Basic Appraisal Principles Exam Question Review

Basic Appraisal Principles Exam Question Review Which of the following items are considered to be personal property? a. a tree orchard b. built-in cabinetry c. furniture d. interior light fixtures - ANS c Mayes owns a property buy has leased it to Jacobs. Which term describes Jacobs' right in the property? a. Fee simple interest b. Leased fee interest c. Leasehold interest d. Lessor interest - ANS c Real estate is best described as a. everything resting on the surface of the land b. fixtures and building improvements c. land and everything permanently attached to it d. the complete bundle of rights attached to the land - ANS c Mineral rights are an example of a. air rights b. riparian rights c. subsurface rights d. suprasurface rights - ANS c An appraiser's familiarity with a specific type of property applies to what concept? a. competency b. impartiality c. intended use d. sufficient dilligence - ANS a Sanchez is appraising a property for a client with the intended use of filing a tax appeal. in this type of assignment, Sanchez should a. find out what value the client's lawyer recommends b. not advocate the cause or interest of any party or issue c. represent the client's cause in the appeal d. try to keep the value as low as possible - ANS b Before an appraiser begins an assignment, the problem to be solved must be identified. What is the next step the appraiser must take to ensure credible assignment results? a. a preliminary opinion for the client b. a pro forma for the assignment c. a project timeline d. determination of the scope of work - ANS d chattel and personalty are terms used to describe a. emblements b. fixtures c. personal property d. real property - ANS c Hooper gave permission to a nearby business neighbor to place a sign on his corner property to advertise the neighbor's liquidation sale. What has Hooper given his neighbor? a. a license b. a partial interest in his property c. a personal easement in gross d. an estate - ANS a What is a tenancy (that is, estate) in which a lessee remains in possession of the property without the lessor's consent? a. tenancy at sufferance b. tenancy at will c. tenancy for years d. tenancy from periordto period - ANS a An appraisal is best defined as a. the act or method of telling the client the market value of the real estate b. the act or process of developing an opinion of value c. the report delivered to the client d. a professional estimate of a property - ANS b In real estate appraisal, fees based on a percentage of the conclusion of value are a. allowed if the client agrees b. never allowed c. strongly discouraged d. allowed in tax appeal cases - ANS b When a property is in dispute, each party will often retain an appraiser. In this type of assignment, it is each appraiser's obligation to do what? a. to represent the client's position in the matter b. to be independent, impartial and objective throughout the appraisal process regardless of the party that retains the appraiser c. to represent the appraiser's own personal interests in the assignment d. to represent the position of the court that is deciding the matter - ANS b Beng competent pertains to a. a market b. specific laws or regulations c. a particular approach d. all of these answers - ANS d An appraiser must be competent in (blank) to produce a credible appraisal a. six of the seven factors necessary b. applying the approaches c. selecting comparable sales d. all the competencies that are necessary - ANS d An appraiser must inform a client prior to accepting the assignment if he or she lacks the requisite training, information and/or work experience to complete the assignment competently a. true b. false - ANS a When developing a real property appraisal, an appraiser a. must use only those methods and techniques the appraiser is familiar with b. must be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal c. can improvise valuation techniques when the assignment is complex and traditional methods don't work d. must be aware that competency doesn't require the appraiser to know the best method or technique to solving the problem - ANS b Making a series of small errors in an appraisal is acceptable so long as it does not significantly affect the value conclusion a. true b. false - ANS b Which of the following is the best example of an appraiser that has performed an appraisal service in a careless or negligent manner? a. the appraiser turned in the appraisal report past the date it was due b. the appraiser made a series of errors that individually might not significantly affect the results of the appraisal, but that in total affect the credibility of those results c. the appraisal report had several typos d. the appraiser mislabeled one of the rooms in the building sketch, although it was correctly stated in the report content - ANS b The manner in which a client utilizes the information and opinions contained in the appraisal report may be best identified as a. the intended use b. the purpose of an appraisal c. the base of an appraisal d. the appraisal permise - ANS a The purpose of the assignment is also referred to as a. scope of work b. type and definition of value c. value opinion d. the extent of research - ANS b Which of the following is one of the assignment elements that an appraiser must identify prior to acceptance? a. assignment delivery date b. assignment fee c. assignment conditions d. assignment exceptions - ANS c What is the strategy for solving a client's valuation problem in which the appraiser determines the type and extent of research and analyses the assignment requires? a. intended use b. scope of work c. type and definition of value d. appraisal plan - ANS b Which of the following statements is true? a. problem identification precedes the scope of work decision b. the scope of work is predetermined in a mortgage related appraisal c. the scope of work determines the problem to be solved d. the assignment conditions control the type of report to be written - ANS a You are an appraiser who also performs brokerage services. You have been asked to help sell a small family farm. The client specifically needs assistance with a marketing plan, deciding what improvements should be made to the property and how to handle an offer. If you accept this assignment, you are a. not competent enough to perform the assignment b. acting in the role of the broker, rather than an appraiser c. providing a value opinion as an appraiser d. violating the code of ethics for appraisers - ANS b In real estate appraisal, fees based on a percentage of the conclusion of value are a. allowed if the client agrees b. never allowed c. strongly discouraged d. allowed in tax appeal cases - ANS b An appraiser who favors the cause of the client shows a. association b. competency c. bias d. discrimination - ANS c What is one of the obligations an appraiser must ensure in order to ethically perform an appraisal assignment? a. an appraiser must ensure partiality b. an appraiser must ensure subjectively c. an appraiser must ensure independence d. an appraiser must accommodate any personal interest in the appraised property - ANS c An appraiser has accepted an appraisal assignment and begins working on it. During the course of the assignment, the appraiser discovers that he doesn't have the competency required to complete the assignment, but feels he can acquire the necessary competency. What is the best course of action the appraiser should take in this situation? a. he has no other choice but to immediately withdraw from the assignment b. He must notify the client of the competency issue and take the necessary steps to gain competency in order to complete the assignment