Basic Appraisal Procedures

Basic Appraisal Procedures First four steps of the valuation process: - ANS 1) Identification of the Problem 2) Scope of work Determination 3) Data Collection and Property Description 4) Data Analysis Second four steps of the valuation process: - ANS 5) Land Value Opinion 6) Application of the Approaches to Value 7) Reconciliation of Value Indications and Final Opinion of Value 8) Report Defined Value Valuation Process definition: - ANS a systematic set of procedures an appraiser follows to provide answers to a client's questions about real property value The valuation process is the ______________ used in forming an opinion of market value, as well as other types of value - ANS Blueprint The valuation process provides a __________________ for both appraisers and users of appraisal services -- and covers the requirements of an appraisal that complies with professional appraisal standards - ANS Checklist the valuation process Is ideally suited for ______________________________ - ANS market value opinions; but it also provides the framework for developing an opinion of other defined values The first two steps in the valuation process are a(n) ________________ designed to produce credible assignment results - ANS exercise in judgement Once the assignment's scope of work is determined, the remaining steps are __________________ - ANS an exercise in execution Client defined: - ANS the individual, group, or entity who engages a valuer to perform a Service Intended User - ANS The party or parties the valuer intends will use the Report Identification of the intended user(s) includes finding out the intended user's: - ANS level of knowledge and experience with regard to the appraised property and its market, including the competition within that market Intended Use - ANS the valuer's intent as to how the Report will be used Intended use affects both __________________ and _____________________ - ANS appraisal development and reporting how the client intends to use the results of the assignment will guide the appraiser's decision on: - ANS the type and extend of research and analyses performed as well as the report content and the level of information it contains Purpose of An assignment defined: - ANS the objective of an assignment -- e.g., in an appraisal assignment, to develop an opinion of the defined value of a specified interest in real estate Types of value: - ANS 1) market value 2) use value 3) investment value 4) Insurable value 5) Assessed value 6) Fair value appraisers often use the _______________ date as the effective date - ANS site inspection Current effective date - ANS means effective date is contemporaneous with the date of the report. This doesn't mean the effective date has to be the same as the appraisal report date, but the two dates should be reasonably close retrospective effective date - ANS appraisals with an effective date in the past are commonly used for estates (such as for probate), casualty loss, property tax appeal, and marriage dissolution prospective effective date - ANS appraisals as of a future date are needed in assignments for proposed or renovated improvements when the value date is based on completion or stabilized occupancy. Prospective dates are also used in reversions at the end of a cash flow projection Statement of dates - ANS professional standards require the appraiser to state two dates in each appraisal report: the effective date of the appraisal and the date of the report (date the report was completed and transmitted to the client). This helps to establish whether the appraisal report represents a retrospective, prospective, or current opinion. Characteristics of property relevant to the purpose and intended use of the appraisal: (5) - ANS 1) its location and physical, legal, and economic attributes; 2) The real property interest to be valued such as a fee simple interest, leased fee interest, leasehold interest, or a partial interest; 3) any personal property, trade fixtures, leased solar photovoltaic systems, or intangible items that are not real property but are included in the appraisal 4) any known encumbrances, easements, leases, restrictions, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature; and 5) whether the subject of the appraisal is a fractional interest, physical segment, or partial holding of a property extraordinary assumption: - ANS an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions extraordinary assumptions presume as - ANS fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis hypothetical Condition - ANS a condition that is contrary to what exists but is supposed for the purpose of analysis. often a "what if" scenario intended to clarify a value issue such as the appraisal of proposed construction on a vacant site with the value opinion effective as of a current date Scope of work - ANS type of data and the extent of research and analyses the appraiser's task in step 2 is to: - ANS Determine the scope of work that is sufficient to produce credible assignment results. Such as how extensively a property is identified, the level and extent that the tangible property is inspected, the amount of research required (i.e., collected, confirmed, and reported) and what type of data the extent of the research and analyses varies according to what two aspects: - ANS the nature of the appraisal problem and the intended use of the assignment two items that are extensions of intended use and relevant property characteristics: - ANS type of assignment type of property what is step 3 of the