Basic Appraisal Principles Test Study Questions

BASIC APPRAISAL PRINCIPLES TEST STUDY QUESTIONS True or False? When developing an opinion of site value of an improved property, an appraiser needs to consider the highest and best use of the property as though vacant. - ANS TRUE When developing an opinion of highest and best use, what is the final criteria that is applied? - ANS maximally productive A lot owner constructs a new 4,000 square foot home in a neighborhood of mostly 800 to 1,200 square foot homes. The value of the new 4,000 square foot home is diminished by the smaller homes surrounding it. This is an example of which valuation principle? - ANS regression Unfortunately, with real estate, the ______ side of the equation is relatively fixed and slow to change whereas the ______ side of the equation can change quickly. - ANS supply, demand The result of the cause and effect relationship among the forces that influence real property value" is the definition of the principle of - ANS change In the agents of production theory, the return on land would be __________ and the return on labor would be ________. - ANS rent, wages The perception that value is created by the expectation of benefits to be derived in the future" is the definition of the principle of - ANS anticipation "The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium" is the definition of the principle of - ANS balance The principle that studies the relationships between participants in the marketplace, such as buyers and sellers or landlords and tenants, is the principle of - ANS competition When estimating the value of a swimming pool to a residential property, the most important principle is the principle of - ANS contribution "The concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income, in dollars, benefits, or amenities, at an increasing rate until a maximum return is reached. Then, income will decrease until the increment to value becomes increasingly less than the value of the added agent or agents" is the definition of the principle of - ANS increasing and decreasing returns Which characteristic would NOT be associated with a good appraiser? - ANS biased Which college-level course would probably be LEAST helpful to an appraiser? - ANS Biology True or False: All appraisals are performed for mortgage lending purposes. - ANS False A certified residential appraiser needs ____ hours of continuing education per year to renew his or her certification? - ANS 14 True or False: An applicant for Certified General appraiser must possess at least an associate's degree from an accredited college or university. - ANS False A licensed or certified appraiser must take the 7-hour USPAP Update course - ANS every 2 years The requirements for state licensed and certified appraisers had their genesis in - ANS FIRREA True or False: The end of the U.S. housing boom meant that appraisal business dropped significantly across the country. - ANS False True or False: Attorneys often engage appraisers to complete assignments for estates and divorces. - ANS False An applicant for Certified General Appraiser must obtain _______ experience hours in no fewer than _____ months. - ANS 3,000, 30 True or False: Some state agencies employ full-time staff appraisers. - ANS True If you have specific questions about appraisal certification or licensure requirements in your state, you should - ANS contact the appraiser licensing and certification agency in your state Under the 2008 criteria, an Appraiser Trainee is permitted to have ________ supervising appraiser, but a supervising appraiser may not supervise ________ trainees. - ANS More than one, more than three Which of the following situations would NOT normally require an appraisal? - ANS title insurance The document transmitted to the client upon completion of an appraisal assignment is the - ANS appraisal report Under the 2008 criteria, an applicant for a Certified General license must hold a(n) ___________ degree or _____ semester hours in certain selected college level courses. - ANS Bachelors ,30 To apply for an Appraiser Trainee license, an applicant must have _____ hours of qualifying education courses and ______ creditable hours of experience. - ANS 75,0 The four components of the Appraiser Qualification Criteria include Continuing Education, Examination, ____________, and ______________. - ANS Experience and Qualifying Education The _____ is charged with establishing the qualifications that all the states must adopt in licensing, certification and re-certification of appraisers. - ANS AQB The number of required classroom hours for Licensed Residential Appraisers under the 2008 criteria is ____ hours. - ANS 150 True or False? The Board of Trustees acts as the executive board for The Appraisal Foundation. - ANS True In 1987, eight U.S. appraisal organizations formed - ANS The Appraisal Foundation The transfer of money from low interest-bearing accounts to higher interest-bearing accounts is referred to as - ANS disintermeditation What event preceded the Great Depression? - ANS Stock Market Crash of 1929 True or False? The Appraisal Subcommittee's mission is to ensure that real estate appraisers who perform appraisals in federally-related transactions are sufficiently trained and tested to assure competency and independent judgment. - ANS political party affiliation True or False? The Dodd-Frank Act gave the ASC the authority to create a National Registry of appraisal management companies. - ANS True Which of these is NOT a protected class, according to the Fair Housing Act? - ANS political party affilitation Which entity is responsible for monitoring state appraiser licensing and certification agencies? - ANS The