Mid-Term Exam Appraisal Practice Cerritos, El Camino, Compton - Rooks
1. An estimate of the rate at which a particular type of space will be sold each year is referred to as:
A. Absorption
B. Rentup
C. Presales
D. Occupancy
2. What term is used for a transaction in which all parties to the transaction are dealing from equal bargaining positions?
A. Anticipation
B. Open Market
C. Arm's-length
D. Secondary market
3. An appraisal for the price that a property would sell for based on a quick sale would be estimating what type of value?
A. Market value
B. Use value
C. Going-concern value
D. Liquidation value
4. A neighborhood's life cycle consists of which of the following stages?
A. Growth, stability, decline and disintegration
B. Growth, stability, decline and revitalization
C. Growth, stability, displacement and gentrification
D. Stability, decline, gentrification and revitalization
5. Primary data refers to:
A. The main data used by the appraiser
B. Data collected by the appraiser
C. Data that has a direct impact on value
D. Data published by a reliable source
6. Which of the following features represent physical data that must be considered by the appraiser?
A. Easements
B. Plottage
C. Public restrictions
D. Utility connections
7. What term BEST identifies the most probable price as of a given date for which specified property rights should sell to a knowledgeable buyer in a competitive market?
A. Market value
B. Value in use
C. Market price
D. Investment value
8. What is meant by the term SURPLUS PRODUCTIVITY?
A. The excess in revenues received above the market rate
B. The income attributable to land rent that remains after labor, capital and coordination have been charged
C. The income received after operating expenses, taxes and debt service have been paid
D. The income received after the marginal level of productivity is reached
9. Which of the following conditions is NOT an economic force that affects real estate?
A. Building codes
B. Desire
C. Effective purchasing power
D. Supply and demand
10. The term investment value is BEST described as value to whom?
A. A typical investor
B. A particular investor
C. A user
D. A lender
11. A set of percentages indicating the proportion of site value attributable to each additional amount of depth in the lot is referred to as:
A. Depth tables
B. Metes and bounds
C. Standard parallel tables
D. Quadrangle percentages
12. The interest or value that the owner has in real estate above the liens against it is referred to as:
A. Capital
B. Debt
C. Principal
D. Equity
13. An appraisal term meaning the legally and physically possible use that, at the time of appraisal, is MOST likely to produce the greatest land value is known as:
A. Highest and best use
B. Investment value
C. Going-concern use
D. Fee simple use
14. Which of the following land uses is generally NOT considered income property?
A. Hotels
B. Undeveloped land
C. Office buildings
D. Apartment buildings
15. What term is used for the act or process of estimating value?
A. Appraisal
B. Market analysis
C. Investment analysis
D. Feasibility analysis
16. A study of the supply and demand conditions in a specific area for a specific product or service is referred to as:
A. Assemblage
B. Projection analysis
C. Economic base
D. Market analysis
17. According to common income taxation terminology, which of the following land uses is residential property?
A. Hotel
B. Office building
C. Apartments
D. Apartments and hotels
18. Risk resulting from uncertainty in rents, vacancies or operating expenses is referred to as:
A. Business risk
B. Operating risk
C. Economic risk
D. Interest risk
19. Risk due to the use of debt financing is referred to as:
A. Interest risk
B. Financial risk
C. Leverage risk
D. Equity risk
20. A collection of retail stores with a common parking area and generally one or more large department, discount or food stores and sometimes including an enclosed mall or walkway is referred to as a:
