RE PExam Valuation and Appraisal

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The income capitalization approach includes the "return of" and "return on" the investment. What does "return of" mean?

Recapture of initial investment

Which of the following types of value would be approximately the same as market value?

Speculative value

An appraiser is reconstructing the operating statement for a small commercial property. Which expense is often overlooked by the owner, but is included by the appraiser on the reconstructed operating statement?

Management

The difference between the way an appraiser looks at depreciation and the way an accountant looks at depreciation is:

an accountant is interested in book depreciation and an appraiser is interested in actual depreciation.

The market value of a 15-year old residence is most commonly determined by:

selling price of comparable residences.

Which of the following is not one of the four elements of the value of real property?

Cost

Which of the following types of depreciation would be most difficult to cure?

Economic obsolescence

The quantity survey method, square foot method, and unit-cost-in-place method, are terms most directly related to real estate:

appraisal.

What a leased property would be expected to rent for under current market conditions if the property were vacant and available for rent is:

economic rent.

In the appraisal field of real estate, there are many ways an appraiser can arrive at a capitalization rate. Which of the following could be used to determine a capitalization rate?

The band of investment theory

"Depth tables" are used by appraisers when appraising:

commercial property.

Which of the following formulas would establish the value of income property?

I divided by R = V

To appraise an amenity an appraiser would probably use the:

market comparison.

The fastest and most accurate method of appraising a library would be:

cost approach.

The period of time in which an income property produces enough income to maintain itself and show a profit is known as its:

economic life.

Most appraisers use the _____________ when appraising a new building.

cost approach

An example of economic obsolescence is:

over supply.

The economic life of an average frame building is:

40 years.

A lesser-valued property will be worth more because of the presence of a greater-valued property nearby. This is known as the principle of:

progression.

An appraiser's primary concern when analyzing real property is:

marketability and acceptability.

When calculating value using a capitalization rate, which item is not deductible in calculating net income?

Interest on loan payments

Which of the following appraisal methods would require the appraiser to determine a separate value of the land?

Cost approach

There are three main causes of depreciation. Which of the following finds its origin in the term, "social forces," which is the basis for the old axiom that, "more houses are torn down than fall down?"

Economic obsolescence

The closest meaning to value is:

worth

If you fix up a building which you own, without changing the interior or exterior design, this would be an example of:

rehabilitation.

A licensee must make an adjustment between the comparable and the subject property because:

two properties are rarely similar concerning everything.

A multi-storied apartment building that contains no elevator is called:

a walk up.

A property located at 147 James Street, Any City, Your State, which is near the corner of Broadway and 3rd Avenue and measures 140' x 200', is:

a physical description.

The concept of fair market value:

all of the above, is used in the appraisal of single family residences., is the price the property will bring on the open market., involves a willing buyer and willing seller.

Of the following, which one would be the least important feature in establishing the value for industrial acreage?

Fertility

Utility value is best described as:

use value

The appraisal approach using income from property as a basis for determining its value would be concerned with which of the following characteristics of the income?

all of the above, Quantity, Durability, Quality

The amount of money left over after an owner of an income producing property has paid all of his expenses, including principal and interest payments, is called:

cash flow.

Ms. Smith built a house with four bedrooms and one bath. When work was completed, the property had depreciated immediately from what cause?

Functional obsolescence

Which principle of valuation says that value is set by the cost of getting an equally desirable substitute?

Principle of substitution

When a person acquires certain assets, he must determine the salvage value of those assets. Before calculating his future depreciation on these assets, the salvage value would:

decrease the allowable depreciation.

The word value, as used in appraising real property, is most nearly comparable to:

worth

The value of the best property in a neighborhood is adversely affected by a substandard property nearby. This can be described as the principle of:

regression.

Which of the following is a correct statement concerning the cost method?

all of the above, It sets the upper limit of value, Little difficulty is encountered in estimating the replacement cost of "new" structures, Serious difficulties often arise in obtaining an accurate computation of accrued depreciation

Depreciation is defined as a loss of value due to any cause. It is also classified as curable and incurable. Of the following statements concerning depreciation, which one is correct?

