Which of the following would be a good source of replacement and reproduction costs when using the cost approach to determine value?
An analysis of supply and demand in a given area
Published indexes and tables
Sales prices of nearby properties
The most recent assessed values of similar properties
What do appraisers use in addition to depreciation to determine the indicated value when using the cost approach?
Comparisons to similar properties
Market data
Potential income generation
Reproduction cost
When you’re using the sales comparison approach to value a property, which of the following is considered a category of adjustment?
Area demographics
Financing terms and cash equivalency
Seller motivation
Types of obsolescence
The GRM for rental homes in an area is 147. If a three-bedroom, one-bath house rents for $820 monthly and sold for $125,000, what is the suggested value of a house that leases for $1,000 monthly based on the GRM?
$120,540
$147,000
$152,439
$198,540
If a property’s income value is $200,000 and it’s earning a net operating income of $40,000, what is the cap rate?
20%
25%
40%
5%
The economic principle of ______ says that when there are two houses in the same neighborhood with the same size, appeal, and utility, the lower-priced one will tend to sell first.
Correlation
Substitution
Supply and demand
Under-bidding
A property generates $30,000 in net operating income and has a 15% cap rate. Using the income approach, what is its value?
$100,000
$20,000
$200,000
$25,000
A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in annual gross income. What is the gross income multiplier (GIM)?
0.125
125
1.25
12.5
What type of valuation would be the best to use when appraising new construction?
Cost
Income capitalization
Liquidation value
Sales comparison
Which element has the highest priority when using the sales comparison approach to value?
Conditions of sale
Location
Market conditions
Physical characteristics
Which element is applied first when using the sales comparison approach to value?
Conditions of sale
Financing terms and cash equivalency
Market conditions
Physical characteristics
Using the income approach, determine the value of a property that has a net operating income of $15,000 and a cap rate of 15%.
$100,000
$15,000
40%
5%
What’s the capitalization formula used in the income approach?
Value = cap rate – income
Value = income × cap rate
Value = income cap rate
Value = net operating income ÷ cap rate
What does the income approach to value rely on when valuing properties that are five or more units?
Gross income multiplier
Gross rent multiplier
Monthly gross rent
Sales comparison
In the sales comparison approach, which of these are selected and evaluated both quantitatively and qualitatively against the subject property?
Alternatives
Comparables
Conformables
Substitutions
Which element is applied last when using the sales comparison approach to value?
Conditions of sale
Location
Market conditions
Physical characteristics
Which of the following best defines capitalization rate?
The expected rate of return on investment
The rate at which assets depreciate over time
The rate of capital recapture
The value of a business as an investment
What is the net operating income if a company has a $674,232 gross operating income, operating expenses of $329,129, and other expenses totaling $38,719?
$306,384
$345,103
$383,822
$635,513
Homes in a new home development have been built with a floor plan that doesn’t appeal to today’s buyers. In a cost approach valuation of the houses, what sort of depreciation will the appraiser apply?
External depreciation
Functional obsolescence
None. Depreciation doesn’t apply to new buildings.
Physical depreciation
Related to depreciation, what are the two types of physical deterioration?
Curable and incurable
Economic and material
Internal and external
Qualitative and quantitative
Which approach to value is typically used for investment property of two- to four-family units?
Cost approach
Income approach
Revenue approach
Sales comparison approach
A strip mall valued at $850,000 has a $67,500 annual net operating income. What is the capitalization rate for the strip mall?
12.59%
7.9%
8.67%
9.2%
Which of the following is a true statement about how adjustments are made in the sales comparison approach?
Adjustments are made to the subject property, not the comparables.
Appraisers adjust downward when a comparable is missing a feature found in the subject property.
Appraisers adjust upward when a comparable is missing a feature found in the subject property.
Only three adjustments per comparable property are allowed; otherwise it’s not considered sufficiently similar.
With the cost approach to value, what is the replacement cost?
Cost of the materials used in construction
Cost to build a functionally equivalent improvement
Cost to build an exact replica of the subject, with the same materials and deficiencies
Cost to buy the property
A development company specializes in constructing new, energy-efficient houses. What is the best approach for an appraiser to use when appraising these homes?
Appraisal process
Cost approach
Income approach
Sales comparison approach
In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what?
Bracketing
Bridging
Substituting
Surrounding
On which type of property would the cost approach typically be used when determining value?
Condominium
Cooperative
New construction
Older but not historical property
A small duplex sold for $550,000. Each unit can gross $2,500 in monthly rent for the owner, and there are no additional income sources from the property. What’s the GRM?
100
110
200
220
With the cost approach to value, what is the reproduction cost?
Cost of the materials used in construction
Cost to build a functionally equivalent improvement
Cost to build an exact replica of the subject, with the same materials and deficiencies
Cost to buy the property
When appraising a property, what type of property would be best suited to the cost approach?
Condominiums
Cooperatives
Historical properties
Older but not historical properties
Which approach to value measures the cost to produce a property, including land acquisition and construction costs?
Cost approach
Income approach
Indirect approach
Sales comparison approach
On which principle of value is the sales comparison approach based?
Anticipation
Competition
Conformity
Substitution
Which one of these would NOT be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation?
Financing terms and cash equivalency
Income generated
Market conditions at time of sale
Physical characteristics of the property
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Why are appraiser activities highly regulated for federally related transactions
Because a federal financial agency is involved.
Because the loan amount is less than $400,000.
Because the loan is federally guaranteed.
Because the loan is federally insured.
Which type of appraisal report is lengthy and often used for complex properties?
Form report
Letter report
Narrative report
Restrictive report
What does the Financial Institutions Reform, Recovery, and Enforcement Act require?
Federally related appraisals must be conducted by an appraiser who’s either licensed or certified by the state.
Federally related transactions need not be appraised.
Non-federally related transactions must be appraised by government employees.
Real estate licensees who perform appraisals must have a federal security clearance.
What entity sets the standards for the appraisal report?
Appraisal Ethics Association
FIRREA
State real estate license law
USPAP
Which category of appraiser can appraise any real property without any limitations related to value or complexity?
Certified general appraiser
Certified residential appraiser
Residential license
Trainee license
Which category of appraiser must be supervised by a certified appraiser?
Appraiser trainee
Certified general appraiser
Certified residential appraiser
Residential license
Which type of appraisal report makes use of pre-printed documents?
Form report
Letter report
Narrative report
Printed report
What type of appraisal report contains minimal detail, and may be prepared for a specific client for an explicit, limited purpose?
Appraisal report
Oral report
Restricted appraisal report
Summary report
These individuals may appraise residential property only, and only of one to four units, without regard to transaction value or complexity.
Appraiser trainee
Certified general real estate appraiser
Certified residential appraiser
Real estate licensee
Ernesto conducts appraisals, but must work under the supervision of a certified appraiser. Which of the following best describes Ernesto’s appraiser status?
Appraiser trainee
Certified general appraiser
Certified residential appraiser
Residential license