Principles of Real Estate 2 Champions
Practice Questions And verified Answers
What does D.U.S.T. stand for? - Demand, Utility, Scarcity, Transferability
the percentage of value or sales price that a lender is willing to finance -
Loan to Value Ratio (LTV)
the value of a property is equal to the sum of the contributory value of each
of its component parts. - principle of contribution
the forces acting on a parcel of land are always affecting the value of the
land - PRINCIPLE OF CHANGE
the legal use that gives the greatest return in money and/or amenities. -
HIGHEST AND BEST USE
the purchase price is affected by the expectation of future appeal and
benefits. - PRINCIPLE OF ANTICIPATION
value is maximized when there is a reasonable degree of homogeneity, or
sameness, in a neighborhood. - principle of conformity
the value of a commodity is influenced by the cost of acquiring a substitute
or comparable item. - principle of substitution
appraisal - someones opinion of value.
The actual age of the property in years. - Chronological Age
The appraiser's estimate of the age of the house based upon its ongoing
maintenance and upgrades. - Effective Age
TYPES OF APPRAISAL REVIEWS - 1. Desk Review
2. Field Review
,to improve property when the value added by the improvement exceeds
cost of the improvement. - PRINCIPLE OF INCREASING AND
DECREASING RETURNS
demand for real estate is great and the supply is short, prices in the
marketplace go up. - PRINCIPLE OF SUPPLY AND DEMAND
The presence of lower-priced properties in the area will cause a decline in
the value of the subject property - PRINCIPLE OF REGRESSION
The absence of competition will cause prices to increase in the
marketplace - PRINCIPLE OF COMPETITION
Acronym for Characteristics of Value - D.U.S.T.
The price a willing seller will sell for and the price a willing buyer will pay. -
Market value
Most common misunderstood appraisal concept? - Market Value
Does price equal value? - No, many factors go into determining the market
value of a property.
Ad valorem - according to value
What are taxes based on? - Assessed Value
Appraiser must follow what? - Uniform Standards of Professional Appraisal
Practice (USPAP).
URAR is commonly referred as - 1004
Uniform Residential Appraisal Report (URAR) is known as - Fannie Mae
1004 or Freddie Mac form 70
Standards that have been established by the Appraisal Standards Board of
the Appraisal Foundation - USPAP
Value - Does not always equal price
,If a type of property in a market area is too abundant, it has reduced value -
Scarcity
Many lenders, especially when dealing with high-LTV loans, will order this
type of appraisal - Field Review
3 approaches to value are - 1. Sales Comparison Approach
2. Cost Approach
3. Income Approach
appraiser focuses on recent sales in determining the value of the subject -
SALES COMPARISON APPROACH
How many comparison sales will and appraiser gather? - Minimum of 3.
some lenders require 4
The degree to which a comparable is adjusted in 2 ways - 1. Net
adjustment
2. gross adjustment
the absolute adjustments made to the comparable, considering those that
are positive and negative - Net Adjustments -
the sum of all adjustments, whether or not they are positive or negative -
Gross Adjustments
the market value of the property considers how much a new structure of
this size and type would currently cost to build. - COST APPROACH
loss in desirability of the style, layout, or function of an element of a
property over time. - Functional obsolescence
to the loss in value of a property caused by factors outside of the property
itself - External obsolescence
Process of estimating the value of an income-producing property by
capitalization of the annual net income. - INCOME APPROACH
Gross Rent Multiplier formula - GRM = Sales Price ÷ Monthly Rent
, Value = Income ÷ Return - Income Capitalization Formula
What is the final step in the appraisal process? - Reconciliation
What is the percentage of value or sales price that a lender is willing to
finance? - loan-to-value ratio (LTV)
How many hours of education required for Appraiser Trainee? - 75 hours
How many appraiser trainee's can one person sponsor at one time? - No
more than 3
How many Continuing Ed hours are need to renew Appraisar Trainee? - 28
hours, 7 hours must be USPAP
How many education hours to be considered a Licensed Appraiser? - 150
hours
How many hours does a Licensed Appraiser must have that are acceptable
and verified? - 2,000 hours over 12 months
How many hours does a Certified residential Appraiser must have that are
acceptable and verified? - 2,500 hours over 24 months
How many education hours to be considered a Certified Residential
Appraiser? - 200 hours
How many hours does a Certified General Appraiser must have that are
acceptable and verified? - 3,000 hours over 20 months.