c. he must complete the assignment to the best of his ability d. the must contact the client to obtain permission to continue the assignment - ANS b Being competent pertains to a. a market b. specific laws of regulations c. a particular approach d. all of these answers - ANS d An appraiser performing an assignment in an unfamiliar geographic location must spend sufficient time to understand the _____ of the local market. a. nuances b. demographics c. political forces d. linkages - ANS a Your client, the bank, discovers an error in your report. The error could result in a change in your conclusion. Are you allowed to change the report? a. Yes, if the client requests a change that does not violate the appraisal contract b. Yes, if the error is verified and a change is logical c. No, you may not change a report once it has been delivered d. No, if the change results in a higher value that favors the cause of the client - ANS c One minor error carries the same weight as a large error in the eyes of the appraisal standards. a. true b. false - ANS a The intended use of the appraisal is the appraiser's understanding of a. who is responsible for the appraiser's fee b. which definition of value is to be used c. if a scope of work description is needed d. how the client will use the appraisal - ANS d What is NOT true about the scope of work in the appraiser's valuation process? a. The actual scope of work performed must be disclosed in the appraisal report b. the scope of work is determined when the report is written c. the appraiser must be prepared to demonstrate that the scope of work is sufficient to produce credible assignment results d. the scope of work is decided after the appraiser has identified the problem to be solved - ANS b Personal property that is installed in a permanent manner and is intended for use in a business on leased property is best classified as what property type? a. a trade fixture b. a fixture c. personal property d. intangible property - ANS a The rights of the owner are also called a. property rights b. exclusionary rights c. use rights d. legal use rights - ANS a In an appraisal assignment, how should photographic printing equipment owned and used by a photo business renting space in a mall be identified for valuation purposes? a. fixture b. trade fixture c. real property d. personal property - ANS b The general characteristics of land are best identified as a. land, labor, capital, and entrepreneurialism b. legal, geographic and environmental, economic, and social c. immobile, durable, finite, and useful d. leasehold, leased fee, and fee simple - ANS c Appurtenant means a. associated b. adjacent c. allowed d. attached - ANS d In theory, the supply of land is considered to be a. increasing over time b. infinite c. finite d. originally established by the surveyors - ANS c A property owner discovered during a loan refinance that a previously unknown public easement may prevent the owner from building an addition to the residence. The owner believes this will have an impact on any future sale of the property. What real right property is affected in this situation? a. right to mortgage b. right to possession c. right to transfer d. right to improve - ANS d Corn in a cornfield is an example of a(n) a. emblement b. fixture c. appurtenance d. trade fixture - ANS a When an appraiser values real property, what is actually being valued? a. property that is not artificial b. the physical land and appurtenances affixed to the land c. any and all buildings on the subject site d. all interests, benefits, and rights inherent in the ownership or real estate - ANS d An appraiser can appraise part of a property a. true b. false - ANS a Retrieving minerals located in the ground are connected to what type of land rights a. suprasurface rights b. air rights c. riparian rights d. subsurface rights - ANS d Why can't riparian rights be retained by a seller after a property is sold? a. all water rights are retained by the federal government b. water rights are attached to the land rather than to an individual c. water rights are always leased d. riparian rights are subsurface in nature and treated the same as mineral and gas rights - ANS b A defeasible estate is limited by a. the occurrence or non-occurrence of a specific event b. the ability of the owner to defease a health issue c. the conclusion of a legal proceeding d. the passage of a specified time period - ANS a Sheena and Nathaniel occupied their apartment for the last three and a half years. They originally signed a lease agreement for a period of two years. Over the last year, their apartment has experienced problems including a defective furnace, the presence of mold, and a broken refrigerator. The couple is concerned about the safety of their young son and the landlord has been slow to repair problems with the apartment in the past. Can the couple give notice and move out now without violating their lease? a. No, the couple cannot move without violating their lease agreement. The original estate for years was a two-year agreement. Once the couple's original two years expired, the lease renewed for another two years because they did not intend to move at that time b. Yes, the couple can move because their original estate for years would have required them to have signed a new lease after two years c. No, the couple canno - ANS b Sarah planted a new flower garden in the easement area adjacent to the sidewalk in front of her home. Recently, a water main broke, and the city needed to have large equipment come in to repair the damage. The flower garden was destroyed and the city re-sodded the area after the repairs. Sarah was outraged at the invasion of her property. What property rights does Sarah have in this situation? a. The city maintains an easement appurtenant along the street to make needed repairs. It has the right to disturb the property as needed b. The city has a dominant estate through a gross easement, allowing it access to the pipes below the ground c. The city must reimburse Sarah for the cost of the flowers and related landscaping d. The city maintains an easement in gross along the street to make repairs. It has a right to disturb this property as needed - ANS d Restrictions affect the owner's ability to (blank) a property a. use b. finance c. sell d. abandon - ANS a Which type of encumbrance is a monetary claim against a property? a. a lease b. an easement c. a property tax lien d. an encroachment - ANS c Another term for an encroachment is a. improvement b. deconstruction c. trespass d. servient estate - ANS c A lease affects the owner's ability to (blank) a property a. abandon b. finance c. sell d. use - ANS d When a financial institution puts together a loan for a property owner, the lender is referred to as the a. grantee b. mortgagee c. mortgagor d. trustor - ANS b Which of the following limitations on ownership is not an exercise of government power? a. covenants b. escheat c. special assessment lien d. zoning ordinance - ANS a The form of legal description most often used west of the Mississippi River is a. bearing and azimuth b. metes and bounds c. recorded plat d. rectangular survey - ANS d A claim against real property to secure repayment of a debt it a. a deed restriction b. a lien c. an easement d. an encroachment - ANS b When a corporation purchases real estate, it conducts this business as a. a limited partnership b. a real estate investment trust c. a syndicate d. if it were a single person - ANS d Rick and Alice set up a living trust for their children involving a rental property they own. in this type of agreement, the children are legally referred to as the a. beneficiaries b. fiduciaries c. trustees d. trustors - ANS