Appraisal Subcommittee The first universally accepted appraisal report form appeared in the - ANS 1970's The Appraisal Foundation is a ___________ organization. - ANS not-for -profit The secondary market came into prominence in mortgage lending in the - ANS late 1970's The ______exercises all authority over the establishment of education, experience, and other criteria for licensing, certification, and re-certification of qualified appraisers. - ANS AQB The Savings and Loan Crisis happened in the - ANS Late 1980's The ______ maintains a National Registry of appraisers. - ANS ASC Only the _______ has the authority to amend or interpret USPAP. - ANS ASB The _________ exercises all authority and power over the subject, style, content, and substance of USPAP. - ANS ASB Mortgage interest rates peaked in the U.S. in the - ANS early 1980's The _________ monitors and reviews the practices, procedures, activities and organizational structure of The Appraisal Foundation. - ANS ASC True or False? The mere fact that an appraiser has previously appraised a property is typically NOT considered confidential information under USPAP. True - ANS True Ethics concerns our obligation to consider - ANS the well being of all .......all of these USPAP requires an appraiser to be - ANS objective True or False? USPAP permits an appraiser to be biased in certain appraisal assignments, as long as the bias is properly disclosed. - ANS false Which of these factors would result in a violation of USPAP if the appraiser based his or her appraisal fee on it? - ANS the appraisers opinion of value Is it ethical for an appraiser to offer a reduced fee on an appraisal if the client's loan does not close? - ANS no An appraiser pays a fee for the procurement of an assignment. Where in the appraisal report does this payment have to be disclosed? - ANS in the certification and any transmittal letter where conclusions are stated True or False? The development of "trust" between the general public and the professional appraiser is not unique to the appraisal profession. - ANS True An appraiser finds out after completing an appraisal that the lender/client's loan did not close. What should the appraiser do regarding the appraisal fee? - ANS charge the agreed-upon fee regardless of whether the loan closed True or False? Webster's Dictionary defines ethics as relating to the principles established by the world's most common religions. - ANS False True or False? "A preference or inclination that precludes an appraiser's impartiality, independence, or objectivity in an assignment" is the definition of bias. - ANS true True or False? The word ethics is not formally defined in USPAP. - ANS true True or False? The ETHICS RULE is the first of the RULES in USPAP. - ANS true True or False? It is ethical for an appraiser to pay a fee to be included on a lender's "approved appraiser" list. - ANS true As it pertains to appraisers, what does the abbreviation UAD stand for? - ANS Uniform Appraisal Dataset When clients began asking for faxed copies of appraisal reports - ANS appraisers typically still had to mail hard copies of reports anyway What is the most comprehensive source for online information from the federal government? - ANS In a UAD-compliant appraisal report, what would be the BEST overall condition rating for the subject property? Good - ANS C1 As it pertains to appraisers, the abbreviation GIS stands for - ANS Geographic Information Systems True or False? There is only one company in the U.S. that produces software programs for appraisers. - ANS False True or False? Prices of laser measuring devices have been declining over the last several years. - ANS True Why is it important that an appraiser be able to adjust settings and features on a camera? - ANS because clients are demanding good quality interior photos The subject property had a prior transfer on October 15, 2012. When reporting the date of this prior sale in a UAD-compliant appraisal report, what would be the correct way this date must be formatted? - ANS 10/15/2012 The largest appraisal software company is - ANS ala mode In a UAD-compliant appraisal report, what would be the WORST overall condition rating for the subject property? - ANS C6 What would be the correct way to format the date March 15, 2013 in a UAD-compliant appraisal report? - ANS 03/15/2013 The most software and applications are available for ____________ computers. - ANS PC An example of a software system that can restore an image of your entire hard drive is - ANS Norton Ghost Today, most appraisals are transmitted in a(n) _______ format. - ANS PDF The web site with the largest amount of demographic information is - ANS C A client asks an appraiser to omit the client's identity from the appraisal report. What can the appraiser do? - ANS omit the client's identity from the report, but identify the client in the workfile Property Owner A has the right to develop his property into 10 lots. He sells this right to nearby Property Owner B who wishes to develop his property into additional lots. This is an example of - ANS transferable development rights Land is a long lasting asset, and has a long economic life as compared to other assets. What characteristic of land does this refer to? - ANS durability Which of these items is LEAST likely to be considered part of the real estate? - ANS window air conditioner The Fifth Amendment to the U.S. Constitution guarantees payment of ________ for the taking of private property. - ANS just compensation Which of these would be considered a public restriction on real property ownership? - ANS escheat True or False? When people buy and sell land and buildings in the marketplace, they are actually buying and selling