Appraisal 1st 100 Questions
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  1. There are valuation scenario in which it may be permissible for an appraiser’s conclusion to be different given the same property and with the same effective date. Which of the following intended use scenarios should NOT be expected to have a significant difference in the value conclusion?

  • The first scenario is for a lender located in the subject’s geographic area and the second scenario is for a lender located in another part of the country. These two scenarios should NOT have significant differences in the value conclusions. The intended use is likely to be the same for both scenarios. (correct)
  • The first scenario addresses site contamination in the value conclusion, while the second scenario treats the property as if it is not contaminated using a hypothetical condition.
  • The first scenario is for lending purposes, whereas the second scenario is to resolve a property dispute in a courtroom trial.
  • The property inspection is limited to exterior-only in the first scenario and in the second scenario, a complete inspection is performed.

    1. When an appraiser identifies the purpose of a real property appraisal, what objective is being sought in the assignment?

  • identifying the purpose of an appraisal is exclusive to consulting assignments in which the client has a specific objective in mind such as a decision to buy, sell, or lease the property.
  • an opinion of value, as defined by the appraiser, of the real property interest Purpose of an appraisal is essentially identifying the type of value sought in the valuation along with its definition. (correct)
  • the intended use of the appraisal because purpose and intended use are interchangeable terms
  • assignment results that maximize the value of the property

    1. An appraiser is analyzing a multi-family apartment complex for lending purposes. While collecting dta for the appraisal, what informaitno listed below would the appraiser identify as general data?

  • ownership history of the subject property
  • regional demographics (correct)
  • income and expense data on the subject property
  • cost and depreciation data on the subject property’s improvements

    1. An appraiser is analyzing the market value of a commercial building that has a lease ending in nine months. For what time period is the appraiser’s opinion of market value valid?

    <p>for the exact date specified by the appraiser (@)</p> Signup and view all the answers

    1. IN the appraiser’s data collection process that involves a market value assignment, which of the following is an example of general data?

    <p>economic indicators for the region (@)</p> Signup and view all the answers

    1. In a market value assignment, which criteria of highest and best use would an appraiser generally NOT analyze as one of the four primary tests?

    <p>environmentally acceptable (@)</p> Signup and view all the answers

    1. An appraiser has been hired to provide a valuation of property that is known to have a contamination issue. To quantify that damage to the property, the appraiser will provide a value opinion as though the property is not contaminated for comparison purposes. What assignment condition should the appraiser use for the specific value opinion?

    <p>hypothetical condition (@)</p> Signup and view all the answers

    1. In which step of the valuation process does n appraiser analyze the ideal improvement for the appraised property?

    <p>data analysis—highest and best use (@)</p> Signup and view all the answers

    1. When an appraiser identities an effective date of value, for what period of time is the value opinion valid?

    <p>for the exact date identified by the appraiser (@)</p> Signup and view all the answers

    1. As the clint may be an individual, group or entity, which of the following best represent how an appraiser identities the client in an appraisal assignment? The client is the party or parties?

    <p>that engages, by employment or contract, an appraiser in a specific assignment. (@)</p> Signup and view all the answers

    1. An appraiser has been hired to provide a valuation of property that is known to have a contamination issue. To quantify that damage to the property, the appraiser will provide a value opinion as though the property is not contaminated for comparison purposes. What assignment condition should the appraiser use for the specific value opinion?

    <p>hypothetical condition (@)</p> Signup and view all the answers

    1. Which of the following best defines the valuation process that appraisers use to perform appraisal assignments?

    <p>a systematic procedure used to solve a client's real property valuation problem (@)</p> Signup and view all the answers

    1. There are valuation scenario in which it may be permissible for an appraiser’s conclusion to be different given the same property and with the same effective date. Which of the following intended use scenarios should NOT be expected to have a significant difference in the value conclusion?

    <p>The first scenario is for a lender located in the subject’s geographic area and the second scenario is for a lender located in another part of the country. (@)</p> Signup and view all the answers

    1. A potential client is on the phone with an appraiser discussing issues about the valuation of a property that client owns. In this initial contact with the client, what step of the valuation process is the appraiser’s focal point?

    <p>identification of the problem (@)</p> Signup and view all the answers

    1. In the highest and best use analysis, when an appraiser is evaluating the land as though vacant, what is one of the four criteria the appraiser will evaluate?