valuation process - ANS data collection and property description general data - ANS data that relates to the four forces that affect real property values-- social, economic, governmental, and environmental forces specific data - ANS details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics Market area data falls into the category of ___________________ and focuses on ______________ that are affected by the four forces that influence value - ANS general data; trends Trend defined: - ANS a series of related changes brought about by a chain of causes and effects. Trends are forecast through economic base analysis, statistical analysis, market analysis, and analysis of economic indicators and surveys Market area trends analyzed as general data can include: - ANS population shifts, declining office building occupancy rates, and increased housing starts. Discussion and interpretation of the effects from the four forces influencing the use and value of the subject property are included in the appraisal report. Subject Property data needed: (4) - ANS 1) This specific data focuses on geographic and geologic characteristics of the land or site and characteristics of the improvements (such as type of building, physical components, legal components, and personal property) 2) Ownership history 3) Cost and Depreciation data 4) Income and expense data Comparables definition: - ANS a shortened term for similar property sales, rentals, or operating expenses used for comparison in the valuation process. In best usage, the thing being compared should be specified, e.g., comparable sales, comparable properties, comparable rents. Step 4 in the valuation process is: - ANS data analysis market analysis defined: - ANS the study of the supply and demand in specific area for a specific type of property a description of prevalent market conditions helps the intended users of the appraisal understand: - ANS the motivations of participants in the market for the subject property the data and conclusions generated through market analysis are: - ANS essential components to the other steps of the valuation process Highest and best use defined - ANS the reasonably probable use of property that results in the highest value. the four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Alternatively, the probable use of land or improved property-- specific with respect to user and timing of the use-- that is adequately supported and results in the highest present value. Highest and best use of land as though vacant: - ANS aids the appraiser in identifying comparable properties. The subject property should be compared (whenever possible) with similar properties that have sold recently in the same market. Comparable properties that do not have the same highest and best use ass the subject are usually eliminated from further analysis highest and best use analysis of property as improved - ANS 1)aids the appraiser in identifying comparable properties 2) aids the appraiser in deciding which of the following options should be pursued for the property: maintain the improvements as is, modify the improvements (for example, renovate, modernize, or convert to an alternative use), or demolish the improvements highest and best use conclusions should specify the following criteria: - ANS 1) use(s) 2) Timing for the use(s) 3) Typical market participants for the use an appraiser is analyzing supply and demand to understand prevalent market motivations affecting properties similar to the client's property. what type of analysis is the appraiser performing here? - ANS market analysis-- market analysis investigates supply and demand and how it impacts the marketability of the appraised property in the appraiser's data collection process that involves a market value assignment, which of the following is an example of general data: a) economic indicators for the region b) ownership history of the appraised property c) capitalization rates applicable to the appraised property d) geographic characteristics of the subject site - ANS A) economic indicators for the region. This is an example of general data because it originates outside the property being appraised the appraiser's collection of supply and demand data has application to what areas of the data collection process? a) both market area data and comparable property data b) comparable property data only c) Market area data only d) subject property data only - ANS A) both market area data and comparable property data. Supply and demand data is important to the appraiser's analysis of the general market area as well as the specific comparable property data because the client may be an individual, group, or entity, which of the following represents how an appraiser identifies the client in an appraisal assignment? The client is the party or parties...... - ANS who engages, by employment or contract, an appraiser in a specific assignment. Engagement of the appraiser establishes the appraiser-client relationship an appraiser's analysis of highest and best use on a property will generally include which of the following: a) extraordinary assumptions and hypothetical conditions b) marketability study c) analysis of the land as though vacant and also as improved d) demand and supply studies - ANS C) analysis of the land as though vacant and also as improved. this is a fundamental component of the highest and best use analysis. data analysis involving highest and best use includes a decision process using two scenarios that the appraiser considers which of the following best describes a person