a Common elements in condominium ownership include all of the following except the a. elevator b. land c. shareholder stock d. swimming pool - ANS c Justin owns a property with three other people. When Justin dies, his interest will be passed according to his will and be part of this estate. In this property, Justin is a. joint tenant b. tenant by the entirety c. tenant in common d. tenant in severalty - ANS c McKibbin has been approved to have a possessory interest in a property and is given a proprietary lease. What kind of ownership does McKibbin have? a. condominium ownership b. cooperative ownership c. leasehold onwership d. timeshare ownership - ANS b A buyer purchased a quarter acre of land for $5 per square foot. What was the price of the parcel? - ANS $54,450 The process used by the government to acquire land for public benefit is known as a. condemnation b. eminent domain c. escheat d. foreclosure - ANS a A land parcel located in Section 14 measures 660 feet by 330 feet. How many acres does this parcel have? a. 10 acres b. 20 acres c. 5 acres d. 640 acres - ANS c Using the rectangular survey method, the SE 1/4 of Section 10 contains how many acres? a. 160 acres b. 40 acres c. 80 acres d. 640 acres - ANS a What is the area size of a township with standard sections as used in the rectangular survey system? a. townships are 640 acres b. cannot be determined as each township size greatly from county to county c. townships are 36 miles square d. townships are 6 miles square - ANS c In a "metes and bounds" description a monument a. defines the "metes" b. is also known as the starting point (POB) for a legal description c. refers to a block of granite with a message on it d. refers to a fixed object used to establish boundaries - ANS d When an appraiser analyzes a legal description that uses the method of metes and bounds, what is the best way to describe metes? a. they are measures that include direction and distance b. they are lines of longitude and latitude c. the metes are the designated points of beginning d. they are terminal points such as landmarks or monuments - ANS a Why is an appraiser's understanding of legal descriptions important to eh valuation process a. all of these answers are correct b. to ensure that the correct property is identified in the appraisal valuation c. the ensure that the size and share are correctly analyzed for valuation purposes d. for identification of FEMA flood zones that may impact the valuation of the property - ANS a When an appraiser reads a rectangular survey description, what is the best method to begin the process? a. the order in which you read the description is irrelevant b. start with the directional description located at the end and work progressively to the beginning of the description c. start with the first directional description and work progressively to the last description d. start with descriptions that include "N" and work progressively to descriptions that include "S" - ANS b Principle meridians run (blank), while baselines run (blank) a. east and west; north and south b. horizontally; vertically c. north and south; east and west d. as longitude lines; as latitude lines - ANS c Government lots are a. parcels owned by local government b. parcels owned by the Federal Government c. irregular parcels that do not fit into the range/township model d. parcels that are too small to be included in the range/township model - ANS c Survey lines that run east and west at six-mile intervals and are located either north or south of a baseline may be best identified as what type of lines? a. principal meridians b. section lines c. range lines d. township lines - ANS d In the rectangular survey method, which section is located directly north of section 23? a. section 24 b. section 27 c. section 22 d. section 14 - ANS d How many acres are contained in a typical 36 square mile township? a. 23,040 acres b. 640 acres c. 5,760 acres d. 2,560 acres - ANS a How many acres are in a square mile? a. 3,200 b. 640 c. 43,650 d. 2,560 - ANS b Which of the following is NOT a form of ownership? a. co-ownership b. trusts c. co-option d. severalty - ANS c The Acme Corporation set up a land trust in a property it owns and conveys it to a nonprofit organization for a specified period of time. What best identifies Acme's position in the trust? a. acme is the trustee b. acme is the grantee c. acme is the trustor d. acme is the beneficiary - ANS c Rick and Alice set up a living trust for their children involving a rental property they own. In this type of agreement, the children are legally referred to as the a. trustee b. beneficiary c. trustor d. fiduciary - ANS b The Hawthorns bought a condominium unit in a resort area for $500,000. They use the condo for one month out of every year and during the remaining months, they rent it out through an agreement with the property management. This is an example of what type of ownership? a. timeshare b. leasehold c. cooperative d. conominium - ANS d Condominium ownership most closely resembles a. restricted use ownership b. cooperative ownership c. single-family ownership d. apartment ownership - ANS c Purchasing a cooperative unit means you are buying a. a proprietary lease b. shares of stock c. real estate d. a bundle of rights - ANS b Ownership in severalty means a. ownership that is severed at death b. ownership by a single owner or single entity c. ownership that cannot be leaded d. ownership by several partners - ANS b Trusts that allow 100 or more investors to pool their resources into a large real estate investments are called a. beneficial trusts b. REITs c. Syndicates d. Investment pools - ANS b Who gives a mortgage to whom? a. the mortgagee gives the mortgage to the mortgagor b. the borrower gives the mortgage to the mortgagor c. the lender gives the mortgage to the mortgagee d. the mortgagor gives the mortgage to the mortgagee - ANS d Sam Gates wants to buy a summer home with his sister Jean. Because they are both retired and have no heirs, they want to be sure that if one of them dies, the interest of the deceased will pass to the other sibling. Which form of ownership should they use to acquire title? a. tenancy by the entirety b. tenancy in severalty c. tenancy in common d. joint tenancy - ANS d Concurrent ownership is also known as a. joint ownership b. partial ownership c. co-ownership d. ownership in severalty - ANS c Undivided interest is a term that applies to a. only joint tenancy b. only tenancy in common c. only tenancy by the entirety d. all of these answers - ANS d Escheat is applied by the government when an owner a. fails to pay child support or alimony b. dies without a will and without heirs c. constructs an addition without a building permit d. makes a fraudulent income tax filing - ANS b Restrictions such as setbacks, density, and building height fall under what category of government control? a. comprehensive plan b. zoning ordinances c. building codes d. covenants - ANS b The Federal Government receives a portion of the real estate taxes paid by the property owner a. true b. false - ANS b As part of a special assessment, a new sidewalk was constructed on Cleveland Street and paid for by all the residents of the street, except the Burris family. As a result, a. a government lien will be placed on the Burris property b. a lis pendens will help the city take possession of enough collateral to pay for the sidewalk c. an equity lien will be placed on the property and the city will use the Burris equity to pay for the sidewalk d. a mortgage lien will be placed on the Burris property and will have to be paid before they can make any more payments toward their home loan - ANS a The residents of Hennepin Street, a recent