Certified Residential Appraiser Exam
Questions and Correct Answers
Question 1
A house has a cost new of $216,234. It is 20 years old and has an estimated remaining
economic life of 40 years. The cost to cure deferred maintenance items is $3,750.
Short-lived items have been identified; the cost of these items is $26,875, and the
short-lived depreciation is $8,330. What is the total physical depreciation attributable
to the improvements?
Correct Answer
$73,943
The deferred maintenance is $3,750 and the depreciation attributable to short-lived
improvements is $8,330. The missing element is the depreciation attributable to the
long-lived items. The cost new ($216,234) minus the deferred maintenance items
($3,750) less the cost of short-lived items ($26,875) equals the cost of long-lived
items. $216,234 - $3,750 - $26,875 = $185,609. The cost of the long-lived items is
then depreciated based on the age (20 years) and total economic life (60 years).
20/60 = 33.33%. $185,609 x .3333 = $61,863 depreciation attributable to the long-
lived items. Total physical depreciation is $3,750 + $8,330 + $61,863 = $73,943.
- get it down to the long lived items because that is what's missing. excluding the
short lived depreciation right now. just add up the deferred maintenance and short
lived improvements. then divide the actual age by TOTAL (not remaining) economic
life. apply the percentage you get to the total long lived items (difference in all
short lived duh). then add it all together (short lived plus long lived that you just
found).
Page 1 of 47
,Question 2
The subject property is a five-year-old house that contains 5,200 sq. ft. of livable area,
located on 1.8 acres, with a two-car garage with 650 sq. ft., and a granite swimming
pool that measures 85 perimeter feet. The costs are estimated to be as follows:
House, $85 per sq. ft.; garage, $25 per sq. ft.; indicated land value is $0.35 per sq. ft.;
and the swimming pool is estimated to cost $275 per perimeter foot. The cost
multiplier for the area is 0.9678. The chronological age is 5 years, and the effective
age is 2 years. The remaining economic life is 63 years. If the total cost of
improvements is $466,117, what is the indicated value via the cost approach?
Correct Answer
$479,576
The effective age is 2 years and the remaining economic life is 63 years for a total
life of 65 years. The total cost new of the improvements equals $466,117.
Depreciation is 3%, calculated as ( = 3%). Multiplying cost new of $466,117 x
3% (0.03) = $13,984 which is total depreciation. $466,117 - $13,984 = $452,133
depreciated cost of improvements. $452,133 + $27,443 (land value) = $479,576.
Question 3
Gus is appraising a house with a total gross living area of 2,217 square feet. Most of
the house has carpet floor covering at 1,596 square feet and the tiled floor area
measures 621 square feet. If the replacement cost for carpet is $21.17 per square yard
and the cost for tile is $8 per square feet, how much would it cost to replace the floor
cover in the house?
Correct Answer
$8,722
For the carpet floor, there are 9 feet in a square yard. Therefore, 1596 divided by 9 =
177.3 square yards necessary to replace the carpet. At $21.17 per square yard, the
cost to replace the carpet is $3,754.15 ($21.17 x 177.3). For the tile floor, the cost is
$4,968.00 ($8.00 x 621). The total cost is the sum to replace the carpet and the tile
floor: $3,754.15 + $4,968 = $8,722.15.
Page 2 of 47
,Question 4
George is analyzing the equity position of an investment property. His client has
asked him to render an opinion regarding the effects of financing on the investment.
A financial analysis has shown that, without a mortgage, the return to the equity
would be 13%. With a mortgage proposed by a local lender, the return to the equity
would be 12%. George will probably recommend against obtaining this loan because
the client would experience
Correct Answer
negative leverage
If the return to the equity declines because of the effects of a loan, the leveraging is
said to be negative. If the return to the equity increases, the leveraging is said to be
positive.
Question 5
What was the original purchase price of a property if the buyer took out an 80% loan-
to-value loan with monthly payments of $1,000, an interest rate of 9%, and the loan
amortized over 30 years?
$180,000
$155,352
$103,568
$124,282
Correct Answer
$155,352
Using the HP12c, enter 1,000 [CHS] [PMT], 9 [g] [i], 30 [g] [n] and solve for [PV],
which is 124.281.87. This, however, is the loan amount, which is only 80% of the
purchase price, so 124,281.87 divided by 0.8 equals $155,352.
- since it had monthly payments, needed to use the g key
Page 3 of 47
, Question 6
A single-family house is 10 years old, and it would cost $540,000 to build new. The
appraiser's research indicates the current contributory value of the house is $450,000.
What is the total economic life of this house?
Correct Answer
60 years
Total depreciation is $90,000 ($540,000 - $450,000), which is 16.67% ($90,000 /
$540,000). The house is 10 years old, so the annual percentage of depreciation is
1.67% (16.67% / 10). If the house loses 1.67% of its value each year, it would take
59.88 years (60 years) to lose 100% of its value (.67). The total economic life
is 60 years.
Question 7
four stages of a neighborhood
Correct Answer
growth, stability, decline, revitilization
Question 8
calculation when asked find how much a property is increasing per year
Correct Answer
sales price divided by 1.percentage.