as an intended user in an appraisal assignment? A) the person that pays the appraiser B) the person that is a recipient of the appraisal report C) a person identified by the appraiser as an intended user as a result of the appraiser's communication with the client prior to accepting the assignment D) a person that uses the appraisal report to make a decision - ANS C) a person identified by the appraiser as an intended user as a result of the appraiser's communication with the client prior to accepting the assignment. The appraiser has the responsibility of identifying the client and the intended users of an appraisal assignment. which of the following would be an appropriate effective date of value for an appraisal assignment of an estate that went into probate 18 months ago? A) contemporaneous valuation date B) Prospective valuation date C) Retrospective valuation date D) Current Valuation date - ANS C) Retrospective valuation date. an effective date 18 months in the past qualifies as a retrospective valuation date an appraiser is analyzing the market value of a commercial building that has a lease ending in nine months. what time period is the appraiser's opinion of market value valid? A) up to 9 months after the effective date B) the value opinion is valid for 120 days, after which, the opinion must be updated by the appraiser C) for the period that extends from the date of the appraisal report until the end of the current lease D) for the exact date specified by the appraiser - ANS D) for the exact date specified by the appraiser. an appraiser identifies a specific point in time for the effective date of the value opinion. the date of value is a specific point in time even if a client makes a decision based on the opinion of value at some later date. the appraiser's initial collection of comparable property data is best categorized as... : A) reliable if the data is confirmed with a third-party source B) general data only C) both general data and specific data D) specific data only - ANS C) both general data and specific data. Comparable property data collection involves both general and specific data an appraiser is analyzing a multi-family apartment complex for lending purposes. while collecting data for the appraisal, what information listed below would the appraiser identify as general data? A) regional demographics B) ownership history of the subject property C) cost and depreciation data on the subject property's improvements D) Income and expense data on the subject property - ANS A) regional demographics. this is general data because the information is found apart from the subject property If the comparable sale has a swimming pool that contributes, say $25,000 to the value of the sale, and the subject does not have a swimming pool, an adjustment may be required. if appropriate, how should the appraiser adjust the comparable sale? - ANS downward $25,000 because if the comparable is superior to the subject, subtract. which of the following is not an element of comparison? A) financing B) reconciliation C) Property rights conveyed D) Conditions of sale - ANS B) reconciliation which of the following statements about land valuation is true? A) income capitalization is the most appropriate way to value a fee simple interest in a residential site B) for estimating the market value of a residential site, the sales comparison method is preferable C) if land sales are readily available, allocation is the most appropriate method to use for valuing a site D)the extraction method considers land value to total property value ratios - ANS B) for estimating the market value of a residential site, the sales comparison method is preferable. sales comparison method is the most common and preferred method of land valuation because the data necessary to use this procedure is most often available if the comparable sale is superior to the subject property, the adjustment to the comparable for that factor should be in what direction? - ANS negative which of the following is the most preferred procedure for deriving a land value opinion? A) income capitalization B) Cost approach C) Sales comparison D) land comparison - ANS C) sales comparison is the most common and preferred method of land valuation which of the following statements about the extraction method of site valuation is true? A) the ratio of land value is multiplied times the property value B) the depreciated value of the improvements is subtracted from the sales price of the entire property C) the value of the property is subtracted from the depreciated value of the improvements D) the depreciated value of the land is subtracted from the depreciated value of the improvements - ANS B) the depreciated value of the improvements is subtracted from the sales price of the entire property In the subject property's neighborhood, improved properties are selling for prices ranging from $140,000 to $160,000. Research reveals a typical land value-to-total property value ratio of 20%. What is the range of value for a similar site in this neighborhood? A) 16,000 to 20,000 B) 28,000 to 32,000 C)14,000 to 16,000 D) 22,000 to 25,000 - ANS B) $28,000 to $32,000. Sale price x ratio (0.20) = Land value what are the 3 traditional approaches to value? A) market analysis, highest and best use analysis, and cost analysis B) Cost, sales comparison, and income capitalization C) sales comparison, extraction, and allocation D) income capitalization, sales comparison, and extraction - ANS B) cost, sales comparison, and income capitalization. The three traditional