addition to Granville, have had nothing but trouble with their septic systems due to a high water-table in the area. The rest of the town has a sewer system. The Hennepin Street residents have gathered together to ask the city to extend the sewer line to their street. The government of Granville was at first reluctant to agree because it was reelection year and the only way to fund the project would be to increase taxes. It was finally agreed that the project would commence so long as the residents of Hennepin Street funded the cost by dividing it amongst themselves. This agreement is an example of a. an eminent domain b. a special assessment c. easement in gross d. an ad valorem tax - ANS b A city may levy a(n) (blank) for a sidewalk project a. proprietary assessment b. special assessment c. auxiliary assessment d. public use assessment - ANS b Seatonville has had an influx of new construction for the small rural town. One of the country roads leading into town has had several new houses spring up as the area along the road was subdivided into lots. According to the comprehensive plan of the area, this land was originally meant for agricultural use, but it is now approved for single-family residential. This is an example of a. a change in the testate variance b. a gross encumbrance change c. a special assessment d. a change in the zoning ordinances - ANS d A grandfathered use is a. a variance b. restricted use ownership c. legally nonconforming d. an example of spot zoninig - ANS c Kenny and Cindy recently attended an open house for a new construction in one of Ottawa's better subdivisions. The house was everything they were looking for with many upgrades and a floor plan that exactly suited their needs. They were contemplating their offer until they stepped onto the back porch and saw a backyard view of a sanitation company that specialized in renting portable toilets. Several freshly cleaned outhouses were lined up along one end of the property and large trucks were busy moving items back and forth across the lot. The realtor claimed that the subdivision contractor planned to provide a fence along the edge of the industrial park, but Kenny and Cindy weren't swayed. Perhaps the city should have planned for a a. barrier zone b. zoning variance c. buffer strip d. gross encumbrance change - ANS c Liens fall into two basic categories a. general and specific b. mechanic and property tax c. partial and total d. testate and intestate - ANS a A claim against real property to secure repayment of a debt is a. an easement b. a lien c. an encroachment d. a deed restriction - ANS b A lien creates a potential ownership interest a. true b. false - ANS b Parties to a valid contract must enter the agreement voluntarily to satisfy the element of a. consideration b. forbearance c. competency d. consent - ANS d If a lender goes into forbearance mode, the result is a. that interest collection is suspended b. immediate foreclosure c. that the loan balance is reduced d. postponed foreclosure - ANS d A document signed only by the seller is enforceable a. true b. false - ANS b Adverse possession must be open, notorious, continuous, friendly, and adverse a. true b. false - ANS b A county highway department wanted to buy the remaining owner's interest in land located under an existing county road in a rural area. Often in cases like this, the public road was established decades earlier and the land owner was never paid for their land because some type of road had always been there prior to the county assuming responsibility. What right did the county have to use the land as a road prior to this point? a. the county had an easement appurtenant b. the county had an easement by adverse possession c. the county has a prescriptive easement d. the county had a special warranty deed - ANS c A tenant has an ice cream shop in a shopping mall and pays $2,000 per month plus 4% in overage rent based on gross sales after the first $100,000. This is an example of a(n) ________________ lease a. percentage b. overage c. index d. revaluation - ANS a A lease with rent that increases at specific intervals is a a. percentage lease b. step-up lease c. revaluation lease d. flat rental lease - ANS b In a gross rental lease, expenses are paid a. by the tenant, except for real estate taxes b. by the owner of the property c. by the tenant d. by both owner and the tenant equally - ANS b A leasehold interest is a. the owner's position in a lease b. a lease in a property with a remaining term of more than one year c. the owner's right to lease the property at the end of the lease d. the tenant's possessory interest created by a lease - ANS d What is generally true about a percentage lease? a. it may be classified as either a gross lease or a net lease b. it must be classified as a gross lease c. it may be classified as either a flat lease or an index lease d. it must be classified as a net lease - ANS a (Blank) is an opinion of the worth of a property as of a specified time a. price b. value c. estimate d. cost - ANS b A newly built property was listed for $440,000 and sold in 60 days for $425,000. The cost of the building and land was $430,000. There were a number of comparable properties in the area that recently sold between $420,000 and $445,000. Assuming no other factors, what would be a reasonably appraised value of the property? a. $425,000 because that is the sale price of the property b. $425,000 because it is supported by both cost and market data c. $420,000 because that is the safest value for the property d. $430,000 because that is the midway price of the comparable sales and it also equals the cost of the property - ANS b The total dollar expenditure to develop an improvement is called a. price b. going concern c. use value d. cost - ANS d Demand is related to which of the following factors of value? a. scarcity b. amenity c. utility d. effective purchasing power - ANS IDK, but i think it is a A good capacity to satisfy human desires or needs is known as a. functional obsolescence b. creative demand c. utility d. effective demand - ANS c Julie is a successful young professional looking to purchase a downtown condominium unit. She wants the convenience of living close to her office building, but she also wants to live in an area that has a reputation for being "trendy". Which value factor best represents Julie's motivation in this scenario? a. effective purchasing power b. scarcity c. utility d. desire - ANS d The market value of a business property including the real property and intangible assets is called a. going-concern value b. assessment value c. fair value d. total value - ANS a The value according to tax rolls in ad valorem taxation is called a. liquidation value b. insurable value c. assessed value d. investment value - ANS c The value of an investment to one particular investor is called a. investment value b. market value c. market value of a going-concern d. use value - ANS a Limited market properties fall into which category of value types? a. investment value b. going-concern value c. market value d. use value - ANS d An appraiser's research of land sales revealed that a recently immigrated family purchased 100 acres of agricultural land. The price was not consistent with other land sales in the area. When the appraiser interviewed the parties to the transaction, she learned that the family wanted to hold the land for future investment potential and that had influenced their offer. However, the land will likely remain agricultural for at least the next 30 years based on the comprehensive plan. What component of the market value definition must the appraiser consider in analyzing the land sale? a. parties to the transaction must be