IAAO 101 2023Course Exam Review with Complete Solutions

Tax Rate (def.) - ANSWER-Percent of assessed value at which each property is taxed in a given district. Tax Rate (formula) - ANSWER-Tax revenue (amount) / Assessed value Property Tax (formula) - ANSWER-Subject assessed value / Tax rate Budget Revenue (formula) - ANSWER-Total budget - Other taxes Effective Tax Rate (def.) - ANSWER-Reflects the relationship between total property taxes on real property and the property's market value. Effective Tax Rate (formula) - ANSWER-Assessment ratio (level) X Tax rate Jurisdictions tax rate is derived by (formula) - ANSWER-Budget revenue (budget -other taxes) / Assessed value Assessment Ratio (def.) - ANSWER-Estimated fractional relationship between the assessed values and market values of a group of properties. Assessment Ratio (formula) - ANSWER-Assessed value / Market value Neighborhood Life Cycle - ANSWER-Growth, Stability, Decline & Revitalization Principle of Conformity - ANSWER-Value of a property depends on its relationship to its surroundings; maximum market value is achieved when reasonable similarity among improvements in the neighborhood. Principle of Competition - ANSWER-Created by the potential for profits; availability must be in harmony with demand; if one or the other is in excess prices will decrease or increase. Principle of Balance - ANSWER-Applied to an individual property; maximum value is obtained when the four agents of production are balanced - land, labor, capital and management. Principle of Change - ANSWER-Market value is never constant; estimate of market value is only valid as of a specific date & changes in the market will impact future value estimates. Principle of Anticipation - ANSWER-Value created by the expected future benefits from the property; related to the Principle of Change. Principle of Consistent Use - ANSWER-Property must be valued with a single use for the entire property; land cannot be valued with one use and improvements with another. Principle of Contribution - ANSWER-Value of component depends on its contribution to the whole; basis for adjustments in the sales comparison approach. Principle of Supply - ANSWER-Amount of product producers are willing to sell under various conditions during a given period. Principle of Demand - ANSWER-Amount of product producers are willing and able to buy during a given period; given the choices available. Principle of Increasing & Decreasing Returns - ANSWER-Addition of successive increments of one agent of production will decrease future incomes or amenities; or additions of successive increments of one agent of productions added, future income or amenities will increase to a point. Principle of Progression - ANSWER-Association with better properties of the same type increase value of a lower priced property. Principle of Regression - ANSWER-Association with lower quality properties of the same area decrease the value of a better quality property. Principle of Substitution - ANSWER-Market value of a property set by cost of acquiring an equally desirable and valuable property; underlies the 3 approaches to appraisal (value). Principle of Surplus Productivitiy - ANSWER-Net income remaining after the costs of labor, management and capital have been satisfied; income earned by land; increase income = increase value. Types of Neighborhood Boundaries - ANSWER-Natural, Political and Man-made Basic steps in definition of the appraisal problem are... - ANSWER-1) Identify the property 2) Determine property rights conveyed 3) Purpose or function of the appraisal 4) Date of appraisal (date of value) 5) Definition of value Property Rights Conveyed (bundle of rights) - ANSWER-SLUGER 1) right to Sell 2) right to Lease or rent 3) right to Use 4) right to Give away 5) right to Enter or leave 6) right to Refuse to do anything Governmental Restrictions - ANSWER-PETE 1) Police power 2) Eminent domain 3) Taxation 4) Escheate Estates in Property (types) - ANSWER-1) Fee simple 2) Leasehold interest 3) Leased fee interest 4) Possessory interest 5) Life estate Fee Simple - ANSWER-Ownership of all rights to the property except governmental restrictions. Leasehold Interest - ANSWER-Tenant rights Lease Fee Interest - ANSWER-Landlord rights Possessory Interest - ANSWER-Rights of possession and use of property Life Estate - ANSWER-Ownership limited to the life of the owner Value in Use - ANSWER-Represents the value of a property to a specific user or for a specific use. Ethics provision of the Intro to USPAP consists of the following... - ANSWER-Conduct, Management, Confidentiality, Record Keeping For all property, the assessor is responsible for.... - ANSWER-1) Discovery of all property 2) Listing all property 3) Valuation of all property Elements in the marketplace that contribute to the change in demand - ANSWER-1) Consumer tastes & preferences 2) Consumer income 3) Price of related commodities 4) Consumer expectations 5) Price of the commodity Elements in the marketplace that contribute to the change in Supply - ANSWER-1) Cost of production 2) Price of other goods 3) Entrepreneur's expectations 4) Number of sellers Under the steps in the appraisal process that is termed Data Collection and analysis, specific data includes.... - ANSWER-1) Site data 2) Off site data 3) Improvment Under the steps in the appraisal process that is termed Data Collection and analysis, general data includes... - ANSWER-1) Physical (environmental) 2) Economic 3) Governmental 4) Social Under the steps in the appraisal process that is termed Data Collection and analysis, comparative data includes... - ANSWER-1) Cost 2) Sales 3) Income & expense Steps in the appraisal process are - ANSWER-1) Definition of the problem 2) Preliminary survey and analysis 3) Data collection and analysis ( general, specific & comparative) 4) Highest and best use 5) Application of data (cost, sales & income) 6) Correlation / reconciliation of value Cadastral Maps - ANSWER-Shows the boundaries of parcels of land and display size and location of each parcel relative to other properties & other physical features; drawn to scale shows dimensions or areas and parcel ID Metes and Bounds - ANSWER-Based on semi-permanent physical features or bearings on a compass. Abstraction (def.) - ANSWER-Subtract the depreciated cost of improvements from the sale price of an improved property; remainder = land value. Abstraction (formula) - ANSWER-Sale price - Depreciated improved value = land value Allocation (def.) - ANSWER-Determine ratio of land value to building value in similar neighborhoods that have vacant land sales. Plottage - ANSWER-Combining 2 or more parcels creating a site that has greater utility and increased value. Assemblage - ANSWER-Combining 2 or more parcels into one common ownership; unit value does NOT increase. 4, 3, 2, 1 Rule - ANSWER-Based on the observation that the front section of a lot is more valuable on a unit basis than the rear portion. Factors affecting land values are... - ANSWER-1) Physical (environmental) 2) Economic 3) Governmental Methods of Land Valuation - ANSWER-1) Direct sales comparison 2) Allocation 3) Abstraction 4) Anticipated use or development 5) Capitalization of ground rent 6) Land residual technique A township in the rectangular survey system contains ______ sections. - ANSWER-36 Each section contains ___________ acres. - ANSWER-640 When valuing land using the direct sales comparison approach, sales must first be ____________ into homogeneous groups. - ANSWER-Stratified Examples of basic units of comparison are - ANSWER-Front foot, square foot and acre In order for a property to have value, it must have - ANSWER-Utility, scarcity and desirablilty The four tests for highest and best use are - ANSWER-1) Physically possible 2) Legally permissible 3) Financially feasible 4) Most productive Equilibrium - ANSWER-The point where the forces of supply and demand meet. Types of private encumbrances that can be placed on ownership of real property are - ANSWER-1) Rights of co-owners 2) Condo and subdivision restrictions 3) Covenants, conditions and restrictions found in the chain of title to the property. 4) Mortgages 5) Easements and rights of way 6) Liens and judgments 7) Leases