approaches that comprise Step 6 of the valuation process are cost, sales comparison, and income capitalization. When an appraiser resolves differences among several value indications, what is this called? - ANS reconciliation-- the process of resolving various value indications into a single dollar figure or range into which the value will likely fall The income capitalization approach is generally not applicable to which of the following property types? A) one-unit homes that are owner occupied B) Apartment buildings C) Hotels D) Shopping Centers - ANS A) one-unit homes that are owner occupied. Typically, an owner-occupied residence is not purchased for investment or producing income when an appraiser analyzes income-producing property, what is actually being measured in the income capitalization approach? a) present value of future benefits derived from property ownership b) the annual rate of return on investment in an income property C) the present value of the future sale price of the subject property D) the future value of the benefits derived from property ownership - ANS a) The present value of future benefits derived from property ownership. The anticipated income stream generated from the property is discounted to a present value indication what are the two primary methods of income capitalization that are differentiated by the duration of their income streams? A) direct capitalization and residual capitalization B) residual and independent capitalization C) direct capitalization and yield capitalization D) Yield capitalization and summation capitalization - ANS C) Direct Capitalization and Yield capitalization. Direct analyzes the income for a one year period, whereas yield capitalization looks at the income stream for a period greater than one year When vacancy and collection loss is deducted from potential grow income, it is called which of the following? A) net operating income B) Pre-tax Cash flow C) After-tax cash flow D) Effective Gross Income - ANS D) Effective gross income. EGI is potential gross income minus vacancy and collection loss. it is the anticipated income from operations after an allowance is made for vacancy and collection loss. which of the following is true of an equity capitalization rate? A) an income rate that reflects the relationship between a single years pre-tax cash flow expectancy and the equity investment B) it is the ratio of pre-tax mortgage debt service and the principal amount of the mortgage C) it is also referred to as the annual constant D) it is the ratio of mortgage debt service to the original amount of equity - ANS A) an income rate that reflects the relationship between a single years pre-tax cash flow expectancy and the equity investment which of the following best describes the term potential gross income? A) the amount of money the owner pockets after paying expenses B) the amount of money collected by the property owner C) the amount of money available for payment of the debt service to the lender D) the amount of money the property would earn if it were fully occupied - ANS D) the amount of money the property would earn if I were fully occupied. PGI is the Total amount of money that the property is capable of generating at full (100%) occupancy The principle of anticipation affirms that value is based on: a) location and condition B) future benefits C) properties offering similar utility D) cash flow - ANS future benefits which of the following best describes the term "Investment value"? A) objective, impersonal, and detached B) value to a typical investor in the market C) value to a particular investor, based on personal, subjective parameters D)value based on the analysis of the investment - ANS C) value to a particular investor, based on personal, subjective parameters which of the following is true of a mortgage capitalization rate? A) it is the same as the equity cap rate B) it is also referred to as the overall cap rate C) it is the ratio of mortgage debt service to the original amount of equity D) it is the ratio of mortgage debt service and the principal amount of the mortgage - ANS D) it is the ratio of mortgage debt service and the principal amount of the mortgage Which of the following would you need to solve for value (V)? A) EGI and value B) Net Income and overall rate C) income and yield rate D) net income and sales price - ANS B) net income and overall rate if the overall rate is 8%, what is its corresponding factor? - ANS 12.5.... a factor is the reciprocal of a rate. so 1/.08=12.5 a property sold for $555,000. the buyer anticipated that the potential gross income would be $93,000, the vacancy would be 5%, and the expenses would be 35% of EGI in the year after the purchase. what is the overall capitalization rate (RO)? - ANS 10.35% a gross income multiplier is generally used to value what type of property A) subdivisions B) one to four unit residential C) commercial D) vacant land - ANS C) commercial a three-unit residential property sells for $232,000. Two units rent for $725 per month, and one unit rents for $550 per month. If the overall rate is 9.5%, what is the equivalent factor? - ANS 10.53. a lot of the information given here was not necessary to answer the specific question. a factor is the reciprocal of a rate. a reciprocal is one divided by the number. the question is asking for the favor that is equivalent to the overall rate of 9.5%, so 1/.095= .1052631, or 10.53 is the factor to 9.5% a comparable four-unit residence just sold for $300,000. It was rented at the time of sale for (or had a market