    <p>the physical possibility of an intended use (@)</p> Signup and view all the answers

    1. Which of the following statements is true regarding the terms “land and “site”?

    <p>Site is land that has all infrastructure installed and is ready for construction of building improvements. (@)</p> Signup and view all the answers

    1. What is the first step in the cost approach?

    <p>estimate the value of the land (@)</p> Signup and view all the answers

    1. How is reversion in an investment property defined?

    <p>a lump sum benefit that an investor receives or expects to receive at the termination of an investment (@)</p> Signup and view all the answers

    1. Which of the following best describes the term, “capitalization”?

    <p>the conversion of income into value (@)</p> Signup and view all the answers

    1. Which of the following descriptions provides a simple explanation of the process used in direct capitalization?

    <p>dividing the net operating income by a capitalization rate (@)</p> Signup and view all the answers

    1. Which of the following is true of an equity capitalization rate?

    <p>it is an income rate that reflects the relationship between a single year's pre-tax cash flow expectancy and the equity investment (@)</p> Signup and view all the answers

    1. What is the amount left after debt service has been deducted from net operating income called?

    <p>pre-tax cash flow (@)</p> Signup and view all the answers

    1. The income capitalization approach is generally not applicable to which of the following property types?

    <p>one-unit homes that are owner-occupied (@)</p> Signup and view all the answers

    1. Which of the following describes the term, “pre-tax cash flow”?

    <p>net operating income less debt service (@)</p> Signup and view all the answers

    1. Which of the following best describes the term, “capitalization”?

    <p>the conversion of income into value (@)</p> Signup and view all the answers

    1. What does GRM refer to in the appraiser’s analysis of a residential income property?

    <p>gross rent multiplier (@)</p> Signup and view all the answers

    1. Which term best describes an interest (yield) rate used to convert future payments into present value?

    <p>discount rate (@)</p> Signup and view all the answers

    1. What is the amount left after debt service has been deducted from net operation income called?

    <p>pre-tax cash flow (@)</p> Signup and view all the answers

    1. What are the two primary methods of income capitalization that are differentiated by the duration of their income streams?

    <p>direct capitalization and yield capitalization (@)</p> Signup and view all the answers

    1. Which of the following descriptions provides a simple explanation of the process used in direct capitalization?

    <p>dividing the net operating income by a capitalization rate (@)</p> Signup and view all the answers

    1. The principal of anticipation affirms that value is based on?

    <p>future benefits (@)</p> Signup and view all the answers

    1. Which of the following is not an element of comparison?

    <p>reconciliation (@)</p> Signup and view all the answers

    1. Which approach to value requires a separate valuation of the site?

    <p>cost approach (@)</p> Signup and view all the answers

    1. The land residual technique is primarily used on which of the following?

    <p>income properties (@)</p> Signup and view all the answers

    1. The three approaches to value are the cost approach, the sale comparison approach, and the income capitalization approach. Which of the following is a true statement regarding the application of these approaches to value?

    <p>The appraiser may apply more than one approach, which will likely result in differing value indications that will need to be reconciled by the appraiser. (@)</p> Signup and view all the answers

    1. When would the extraction method of land valuation be most applicable?

    <p>when the value of the improvements can be reliably estimated (@)</p> Signup and view all the answers

    1. Which of the following statements about land valuation is true?

    <p>The sales comparison method is preferable for estimating the market value of a residential site. (@)</p> Signup and view all the answers

    1. Which of the following descriptions provides a simple explanation of the process used in direct capitalization?

    <p>dividing the net operating income by a capitalization rate (@)</p> Signup and view all the answers

    1. Which of the following is true of an equity capitalization rate?

    <p>it is an income rate that reflects the relationship between a single year's pre-tax cash flow expectancy and the equity investment (@)</p> Signup and view all the answers

    1. What is the amount left after debt service has been deducted from net operation income called?

    <p>pre-tax cash flow (@)</p> Signup and view all the answers

    1. The income capitalization approach is generally not applicable to which of the following property types?

    <p>one-unit homes that are owner-occupied (@)</p> Signup and view all the answers

    1. Which of the following describes the term, “pre-tax cash flow”?

    <p>net operating income less debt service (@)</p> Signup and view all the answers

    1. Which of the following is another term for yield capitalization?

    <p>discounted cash flow analysis (@)</p> Signup and view all the answers

    1. Which of the following best describes the term, “capitalization”?

    <p>the conversion of income into value (@)</p> Signup and view all the answers

    1. What does GRM refer to in the appraiser’s analysis of a residential income property?

    <p>gross rent multiplier (@)</p> Signup and view all the answers

    Which of the following describes the term, “Pre-tax cash flow”?