real property rights. - ANS False Which of these is NOT a public restriction on real property ownership? - ANS CC&Rs The process of eminent domain is administered through - ANS condemnation "The earth's surface, both land and water, and anything that is attached to it whether by the course of nature or human hands" is the definition of - ANS land Which of the following would likely NOT be considered personal property? - ANS wall to wall carpet Which of the following would MOST LIKELY be considered personal property? - ANS window air conditioner The right to construct and maintain tunnels, subways, subcellars, pipelines, sewers, etc." is the definition of ___________ rights. - ANS subsurface Which is NOT considered to be real estate? - ANS property rights Physical land and appurtenances attached to the land is the definition of - ANS real estate Which is NOT a characteristic of land? - ANS mobility The public restriction on property rights that allows the government to place a lien on a property is - ANS taxation Public limitations on private property rights include all of the following EXCEPT - ANS CC&R's True or False? A lot and block legal description always gives the lot size and dimensions. - ANS False Which system of legal desription is the earliest of systems used in the U.S.? - ANS metes and bounds "Metes" refers to __________ and "bounds" refers to _________. - ANS bearing, distance A farmer purchased a half-section for $456,000. How much did he pay for the property per acre? - ANS $1,425 Which system of legal descriptions is based on standardized measurements and consistent squares? - ANS rectangular survey The rectangular survey system is also known as the - ANS government survey system A rectangular lot measures 569.32 feet by 414.90 feet. How many acres is that? - ANS 5.42 A lot contains 5.62 acres. It sells for $225,000. How much did it sell for per acre? - ANS $ 40,036 A lot contains 1.54 acres. It sells for $100,000. How much did it sell for per square foot? - ANS $ 1.49 A township contains ______ square miles. - ANS 36 How many degrees are in a full circle? - ANS 360 How many links are there in Gunter's chain? - ANS 100 A rancher owns 8 full sections and 3 half sections. He sells off 5 quarter sections. How many acres are left? - ANS $ 5,280 An easement that has, by definition, both dominant and servient tenements is a - ANS easement appurtenant When appraising a property that is subject to a life estate, an appraiser is MOST likely to use - ANS a discount based on a mortality table Bob grants a life estate in his property to his mother, Mary. As long as Mary is alive, Bob's estate in the property is referred to as a (an) - ANS estate in remainder True or False? When a property is leased, two separate estates are created. - ANS True What type of property ownership is characterized by the purchase of shares of stock in a corporation, which provides a proprietary lease to occupy an apartment unit? - ANS cooperative What is a corporation or trust that functions like a mutual fund for real estate, by combining the capital of many investors to acquire real estate? - ANS REIT What form of concurrent ownership allows a person to sell off their interest without the approval or knowledge of the other owners? - ANS tenants in common Tenancy by the entirety is a form of ownership reserved for - ANS spouses Which is NOT a partial estate? - ANS fee simple estate "A form of ownership in which each owner possesses the exclusive right to use and occupy an allotted unit plus an undivided interest in common areas" is the definition of a - ANS condominium "A type of building development designed as a grouping of complementary land uses, such as housing, schools, recreation, retail, office, and industrial parks, contained within a single master development." is the definition of - ANS PUD "A right or interest in property" is the definition of - ANS Estate "The right to perform a specific action on a property owned by another" is the definition of - ANS Affirmative Easement A leasehold interest belongs to the - ANS tenant "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat" is the definition of - ANS fee simple A fee simple estate is NOT - ANS between husband and wife only Which ownership includes a right of survivorship? - ANS joint tenancy and tenancy by the entirety "An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and not a particular tract of land" is the definition of a(an) - ANS easement in gross In a real estate transaction, who is the grantee? - ANS buyer Which is the best type of deed for the buyer? - ANS warranty deed From the buyer's standpoint, what is the weakest type of deed? - ANS quitclaim deed Contracts are __________ that the law will enforce. - ANS promises As it refers to an individual's ability to contract, the word "competent" means - ANS the ability to understand the transaction or document A ________ contract is binding and enforceable on all parties. - ANS valid Which of these is NOT listed as a way that a contract can be terminated? - ANS unilateral recission Contracts for the sale of real estate must be __________ in order to be enforceable. - ANS in writing True or false? Punitive damages are commonly awarded in breach of contract cases. - ANS False What type of lease requires the landlord to pay all of the property's operating and fixed expenses? - ANS gross lease In most appraisals for residential mortgage lending transactions, personal property items are - ANS not included in the real property appraisal If a buyer in a real estate transaction defaults on the contract, the seller may - ANS any of these Which is NOT true of an express contract? - ANS the terms must always be stated in writing "Damages awarded in a lawsuit as a punishment and example to others for malicious, evil or particularly fraudulent acts" is the definition of _____________ damages. - ANS punitive The amount stated in a deed is called the - ANS consideration A writ (order) issued by a court ordering someone to do something or prohibiting some act after a court hearing" is the definition of - ANS injunction "To finish, complete or perform as required, as in fulfilling one's obligations under a contract or a court order" is the definition of - ANS execute A(n) __________ contract is one that is not been fully performed or completed. - ANS executory The weakest form of deed is the ___________ deed. - ANS quitclaim Acceptance may occur as - ANS either an express act or an implied act A contract in which one party makes a promise in order to induce another party to do something is a(n) __________________ contract. - ANS bilateral A law changed after the contract was arranged but before the full performance of the contract. This would be an example of - ANS impossibilty A firm agreement to perform an act, refrain from acting or make a payment or delivery" is the definition of a(n) - ANS promise Every ____________ has a statute of frauds. - ANS state Which item would NOT be typically found in a real estate contract? - ANS appraised value The cancellation of a contract by mutual agreement of the parties" is the definition of - ANS rescission An agreement of parties to a contract to substitute a new contract for the old one is called - ANS novation True or False? The principle of supply and demand applies to consumer goods and services, but not real property. - ANS false According to the principle of supply and demand, the price of a commodity varies ___________ with supply. - ANS inversely Which type of market is MOST likely to be characterized by higher prices and a shortage of homes for sale? - ANS seller's market In a real estate market, which factor of the supply and demand equation is dynamic and subject to immediate change? - ANS demand Which of these is NOT a characteristic of an efficient market? - ANS immobility of product In real estate, a market is defined in terms of - ANS competition The area associated with a subject property that contains its direct competition" is the definition of - ANS market area Real estate is unique as an economic good in that it is - ANS immovable All the following are characteristics of a good market EXCEPT - ANS prices are relatively high A market is defined in terms of __________. - ANS competition All of the following would be participants in the real estate market EXCEPT - ANS economists "An active market in which the sellers of available properties can obtain higher prices than those obtainable in the immediately preceding period; a market in which a few available properties are demanded at prevailing prices by many users and potential users" is the definition of a(n) __________ market. - ANS seller's A neighborhood consists of ____________ land uses, while a district consists of __________ land uses. - ANS complementary, homogeneous "A market in which product differentiation exists, there is a lack of important product or market information, and some of the producers and/or consumers are significant enough to affect the price and quantity of goods by their actions alone" is the definition of a(n) ____________ market. - ANS imperfect "A market in which buyers have the advantage; exists when market prices are relatively low due to an oversupply of property or reduced buyer demand" is the definition of a(n) ___________ market. - ANS buyer's How do investors typically compensate for higher risk in an investment? - ANS they demand a higher return True or False? Stocks are considered a good investment because the return OF your investment is guaranteed. - ANS True You are an investor who owns a parcel of real estate. You want to cash out your investment, and it takes you a year to market your property and close the sale. What investment factor does this demonstrate? - ANS liquidity How are members of the Board of Governors of the Federal Reserve System selected? - ANS they are appointed by the President and confirmed by the Senate Where are short-term money instruments are bought and sold? - ANS money market Which of these entities needs to invest money as a fundamental part of their operations? - ANS government, insurance companies, pension funds (all of these) The rate that banks employ when lending money to their highest rated customers is called the __________ rate. - ANS Prime To whom is the Fed accountable? - ANS Congress "The interaction of buyers and sellers trading long- or intermediate-term money instruments" is the definition of the _____________ market. - ANS Capital "A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user" is the definition of - ANS amenity Who appoints members to the Federal Reserve Board? - ANS the President of the U.S. Amenities such as a nice view are generally more important to - ANS homeowners The return ON investment is usually accomplished through - ANS interest payments Which of the following typically generates the highest return on investment? - ANS real estate Up until the 1970s, mortgage lending was typically done at the ______ level. - ANS local What type of loans are assumable without the permission of the originating lender? - ANS VA and FHA loans The principal operators in the secondary mortgage market include - ANS Fannie Mae, Freddie Mac, Ginnie Mae A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions" is the definition of - ANS mortgage A property has a first mortgage of $180,000, a second mortgage of $25,000, and a third mortgage of $10,000. The borrower