A. Mall
B. Retail complex
C. Mixed-use development
D. Shopping center
21. A large national tenant that occupies space in a shopping center is often referred to as (an):
A. Discount tenant
B. Anchor tenant
C. Department store
D. Mall tenant
22. Which of the following examples BEST reflects investment value?
A. Value to a typical buyer or seller
B. Value to a specific buyer or seller
C. Value for insurance purposes
D. Value for property tax purposes
23. Federal fair housing laws are administered by which government agency?
A. Attorney General
B. Department of Housing and Urban Development
C. Federal Reserve System
D. Department of Human Resources
24. The term market value is MOST closely associated with which of the following terms?
A. Value in use
B. Assessed value
C. Intrinsic value
D. Value in exchange
25. What is the distinction between the terms MARKET PRICE and MARKET VALUE?
A. Market price is synonymous with replacement cost while market value is the same as assessed value.
B. Market price is what the seller asks for while market value is what the buyer actually pays.
C. Market price is what the property sells for while market value is what the sales price should be to a typical buyer.
D. Market price is what is currently owed on the property while market value is what is actually paid for the property.
26. Which of the following conditions is NOT a basic assumption in the definition of market value?
A. The seller receives cash or its equivalent
B. Both the buyer and the seller are knowledgeable about current market conditions
C. The value will be as of a specific date
D. The property will sell promptly
27. Under which of the following conditions should an appraiser appraise the value of the property as of a future date?
A. If the current use is its highest and best use
B. If the appraiser uses all three approaches to value
C. If the market is stable and there is no inflation
D. If the value is appropriately defined for the date of the value
28. The term MARKET VALUE is sometimes explained as a theoretical economic concept. Part of the definition of MARKET VALUE addresses how payment is made. In the common definition of MARKET VALUE, the method of payment is assumed to be in what form?
A. Cash to the seller
B. Cash to the buyer
C. Purchase-money mortgage by the seller
D. No financing by the buyer
29. In valuation theory, the economic concept that considers the usefulness of property is known as:
A. Situs
B. Linkage
C. Plottage value
D. Functional utility
30. Which of the following principles best describes the effect of an international airport on the value of a nearby residential subdivision?
A. Substitution
B. Highest and Best Use
C. Externalities
D. Conformity
31. The fundamental economic (valuation) principle underlying the sales comparison (market) approach to value is known as:
A. Anticipation
B. Conformity
C. Highest and Best Use
D. Substitution
32. What type of analysis identifies uses for a parcel of land that are legally permissible, physically possible and financially feasible?
A. Sensitivity
B. Highest and Best use
C. Feasibility
D. Supply and Demand
33. In considering the highest and best use of a parcel of land to be improved with an office building, the appraiser determines the optimal land/building ratio for the parcel. Which of the following economic principles does this illustrate?
A. Anticipation
B. Balance
C. Contribution
D. Substitution
34. The income approach to value is based primarily on which of the following economic principles?
A. Anticipation
B. Conformity
C. Highest and Best Use
D. Substitution
35. What economic principle would explain that when several houses with essentially the same utility are available, the one with the lowest price will attract the greatest demand?
A. Anticipation
B. Highest and Best Use
C. Substitution
D. Surplus Productivity
36. An appraiser estimates the income for several possible uses of a vacant site for the purpose of estimating how that income contributes to the value of the land. This is an example of:
A. Reconciliation
B. Analysis
C. Market analysis
D. Regression
37. Included in the definition of highest and best use are certain tests or criteria that must be met. Which of the following conditions is NOT a criterion in determining the highest and best use of land?
A. Physically possible
B. Legally permissible
C. Financially feasible
D. Socially acceptable
38. An estimate of the accrued depreciation is an important part of the cost approach to value. Which of the following economic principles is the foundation on which estimating accrued depreciation is based?
A. Anticipation
B. Balance
C. Contribution
D. Substitution
39. The sales comparison approach involves a step undertaken by the appraiser to adjust for such items as square footage, age, quality of construction, etc. What economic principle is the foundation on which this adjustment process is undertaken?
A. Anticipation
B. Contribution
C. Substitution
D. Surplus Productivity
40. The use of a parcel of real estate that generates the largest residual land value is known as that parcel's:
A. Efficient use
B. Highest and Best Use
C. Intrinsic Use
D. Income Use
41. The term used to explain the difference between the value of a parcel of land and the outstanding balance on an existing mortgage is known as:
A. Sales price
B. Equity
C. Fee Simple
D. Escheat
42. The financial device used to maximize cash flow using other people's money is commonly referred to as:
A. Liquidity
B. Equity
C. Leverage
D. Tax Shelter
43. Which of the following statements is CORRECT in regard to an increase in the loan-to-value ratio for a loan to finance the purchase of a parcel of land?
A. The selling price of the land must be higher
B. The selling price of the land must be lower
C. The equity required of the borrower must be lower
D. The equity required of the borrower must be higher
Questions 44 and 45 pertain to the following information:
Certain properties have a very limited number of uses, perhaps only one use. In the case of a heavy manufacturing plant, the highest and best use probably is to continue the present use.