informed or well advised b. parties to the transaction must be acting in their own best interests c. parties to the transaction must be motivated d. parties to the transaction must not be affected by undue stimulus - ANS IDK Which of the following is NOT a part of the market value definition used by federal financial institutions? a. the property sells in 90 days to 120 days b. payment is made in cash or cash equivalent terms c. both parties are well informed d. buyer and seller are typically motivated - ANS a Which of the following statements is true concerning the components that define market value? a. market value is based on a 120-day exposure time b. market value is expressed as the highest price c. market value requires terms of cash, or terms equivalent to cash, market value is based on cash, or cash equivalent terms d. market value must be expressed as of a current date - ANS c Value estimate is the preferred way to state your conclusion of market value a. true b. false - ANS b Market value is less precise because a. it does not require a property inspection b. it is expressed as most probable c. it is only valid on the date of the appraisal d. it can only be estimated as of the date of the property visit - ANS b Why is a property seller willing to pay a specific amount of mortgage discount points to the buyer's lender at the closing? Select the best response. a. lenders require that the seller pays all mortgage discount points b. A seller's willingness to pay points attracts more buyers and the premium price the buyer pays for the property may cover most of the seller's cost. c. Property owners in these situations are desperate to sell and paying discount points attracts buyers who would otherwise not be able to purchase their property d. it allows the seller to save face by receiving a premium price rather than accepting a low offer - ANS b A property was listed for $400,000 and the seller was hoping to receive $390,000 when it sold. However, a buyer offered full price and asked the seller to pay 4 points toward the buyer's financing. What would the seller receive in this offer if the buyer obtained an 80 percent loan? a. $387,200 b. $388,800 c. $387,520 d. $384,000 - ANS a An appraiser is analyzing comparable sales to a subject property. She finds that one property was sold to a neighboring property owner before the listing became available on the open market. Which statement best describes how the appraiser should address this sale in the comparable sale analysis? a. The appraiser may use this sale without qualification because a quick sale is an excellent indicator of market value b. The appraiser should use this sale as a comparable because time spent on the market has no bearing on market value c. The appraiser must not use this sale because it is not an arm's length transaction d. The appraiser may identify this sale as additional data the appraiser considered, but it may not meet the market value criterion of reasonable exposure - ANS d Which of the following statements is accurate regarding the relationship of exposure time and marketing time? a. Exposure time and marketing time are unrelated because one is connected to the effective date, while the other is not b. Exposure time and marketing time are simply two terms that express the same thing c. Exposure time follows the effective date; marketing time precedes the effective date d. Exposure time precedes the effective date; marketing time follows the effective date - ANS IDK A waterfront property sold and closed recently. The purchase price included a deluxe bass fishing boat, several jet skis, and a well-equipped ice fishing house. The property sold for $850,000. If an appraiser wishes to use this sale as a comparable, what should the appraiser consider? a. The appraiser should treat the personal property included in the sale as amenity features of the real estate b. The personal property is a seller concession that must be addressed in the appraiser's analysis to ensure cash equivalency. The sale price must be adjusted to reflect what the buyer would have paid for the property without the personal property c. The appraiser should use $825,000 as the revised comparable sale price d. The cost of the personal property must be deducted to derive a cash equivalent price - ANS b A typical option contract to purchase real property binds which of the following? a. both buyer and seller b. neither buyer nor seller c. only the buyer d. only the seller - ANS d The total dollar expenditure to develop an improvement is called a. cost b. going concern c. price d. use value - ANS a An increase in demand will typically affect a commodity in what way? a. a decrease in price b. an increase in market exposure time c. an increase in price d. an increase in supply - ANS c An agreement that is presumed to exist because of the parties' actions is called an implied contract. In contrast, an agreement that is put into words is what type of contract? a. express contract b. forbearance contract c. legal purpose contract d. unilateral contract - ANS a Jensen has a sale contract on a property, but it does not state the legal description, and it is not signed by the seller. the contract is a. implied b. unilateral c. valid d. void - ANS d the value according to tax rolls in ad valorem taxation is called a. assessed value b. insurable value c. investment value d. liquidation value - ANS a A portion of the purchase price given to bind the transaction is known as a. a guarantee certificate b. a purchase receipt c. earnest money d. trust funds - ANS c Warner is a tenant and pays a fixed rent, while his landlord pays all of the operating expenses and real estate taxes. what type of lease is this? a. double net b. gross c. net d. sandwich - ANS b If demand is constant for a particular commodity, what factor of value would make the commodity more valuable? a. desire b. effective demand c. scarcity d. utility - ANS c Jill sold her property interest to her sister Joanna, involving land they jointly owned. Years later, Joanna decided to sell the land, but the buyer wanted assurance that Jill had no rights to the property. What type of deed would Jill provide in this situation? a. bargain and sale deed b. general warranty deed c. quitclaim deed d. special warrant deed - ANS c The value of an investment property to one particular investor is called a. investment value b. market value c. market value of a going concern d. use value - ANS a Rita purchased a timeshare property that included a one-week expense-paid trip to the Cayman Islands as an inducement to buy the property. The trip was valued at $3,000. If the property sold for $28,000, what is a reasonable cash equivalent price for the property? a. $25,000 b. $28,000 c. $31,000 d. none of the above - ANS a The type of deed that provides the greatest warranty against lawful claims is a a. deed of trust b. general warranty deed c. special warranty deed d. title insurance certificate - ANS b A sale that takes place between unrelated parties is considered to be what kind of transaction? a. arm's length b. cash equivalent c. reasonable exchange d. self-interest - ANS a The cost of options foregone or opportunities not chosen is which subprinciple of substitution? a. opportunity cost b. contribution c. increasing and decreasing returns d. competition - ANS a Property values tend to be set by the cost of acquiring an equally desirable substitute. This is an attribute of which principle? a. supply and demand b. substitution c. anticipation d. competition - ANS b All the following are tests of highest and best use EXCEPT a. maximum productivity b. legal permissibility c. physical possibility d. economic viability - ANS d A small average