    <p>net operating income less debt service (@)</p> Signup and view all the answers

    1. Which of the following is true of an equity capitalization rate?

    <p>it is an income rate that reflects the relationship between a single year's pre-tax cash flow expectancy and the equity investment (@)</p> Signup and view all the answers

    1. How is reversion in an investment property defined?

    <p>a lump sum benefit that an investor receives or expects to receive at the termination of an investment (@)</p> Signup and view all the answers

    1. What is the amount left after debt service has been deducted from net operating income called?

    <p>pre-tax cash flow (@)</p> Signup and view all the answers

    1. Which of the following is the correct manner in which a GRM (gross rent multiplier) would be calculated?

    <p>divide sale price by monthly gross income (@)</p> Signup and view all the answers

    1. What is a discount rate used for?

    <p>to convert future payments or receipts into present value (@)</p> Signup and view all the answers

    1. The principle of anticipation affirms that value is based on

    <p>future benefits (@)</p> Signup and view all the answers

    1. What of the following best describes the term capitalization?

    <p>the conversion of income into value (@)</p> Signup and view all the answers

    1. Which of the following do you need to now in order to solve for an operating expense ratio?

    <p>operating expenses and EGI (@)</p> Signup and view all the answers

    1. If the overall rate is 8%, what is its corresponding factor?

    <p>12.5 (@)</p> Signup and view all the answers

    1. A gross income multiplier (GIM) is generally used to value what type of property?

    <p>commercial (@)</p> Signup and view all the answers

    1. What is the capitalization rate for a property that has a net operating income of $45,000 and that just sold for $500,000?

    <p>9% (@)</p> Signup and view all the answers

    1. What is the value of a property that has an appropriate capitalization rate (R) of 12.5%, an operating expense ratio of 40%, and effective gross income of $10,000?

    <p>$48,000 (@)</p> Signup and view all the answers

    1. Which of the following rates would be used when seeking the value of the property (both land and improvements) based on a single year of net operating income?

    <p>the overall capitalization rate (@)</p> Signup and view all the answers

    1. Which of the following would you need to solve for income (I)?

    <p>factor and value (@)</p> Signup and view all the answers

    1. If the overall rate is 8%, what is its corresponding factor?

    <p>12.5 (@)</p> Signup and view all the answers

    1. A comparable four-unit residence just sold for $300,000. It was rented at the time of sale for (or has a market rent of) $1,000 per unit per month. What is the GRM?

    <p>75 (@)</p> Signup and view all the answers

    1. A comparable one-unit residence just sold for $300,000. It was rented at the time of sale for (or had a market rent of) $3,000 per month. What is the GRM?

    <p>100 (@)</p> Signup and view all the answers

    1. A gross income multiplier (GIM) is generally used to value what type of property?

    <p>commercial (@)</p> Signup and view all the answers

    1. What is the capitalization rate (R) for a property that has a net operating income of $45,000 and that just sold for $500,000?

    <p>9% (@)</p> Signup and view all the answers

    1. What is the value of a property that has an appropriate capitalization rate (R) of 12.5%, an operating expense ratio of 40%, and effect gross income of $10,000?

    <p>$48,000 (@)</p> Signup and view all the answers

    1. What of the following rates would be used when seeking the value of the property (both land and improvements) based on a single year of net operating income?

    <p>the overall capitalization rate (@)</p> Signup and view all the answers

    1. What is the capitalization rate (R) for a property that has a net operating income of $40,000 and a net income multiplier (NIM) of 12.5?

    <p>8% (@)</p> Signup and view all the answers

    1. A multi-unit apartment building has a net operating income of $505,000 and an operating expense ratio (OER) of 43.56%. The vacancy is estimated at 4% in the market. What is the net income ratio (NIR)?

    <p>56.44% (@)</p> Signup and view all the answers

    1. A property has a net operating income of $355,500. The fixed expense are $110,200 and variable expenses are $125,000. What is the effective gross income (EGI)?

    <p>$590,700 (@)</p> Signup and view all the answers

    1. A warehouse has a net operating income of $135,000 and net income ratio (NIR) of 60%. The vacancy is estimated at 4% in the market. What is the operating expense ratio (OER)?

    <p>40% (@)</p> Signup and view all the answers

    1. A property has a net operating income of $150,000. The fixed expenses are $50,000 and variable expenses are $75,000. What is the effective gross income (EGI)?

    <p>$275,000 (@)</p> Signup and view all the answers

    1. Which of the following best describes a net lease?

    <p>the tenant pays all operating expenses (@)</p> Signup and view all the answers

    1. What is the total income attributable to real property at full occupancy before vacancy and operating expense are deducted?

