Diagnostic Test-Appraisal/Valuation

Valuation & Appraisal

1.A competitive market analysis is prepared by a real estate agent to estimate the
likely sales price of a property. This analysis is based on the:
A.Sales Comparison Method
B.Gross rent multipier
C.cost approach
D.income approach

2.In appraising a home for a lender who wishes to make a purchase loan, the
appraiser would be concerned with:
A.the amount of the loan requested
B.unpaid special assessments
C.the price the seller has agreed to pay
D.economic changes in the arena

3.An example of external obsolescence would be

A.numerous pillars supporting the ceiling in a store
B.roof leaks, making the premises unrentable
C.an older building with very small rooms
D.vacant and abandoned structures in the area

4.An appraisal of property is the

A.supported estimate of value
B.utility value
C.selling price
D.cost plus improvements less depreciation

5.An appraiser would need to determine accrued depreciation when using the:
A.gross rent multiplier method
B.cost approach
C.income approach
D.sales comparison approach

6.In appraising property an appraiser would depreciate

A.fences
B.agricultural land
C.land under a structure
D.a vacant lot

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation

7.Which of the following actions by an appraiser would be unethical?

A.Refusal to make an appraisal that the appraiser
feels is beyond his or her expertise
B.appraising a property in which the appraiser has
disclosed interest
C.Accepting an appraisal where the fee will be a
percentage of the value derived
D.Requesting payment in advance

8.An appraiser in using the expression a "willing, informed buyer and a willing
informed seller," is referencing
A.Progression
B.supply and demand
C.the principle of highest and best use
D.market value

9.Which appraisal method would tend to set the upper limit of value on a new
structure?
A.Gross multiplier
B.Income approach
C.Cost approach
D.Sales comparison approach

10.The advisability of including a tennis court with a planned apartment building may
be determined by the principle of
A.contribution
B.progression
C.substitution
D.change

11.A new, expensive home in a mixed area of commercial property and older, less
expensive homes could have a market value less than the cost of the new home
because of:
A.external obsolesence
B.the gross multiplier effect
C.progression
D.physical deterioration

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation

12.A property has a net income of $30,000. One appraiser decides to use a 12
percentcapitalization rate, while a second appraiser uses a 10 percent rate. Use of the
higher rate results in:
A.a 2 percent increase in appraised value
B.a $50,000 increase in appraised value
C.a $50,000 decrease in appraised value
D.no change in appraised value

13.Which of the following reports would be the most comprehensive appraisal

report?
A.short form report
B.narrative report
C.uniform residential appraisal report
D.certified appraisal report

14.A value regarded as being a subjective value would be

A.market value
B.assessed value
C.use value
D.book value

15.According to the principle of integration and disintegration

A.the value of a property will eventually decline
B.property value is best maintained in
homogeneous areas
C.extraordinary rofits will disappear with competition
D.the maximum value would be based on cost of a
comparable property

16.The reason the gross rent multiplier is an inaccurate measurement of value is that
it fails to consider:
A.depreciation
B.unusual expenses
C.location
D.amenity values

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation

17.According to the principle of conformity, the highest value is maintained by having

a residence
A.adjoining a shopping area
B.next to a church
C.across from a school
D.in a center of a residential development

18.Several $150,000 homes were built in an area where the existing homes had been
valued at $400,000 to $500,000. The effect was that the value of the existing homes
declined. Which real estate principle applies to this situation?
A.regression
B.competition
C.substitution
D.integration and disintegration

19.With an annual net income of $40,000 and a capitalization rate of 8 percent, the
value of the property using the income approach would be
A.$400,000
B.$440 ,000
C.$500,000
D.$520,000

20.The time period during which a structure shows income that is attributable to the
structure itself is known as its
A.economic life
B.effective age
C.period for depreciation
D.period of profitability

21.the last lot in a subdivision sold for almost twice the price paid for the first lot
sold. This is an example of the principle of
A.regression
B.diminishing returns
C.supply and demand
D.Conformity

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation

22.A property being appraised has a two car garage, while a comparable has a three
car garage. In making adjustments, the apppraiser would
A.raise the value of the comparable
B.lower the value of the home being appraised
C.lower the value of the comparable
D.raise the value of the home being appraised

23.A good definition of market value would be the

A.price paid by the owner
B.present worth of future benefits
C.assessed valuation
D.price offered by a prospective buyer

24.After determining the value of the improvements of an existing structure, the

appraiser deducted this amount from the market value to determine the value
attributed to the land. This appraisal method is known as
A.surplus productivity
B.the abstractive method
C.the development method
D.the land residual method

25.The highest and best use is the use that provides the greatest
A.benefit to the community
B.gross
C.value
D.capitalization rate

26.Demand is not effective in determining the value of real property unless it is

combined with
A.scarcity
B.a use
C.purchasing power
D.access

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
27.An investor making extraordinary profits from the first mini warehouse in the area
would be concerned with the principal of
A.substitution
B.competition
C.surplus productivity
D.conformity

28.The principle of supply and demand predicts

A.increasing price when supply increases
B.decreasing demand when supply increases
C.increasing demand when price decreases
D.decreasing price when demand increases

29.An appraiser wanted to know the capitalization rate applicble for a recent sale. The
net income was reported at $21,000 and the property sold for $300,000. What
capitalization rate applied to this sale?
A.6%
B.7%
C.8%
D.9%