rent of) $1,000 per unit per month. What is the GRM? A) cannot be determined from the data given B) 10 C) 75 D) 100 - ANS C) 75 solve for gross monthly income NOI ($1,000 x 4) = $4,000 PGI $300,000 / $4,000 = 75 what is the value of a property that has an appropriate capitalization rate (R) of 12.5%, an operating expense ratio of 40%, gross potential income of $45,000, and vacancy and collection loss of 10% - ANS $194,400 Solve for net income PGI - V&C loss = EGI - expenses = net income, then apply the I/R=V formula: $45,000 x .9 = 40,500 x .6 = 24,300/.125 = 194,400 what is the capitalization rate (R) for a property that has a net operating income of $40,000 and a net income multiplier (NIM) of 12.5 - ANS 8% what difference may be identified in the factors when a Gross Income Multiplier (GIM) is used in analyzing commercial income properties and a Gross Rent Multiplier (GRM) is used in analyzing a residential income-producing property? - ANS GIM is based on annual income, whereas the GRM is based on monthly rent in the case of a residential property. what is the Toal income attributable to real property at full occupancy before vacancy and operating expenses are deducted? - ANS potential Gross income (PGI). This income from all sources attributed to property is estimated before any items are deducted which of the following would be considered a fixed expense? A) an operating expense that does not change with occupancy B) an expense based on a percentage of effective gross income C) an operating expense that changes with occupancy D) any expense to fix the property - ANS A) an operating expense that does not change with occupancy -- a fixed expense is not expected to vary with the occupancy of the building if the property to be appraised has been recently leased and all the lease terms are available, would the appraiser still need to estimate the market rent? - ANS yes, it is necessary to determine whether the contract rent is above or below market rent how does an appraiser usually calculate vacancy and collection loss? - ANS as a percentage of potential gross income a retail building has a NOI of $45,000 and an OER of 55%. Vacancy is estimated at 4% in the market. What is the net income ratio (NIR)? - ANS 45%. The net income ratio can be calculated by taking the complement of the operating expense ratio. in this case, 1 - 0.55 = 0.45, or 45% a property has a potential gross income of $600,000. Vacancy and collection loss are estimated at 10% in the market, and operating expenses total $250,000. What is the net operating income (NOI)? - ANS $290,000 a multi-unit apartment building has a net operating income of $535,000 and a net income ratio, NIR, of 56.71%. Vacancy is estimated at 4% in the market. what is the operating expense ratio? - ANS 43.29% which of the following best describes a net lease? - ANS the tenant pays all the operating expenses. this is commonly found in single-tenant retail properties when is rent called excess rent? - ANS when it is greater than market rent which of the following expenses that may be found on a property owner's financial statements, should be excluded in the appraisers reconstructed operating statement? A) real estate taxes B) property maintenance and repairs C) corporate franchise tax D) property management - ANS C) corporate franchise tax what is the value of a property with an EGI of $100,000, an OER of 35%, and an overall cap rate of 0.10? - ANS $650,000. 100,000(.65)= 65,000 65,000/.10 = 650,000 an appraiser's analysis of a property indicates that the PGI is $675,000, and has tenant occupancy of 95%. OER is 38%. If the market indicates an overall capitalization rate of 8.5, what is the value of the property by income capitalization? - ANS $4,677,353 the subject property has a PGI of $450k, vacancy and collection losses of 5%, fixed expenses of $56,000, and variable expenses of $125,000. Recent sales of very similar properties in this market suggest that a capitalization rate of 8.0% is appropriate. The capitalization rates were extracted from sales in which the price was divided into the estimate of net operating income from the broker. what is the market value of the subject property? - ANS $3,081,250 what is the value of a property with an EGI of $423,000, an operating expense ratio of 32%, and an overall capitalization rate of 0.11? - ANS $2,600,000 (rounded down answer from 2,614,909) an appraiser is analyzing a comparable sale and she has estimated EGI at $660,000 and OER at 300,000. given this data, what overall capitalization rate can the appraiser derive from this comp if it sold for $4,800,000? - ANS 7.5% a bed and breakfast lodging facility has an Effective Gross Income of $255,000 and collection loss of 2%. If the market-derived PGIM is 7.2, what is the indicated value of the property? - ANS $1,873,469 using the following information, what is the value of the property? EGI = 175,000, vacancy 5% and PGIM of 6.5 - ANS 1,197,368 using the following information, what is the effective gross income multiplier? PGI: 75,000, value: 550,000, vacancy: 5%, OER: 45% - ANS 7.72 what is the expected annual income of a property that recently sold for $950,000, where the buyers indicated that they used an overall capitalization rate of 8.5%? - ANS 80,750 per year using the following information, what is the effective gross income multiplier? PGI: 275,000, Sales price: 2,750,000, vacancy: 10% - ANS 11.11 what is the expected annual income of a property that recently sold for $100,000, where the buyers indicated that they used an overall cap rate of 