Bearing walls sagging beyond a 30-degree angle is an example of physical deterioration--incurable

Economic obsolescence is said to be extraneous, caused by environmental or economic changes. Of the following, which is a correct statement concerning economic obsolescence?

Value loss due to proximity to a major highway causing noise and traffic hazards will create economic obsolescence

Appraisers speak of "the highest and best use." Of the following, which is related to this expression?

both, A starting point for an appraisal, Greatest net return

The income method would be used when appraising:

all of the above, a shopping center., a medical building under long term lease., a hotel.

A residential property that is 15 years old has an average projected physical life of 40 years. This particular property has been superbly maintained and appears as if it were just 5 years old. This represents the concept of:

effective age.

Unearned increment means:

value increases due to population increase.

Of the following, which is a correct statement concerning the comparison method?

all of the above, It is the quickest and easiest method, It is the simplest method and easiest for a beginner to learn, It is often used to appraise unimproved land

What appraisal approach would be used on a residential duplex for fire insurance purposes?

Cost

Depreciation, as used in the cost approach to appraisal, may be defined as:

a loss in value from any cause.

The most important factor listed below, in determining the value of a home, is:

availability of interested buyers.

In the field of real estate, the terms "quantity survey," "unit-cost in place," and "square foot" apply to:

appraising.

When an appraiser adjusts the income of an apartment property for vacancies and loss of rent, the resulting figure is:

effective gross income.

If a house were built in 1948 and appraised in 1993, it:

had a physical life of 45 years.

Mr. Loveless built a quality custom home in an area where the surrounding homes were valued at $120,000. His home cost $350,000 to construct. He will suffer a loss of value due to:

regression.

In which of the following is the appraiser estimating the value of the land by considering it as fully developed to its highest and best use, then deducting the cost of development?

Development method

The real estate appraisal field is a very complex and detailed area. When developing an appraisal to determine an opinion of value, which of the following dates would be of most importance to an appraiser?

The date the appraiser inspects the physical improvements

Appraisers using the observed condition method to appraise a property would consider all except:

political obsolescence.

When a building earns sufficient income to justify its continued operation, this is called:

economic life.

When the owner of a commercial property lists it for the purpose of selling, which cost is most often overlooked?

Management costs

What would happen to the value of a commercial property whose depth is extended beyond that of neighboring lots?

Value per front foot would increase

All of the following are considered forces of value. Which is least important in its effect on value?

Original cost

You would most likely find the best kept homes in a neighborhood where:

all owners are required to pay a substantial down payment.

A couple is looking at houses and turns one down because they felt the price of the home was too high. This is based on what principle of real estate?

Substitution

A professional appraiser, in arriving at the value of an income producing property, may use:

all of the above, property residual technique., capitalization of net income., land residual technique.

What contributes most to the maintenance of value in a well-planned community?

Conformity to proper land use objectives

In the situation where no prudent person would pay more for a piece of land than others, which of the following principles would be best applied?

Substitution

The upper limits of value are determined by which approach?

Reproduction

Accrued depreciation is a term used in the real estate appraisal field. Which of the following methods would accrued depreciation have its greatest effect on?

Cost approach

Broker Jones appraised two similar commercial properties. Both were leased on a long term basis. One was a hardware store and the other was a post office. Compared to the hardware store, the capitalization rate on the post office was:

lower

An appraiser, in determining the value of real property, would give consideration to which of the following?

all of the above, The desire of a person for the desired thing, The relationship of the value of the property in exchange for other property, Effective demand, as evidenced by purchasing power, and relative scarcity

A nice yard, beautiful trees, and good neighbors usually increase the value of residential property. These things are known as:

amenities

To arrive at the valuation of an amenity type property, an appraiser would use:

market data approach.

