desirability in terms of layout, style and design as compared with that of a new property serving the same function; external obsolescence or a loss in value from causes in the neighborhood, but outside the property itself. 22-449

1 point

Capitalization Rate

Effective Gross Income

Functional Obsolescence

Economic Obsolescence

Clear selection

Properties that are similar to the subject property. AKA "comps." 22-445

1 point

Comparables

Appraisal

Market Price

Cost Approach

Clear selection

The difference between the cost of replacement and current valuation is equal to:

1 point

(A) accrued depreciation.

(B) assessed valuation.

(D) book value.

Clear selection

The useful life of a building, or period of time after which the income provided by it is not sufficient to warrant its maintenance, is called:

1 point

(A) recapture limit.

(B) economic life.

(D) investment duration.

Clear selection

Which of the following might be classified as functional obsolescence?

1 point

(A) Exterior needs painting.

(B) Property fronts on a busy expressway.

(D) Neighborhood is 35 to 50 years old.

Clear selection

If the subject property has central air conditioning valued at $2,000, and the comparable does not, the sale price of the comparable is adjusted by:

1 point

(A) +$2,000.

(B) -$2,000.

(D) Can't be computed based on the information given.

Clear selection

Which of the following is NOT an example of physical deterioration?

1 point

(A) Poor floor plan.

(B) Peeling paint.

(D) Missing shingles.

Clear selection

A residence located in an area where there are factories and plants, and where there is much smoke and dust, is suffering from:

1 point

(A) physical depreciation.

(B) external obsolescence.

(D) None of the above.

Clear selection

A house with four bedrooms and one bath is an example of:

1 point

(A) economic obsolescence.

(B) functional obsolescence.

(D) all of the above.

Clear selection

All but which one of the following would be considered in the cost approach appraisal method?

1 point

(A) Operating expenses.

(B) Depreciation.

(D) Replacement cost.

Clear selection

The definition of market value assumes that:

1 point

(A) the buyer is not under pressure to buy and the seller is not under pressure to sell.

(B) the property has been on the market for a reasonable length of time.

(D) Neither A nor B.

Clear selection

The relationship or ratio between the net income from a real estate investment and the value of the investment, usually expressed as a percentage; the rate of interest which is considered a reasonable return on the investment. 22-447

1 point

Market Value

Reproduction Cost

Cost Approach

Capitalization Rate

Clear selection

An appraiser's fee is typically based on which of the following?

1 point

(A) Time and expenses.

(B) Percent of value estimate.

(D) Percent of income.

Clear selection

Functional obsolescence is a decrease in value due to:

1 point

(A) being "outdated."

(B) decline in neighborhood.

(D) excessive cost.

Clear selection

The trend in architectural design in a neighborhood is toward more contemporary styled homes. Because of this trend a conservatively designed home will tend to:

1 point

(A) depreciate in value more rapidly.

(B) depreciate in value less rapidly.

(D) appreciate in value.

Clear selection

The amount which a seller who does not have to sell will accept from a buyer who does not have to buy is called:

1 point

(A) market value.

(B) market price.

(D) appraised value.

Clear selection

When capitalization is sought, a person is particularly interested in:

1 point

(A) the potential future value.

(B) cost value.

(D) converting income into value.

Clear selection

The difference between the cost of a replacement new, on the date of the appraisal, and the present appraised value. 22- 449

1 point

Economic Obsolescence

Accrued Depreciation

Replacement Cost

Highest and Best Use

Clear selection

The total dollar expenditure for the labor, materials and other items related to construction improvements plus the value of the land.

1 point

Replacement Cost

Highest and Best Use

Basis

Cost

Clear selection

The period of time over which a property may be profitably used. 22-446

1 point

Economic Life

Capitalization

Market Price

Comparables

Clear selection

Determining the value of property by dividing net annual income by the capitalization rate. Used on income-producing properties. Also called "capitalization approach." 22-446

1 point

Cost Approach

Gross Multiplier

Income Approach

Accrued Depreciation

Clear selection

Physical deterioration most closely means:

1 point

(A) obsolescence.

(B) wear and tear.

(D) recapture.

Clear selection