44. This is an example of which of the following types of property?
A. Nonconforming use property
B. Special purpose property
C. Variance property
D. Interim use property
45. Which of the traditional approaches to value is NORMALLY considered the most applicable for this type of property?
A. Cost approach
B. Comparable sales approach
C. Income capitalization approach
D. Gross income multiplier approach
46. Liquidity is normally defined as the:
A. Difference between income and expenses
B. Purchasing power of an asset
C. Ease of converting an asset into cash
D. Difference between value and outstanding debt
47. What type of depreciation is generally not curable?
A. Physical
B. Functional
C. External
D. Internal
48. What term is used to denote the cost of an exact duplication of the property?
A. Replacement Cost.
B. Reproduction Cost.
C. Original Cost.
D. Construction Cost.
49. Land that is NOT necessary for the primary improvements is referred to as:
A. Plottage land.
B. Offsite land.
C. Excess land.
D. Residual land.
50. The term PLOTTAGE VALUE can be defined as the:
A. Incremental value created by combining two or more sites to produce greater utility.
B. Value associated with the plot of land on which the improvement is built.
C. Value of a plot of land according to tax rolls.
D. Total value of a parcel of land that has been subdivided.
51. If a building layout or style fails to meet market tastes or standards due to changes in economic trends and technological advances, the building suffers from:
A. External obsolescence.
B. Incurable depreciation.
C. Functional obsolescence.
D. Curable physical deterioration.
52. The remaining economic life of a building is equal to the:
A. Total period of time in which real estate improvements contribute to property value.
B. Estimated period of time over which improvements will continue to contribute to property value.
C. Number of years since construction was completed.
D. Estimated period of time remaining until repairs will have to be made.
53. Which of the following methods is NOT an acceptable means of estimating building costs?
A. Unit-in-place method.
B. Quantity survey method.
C. Break-down method.
D. Comparative unit method.
54. The building cost estimate method that finds a cost per unit of area or volume based on known costs of similar structures that are adjusted for time and physical differences is known as the:
A. Unit-in-place method.
B. Quantity survey method.
C. Break-down method.
D. Comparative unit method.
55. The method of measuring accrued depreciation by analyzing each cause of depreciation separately and then summing the separate estimates to arrive at the total is know as the:
A. Break-down method.
B. Economic age-life method.
C. Modified economic age-life method.
D. Comparative unit method.
56. Which of the following conditions is an example of external obsolescence?
A. Location in a neighborhood that is in the decline phase of its life cycle.
B. A roof that leaks.
C. A ceiling that is too high based on current standards.
D. Light fixtures that do not meet current building codes.
57. External obsolescence can be measured by:
A. Capitalizing the income or rent loss attributable to the negative influence.
B. Calculating the actual age of the improvements.
C. Applying the ratio of effective age to estimated total physical life to the reproduction or replacement cost of each component.
D. Subtracting functional obsolescence from total replacement cost.
58. A building was purchased for $100,000. The annual straight-line depreciation expense is $2,500. The accumulated depreciation in three years is:
A. $ 2,500
B. $ 5,000
C. $ 7,500
D. $92,500
59. A charge against the reproduction cost (new) of an asset for the estimated wear and obsolescence is referred to as:
A. Physical obsolescence.
B. Functional obsolescence.
C. Economic obsolescence.
D. Depreciation.
60. The estimated reproduction cost (new) of a theater being appraised is $600,000. Wear and tear sustained during its life is estimated at $100,000. Functional obsolescence caused by lack of air conditioning and high ceilings causes an estimated loss of $100,000. It is in a decaying area of the city estimated at causing $100,000 of economic obsolescence. Total depreciation is:
A. $100,000
B. $200,000
C. $300,000
D. $400,000
61. What term refers to the loss of value from all causes outside the property itself?
A. Economic depreciation.
B. Functional obsolescence.
C. Physical obsolescence.
D. Superadequacy.
62. A private home may drop in value when an industrial plant is built nearby. This is a form of what type of depreciation?
A. Functional depreciation.
B. Economic depreciation.
C. Physical depreciation.
D. Incurable functional depreciation.
63. The total period of time for which real estate improvements are expected to generate more income than operating expenses cost is referred to as the:
A. Depreciable life.
B. Effective age.
C. Remaining operating life.
D. Economic life.
64. The term "economic obsolescence" denotes the same things as:
A. Economic base.
B. Superadequacy.
C. Economic function.
D. External depreciation.
65. The age of a property based on the amount of wear and tear it has sustained is referred to as:
A. Effective age.
B. Actual age.
C. Physical age.
D. Depreciable age.
66. Loss of value from all causes within the property, except those due to physical deterioration is referred to as:
A. Depreciation.
B. Internal Obsolescence.
C. Functional obsolescence.
D. Obsolescence.
67. A plot of land already prepared for or underlying a structure or development is generally referred to as a:
A. Site
B. Lot
C. Plat
D. Subdivision
68. A tract of land divided into lots suitable for home-building purposes is referred to as a:
A. Subdivision.
B. Section.
C. Township.
D. Quadrangle.
69. The term "wear and tear" refers to:
A. External obsolescence inherent in the aging of a building.
B. Physical deterioration of property as the result of use, weathering and age.
C. All obsolescence incurred by a building as it ages.
D. Functional obsolescence.
70. The subject property being appraised cannot provide the same utility as that provided by a new structure designed for similar use. Such obsolescence is referred to as:
A. Locational obsolescence.
B. Functional obsolescence.
C. Economic obsolescence.
D. Environmental obsolescence.
71. The difference between a buildings economic life and its remaining economic life is the:
A. Effective age.
B. Actual age.
C. Economic age.
D. Chronological age.
72. Physical deterioration results from which of the following?
A. Deferred maintenance.
B. Federal income tax depreciation.
C. Functional utility.
D. Economic obsolescence.
73. In the cost approach to value, which of the following steps is the ONLY one that an appraiser would take in estimating value?
A. Estimate the net operating income of the property.
B. Determine the value of the land using the assessed value and tax rate.
C. Estimate the accrued depreciation.
D. Calculate the acquisition price of the construction material used when the structure was built.
74. What is the total area of a parcel of land that measures 80 feet by 62.5 feet?
A. 5,000 ft.
B. 5,000 Sq. ft.
C. 5,000 cu. ft.
D. 5,000 Sq. miles
75. What percentage of an acres is the lot in question above?
A. 0.1055
B. 0.1148
C. 8.7120
D. 1.1478
76. Under which of the following circumstances would the lack of central air conditioning most likely be considered a functional deficiency in a dwelling?
A. The cost of replacement is high.
B. The dwelling has never been occupied.
C. Comparable properties have central air conditioning.
D. The dwelling is less than 10 years old.
77. Under which of the following conditions might the cost approach to value be a poor indicator of value?
A. There is functional obsolescence.
B. The unit-in-place method is used.
C. Accrued depreciation is substantial.
D. Any market data is available.
78. The cost approach to value is more reliable when the improvement is:
A. Highest and best use.
B. New and highest and best use.
C. Highest and best use and suffers no functional obsolescence.
D. New, has no accrued depreciation, and highest and best use.
79. How is land value treated under the cost approach to value?
A. At present use if currently improved.
B. At its highest and best use as if vacant.
C. At highest and best use if the cost of demolition is less than 50% of the land cost.
D. At present use so long as it is not economical to demolish the building.
80. Accrued depreciation is calculated as the difference between what it would cost to replace the building new and the:
A. Current assessed value.
B. Current appraised value.
C. Current insured value.
D. Accumulated depreciation allowed for tax purposes.
81. Accrued depreciation is defined as the difference between the reproduction or replacement cost of an improvement, such as a building, and its value as of the:
A. Date of original construction.
B. Time of the most recent sale.
C. Present..
D. Time any financing is approved.
82. The actual number of elapsed years since a structure was originally built is referred to as that building's:
A. Economic life.
B. Chronological age.
C. Remaining economic life.
D. Effective age.
83. When using the cost approach to value, an appraiser generally treats the contractor's overhead and profit as:
A. Direct costs.
B. Indirect costs.
C. opportunity costs.
D. Inapplicable, because contractor's overhead and profit are not considered when the cost approach to value is being used.
84. An active railroad line running behind the property lines of lots in a residential subdivision would BEST be described as what type of obsolescence?
A. Functional curable.
B. Functional incurable.
C. Economic curable.
D. Economic incurable.
85. The poor layout of offices in a commercial building would be an example of curable or incurable:
A. Physical obsolescence.
B. Functional obsolescence.
C. Economic obsolescence.
D. Locational obsolescence.
86. With the cost approach to value, the site is valued as if:
A. Vacant and available to be used under its highest and best use.
B. Its current use is its only use.
C. Vacant and available for any use that will generate income.
D. Occupied and being used under its existing use.
87. Which of the following statements BEST describes the use of depth tables by appraisers?
A. Depth tables are a sophisticated mathematical model employed by appraisers when using the income approach to value.
B. Depth tables generally can be used to reflect market activity in metropolitan areas.
C. An appraiser should place little reliance on the use of depth tables without first testing market behavior.
D. The use of depth tables is superior to any other mathematical technique, such as simple or multiple regression, because depth tables are precise and easily obtained.