In making a real estate appraisal, the opinion of value typically is based on the:

effective date of the appraisal.

Which of the following is an example of economic obsolescence?

An oversupply of like properties

When two or more contiguous parcels owned by one person have an increased value, above the value of the individual lots, this is called:

plottage.

Present worth and future benefits of property are concerned with:

appraised value.

When two properties are identical or highly-similar most buyers focus on lower price. This principle is called.

Substitution

Which of the following is not classified as obsolescence?

Worn out roof

Which of the following statements is correct concerning the income approach?

all of the above, it requires the determination of net income before interest and amortization but after deduction of operating expenses, an appropriate capitalization rate must be determined, it is not applicable to owner-occupied homes because benefits of amenities are difficult to measure in terms of dollars

Of the following, which is a correct statement concerning the cost method of appraisal?

all of the above, It sets the upper limit of value, Little difficulty is encountered in estimating the replacement cost of new structures, Serious difficulties often arise in obtaining an accurate computation of accrued depreciation

An appraisal has been requested for a residential home. The home is actually 10 years old but because it has been exceptionally cared for, the appraiser places its age at 6 years. This would be known as:

effective age

Of the following, which one is not a cause of depreciation?

Sinking fund

In the definition of highest and best use, one would likely find the phrase:

net return

Regarding past and future depreciation it is true that the:

straight-line method of depreciation may be used to measure past or future depreciation.

Demand being equal:

prices increase as availability decreases.

4 - 3 - 2 - 1 is a familiar term used in a general real estate practice. This refers to:

appraising vacant land where the lots vary in depth.

An appraiser's opinion of value of a property may be lowered by nearby nuisances. When this occurs, it is known as:

economic obsolescence.

Of the following, which is the closest to highest and best use?

Greatest net income

An increase in value of real property is known as:

appreciation.

The age of a single family residence could best be determined by the:

County Assessor's records.

The age of a house can be determined most accurately by inspecting the:

tax assessor's records.

The economic life of an income property is:

shorter than its physical life.

In the appraisal of real property, using the capitalization approach, the overall capitalization rate applicable to the income in interpreting value would take into consideration which of the following?

all of the above, Durability of income, Quality of income, Quantity of income

Insofar as the ratio of improvements to land, which would most likely give the greatest depreciation?

Apartment property valued at $100,000

A good example of the most incurable functional obsolescence is:

closely aligned pillars inside of a store.

Which of the following types of depreciation would be most difficult to calculate accurately?

Economic obsolescence

Referring to the capitalization rate used in the income method:

all of the above, the higher the risk, the higher the rate., the higher the rate, the lower the value., the lower the rate, the higher the value.

Which of the following would be the most important factor in determining the value of a single family residence?

Location and neighborhood

Value is created, maintained, modified, and destroyed by all of the following except:

personal forces.

A roof that inclines from four sides is a:

hip roof

To obtain the most accurate report of the actual gross income of an apartment, an appraiser should:

obtain a statement from each tenant as to the amount of rent he pays.

The prime factors of value are:

utility, scarcity, demand, and transferability.

The word "potable" refers to:

water

A gross multiplier:

may be expressed as a monthly or annual gross multiplier.

A usual definition of "highest and best use" includes the words:

net income

Which of the following is an appraisal approach?

all of the above, Market data, Cost, Income

The reproduction cost method:

requires a separate appraisal of the land.

What approach to value tends to set the upper limit to value?

Reproduction cost

The first step in the appraisal process is:

define or state the problem.

Functional obsolescence:

both, causes a more rapid decline in value than physical deterioration., can be caused by changes in style and design.

When the appraiser is concerned with depreciation in his appraisal report, the method he would use would be:

straight line.

In the appraisal of residential structures, the cost approach is best suited to:

new properties.

Which method of appraisal would a licensee use to appraise a restaurant?

Income approach

Demand is a very important element of value. In order for demand to be effective, it must be implemented by:

purchasing power.

