EXAM | COMPLETE QUESTIONS AND DETAILED
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Question
What is Effective Gross Income?
A) Gross income less vacancy factor and bad debt allowance
B) Gross income plus operating expenses
C) Net operating income plus taxes
D) Potential gross income minus taxes
Expert Rationale: Effective Gross Income (EGI) is the gross income less the vacancy factor
and bad debt allowance. Operating expenses are then deducted from EGI to determine Net
Operating Income (NOI). It represents the actual income a property is expected to
generate.
Question
What are non-realty components in an appraisal?
A) Personal property not included in comparable property
B) Fixtures attached to the property
C) Land and improvements
D) Easements and rights of way
Expert Rationale: Non-realty components include personal property that is not included in
the comparable property. These items are typically excluded from the real estate appraisal
because they are not permanently attached to the property.
Question
What does "Rights Conveyed" refer to in an appraisal?
A) The appraiser estimates market value in fee simple; sometimes air rights, mineral rights,
and leasehold rights need to be included
B) The deed type used to transfer property
,C) The zoning regulations affecting the property
D) The tax rate applied to the property
Expert Rationale: Rights Conveyed refers to the interests being appraised. In general, the
appraiser estimates market value in fee simple. Sometimes, other rights such as air rights,
mineral rights, and leasehold rights need to be included.
Question
What is the first step in the Sales Comparison Approach to Value?
A) Collect and analyze data
B) Define the appraisal problem
C) Select appropriate units of comparison
D) Make adjustments on the market to comparable property
Expert Rationale: The first step in the Sales Comparison Approach is to define the
appraisal problem. This is followed by collecting and analyzing data, selecting appropriate
units of comparison, making reasonable adjustments, and applying data to the subject of
the appraisal.
Question
What is the second step in the Sales Comparison Approach to Value?
A) Define the appraisal problem
B) Collect and analyze data
C) Select appropriate units of comparison
D) Make adjustments on the market to comparable property
Expert Rationale: The second step in the Sales Comparison Approach is to collect and
analyze data. This includes gathering information on comparable sales, market conditions,
and property characteristics.
Question
What is the third step in the Sales Comparison Approach to Value?
A) Define the appraisal problem
B) Collect and analyze data
,C) Select appropriate units of comparison
D) Make adjustments on the market to comparable property
Expert Rationale: The third step in the Sales Comparison Approach is to select
appropriate units of comparison. This may include price per square foot, price per room, or
other relevant units.
Question
What is the fourth step in the Sales Comparison Approach to Value?
A) Define the appraisal problem
B) Collect and analyze data
C) Select appropriate units of comparison
D) Make reasonable adjustments on the market to comparable property
Expert Rationale: The fourth step in the Sales Comparison Approach is to make
reasonable adjustments on the market to comparable property. Adjustments are made for
differences between the subject property and the comparables.
Question
What is the fifth step in the Sales Comparison Approach to Value?
A) Define the appraisal problem
B) Collect and analyze data
C) Select appropriate units of comparison
D) Applying data to subject of appraisal
Expert Rationale: The fifth step in the Sales Comparison Approach is applying data to the
subject of the appraisal. This involves reconciling the adjusted sale prices of the
comparables to arrive at an estimate of value for the subject property.
Question
What is an arms-length sale?
A) A sale between related parties
B) A sale where buyer and seller are typically motivated, well-informed, acting in their own
best interest, and no special financing
, C) A sale forced by foreclosure
D) A sale with creative financing
Expert Rationale: An arms-length sale is a transaction where the buyer and seller are
typically motivated, both well-informed and advised, acting in their best self-interest, with
a reasonable time exposed in the market, and no special or creative financing. It represents
a fair market transaction.
Question
Which of the following is NOT a criterion for an arms-length sale?
A) Buyer and seller are typically motivated
B) Both parties are well-informed and advised
C) Special or creative financing is used
D) Price represents typical pricing for the area
Expert Rationale: Special or creative financing is NOT a criterion for an arms-length sale.
In fact, arms-length sales should have no special or creative financing. The other criteria
include typically motivated parties, well-informed parties, acting in best self-interest,
reasonable market exposure, and typical pricing.
Question
What data should be collected on each sale?
A) Actual sale price, type of deed, date of sale, date of agreement, personal property, type
of financing
B) Only the sale price
C) Only the type of financing
D) Only the date of sale
Expert Rationale: Data to collect on each sale includes actual sale price, type of deed,
date of sale, date of agreement, personal property, and type of financing. This information
is essential for making accurate adjustments.
Question
What is the actual sale price?