Basic Appraisal Principles-Chapter 13
Test Questions All Solved.
Value is defined as: - Answer " 1. The monetary relationship between properties and those
who buy, sell, or use those properties. Value expresses an economic concept. As such, it is never
a fact but always an opinion of the worth of a property at a given time in accordance with a
specific definition of value. In appraisal practice, value must always be qualified - for example,
market value, liquidation value, or investment value. (USPAP, 2010-2011 ed.) 2. The present
worth of the future benefits that accrue to real property ownership."
value is: - Answer what a property is worth.value is related to the actions and beliefs of
buyers and sellers
value is: - Answer "never a fact but always an opinion of the worth of a property..."
Price is defined as - Answer "The amount asked, offered, or paid for a property. Once stated,
price is a fact, whether it is publicly disclosed or retained in private. Because of the financial
capabilities, motivations, or special interests of a given buyer or seller, the price paid for a
property may or may not have any relation to the value that might be ascribed to that property
by others
Price and value are not the same thing! - Answer Price is something that happened once in a
particular situation at a moment in time.
Value is a price that would tend to prevail. A pattern of prices sets a range of values.
cost. is defined as - Answer "1. The total dollar expenditure to develop an improvement
(structure); applies to either reproduction of an identical improvement or replacement with a
functional equivalent, not exchange (price).
2. The amount required to create, produce, or obtain a property. (USPAP, 2016-2017 ed.) In
USPAP, the term cost is used either as a historic fact or as an appraisal estimate of current future
or historic reproduction or replacement cost."
Cost and value are not the same! - Answer It is possible that cost and value could possibly
equal the same amount in a particular situation. However, this happens even less frequently
than with price and value.
The bottom line is - we cannot assume that cost is equal to value.
The most common type of value sought by real property appraisers is - Answer market value
, market value is defined as - Answer "The major focus of most real property appraisal
assignments.
The most widely accepted components of market value are incorporated in the following
definition: - Answer The most probable price that the specified property interest should sell
for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or
in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and
seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under
duress.
an arm's length transaction is defined as - Answer "A transaction between unrelated parties
under no duress."
Exposure time is: - Answer a retrospective opinion developed by the appraiser based on an
analysis of past events assuming a competitive and open market
In developing a real property appraisal an appraiser must: - Answer identify the type and
definition of value and, if the value opinion to be developed is market value, ascertain whether
the value is to be the most probable price:
(i) in terms of cash; or
(ii) in terms of financial arrangements equivalent to cash; or
(iii) in other precisely defined terms; and
(iv) if the opinion of value is to be based on non-market financing or financing with unusual
conditions or incentives, the terms of such financing must be clearly identified and the
appraiser's opinion of their contributions to or negative influence on value must be developed
by analysis of relevant market data;
When exposure time is a component of the definition for the value opinion being developed: -
Answer the appraiser must also develop an opinion of reasonable exposure time linked to
the value opinion
Exposure time is defined as: - Answer "1. The time a property remains on the market. 2. The
estimated length of time the property interest being appraised would have been offered on the
11
market prior to the hypothetical consummation of a sale at market value on the effective date
of the appraisal; a retrospective estimate based on an analysis of past events assuming a
competitive and open market."
USPAP defines exposure time as - Answer "estimated length of time the property interest
being appraised would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of the appraisal.
Test Questions All Solved.
Value is defined as: - Answer " 1. The monetary relationship between properties and those
who buy, sell, or use those properties. Value expresses an economic concept. As such, it is never
a fact but always an opinion of the worth of a property at a given time in accordance with a
specific definition of value. In appraisal practice, value must always be qualified - for example,
market value, liquidation value, or investment value. (USPAP, 2010-2011 ed.) 2. The present
worth of the future benefits that accrue to real property ownership."
value is: - Answer what a property is worth.value is related to the actions and beliefs of
buyers and sellers
value is: - Answer "never a fact but always an opinion of the worth of a property..."
Price is defined as - Answer "The amount asked, offered, or paid for a property. Once stated,
price is a fact, whether it is publicly disclosed or retained in private. Because of the financial
capabilities, motivations, or special interests of a given buyer or seller, the price paid for a
property may or may not have any relation to the value that might be ascribed to that property
by others
Price and value are not the same thing! - Answer Price is something that happened once in a
particular situation at a moment in time.
Value is a price that would tend to prevail. A pattern of prices sets a range of values.
cost. is defined as - Answer "1. The total dollar expenditure to develop an improvement
(structure); applies to either reproduction of an identical improvement or replacement with a
functional equivalent, not exchange (price).
2. The amount required to create, produce, or obtain a property. (USPAP, 2016-2017 ed.) In
USPAP, the term cost is used either as a historic fact or as an appraisal estimate of current future
or historic reproduction or replacement cost."
Cost and value are not the same! - Answer It is possible that cost and value could possibly
equal the same amount in a particular situation. However, this happens even less frequently
than with price and value.
The bottom line is - we cannot assume that cost is equal to value.
The most common type of value sought by real property appraisers is - Answer market value
, market value is defined as - Answer "The major focus of most real property appraisal
assignments.
The most widely accepted components of market value are incorporated in the following
definition: - Answer The most probable price that the specified property interest should sell
for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or
in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and
seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under
duress.
an arm's length transaction is defined as - Answer "A transaction between unrelated parties
under no duress."
Exposure time is: - Answer a retrospective opinion developed by the appraiser based on an
analysis of past events assuming a competitive and open market
In developing a real property appraisal an appraiser must: - Answer identify the type and
definition of value and, if the value opinion to be developed is market value, ascertain whether
the value is to be the most probable price:
(i) in terms of cash; or
(ii) in terms of financial arrangements equivalent to cash; or
(iii) in other precisely defined terms; and
(iv) if the opinion of value is to be based on non-market financing or financing with unusual
conditions or incentives, the terms of such financing must be clearly identified and the
appraiser's opinion of their contributions to or negative influence on value must be developed
by analysis of relevant market data;
When exposure time is a component of the definition for the value opinion being developed: -
Answer the appraiser must also develop an opinion of reasonable exposure time linked to
the value opinion
Exposure time is defined as: - Answer "1. The time a property remains on the market. 2. The
estimated length of time the property interest being appraised would have been offered on the
11
market prior to the hypothetical consummation of a sale at market value on the effective date
of the appraisal; a retrospective estimate based on an analysis of past events assuming a
competitive and open market."
USPAP defines exposure time as - Answer "estimated length of time the property interest
being appraised would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of the appraisal.