In analyzing a vacant parcel of land to estimate its value, the first logical step is to determine:

highest and best use.

The value of income property is usually:

based on capitalization of net income.

Economic obsolescence is best described as:

changes in the local economy that affect the subject property's value.

According to appraisal theory, which is the most desirable corner for a retail business?

Southwest

In the appraising process, the term "highest and best use" often comes into play. This can best be defined as:

producing the greatest net return on the investment over a given period of time.

If you were asked to appraise an industrial piece of property, which of the following would be most important to you?

The location of the property

Which of the following types of depreciation would be the most difficult to estimate?

Economic obsolescence

Which of the following would cause a home to be considered substandard?

Leaking roof

If you were asked to appraise a piece of property with a worthless building on it, in order to arrive at the value of the lot and determine its highest and best use, you would:

subtract the cost of removing the worthless building from the current value of the lot.

Negligent care of a building is called:

deferred maintenance.

What would be the most accurate way of telling the age of a single family residence?

Check the tax assessor's records

Most appraisers use the _____________ when appraising a new building:

cost approach

An appraiser will seriously consider all of the following in arriving at an opinion of value, except:

assessed value.

The building residual technique of appraising is directly related to the:

capitalization of net income approach.

A bare lot would most likely be appraised using which of the following principles?

Principal of substitution

What is the definition of value to an appraiser?

all of the above, Relationship of desirous persons and things desired, Ability of one commodity to command other commodities, Present worth of future benefits arising out of ownership of property

When appraising a property for a lender in connection with financing the purchase of a residential property, an appraiser determines an estimate of value based upon the date that:

the subject property is inspected by the appraiser.

When an appraiser raises the capitalization rate on income property, he must realize that he implies a:

greater risk.

On appraising a residential property, which of the following would have the least effect on the appraiser's estimate?

The original cost of the building

Economic obsolescence is said to be extraneous, caused by environmental or economic changes. Of the following, which is a correct statement concerning economic obsolescence?

Value loss due to proximity to a major highway causing noise and traffic hazards will create economic obsolescence.

When appraising income producing properties, the appraiser is concerned with the effective gross income. Which of the following with respect to effective gross income, is the appraiser concerned with?

Vacancy

"Depth tables" are used by:

appraisers.

There are four essential elements of value. Which of the following is not an essential element?

Cost

The square footage of a single family residence for appraisal purposes is computed by obtaining the:

outside measurement of the house only.

Under the principle of substitution, one assumes that one property may be substituted for another in terms of:

any of the above, income., use., structural design.

In the cost approach to appraisal, the phrase reproduction cost is different from replacement cost in that replacement cost measures:

the present cost using utility.

Broker Jones appraised two similar commercial properties. Both were leased on a long term basis. One was a hardware store and the other was a post office. Compared to the hardware store, the capitalization rate on the post office was:

lower.

Of the following, which is a correct statement concerning the income method of appraisal?

all of the above, It requires the determination of net income before interest and amortization, but after deduction of operating expenses, An appropriate capitalization rate must be determined, It is not applicable to owner-occupied homes because benefits of amenities are difficult to measure in terms of dollars

A specific purpose property is appraised using which appraisal approach?

Cost

If two nearby homes cost the same to build, but one is worth considerably less than the other, the cause would be:

functional obsolescence.

The price a property would bring if freely offered on the open market, with both a willing buyer and a willing seller is:

fair market value.

Under real estate law an appraisal would be required:

in the sale of subdivided land located out-of-state being offered for sale in the State of California.

In the appraisal process the first step is to:

define the problem, second is to reconcile, and the final step is to set the opinion of value.

The income remaining after cost of labor and management have been paid is called:

theory of surplus productivity.

In the cost approach to appraisal, the phrase "reproduction cost" is different from "replacement cost" in that "replacement cost" measures the:

A mental hospital built in a new up-scale neighborhood

In appraising an unimproved lot, one would logically first determine:

highest and best use.

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