residence is in area of luxury homes. The effect of the surrounding homes on the small residence is called a. conformity b. progression c. regression d. excess profits - ANS b Which of the following is true regarding excess land? a. it must be platted as a stand-alone lot b. it must be larger than 1 acre c. it must have an independent highest and best use d. it must result in measurable profit when developed - ANS c Which theory states that land cannot be valued based on one use while the improvements are values on the basis on another use? a. value in use b. uniform use c. interim use d. consistent use - ANS d Highest and best use can be concluded as a fact a. true b. false - ANS b A temporary use of property until a different use becomes maximally productive is a. nonconforming use b. excess use c. conditional use d. interim use - ANS d If the income approach shows a negative cash flow (profit) it is said to support a. legal feasibility b. surplus productivity c. lack of financial feasiability d. a clear over-improvement - ANS c An appraiser is analyzing a development site that has several Indian burial mounds. There are federal laws that protect Native American burial sites and how close improvements of any kind are to the mounds. What test of highest and best use must the appraiser first consider in this assignment? a. legal permissibility b. maximum productivity c. financial feasibility d. physically possible - ANS a Tammy has been renting a one-story, 53-year-old single family home from Mr. and Mrs. Rodriguez for the last twelve years. Six years ago, Tammy opened a beauty shop in the garage. The shop area has updated wiring, insulation, gas forced central air and heating, and some finishing. The Rodriguez' have decided to sell the home and have offered Tammy the option to purchase before they place it on the market. To arrive at a price, Tammy and her landlords split the cost of an appraisal. The site is zoned B-4 / Commercial. How should the highest and best use be considered? a. Whether or not the market better supports residential or commercial use, the land and structure should be valued under different zoning b. Whether or not the market better supports residential or commercial use, the land and structure should be valued under the same zoning c. The site is zoned commercial, so consider the area vacant and base your value - ANS b When an appraiser bases his or her opinion of the value of a property as of a certain date, which economic principle best reflects that necessity? a. competition b. balance c. substitution d. change - ANS d The owner of an apartment complex decided to put off a planned renovation project to save money. However, in the years following this decision the property continues to experience higher vacancy and pressure to reduce rental rates as tenants move to apartments that have been renovated. What appraisal principle does this example best illustrate? a. competition b. anticipation c. highest and best use d. opportunity cost, a sub-principle of substitution - ANS d Which of the following illustrates a positive effect of the principle of externalities? a. a residential property located adjacent to high-voltage power lines b. a retail business located on a highway with restricted access c. a commercial retail business located in an area with year-round tourism traffic d. a residential property located adjacent to a manufacturing facility - ANS c Paul enjoys his new comparable search engine. He can import comparables and the information accurately without retyping. Plus, it provides him with recent property closings in several market areas. Paul's internet, however, is extremely slow and the daily download takes almost an hour to complete. He turns off this feature to utilize his time more effectively and updates his database once every two to three months. When one of his reports was reviewed, it was questioned why a recent sale in the same subdivision was ignored. It closed two months before Paul received the appraisal order. Paul should a. be concerned with updating the market database. The market can change daily. Updating the comparable database is essential to having access to present comparables b. be more concerned with updating his information. The market changes approximately every 30 to 45 days, and he needs to update his database accordingly c. po - ANS a A young builder bought 20 acres outside of the city limits of LaSalle. He planned to construct a man-made lake and to sell the lots off. After researching subdivision prices in the local community (none of which contained lakes), he listed his lots for 10% more than the average lot price of the other subdivisions and set the lots with views of the lake at an additional $5,000 above this increase. Is there evidence to support his price increase? a. As the availability of vacant lots increase, the value of the lots should decrease based on the current supply and demand curve. Externalities can have a positive influence on properties; the lake view would be an improvement over a view of a residential dwelling. List the lots at the same price as in other subdivisions. The lake view properties can be listed for more b. As the availability of vacant lots decreases, the value of the remaining lots should increase based on t - ANS a After renting from his landlord for the last ten years, Jeremy's home was recently offered to him for purchase at $100,000. Jeremy was approved for financing up to $110,000, and he signed a contract with an appraisal rider as advised by his mortgage company. Nevertheless, he was soon disappointed to find out that the home was only valued at $70,000. One of the comparables photographs showed a better-looking dwelling that sold for $90,000. The tenant began questioning what he could get for the mortgage payment he could easily afford. How was the appraisal important in this situation? a. The tenant is unable to purchase the properties included in the report, as they are closed sales. Current listings are not a good indication of value. The tenant should not compare the appraised property to other listings b. The competitive properties used in the sales comparison approach indicated that the price buyers are willing to - ANS b Jack's parents recently moved into an assisted living community. Jack and his wife are debating moving into his parents now vacant home. The dwelling is dated and would require updating and remodeling to reach a level of maintenance comparable to the rest of the neighborhood. Jack and his wife, who are expecting their second child, live in a smaller home situated in the center of a neighborhood that has not changed in over 30 years. Some of the dwellings need exterior updating and repairs. Jack is concerned the deferred maintenance in the area will affect his value. Acting as a consultant, what advice is appropriate? a. The principal of regression supports Jack's thoughts. The predominant value of Jack's current neighborhood will decrease as the quality of the homes increase. The pull-up effect will have a negative impact on Jack's property value. Investing energy in updating and remodeling his parents home will most - ANS c Maple Lawn is an older neighborhood with two vacant lots. One is on the corner of 9th Street and Calhoun. The other is in the middle of the 1200 block of 12th Street. Recently a local developer purchased these two lots and constructed ranch-style dwellings similar to the existing homes in the neighborhood, on each lot. Was this an advisable move? a. No, the highest and best use is always the current use. Improving the properties will have upset the principle of balance. The cost of construction will not be recaptured in the market, so construction is not a good