88. There are numerous techniques available to estimate reproduction or replacement cost of a building. The most detailed and precise technique is the:
A. Comparative unit method.
B. Builder's (trade break-down) method.
C. Unit-in-place method.
D. Quantity survey method.
89. A building feature NOT fully valued by the marketplace, such as 24-karat gold faucets in the bathroom, is normally referred to as a (an):
A. Physical deterioration.
B. Underimprovement.
C . Superadequacy.
D. Nonconforming use.
90. While appraising a single family residence you observe the following: run-down and vacant buildings around the subject property, a roof that needs replacing and undersize bedrooms with no windows. You observed (respectively):
A. Economic obsolescence, physical deterioration and functional obsolescence.
B. Functional obsolescence, physical deterioration and economic obsolescence.
C. Economic obsolescence, physical deterioration and locational obsolescence.
D. Economic obsolescence, physical deterioration and economic obsolescence.
91. The age-life method is a method of estimating accrued depreciation by applying to a property's reproduction cost new the ratio of the property's effective age to its:
A. Economic age.
B. Actual age.
C. Chronological age.
D. Economic useful life.
92. Physical deterioration of a building would be a direct result of which of the following?
A. Functional utility.
B. Deferred maintenance.
C. Tax depreciation.
D. Locational obsolescence.
93. With the cost approach to value, a decrease in value as a result of deferred maintenance is referred to as:
A. Accelerated depreciation
B. Functional obsolescence.
C. Physical deterioration.
D. Economic obsolescence.
94. Economic obsolescence of residential property could be a result of one of the following?
A. An increase in FHA or VA interest rates.
B. Construction of a warehouse on the adjoining lot..
C. Passage of a more restrictive zoning ordinance barring property in the area from commercial use.
D. Increases in the cost of construction.
95. Under which of the following conditions is an item of accrued depreciation considered to be curable?
A. The cost to cure is less than the replacement cost new.
B. The cost to cure is less than the reproduction cost new.
C. The cost to cure is less than the expected increase in value.
D. The item can be physically replaced or repaired.
Questions 96 and 97 are based on the following information:
A newly completed state highway has directed traffic from a road on which the subject property is located. As a result of the new road, the subject property is renting for $.50 per square foot less prior to the opening of the new highway. The typical GIM for property in this area is 9. The building on the subject property contains 25,000 square feet.
96. What is the amount of accrued depreciation attributable to the new highway?
A. $ 12,500
B. $ 25,000
C. $112,500
D. $225,000
97. In the cost approach to value, this type of depreciation would be classified as:
A. Physical deterioration.
B. Functional Depreciation.
C. Interior deterioration.
D. Economic obsolescence.
98. In estimating the value of a single family residence, the appraiser concludes that 24% of the total estimated value of the property is attributable to the land. If the value of the property is estimated to be $150,000, what is the estimated value of the land.
A. $ 0
B. $ 36,000
C. $114,000
D. $150,000
99. What is the percentage of accrued depreciation for a 12 year old building that has a total economic life of 50 years and a remaining economic life of 40 years?
A. 12%
B. 20%
C. 24%
D. 50%
100. When a property's value is decreased because of a structural feature that is considered undesirable by today's standards, the property is said to be suffering from:
A. Functional obsolescence.
B. Functional obsolescence curable.
C. Functional obsolescence incurable.
D. Locational obsolescence.
MID-TPRACTICE BUSR 31
1. A
2. C
3. D
4. B
5. B
6. D
7. A
8. B
9. A
10. B
11. A
12. D
13. A
14. B
15. A
16. D
17. C
18. A
19. B
20. D
21. B
22. B
23. B
24. D
25. C
26. D
27. D
28. A
29. D
30. C
31. D
32. B
33. B
34. A
35. C
36. B
37. D
38. C
39. B
40. B
41. B
42. C
43. C
44. B
45. A
46. C
47. A
48. B
49. C
50. A
51. C
52. B
53. C
54. D
55. A
56. A
57. A
58. C
59. D
60. C
61. A
62. B
63. D
64. D
65. A
66. D
67. A
68. A
69. B
70. B
71. A
72. A
73. C
74. B
75. B
76. C
77. C
78. D
79. B
80. B
81. C
82. B
83. A
84. D
85. B
86. A
87. C
88. D
89. C
90. A
91. D
92. B
93. C
94. B
95. C
96. C
97. D
98. B
99. B
100.A