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Real Estate 16

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created 8 months ago by Tamie24
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1

A federally transaction is

any real estate-related financial transaction that a federal financial institutions regulatory agency has either contracted for, regulates, or requires the service of an appraiser

2

USPAP is

a set of guidelines (standards of practice to follow when providing appraisal services

3

CMAs and BPOs are

exempt from USPAP standards

4

Market value is

the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale

5

Liquidation value is

the value associated with a rapid sale

6

Assessed value is

the value used as a basis for property taxation

7

According to the principle of substitution, the maximum value of a property tends to be set by

how much it would cost to purchase an equally desirable substitute property

8

An overimprovement occurs when

an owner invests more money in a structure than the owner can reasonably expect to recapture

9

The combining of two or more adjoining properties into one larger tract is called

assemblage

10

The sales comparison approach to value is

the most relevant approach for estimating the value of a vacant lot

11

The cost depreciation approach to value is

the most relevant approach for estimating the value of special-purpose properties

12

The income approach to value is

the most relevant approach for estimating the value of income-producing property

13

List the three types of depreciation used in the cost approach

Physical deterioration

principal absolescence

External obsolescence

14

Reproduction cost is

the current construction costs to produce improvements that are identical to the subject property

15

Depreciation is

the loss in value caused by things such as wear and tear, poor design, or the structure's surroundings

16

If the value added is greater than the cost to cure the defect, the depreciation is said to be

curable

17

Total economic life (or useful life) is

the total estimated number of years that the structure is expected to contribute to the property's value

18

The income approach is based on

the present value of future income from the subject property

19

Potential gross income is

the total annual income of a property that is fully rented with no collection losses

20

Vacancy and collection loss is

the expected income loss that will result from occasional turnover of renters and periodic vacancies

21

Net operating income is

the income remaining after subtracting all relevant expenses from the effective gross income

22

List the three major categories of property use in the preparation of CMAs

Recently sold

Currently on the market

recently expired listings

23

Real estate licensees who conduct real estate appraisals are

required to comply with USPAP

24

Appraisal reports involving a federally related transaction must be prepared by

a state-certified or licenses appraiser

25

Market value is

the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and the seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus

26

To have value, goods and services must possess four traits

demand

utility

scarcity

transferability

27

Highest and best use is

the most profitable use of a property

28

The use must be legally permissible, physically possible, and financially feasible

Highest and best use

29

The three approaches to estimating value are

sales comparison approach

cost-depreciation approach

income approach

30

the principle of substitution is

the basis for all three approaches

31

The sales comparison approach compares

similar properties to the subject property

32

the comparable properties' sale prices are adjusted

upward or downward to reflect differences between each comparable and the subject property

33

If a comparable is superior to the subject property on a given feature,

a downward adjustment is made to the comp

34

If a comparable is inferior to the subject property

an upward adjustment is made to the comp

35

The adjusted sale prices of the comparable are reconciled using a

weighted average to estimate the market value of the subject property

36

The cost-depreciation approach

estimates the market value of a property based on the cost to buy an equivalent site and to reproduce the structure as if new, less depreciation

37

Reproduction cost is

the amount of money required to build an exact duplicate of the structure

38

Replacement cost is

the amount of money required to replace a structure having the same use and functional utility as the subject property but using modern, available, or updated materials.

39

Depreciation is

the loss in value

40

Accrued depreciation is

the total depreciation that has accumulated over time

41

Depreciation is curable when

a building component has been added or repaired and the owners are able to get their money back in added value

42

If the owners are not able to recoup of the repaired or added item, it is said to be

incurable depreciation

43

The three major causes of depreciation are

physical deterioration

functional obsolescence

external obsolescence

44

The age-life method of estimating depreciation is based on

aa ration of the property's effective age to its economic life

45

Effective age is

the age indicated by a structure's condition and utility

46

Total economic life is

the total estimated number of years that a structure is expected to contribute to the property's value

47

The income approach develops an estimated value based on

the present worth of future income from the subject property

48

The approach capitalizes net operating income into value

The income approach

49

Potential gross income (PGI) is

the total annual income a property would produce if it were fully rented and no collection losses were incurred

50

Effective gross income (EGI) is calculated by

subtracting vacancy and collection losses from the PGI

51

Net operating income (NOI) is

the income remaining after subtracting operating expenses from EGI

52

The three categories of operating expenses are

fixed

variable

reserve for replacements

53

The gross rent multiplier (GRM)is

the ratio between a property's gross monthly rent and its selling price

54

The gross income multiplier (GIM) is

the ratio between a property's gross annual income and its selling price

55

Automated valuation models are

not appraisals

They do not conform to USPAP standards

56

The total expenditure required to bring a new improvement into existence is called

a) cost

b) price

c) market price

d) market value

a) cost

57

Which assumption does not apply to definition of market value

a) payment is made in cash or its equivalent

b) neither the buyer nor the seller is under any compulsion to act quickly

c) market value is the median price a property will bring

d) Both buyer and seller are fully informed

c) market value is the median price a property will bring

58

The approach to estimating value that is called "the real estate market speaking through past sales because it uses actual sales transactions" is the

a) transitional comparison approach

b) economic indicator approach

c) sales comparison approach

d) sales transaction approach

c) sales comparison approach

59

When more money is invested in a building than can reasonable be expected to be recaptured, it is called

a) economic lack of utility

b) overimprovement

c) underimprovement

d) depreciation

b) overimprovement

60

Loss of value for any reason is called

a) transferability

b) substitution

c) depreciation

d) economic obsolescence

c) depreciation

61

All these characteristics are required to create value except

a) demand

b) supply

c) utility

d) transferability

b) supply

62

The approach to value most likely to be relevant for appraising a community college is the

a) comparable sales appraoch

b) cost approach

c) income approach

d) straight-line approach

b) cost approach

63

The subject property has 200 less square feet of living room area than comparable. The market area value of 200 square feet is $20,000. Which adjustment should the appraiser make?

a) add $20000 to the subject

b) add 20000 to the comparable

c) subtract $20000 from the subject

d) subtract $20000 from the comparable

d) subtract $20000 from the comparable

64

The most relevant approach to estimating the value of a vacant lot in a residential neighborhood usually is the

a) square-foot approach

b) cost approach

c) unit-in-place method

d) sales comparison approach

d) sales comparison approach

65

Which condition is considered external absolescence?

a) peeling exterior paint

b) one bathroom in a three-bedroom home

c) metal utility shed that is in poor condition located just inside the property line

d) a residential property's proximity to an industrial area

d) a residential property's proximity to an industrial area

66

Loss in value because of operational inadequacies, poor design, or changing tastes is called

a) physical deterioration

b) functional obsolescence

c) external obsolescence

d) under improvement

b) functional obsolescence

67

The total estimated time in years that an improvement can be profitably useful is called

a) effective age

b) economic life

c) accrued depreciation

d) chronological age of the improvement

b) economic life

68

In the income approach, if the capitalization rate is increased and the net income is unchanged, the

a) present value will be less

b) future value will be less

c) present value will be more

d) future value will be more

a) present value will be less

69

Effective gross income is

a) net operating income divided by an appropriate capitalization rate

b) potential gross income minus vacancy and collection loss

c) net operating income minus annual mortgage expense

d) before-tax cash flow divided by equity invested

b) potential gross income minus vacancy and collection loss


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