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Physical deterioration most closely means:
a. obsolescence
b. reversion
c. wear and tear
d. recapture
a. obsolescence
b. reversion
c. wear and tear
d. recapture
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Question
A buyer is considering buying a lot to build a single family residence and hires an appriaser. Which approach to value would the appraiser choose?
a. land residual
b. sales comparison
c. reproduction cost
d. income approach
a. land residual
b. sales comparison
c. reproduction cost
d. income approach
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PSI Appraisal ?s
| Question | Answer |
|---|---|
| Physical deterioration most closely means: a. obsolescence b. reversion c. wear and tear d. recapture | C |
| A buyer is considering buying a lot to build a single family residence and hires an appriaser. Which approach to value would the appraiser choose? a. land residual b. sales comparison c. reproduction cost d. income approach | B The sales comparison is the most used approach to value vacant land. Reproduction cost approach is used for buildings, not land. Income approach when property produces rent. |
| A post office of unique design and construction is best appraised by which of the following approaches? a. sales comparison b. cost c. income d. gross rent multiplier | B Cost Approach- Special purpose and public services buidings (ie schools, churches and post offices) and buildings of unique design & constructions. Few comparable sales and no income usually. |
| A real estate pro is doing a CMA(comparitive market analysis) for a residential home. She would use all of the following EXCEPT: a. original cost b. date of sale c. financing terms d. location of property | A In sales comparison approach properties are compared based on features, locations, conditions of sale (financing) and time of sail. Neither the cost of construction or original cost is relevant for determining value. |
| An appraiser needing to find the value of a single family home would use which approach to value? a. cost b. sales comparison c. capitalization d. income | B |
| An appraiser seeking to find market value would be concerned with all of the follwoing EXCEPT: a. curent market sales b. reproduction cost c. income value d. original cost of property | D The original cost of the property is not sued in any approach to value. In an appraisal, the appraiser uses market sales, reproduction cost and income value to determine market value. |
| Compared to physical live, economic life is usually: a. shorter b. the same c. shorter or longer depending on type of improvement d. longer | A Economic life is the estimated period over which an improved property may be profitably utilized so that it will produce a yield over and above economic rent attributable to the land. Can never be greater than physical life and is usually less. |
| Reconciliation is best defined as: a. the appraiser's determination of a preperty's highest & best use b. appraiser's weighing of each property & approach to value c. average of the value from each approach to value | B Reconciliation (correlation) is the final step in the appraisal process inwhich the appraiser weighs each approach to value & determines which is most relevant for the type of property being appraised. Averaging is NEVER used in reconciliation. |
| Replacement cost is best described as the: a. cost of building a property of equivalent utility w/ the same or similar materials b. original cost adjusted for inflation c. cost of building an exact replica of the subject | A Replacement cost is the cost of a new building with the same functional utility. Reproduction cost is the cost of an exact replica of an existing structure. |
| The income approach would be used for appraisals of: a. properties rented to tenants b. newly opened subdivisions c. heavily mortgaged properties d. heavily insured properties | A Income approach is used for income producing (rental) properties such as apartment buildings, office space, shopping centers and retail stores. |
| The period over which a property may be profitably utilized is known as: a. economic life b. amortized life c. profit d. income | A Economic life is never greater than the phsycial life, but is usually less. Physical life refers to how long the structure can stand and economic life refers to how long it is profitable to keep standing. |
| The sales comparison approach to value would be best used for which of the following: a. school b. single family dwellings c. apartment property d. industrial property | B |
| There are 3 main causes of depreciation. Which one of these finds its origin in social sources? a. straight line depreciation b. physical deterioration c. economic obsolescence d. functional obsolescence | C Depreciation may occur from physical deterioration, functional obsolescence or economic obsolescence. Economic obsolescence, being incurable, would cause buildings to be torn down before they fall down. |
| To appraise a special use building, an appraiser would most likely use the: a. capitalization approach b. comparison approach c. market data approach d. cost approach | D |