decision b. No, the properties should have been left unimproved. New construction will have upset the principle of balance in the market c. Yes, the highest and best use of the vacant lots would be to improve them while conforming to the residential zoning. The features and style should be consistent with the neighborhood properties d. Yes, the highest and bes - ANS c When a property owner volunteers information that could influence the appraisal, the appraiser should a. tell the owner that he cannot accept information that is not in print b. tell the owner the direction of value influence it will have and allow the owner to take back the information if he wishes c. tell the owner that he will consider the information, then ignore it as hearsay d. consider the information provided and give it the weight it deserves - ANS d A developer recently purchased land on speculation that a regional shopping center will be developed on the other side of the roadway. What real estate principle best illustrates the motivation of the developer? a. change b. competition c. highest and best use d. anticipation - ANS d Charles is reviewing Mike's appraisal. The homeowner feels his property is worth more than the value indicated on the report. Mike inspected the property May 9th and mailed the final report May 14th. Upon reviewing the market, Charles notes that two properties on the same street as the subject closed May 9th. These properties are similar to the subject property and sold for $15,000 more than Mike's estimated value. As a reviewer, Charles should consider that a. in his research of the market, Mike should have recorded these sales, as the effective date is May 14th b. current market trends will render a better opinion of value. He should review current comparables, not the outdated ones from this time period. c. these sales may not have been recorded on the 9th. There is usually a period of delay between when the property closes and when the sale of a property is recorded d. these sales should have been reported, as th - ANS c Highest and best use analysis of the property as improved is required in every appraisal situation a. true b. false - ANS b If the appraiser is unsure of the evidence, highest and best use can be concluded as an assumed outcome a. true b. false - ANS b An investor purchasing mortgage-backed securities believes their investment has relative safety because their dollars are spread out over large pools of mortgages. What could undermine that safety for the investor? a. a broad decline in real estate that impacts the entire market rather than a particular sector b. a decrease in interest rates causing more people to refinance c. a population shift that moves property owners from detached houses to condo units d. increasing rate of inflation over a period of 3 years or more - ANS a In the competition for real estate investment dollars, what is another way to break down the sources connected to the money market and the capital market? a. debt and equity b. present and future c. long term and short term d. dividends and interest - ANS a An investor's down payment is a form of a. debt investment b. protected investment c. deferred investment d. equity investment - ANS d Bonds, stocks, and mortgages are __________ instruments. a. equity b. real estate c. money market d. capital - ANS d What actually happens when a particular parcel of real estate appreciates in value? a. the value increase is due to excess demand over supply b. increasing interest rates and inflation create an appreciation of value c. the owner recaptures their cost of improvements to the property d. the market is in equilibrium - ANS a In the principle of substitution, markets require a. a reasonable alternate b. a replica c. a property in close proximity d. an exact duplicate - ANS a Which of the following best illustrates an example of a guaranteed residential mortgage a. Veterans Administration mortgage b. FHA mortgage c. balloon mortgage d. conventional-insured mortgage - ANS a A mortgage is a a. document that makes a borrower promise to repay money b. pledge of collateral for a real estate loan c. document that indicates the interest rate and terms of a loan d. pledge of collateral for a car loan - ANS b A VA loan is a guaranteed mortgage a. true b. false - ANS a When the U.S. Treasury borrows foreign funds to cover budget deficits, the money supply may decrease. In response, the Federal Reserve may increase the supply of money to keep the economy growing. What effect might these actions have on the real estate market? a. these actions have little or no impact on the real estate market b. deflation becomes more likely as interest rates go up c. interest rates may increase as well as the rate of inflation d. interest rates will generally go down and thus lower investment returns - ANS FIND THE RIGHT ANSWER The Federal Reserve System a. was established and is controlled by the national banks in the US b. was established by Congress but is now independent of it c. was established and is now controlled by Congress d. was established and is controlled by the President - ANS b All the following are tools used by the Federal Reserve Bank Board to influence the economy through monetary policy, EXCEPT a. setting property tax rates, thus determining the amount of revenue collected by the federal government b. setting reserve requirements for banks c. open market policy; the buying and selling of government bonds c. setting the federal funds rate, which is the rate changed by banks to borrow from each other - ANS a The interaction of buyers and sellers who trade short-term money instruments is referred to as a a. real estate market b. capital market c. money market d. financial market - ANS c The interaction of buyers and sellers who trade short-term money instruments is referred to as a a. treasury bills b. stocks c. CDs d. eurodollars - ANS b A bond is a form of debt investment a. true b. false - ANS a A land contract, also known as a conditional sales contract or an installment sales contract, is a. purchase agreement with many conditions on it b. a a purchase agreement with many conditions on it c. a sale of real property with the seller financing the sale and transferring the rights in realty d. a sales contract with a mortgage loan - ANS d A pledge of a described property interest as security for repayment of a loan is called a. balloon b. mortgage c. amortization d. a loan - ANS b Supply and demand is an important component of a. anticipation b. equilibrium c. change d. competition - ANS d Which principle states that the property with the lowest price attracts the greatest demand and widest distribution when several competing properties are available? a. competition b. contribution c. increasing and decreasing returns d. substitution - ANS d Four forces impact value. Employment levels, wage rates, and interest rates are examples of which force? a. economic b. environmental and geographic c. governmental and legal d. social - ANS a Which principle states that real estate value is created and sustained when the characteristics of a property correspond to the demand of its market? a. balance b. conformity c. externalities d. highest and best use - ANS b The elements that create wealth, income, or services when they are combined are known as a. agents of production b. forces that influence real estate value c. land and improvements d. surplus productivity - ANS a A temporary use of a property until a different use becomes maximally productive is a. conditional use b. excess use c. interim use d. nonconforming use - ANS c Zoning, public transportation, and sales taxes are examples of which of the four forces impacting value? a. economic