9.25%? - ANS $9,250 per year a monolithic slab is generally made of what material? - ANS one continuous pour of concrete a wood stud home in which each floor is framed and erected separately is referred to as what type of construction? - ANS platform framing during a property inspection, an appraiser notes that the structure does not have a full basement or a crawl space. which foundation type does the structure likely have? - ANS slab foundation. a slab foundation is simply a poured concrete "slab" on grade with the site. a wood stud home in which the wall studs extend from the sill plate to the roof is referred to as what type of construction? - ANS balloon framing. balloon construction, in which both stories are constructed simultaneously, is sometimes used today to achieve tall walls sometimes seen in valued ceilings or a smooth, joint-free exterior wall to which plaster or stucco is applied. balloon framing has studs that extend from the sill plate to the roof which of the following is not one of the six major components of a building? a) home theatre system b) electrical wiring C) roofing D) foundation - ANS home theatre system an appraiser is not a building inspector. the appraiser does which of the following? A) tests for radon and other contaminants b) takes core samples c) observes unapparent conditions d) observes apparent conditions - ANS d) observes apparent conditions which of the following is not one of the 6 major components of a building? a) framing b) landscaping c) electrical wiring d) HVAC - ANS b) landscaping is not one what are the 6 major components of a building - ANS foundation, framing, roofing, plumbing, electrical wiring, and HVAC during an exterior inspection, an appraiser observes a foundation that is exposed to the environment. which foundation type is this? A) pier b) balloon c) wall d) slab - ANS a) pier. a pier is visible from the exterior and exposed to the environment an appraiser observes a bathroom with a sink and toilet only. what would this be called? - ANS 1/2 bath if an appraiser estimates the current cost of individual units of construction and adds them up, what method is the appraiser using? - ANS unit-in-place. this method segregates the building into units of construction (e.g. exterior wall, foundation, insulation, etc.) the cost of building materials increases after an intense natural disaster creates the need for massive rebuilding. which economic principle does this illustrate? - ANS supply and demand. shifts in supply and demand cause costs to increase or decrease and alter the need of supply of different types of buildings. changes in the amount of new construction may affect the value of existing buildings which of the following best describes GLA in a single-unit residence - ANS gross living area (GLA) is the above-grade, finished, habitable, residential space measured from the outside an appraiser asks a local building contractor for cost data. the contractor gives his best estimate to build an exact replica of the property being appraised. this data could be called? - ANS reproduction cost the second step of the cost approach is to estimate direct and indirect costs as of? - ANS the effective date of the appraisal the first step of the cost approach is to? - ANS estimate the value of the site as if vacant and available to be put to its highest and best use when measuring a commercial office structure, an appraiser identifies the amount of space on which the rent is based. Which measurement tis the appraiser using? - ANS net rentable area. this is the amount of space on which the rent is based, calculated according to local practice an estimate of replacement cost includes which of the following: - ANS all items at today's prices with modern materials, including none of the deficiencies caused by changes in building techniques when performing a cost analysis, where can an appraiser obtain information about entrepreneurial incentive? - ANS derive it from the local market. entrepreneurial incentive is generally not included in the rates provided by professional cost service providers. commercial property appraisers drive the entrepreneurial incentive from the local market and add it to the cost. the incentive will vary based on the type of property and the risk associated with the project development. residential property appraisers may find that entrepreneurial incentive is more difficult to identify or measure int he market. the federal government increases interest rates by .25 of a point, causing newly constructed buildings to be worth less than its cost. what principle does this illustrate? - ANS externalities an appraiser measuring a residential structure would most likely use: - ANS GLA. gross living area is commonly used to describe the size of residential properties. when an appraiser estimates cost using a cost manual, which method is being used? - ANS comparative unit. The use of a cost manual is an example of the comparative unit (per square foot, for example) method of cost estimating in terms of cost, what type of cost are appraisal fees? - ANS indirect costs only which of the following best describes direct cost? - ANS expenditures for the labor and material used in the construction of the improvements the total construction cost of a structure requires consideration of which of the following? a) direct and indirect costs only b) direct and indirect costs along with entrepreneurial incentive c) direct costs only d) indirect costs only - ANS b) direct and indirect costs along with entrepreneurial incentive. entrepreneurial