| Two appraisers were asked to appraise an apartment property. 1st appraiser used a cap rate of 6%, 2nd used cap rate of 8%. Which property with the higher cap rate will have a: a lower income b lower value c higher value d higher projected income | B The more an investor wants in return on a property, the less he or she can pay to buy it. Therefore , the higher the cap rate, the lower the value. If the property has NOI of $9600, a 6% rate gives a value of $160,000, 8% 120K |
| Using the income approach to valuation, which of the following is NOT a proper deduction from effective gross income to determine net income? a. reserves for replacement b. management costs c. interest payments on loans d. maintenance expenses | Interest payments on laons are presonal expenses of the owner and will vary from one investor to another. Therefore, they are not calculated when determining property expenses. |
| What formula would be best used to estimate the value of a property using the income approach to appraising? a. net operating income divided by the cap rate b. net income multiplied by cap rate c. value of land & improvements minus depreciation | A The formula used in the income approach is: net income divided by cap rate = value. For example, if income is $15000 and the cap rate is 10%, the value is $150,000 (15,000/10%) |
| An appraisal is: a. market value b. opinion of value c. scientifically determined value d. legal value | B An appraiser estimates (informed opinion) market value. Since market price is what buyers are willing to pay and sellers are willing to accept an appraiser cannot "determine" market price but can give an opinion of market value |
| An appraiser was hired to prepare a feasibility study for adding a swimming pool to a 24 until apartment building. What basic principle of appraising would be used? a. substitution b. contribution c. competition d. regression | B The principle of contribution values a component of a property in proportion to it contribution value of the whole. Maximum values result when improvements produce the greatest net return. |
| The principle that no buyer will pay more for a product than the price he can pay for a reasonable duplicate is known as the principle of: a. balance b. conformity c. competition d. substitution | D The principle of substitution states no buyer will pay more for something if there is a suitalbe alternate of equal or lesser price. |
| Demand is one of the elements that help determine value. In order for demand to be effective, it must be implemented by: a. purchasing power b. highest and best use c. location d. amenities | A Unless those who want an item can afford to purchase it, their demand will not have any effect on the value of the item. |
| The actual amount that a parcel of property sells for is the: a. fair market value b. assessed value c. market value d. market price | D Market price is the actual price paid; market value is the listing price. Assessed value is used by the tax assessor. |
| The fact that land has a number of important uses is the basis for the essential element of value known as: a. demand b. scarcity c. utility d. transferability | C The essential elements of value are demand, utility, scarcity and transferability, or DUST |
| The fact that the ability to buy and sell land affects its value is the basis for the essential element of value known as: a. demand b. scarcity c. utility d. transferability | D |
| The fact that the amount of land available affects its value is the basis for the element of value known as: a. scarcity b. demand c. transferability d. utility | A |
| The listing price of the property is known as: a. assessed value b. market value c. actual price d. market price | B |
| The value of the best property in the neighborhood will be adversely affected by the presence of comparatively substandard property in the same neighborhood. This is known as the principle of: a progression b balance c. regression d. contribution | C The principle of regression states that the value of better quality property is adversely affected by the presence of lesser quality property. The principle of progression is opposite. |
| To realize the maximum value of property, a reasonable degree of sociological & economic homogeneity is necessary but should not become monotonously uniform is: a. progression b. conformity c. contribution d. correlation | B The principle of conformity states that max value is reqlized if the use of land conforms to existing neghborhood standards (ie design, size, age, social and economic status) but not be so uniform as to become monotonous. |
| Which principle of value describes the value produced by adding an improvement or upgrades to a property? a. principle of substitution b. principle of anticipation c. highest and best use d. principle of contribution | D Principle of contribution determines if an improvement or upgrade adds value to the property. Determined by what the market will pay for the upgrade, not the cost of it. |
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jenkasick