b. environmental and geographic c. governmental and legal d. social - ANS c Avery is beginning a highest and best use analysis of a property with existing improvements. What is the first analytical step Avery should perform? a. an analysis of consistent use b. an analysis of interim use c. an analysis of the land as though vacant d. an analysis of whether the property has excess land - ANS c A small average residence is located in an area of luxury homes. The effect of the surrounding homes on the small residence is called a. conformity b. excess profits c. progression d. regression - ANS c In an office market that has more available space than tenants willing to rent, what principle will affect pricing the most? a. anticipation b. competition c. conformity d. contribution - ANS b Which theory states that land cannot be valued on the basis of one use while the improvements are valued on the basis of another use? a. consistent use b. interim use c. uniform use d. value in use - ANS a An owner continues to make improvements to a property to the point where the value is no longer enhanced. What subgroup principle of balance does this illustrate? a. contribution b. increasing and decreasing returns c. opportunity cost d. surplus productivity - ANS b Moderate profits attract healthy competition, but excess profits can lead to what? a. decrease in demand b. equilibrium c. increase in supply d. ruinous competition - ANS d Which of the following could not be considered an interim use? a. building in a warehouse district currently used as a religious facility b. manufacturing business operating at 75% of its normal production c. rural tract of land farmed while awaiting subdivision approval d. vacant downtown commercial land used for surface parking - ANS b Ellis built his residence on two lots in a manner that makes it impossible to subdivide the land. The land site situation that ellis has is an example of what? a. excess land b. opportunity cost c. surplus land d. surplus productivity - ANS c Which of the following is NOT a test of highest and best use? a. environmental viability b. legal permissibility c. maximum productivity d. physical possibility - ANS a 8,000 is 8% of what number? a. 10,000 b. 100,000 c. 80,000 d. 20,000 - ANS b Scott and Linda have decided to sell their home. They purchased the property 12 years ago for $250,000. Sales commission and other closing cost will be 15% of the sales price. To break even, how much would the home's value have needed to appreciate? a. $66,667 b. $37,500 c. $44,118 d. $25,000 - ANS c Two years ago Alex had a property tax bill of $2,250. The next year it increased by 8% and the year after that he received another 9% increase. What is the current property tax considering the increases over the last several years? a. $2,441 b. $2,649 c. $2,632 d. $2,430 - ANS b Radiant Glass has a newly constructed warehouse and asked the municipal tax assessor what the property taxes might be when they become payable on the full value next year. The owner provided the assessor with an estimate of their cost to acquire the land and build the warehouse. The assessor calculated the estimated tax to be $11,500 based on an effective tax rate of 2.3 percent of the total value. Based on this information, what value did the owner provide to the assessor? a. $50,000 b. $264,500 c. $1,414,500 d. $500,000 - ANS d Plum Creek Subdivision has average sales prices of $300,000 in phase I, $315,500 in phase II, and $329,000 in phase III. What is the approximate average sales price for the subdivision? a. $314,833 b. $315,500 c. $157,333 d. $300,000 - ANS a A buyer received an 8% concession on the purchase of a parcel of land. If the discounted price was $275,000 what was the price before the concession? a. $297,005 b. $298,913 c. $298,900 d. $297,000 - ANS b A buyer received a 10% concession on the purchase of a parcel of land. If the discounted price was $142,500, what was the price before the concession? a. $128,250 b. $158,333 c. $142,500 d. $156,750 - ANS b Whitney and Colleen purchased their property three years ago for $289,000. They are now planning to sell and were disappointed to learn from their real estate agent that they can expect an offer of about $219,000 due to an extended economic downturn that began two years ago. What is the percentage loss in value to the property owners since their purchase? a. 32% b. 28% c. 24% d. 22% - ANS c A developer purchased a property for $200,000. He spent $50,000 on the renovation. He sold the property for $370,000. What is the percentage of profit? a. 48% b. 22% c. 40% d. 35% - ANS a A two-story dwelling sold for 8% less than its list price. If its sales price was $220,000, what was the listing price? a. $275,000 b. $115,789 c. $239,130 d. $176,000 - ANS c A purchaser applied for an 80% mortgage, and the seller agreed to pay 2 points on the mortgage. If the seller paid $3,500 in points, what was the selling price of the property? a. $218,750 b. $187,500 c. $175,000 d. $210,000 - ANS a What type of rate is used in the calculation of ad valorem taxes of real property? a. mill rate b. period rate c. capitalization rate d. nominal rate - ANS a A purchaser applied for an 80% mortgage, and the seller agreed to pay 4 points on the mortgage. If the seller paid $4,000 in point, what was the selling price of the property? a. $238,000 b. $125,000 c. $114,286 d. $140,000 - ANS b If the real estate taxes for a property are $3,500 and the tax rate is 1.25%, what is the assessed value of the property? a. $2,800 b. $280 c. $280,000 d. $2,800,000 - ANS c Thompson paid an annual property tax this year of $4,000. If the mill rate is 35 and the assessed ratio is 70% of market value, what market value did the assessor assign to the Thompson property? a. $157,500 b. $163,265 c. none of these answers d. $262,500 - ANS b A truth-in-housing inspection uncovered an issue with a home's electrical system. The buyer negotiated a 15% concession on the purchase of the home. If the discounted price was $142,800, what was the price before the concession? a. $164,220 b. $21,420 c. $144,942 d. $168,000 - ANS d Thompson paid an annual property tax this year of $2,940. If the mill rate is 28 and the assessed ratio is 60 percent of market value, what market value did the assessor assign to the Thompson property? a. $262,500 b. $175,000 c. none of these answers d. $157,500 - ANS b A homeowner with a 24' X 40' home adds an addition with dimensions of 12' X 20', what is the percentage increase in the home's area? a. 20% b. 2% c. 25% d. 2.50% - ANS c A three-story building contains 3,000 square feet on the first floor, 2,000 square feet on the second floor, and 1,500 square feet on the third floor. The building is located on a 26,000 square foot site. What is the floor area ratio? a. 0.300 b. 0.250 c. 0.115 d. 0.192 - ANS b You are asked to appraise a single-story dome home with a radius of 31.5 feet. What is the area of the home? a, 9,891 sq ft b. 3,082 sq ft c. 99 sq ft d. 3,116 sq ft - ANS d Thompson paid an annual property tax this year of $2,940. If the mill rate is 28, and the assessed ratio is 60 percent of market value, what market value did the assessor assign to the Thompson property? a. $157,500 b. $175,000 c. $262,500 d. none of the above - ANS b Which of the following is NOT a money market instrument? a. certificates of deposit b. eurodollars c. stocks d. treasury bills - ANS c Fannie Mae, Freddie Mac, and Ginnie Mae participate in a market known as the a. equity market b. money market c. primary market d. secondary market - ANS d Walton purchased a property six months ago for $200,000. Properties have been appreciating at a rate of 10% per year. What is Walton's property likely to be w