- sales price is increasing 20% per year, do salesprice times 1.20
Page 4 of 47
Questions and Correct Answers
Question 1
A house has a cost new of $216,234. It is 20 years old and has an estimated remaining
economic life of 40 years. The cost to cure deferred maintenance items is $3,750.
Short-lived items have been identified; the cost of these items is $26,875, and the
short-lived depreciation is $8,330. What is the total physical depreciation attributable
to the improvements?
Correct Answer
$73,943
The deferred maintenance is $3,750 and the depreciation attributable to short-lived
improvements is $8,330. The missing element is the depreciation attributable to the
long-lived items. The cost new ($216,234) minus the deferred maintenance items
($3,750) less the cost of short-lived items ($26,875) equals the cost of long-lived
items. $216,234 - $3,750 - $26,875 = $185,609. The cost of the long-lived items is
then depreciated based on the age (20 years) and total economic life (60 years).
20/60 = 33.33%. $185,609 x .3333 = $61,863 depreciation attributable to the long-
lived items. Total physical depreciation is $3,750 + $8,330 + $61,863 = $73,943.
- get it down to the long lived items because that is what's missing. excluding the
short lived depreciation right now. just add up the deferred maintenance and short
lived improvements. then divide the actual age by TOTAL (not remaining) economic
life. apply the percentage you get to the total long lived items (difference in all
short lived duh). then add it all together (short lived plus long lived that you just
found).
Page 1 of 47
,Question 2
The subject property is a five-year-old house that contains 5,200 sq. ft. of livable area,
located on 1.8 acres, with a two-car garage with 650 sq. ft., and a granite swimming
pool that measures 85 perimeter feet. The costs are estimated to be as follows:
House, $85 per sq. ft.; garage, $25 per sq. ft.; indicated land value is $0.35 per sq. ft.;
and the swimming pool is estimated to cost $275 per perimeter foot. The cost
multiplier for the area is 0.9678. The chronological age is 5 years, and the effective
age is 2 years. The remaining economic life is 63 years. If the total cost of
improvements is $466,117, what is the indicated value via the cost approach?
Correct Answer
$479,576
The effective age is 2 years and the remaining economic life is 63 years for a total
life of 65 years. The total cost new of the improvements equals $466,117.
Depreciation is 3%, calculated as ( = 3%). Multiplying cost new of $466,117 x
3% (0.03) = $13,984 which is total depreciation. $466,117 - $13,984 = $452,133
depreciated cost of improvements. $452,133 + $27,443 (land value) = $479,576.
Question 3
Gus is appraising a house with a total gross living area of 2,217 square feet. Most of
the house has carpet floor covering at 1,596 square feet and the tiled floor area
measures 621 square feet. If the replacement cost for carpet is $21.17 per square yard
and the cost for tile is $8 per square feet, how much would it cost to replace the floor
cover in the house?
Correct Answer
$8,722
For the carpet floor, there are 9 feet in a square yard. Therefore, 1596 divided by 9 =
177.3 square yards necessary to replace the carpet. At $21.17 per square yard, the
cost to replace the carpet is $3,754.15 ($21.17 x 177.3). For the tile floor, the cost is
$4,968.00 ($8.00 x 621). The total cost is the sum to replace the carpet and the tile
floor: $3,754.15 + $4,968 = $8,722.15.
Page 2 of 47
,Question 4
George is analyzing the equity position of an investment property. His client has
asked him to render an opinion regarding the effects of financing on the investment.
A financial analysis has shown that, without a mortgage, the return to the equity
would be 13%. With a mortgage proposed by a local lender, the return to the equity
would be 12%. George will probably recommend against obtaining this loan because
the client would experience
Correct Answer
negative leverage
If the return to the equity declines because of the effects of a loan, the leveraging is
said to be negative. If the return to the equity increases, the leveraging is said to be
positive.
Question 5
What was the original purchase price of a property if the buyer took out an 80% loan-
to-value loan with monthly payments of $1,000, an interest rate of 9%, and the loan
amortized over 30 years?
$180,000
$155,352
$103,568
$124,282
Correct Answer
$155,352
Using the HP12c, enter 1,000 [CHS] [PMT], 9 [g] [i], 30 [g] [n] and solve for [PV],
which is 124.281.87. This, however, is the loan amount, which is only 80% of the
purchase price, so 124,281.87 divided by 0.8 equals $155,352.
- since it had monthly payments, needed to use the g key
Page 3 of 47
, Question 6
A single-family house is 10 years old, and it would cost $540,000 to build new. The
appraiser's research indicates the current contributory value of the house is $450,000.
What is the total economic life of this house?
Correct Answer
60 years
Total depreciation is $90,000 ($540,000 - $450,000), which is 16.67% ($90,000 /
$540,000). The house is 10 years old, so the annual percentage of depreciation is
1.67% (16.67% / 10). If the house loses 1.67% of its value each year, it would take
59.88 years (60 years) to lose 100% of its value (.67). The total economic life
is 60 years.
Question 7
four stages of a neighborhood
Correct Answer
growth, stability, decline, revitilization
Question 8
calculation when asked find how much a property is increasing per year
Correct Answer
sales price divided by 1.percentage.
- sales price is increasing 20% per year, do salesprice times 1.20
Page 4 of 47