incentive must be present in order to entice a developer to construct the improvements to which kind of cost should an appraiser attribute labor and materials to? - ANS direct cost. direct costs are typically part of the construction contract and include material and labor In this module we derived the various components costs for estimating the current cost of our Oak Street case study. which method of the cost approach were we using? - ANS comparative unit method. what area is excluded from GLA? A) finished floor areas below grade b) all of these answers c) garage, porches, and decks d) open non-floored area of a two-story foyer - ANS all of these answers what area is included in gross living area? - ANS finished floor areas above grade which of the following is not considered a plumbing fixture? a) toilet b) water heater c) dishwasher d) sink - ANS c) dishwasher what is the Total GLA for the following structure: one-story area: 200 sq. ft. two-story area: 1,600 sq. ft. finished basement area: 800 sq. ft. garage area: 300 sq. ft. - ANS 1,800 sq. ft. a single unit residence has a two-story main section that is 600 square feet on each floor, and a one-story addition of 400 square feet. if the replacement cost is estimated at $54.00 for the two-story section and $51.00 for the one-story addition, what is the total replacement cost new of the entire structure (round) - ANS $85,000 assume that wood subfloor is included in the base cost. the subject has a concrete slab (less desirable) which has a cost of $2.04 per square foot less than the base cost. in estimate the cost for the subject, the adjustment to the base cost would be? - ANS downward $2.04/ sq. ft. what is the total GLA for the following structure: one story area: 360 sq. ft. two story area: 1300 sq. ft. finished basement area: 750 garage area: 500 sq. ft. - ANS 1660 sq. ft. garages and basements are not included when making the wall height adjustment of 1.03, you were adjusting of the fact that: - ANS taller ceilings cost more to construct than lower ones which statement best describes the term "depreciation?" - ANS the difference between the reproduction or replacement cost and the market value of the improvements as of the effective date of the appraisal. depreciation is the Total loss in value from cost new as of the effective date of value the older a builder becomes, the greater is the likelihood of it having: a) all listed answers b) external obsolescence c) functional obsolescence d) physical deterioration - ANS a) all. which of the following describes the period of time over which the improvements will contribute to property value? a) effective age b) remaining economic life c) economic life d) physical life - ANS c) economic life. the economic life of improvements can be affected by physical, economic, social, and geographic forces, and can be extended by renovations and remodeling which of the following describes the age of a property that is based on the amount of o observed deterioration and obsolescence it has sustained? a) remaining economic life b) effective age c) actual age d) economic age - ANS b) effective age which of the following describes the number of years the have elapsed since the construction of the improvements was completed? a) all listed choices b) chronological age c) historical age d0 actual age - ANS a- all listed choices are correct suppose you are appraising a high-rise apartment building with fireproofed structural steel frames, concrete floors and roof, and metal and glass paneled walls. what class of construction si this building? - ANS class a. the primary feature of class a buildings is the fireproofed, protected structural steel frame and metal deck flooring and roof with a concrete topping. you have a 20,000 square foot retail store with a concrete slab floor, stucco on masonry block exterior walls, and metal trusses as a roof structure partially supported by open steel framing members. what class of construction is this building? - ANS Class C. the primary features of class c buildings are masonry or reinforced concrete exterior walls, and wood or steel roof and floor structures that have not been made fire-resistant, except for the concrete slab on grade. when is an item of depreciation curable? - ANS when the cost to cure is less than the expected increase in value an incurable functional problem is best defined as: - ANS an item that will not return as much in value as it costs to fix according to Marshall Valuation Service, what type of construction would be a tilt-wall warehouse? - ANS Class C masonry or reinforced concrete frame depreciation is a loss in value. which of the following categories can these losses be attributed to? a) function, social, or financial b) physical, functional, or financial c) physical, functional, or economic d) physical, social, or economic - ANS c)physical, functional, or economic within each construction class, Marshall Valuation Service assigns a quality rating. What are the four quality ratings? - ANS excellent, good, average, low-cost according to Marshall Valuation service, what type of construction would be a high-rise office tower/ - ANS Class A fireproofed steel Frame which of the following statements is most correct? a) functional obsolescence can be caused by insect infestation b) functional obsolescence can be caused by action of the elements c) functional obsolescence can be caused by wear and tear d) functional obsolescence can be caused by poor design or layout - ANS d) functional obsolescence can be caused by poor design or layout