    <p>potential gross income (PGI) (@)</p> Signup and view all the answers

    1. A property has an effect gross income of $60,420. Vacancy and collection loss are estimated at 5% in the market, and operating expenses total $19,156. What is the net operating income (NOI)?

    <p>$41,264 (@)</p> Signup and view all the answers

    1. What is the most probable rent that the property should bring?

    <p>market rent (@)</p> Signup and view all the answers

    1. Which type of lease may adjust due to changes in market rent, and may be facilitated through the use of an appraisal or arbitration?

    <p>revaluation lease (@)</p> Signup and view all the answers

    1. Using the following date, what is the value?

    Potential gross income (PGI) = $455,000 Vacancy = 10% Operating expense ratio (OER) = 45% Overall capitalization rate = 9.5%

    <p>$2,370,789 (@)</p> Signup and view all the answers

    1. Which of the following is NOT one of the six major components of a building?

    <p>home theatre system (@)</p> Signup and view all the answers

    1. Which of the following is considered a type of framing?

    <p>wood studs and joists (@)</p> Signup and view all the answers

    1. An appraiser is not a building inspector. The appraiser does which of the following?

    <p>observes apparent conditions (@)</p> Signup and view all the answers

    1. A wood stud home in which each floor is framed and erected separately is referred to as what type of construction?

    <p>platform framing (@)</p> Signup and view all the answers

    1. An appraiser observes a bathroom with a sink, a bathroom with shower, and toilet. What would this be called?

    <p>full bath (@)</p> Signup and view all the answers

    1. What is the predominant type of frame construction used after World War II?

    <p>platform (@)</p> Signup and view all the answers

    1. If an appraiser observes missing flashing, what construction system is the appraiser viewing?

    <p>roofing system (@)</p> Signup and view all the answers

    1. During an exterior inspection, an appraiser observes a foundation that is exposed to the environment, what type of foundation is this?

    <p>pier (@)</p> Signup and view all the answers

    1. Which of the following is NOT considered an interior framing finish?

    <p>plywood (@)</p> Signup and view all the answers

    1. An appraiser observes a bathroom with a sink and toilet only. What would this be called?

    <p>1/2 bath (@)</p> Signup and view all the answers

    1. The annual debt service on a property is $25,000 and the pre-tax cash flow is $50,000. If the mortgage capitalization rate is 8.5% and the overall rate is 10%, what is the indicated value of the property?

    <p>$750,000 (@)</p> Signup and view all the answers

    1. Which of the following expenses that maybe be found on a property owner’s financial statements, should be excluded from the appraiser’s reconstructed operating statement?

    <p>All of these answers should be excluded (@)</p> Signup and view all the answers

    1. Using the following date, what is the value? Potential gross income (PGI) = $175,000 Vacancy = 5% Operating expense ratio (OER) = 35% Overall capitalization rate = 8.5%

    <p>$1,271,323 (@)</p> Signup and view all the answers

    1. Which of the following expense that may be found on a property owner’s financial statements, should be exclude in the appraiser’s reconstructed operating statement?

    <p>corporate franchise tax (@)</p> Signup and view all the answers

    1. Using the following information, what is the effective gross income multiplier (EGIM)? PGI = $275,000 Sales price = $2,750,000 Vacancy = 10%

    <p>11.11 (@)</p> Signup and view all the answers

    1. What is the monthly debt service on a commercial warehouse with a mortgage amount of $450,000 and a mortgage capitalization rate of 6.75%?

    <p>$2,531.25 (@)</p> Signup and view all the answers

    1. Using the following information, what is the effective gross income multiplier? PGI = $125,000 Value = $750,000 Vacancy = 10% Operating expense ratio = 35%

    <p>6.67 (@)</p> Signup and view all the answers

    1. Using the following data, what is the pretax cash flow (PTCF)? Potential gross income (PGI) = $300,000 Operating expense ratio (OER) = 45% Vacancy = 10% Debt service (annual mortgage payment) = $125,500

    <p>$23,000 (@)</p> Signup and view all the answers

    1. An appraiser asking a local building contract for cost data. The contractor gives his best estimate to build an exact replica of the property being appraised. What could this data be called?

    <p>reproduction cost (@)</p> Signup and view all the answers

    1. Which of the following best describes gross living area (GLA) in single-unit residences?

    <p>GLA is the above-grade, finished, habitable, residential space measured from the outside. (@)</p> Signup and view all the answers

    1. The cost approach might be the only approach available to an appraiser when appraising?

    <p>a library. (@)</p> Signup and view all the answers

    1. The second step of the cost approach is to estimate direct (hard) and (soft) costs as of

    <p>the effective date of the appraisal. (@)</p> Signup and view all the answers

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