IAAO 102 MAIN EXAMS ANSWERS AND QUESTIONS
SET A+
✔✔Deficit rent - ✔✔When market rent exceeds contract rent the difference is ____.
✔✔Recapture - ✔✔In straight-line capitalization, _____ is received in equal amounts
during the economic life of the improvement.
✔✔Convert income into an estimate of value - ✔✔Capitalization is the process used to:
✔✔Fixed-rate mortgage - ✔✔A loan secured by real property featuring an interest rate
that is constant for the term of the loan is referred to as a(n):
✔✔Anticipation - ✔✔The underlying principle providing the basis of the income
capitalization approach is:
✔✔Income / rate = value - ✔✔The basic equation used in the income approach to value
is:
✔✔Deficit rent - ✔✔When market rent exceeds contract rent the difference is known as:
✔✔Market rent - ✔✔The rental income that a property would most probably command
in the open market is called:
✔✔Effective gross income - ✔✔The anticipated income from all operations of the
property adjusted for vacancy and collection losses, and miscellaneous income is
called:
✔✔Effective rent - ✔✔The lease base rent less rent concessions is called:
✔✔Effective tax rate - ✔✔the rate that is the percentage that annual real estate taxes
are in relation to the property's total value is:
, ✔✔Net income ratio - ✔✔The ratio of net operating income to effective gross income is
called:
✔✔Annually - ✔✔The mortgage capitalization rate (Rm) is the ratio between the
payments of principle and interest on a mortgage to the original amount borrowed and is
expressed:
✔✔Lease - ✔✔A written document in which the rights to use and occupy land or
structures are transferred by the owner to another for a specified period of time in return
for a specified rent is:
✔✔ Income - ✔✔One of three approaches to value in which the appraiser derives a
value indication by converting anticipated benefits through ownership of income-
producing property is the ______ approach.
✔✔Anticipation - ✔✔The economic principle of ______ states that value is created by
the expectation of benefits to be derived in the future.
✔✔Substitution - ✔✔The economic principle of _____ states that a property's maximum
value tends to be set by the lowest cost or price at which another property of equivalent
utility can be acquired.
✔✔Oversupply; shortage - ✔✔Competition is created by the potential for profits.
However, competition among sellers may lead to a/an
_______, which reduces prices and profits. Competition among buyers may lead to
________, which increases prices and profits to sellers
✔✔Recapture - ✔✔The _____ rate reflects the return of the investment in the wasting
asset.
✔✔Safety, liquidity, and size of investment, use as collateral, time, management,
appreciation, income tax advantages, and leverage - ✔✔Nine factors influencing
investor decisions
✔✔Positive - ✔✔____ leverage is achieved when funds are invested in property, which
has a higher rate of return than the cost of borrowed funds.
✔✔Mortgage, trust deed, cash, land contract (contract for deed) - ✔✔The 4 most
common methods of financing real estate
✔✔Chattel - ✔✔A mortgage on personal property is termed a ______ mortgage.
✔✔junior - ✔✔A _____ mortgage is also called a second mortgage.
SET A+
✔✔Deficit rent - ✔✔When market rent exceeds contract rent the difference is ____.
✔✔Recapture - ✔✔In straight-line capitalization, _____ is received in equal amounts
during the economic life of the improvement.
✔✔Convert income into an estimate of value - ✔✔Capitalization is the process used to:
✔✔Fixed-rate mortgage - ✔✔A loan secured by real property featuring an interest rate
that is constant for the term of the loan is referred to as a(n):
✔✔Anticipation - ✔✔The underlying principle providing the basis of the income
capitalization approach is:
✔✔Income / rate = value - ✔✔The basic equation used in the income approach to value
is:
✔✔Deficit rent - ✔✔When market rent exceeds contract rent the difference is known as:
✔✔Market rent - ✔✔The rental income that a property would most probably command
in the open market is called:
✔✔Effective gross income - ✔✔The anticipated income from all operations of the
property adjusted for vacancy and collection losses, and miscellaneous income is
called:
✔✔Effective rent - ✔✔The lease base rent less rent concessions is called:
✔✔Effective tax rate - ✔✔the rate that is the percentage that annual real estate taxes
are in relation to the property's total value is:
, ✔✔Net income ratio - ✔✔The ratio of net operating income to effective gross income is
called:
✔✔Annually - ✔✔The mortgage capitalization rate (Rm) is the ratio between the
payments of principle and interest on a mortgage to the original amount borrowed and is
expressed:
✔✔Lease - ✔✔A written document in which the rights to use and occupy land or
structures are transferred by the owner to another for a specified period of time in return
for a specified rent is:
✔✔ Income - ✔✔One of three approaches to value in which the appraiser derives a
value indication by converting anticipated benefits through ownership of income-
producing property is the ______ approach.
✔✔Anticipation - ✔✔The economic principle of ______ states that value is created by
the expectation of benefits to be derived in the future.
✔✔Substitution - ✔✔The economic principle of _____ states that a property's maximum
value tends to be set by the lowest cost or price at which another property of equivalent
utility can be acquired.
✔✔Oversupply; shortage - ✔✔Competition is created by the potential for profits.
However, competition among sellers may lead to a/an
_______, which reduces prices and profits. Competition among buyers may lead to
________, which increases prices and profits to sellers
✔✔Recapture - ✔✔The _____ rate reflects the return of the investment in the wasting
asset.
✔✔Safety, liquidity, and size of investment, use as collateral, time, management,
appreciation, income tax advantages, and leverage - ✔✔Nine factors influencing
investor decisions
✔✔Positive - ✔✔____ leverage is achieved when funds are invested in property, which
has a higher rate of return than the cost of borrowed funds.
✔✔Mortgage, trust deed, cash, land contract (contract for deed) - ✔✔The 4 most
common methods of financing real estate
✔✔Chattel - ✔✔A mortgage on personal property is termed a ______ mortgage.
✔✔junior - ✔✔A _____ mortgage is also called a second mortgage.