Minimum of 1,500 hours must be non-residential real property
How many education hours to be considered a Certified General
Appraiser? - 300 hours
The appraised value of a property is:
a. The sale price
b. An opinion of value
c. A market analysis
d. The market value of a property - b. An opinion of value
Practice Questions And verified Answers
What does D.U.S.T. stand for? - Demand, Utility, Scarcity, Transferability
the percentage of value or sales price that a lender is willing to finance -
Loan to Value Ratio (LTV)
the value of a property is equal to the sum of the contributory value of each
of its component parts. - principle of contribution
the forces acting on a parcel of land are always affecting the value of the
land - PRINCIPLE OF CHANGE
the legal use that gives the greatest return in money and/or amenities. -
HIGHEST AND BEST USE
the purchase price is affected by the expectation of future appeal and
benefits. - PRINCIPLE OF ANTICIPATION
value is maximized when there is a reasonable degree of homogeneity, or
sameness, in a neighborhood. - principle of conformity
the value of a commodity is influenced by the cost of acquiring a substitute
or comparable item. - principle of substitution
appraisal - someones opinion of value.
The actual age of the property in years. - Chronological Age
The appraiser's estimate of the age of the house based upon its ongoing
maintenance and upgrades. - Effective Age
TYPES OF APPRAISAL REVIEWS - 1. Desk Review
2. Field Review
,to improve property when the value added by the improvement exceeds
cost of the improvement. - PRINCIPLE OF INCREASING AND
DECREASING RETURNS
demand for real estate is great and the supply is short, prices in the
marketplace go up. - PRINCIPLE OF SUPPLY AND DEMAND
The presence of lower-priced properties in the area will cause a decline in
the value of the subject property - PRINCIPLE OF REGRESSION
The absence of competition will cause prices to increase in the
marketplace - PRINCIPLE OF COMPETITION
Acronym for Characteristics of Value - D.U.S.T.
The price a willing seller will sell for and the price a willing buyer will pay. -
Market value
Most common misunderstood appraisal concept? - Market Value
Does price equal value? - No, many factors go into determining the market
value of a property.
Ad valorem - according to value
What are taxes based on? - Assessed Value
Appraiser must follow what? - Uniform Standards of Professional Appraisal
Practice (USPAP).
URAR is commonly referred as - 1004
Uniform Residential Appraisal Report (URAR) is known as - Fannie Mae
1004 or Freddie Mac form 70
Standards that have been established by the Appraisal Standards Board of
the Appraisal Foundation - USPAP
Value - Does not always equal price
,If a type of property in a market area is too abundant, it has reduced value -
Scarcity
Many lenders, especially when dealing with high-LTV loans, will order this
type of appraisal - Field Review
3 approaches to value are - 1. Sales Comparison Approach
2. Cost Approach
3. Income Approach
appraiser focuses on recent sales in determining the value of the subject -
SALES COMPARISON APPROACH
How many comparison sales will and appraiser gather? - Minimum of 3.
some lenders require 4
The degree to which a comparable is adjusted in 2 ways - 1. Net
adjustment
2. gross adjustment
the absolute adjustments made to the comparable, considering those that
are positive and negative - Net Adjustments -
the sum of all adjustments, whether or not they are positive or negative -
Gross Adjustments
the market value of the property considers how much a new structure of
this size and type would currently cost to build. - COST APPROACH
loss in desirability of the style, layout, or function of an element of a
property over time. - Functional obsolescence
to the loss in value of a property caused by factors outside of the property
itself - External obsolescence
Process of estimating the value of an income-producing property by
capitalization of the annual net income. - INCOME APPROACH
Gross Rent Multiplier formula - GRM = Sales Price ÷ Monthly Rent
, Value = Income ÷ Return - Income Capitalization Formula
What is the final step in the appraisal process? - Reconciliation
What is the percentage of value or sales price that a lender is willing to
finance? - loan-to-value ratio (LTV)
How many hours of education required for Appraiser Trainee? - 75 hours
How many appraiser trainee's can one person sponsor at one time? - No
more than 3
How many Continuing Ed hours are need to renew Appraisar Trainee? - 28
hours, 7 hours must be USPAP
How many education hours to be considered a Licensed Appraiser? - 150
hours
How many hours does a Licensed Appraiser must have that are acceptable
and verified? - 2,000 hours over 12 months
How many hours does a Certified residential Appraiser must have that are
acceptable and verified? - 2,500 hours over 24 months
How many education hours to be considered a Certified Residential
Appraiser? - 200 hours
How many hours does a Certified General Appraiser must have that are
acceptable and verified? - 3,000 hours over 20 months.
Minimum of 1,500 hours must be non-residential real property
How many education hours to be considered a Certified General
Appraiser? - 300 hours
The appraised value of a property is:
a. The sale price
b. An opinion of value
c. A market analysis
d. The market value of a property - b. An opinion of value