30.The appraiser used 80 percent of the value arrived at by the market comparison
approach, 20 percent of the value arrived at with the cost approach, and did not
consider the value arrived at using the income approach. the process the appraiser
was engaged in is known as:
A.the sum of the values
B.reconciliation
C.the abstractive method
D.the index method

31.The appraiser could calculate the annual gross rent multiplier that applied to a
recent sale by:
A.capitalizing the annual gross income
B.dividing the annual gross income by the price paid
C.dividing the price paid by the annual gross
income
D.multiplying the monthly gross income by 12

32.A seller agreed to sell a home with no down payment and the below market rate
seller financing. The favourable financing could be expected to affect the
By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
A.price but not the value of the property
B.value of the property but not the price
C.utility of the property
D.depreciation method

33.A property owner would have the greatest difficulty in correcting depreciation
caused by
A.chronological age
B.the built in nature of the structure
C.forces outside the property boundaries
D.wear and tear due to use

34.An appraiser sets a replacement cost of a structure at $120,000 and appraises the
land value separately at $80,000. the appraiser places an economic life on the
structure at 50 years and states that it has an effective age of 10 years. Using the cost
approach, the appraiser would appraise this property at
A.$140,000
B.$160,000
C.$176,000
D.$200,000

35. In Appraisal, what percent is factored in for depreciation per year?

A.2%
B.4%
C.5%
D.10%

36. What is the formula for assessing value?

A.depreciation x cost - land
B.depreciation + replacement cost + land
C.replacement cost - depreciation + land
D.replacement cost + depreciation + land

37. In using the sales comparison approach to value to appraise a single family
residence, an appraiser might have to make adjustments for
A.assessed valuation differences
B.a difference in possible rental income

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
C.date of sale
D.difference in the capitalization rate

38. Each unit in a fourplex rents for $225 per month. With the sales price of $81,000,
the annual gross rent multiplier is
A.7.5
B.30
C.90
D.360

39. how do you calculate the gross rent multiplier

A.rent x 12
B.rent x # units divided by income per month x 12
C.rent x # units divided by income per month x #
units
D.rent x # units x 12

40. Federal law requires that an appraiser be licensed or certified for

A.any appraisal
B.any residential appraisals
C.any federally related appraisal
D.federally related appraisals of $250,000 or more

41. A buyer who looked at seven very similar homes in a three year old subdivision
made an offer on the home with the lowest list price. the buyer was utilizing the
principal of
A.supply and demand
B.substitution
C.conformity
D.change

42. A separate value for the land is needed for the

A.income approach
B.gross rent multiplier method
C.cost approach
D.market comparison approach

43. what is the formula for the cost approach

A.replacement cost x depreciation land
B.rent x # units divided by income per month x 12
C.replacement cost - depreciation + land

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
D.land x depreciation + cost

44. With fixed rents and a capitalization rate of 8 percent, an increase in taxes of
$4,000 would result in the value of a property:
A.decreasing by $5,000
B.decreasing by $50,000
C.remaining unchanged
D.Increasing

45. what is the capitalization formula?

A.increase in expenses / the capitalization rate
B.income * capitalization rate
C.income / capitalization rate
D.depreciation * capitalization rate

46. An appraiser counting the number of electrical outlets in a structure is using the
A.market comparison method
B.income approach
C.cost approach
D.gross rent multiplier method

47. A property being appraised had 2,400 square feet, but a comparable used by the
appraiser had only 2,250 square feet. The appraiser should
A.disregard the comparable because of dissimilar
size
B.use the comparable but ignore the slight size
difference
C.adjust the sale price of the comparable upward
because of size difference
D.adjust the sale price of the comparable downward
because of the size difference

48. which appraisal principle indicates the economic effect an improvement has on
property?
A.progression
B.substitution
C.surplus
D.Contribution

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
49. the use of more than one appraisal method with different weights assigned to
each method describes:
A.Reconciliation
B.a certified appraisal
C.the development method
D.the quantity survey method

50. In the market comparison method, amenities are balanced out

A.to allow for appreciation
B.because of the principle of competition
C.because the market is not static
D.because no two properties are identical

51. The first step in appraising an apartment building using the income approach
would be to determine the
A.scheduled gross income
B.effective gross income
C.net income
D.vacancy factor

52. "The whole is worth more than the sum of its parts" refers to
A.progression
B.assemblage
C.land residual
D.depreciation

53. Two adjacent residences in the center of a large development had similar values
when they were built 60 years ago. They both have been maintained in similar
condition and the site values are identical but one is now worth far more than the
other. The reason for the difference in value relates to:
A.physical deterioration
B.economic obsolesence
C.functional obsolesence
D.the principle of integration and disintegration

54.Which appraisal method would be used to determine the present value of future
income?
A.income approach
B.cost approach
C.quantity survey method
D.Sales comparison approach

By: R.D.LEONEN-IPA, REB, REA, REC

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Diagnostic Test-Appraisal/Valuation
55. Which description refers to reproduction cost?
A.present cost to build a structure of similar utility
and desirability
B.depreciated present value of a structure
C.present cost to produce a duplicate of a structure
D.depreciated value of a structure plus the present
land value

By: R.D.LEONEN-IPA, REB, REA, REC

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