defaults, and the property is sold for $210,000. The holder of the third mortgage receives ______, and the holder of the second mortgage receives ________. - ANS $5,000, $25,000 True or False? FHA charges a mortgage insurance premium to borrowers. - ANS True A mortgage loan that is not government-insured or guaranteed is considered a - ANS conventional mortgage _____________ loans are assumable without the permission of the lender. - ANS FHA and VA Which is NOT a primary source for mortgage capital? - ANS FHA The primary participants in the secondary mortgage market are - ANS Fannie Mae, Freddie Mac, and Ginnie Mae Most ___________ were chartered primarily to provide residential mortgages for the local areas. - ANS savings & loans Which were NOT sources of capital for banks in the 1950s? - ANS Freddie Mac Which of the following entities guarantees mortgage loans? - ANS VA Which of the following is an insured loan? - ANS FHA ________ liens are liens placed on a property after a previous lien has been made and recorded. - ANS Junior Which was the first kind of mortgages to be developed? - ANS Fixed Rate The FHA mortgage insurance program is funded by - ANS mortgage insurance premiums paid by borrowers True or False? Building codes have no impact on property values - ANS False True or False? In addition to federal environmental authorities, each state has its own agency that controls environmental issues. - ANS True Why would a handful of air typically have no value? - ANS it lacks scarcity Taxes would be a _____________ force affecting property values. - ANS governmental The mortgage meltdown of the late 2000s resulted in - ANS lessened availability of mortgage loans Generally speaking, low interest rates encourage ___________, while high interest rates encourage ___________. - ANS borrowing, saving The cost of construction is based on three factors. What are they? - ANS land, materials, and labor After the crash of the mortgage lending industry in the late 2000s, lenders that remained in business - ANS tightened their underwriting standards In analyzing a market area, an appraiser finds that most of the residents are middle-aged, and some are empty-nesters. This would typically mean - ANS there is a demand for more expensive homes Environmental influences on property values are sometimes called ________ influences. - ANS Physical Environmental influences on property values would include all of these EXCEPT - ANS constructions costs What would be a drawback of building a structure on sandy soil? - ANS additional footings or structural support may be required "The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards; the efficiency of a building's use in terms of architectural style, design and layout, traffic patterns, and the size and type of rooms" is the definition of - ANS functional utility Which is NOT an economic force? - ANS transportation The present or anticipated undersupply of an item relative to the demand for it...." is the definition of - ANS scarcity Economic forces would include all of the following EXCEPT - ANS zoning and building codes A one-acre parcel in the middle of a swamp might have very little or no value because it lacks - ANS utility Governmental forces would include all of the following EXCEPT - ANS unemployment rates The value of an income property is based primarily on - ANS the net income it can produce A large good quality mansion is built in a market area where no one can afford to purchase it. This demonstrates lack of - ANS effective purchasing power Which is NOT an environmental influence? - ANS income levels The four elements of value are desire, ____________, _____________, and ______________. - ANS utility, scarcity, effective purchasing power If a property has no utility, it therefore has - ANS no value Value is created by - ANS external market forces All of the following would be social influences EXCEPT - ANS building codes Which is a slow draining type of soil? - ANS clay "The concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income, in dollars, benefits, or amenities, at an increasing rate until a maximum return is reached. Then, income will decrease until the increment to value becomes increasingly less than the value of the added agent or agents" is the definition of the principle o - ANS increasing and decreasing returns increasing and decreasing returns - ANS change How many criteria are used in highest and best use analysis? - ANS 4 The four criteria for highest and best use are - ANS legally permissible, physically possible, financially feasible, maximally productive Supply and price move in a(n) ____________ relationship. - ANS inverse The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium" is the definition of the principle of - ANS balance In the agents of production theory, the return on land would be __________ and the return on labor would be ________ - ANS rent, wages The principle that studies the relationships between participants in the marketplace, such as buyers and sellers or landlords and tenants, is the principle of - ANS competition The principle that studies the relationships between participants in the marketplace, such as buyers and sellers or landlords and tenants, is the principle of - ANS progression Normally the first step in highest and best use determination is to is to investigate the uses that are - ANS legally permissible "In appraisal, the concept that the value of a superior property is adversely affected by its association with an inferior property of the same type" is the definition of the principle of - ANS regression If there is anything at all left after satisfying the four agents of production, the excess profit would be returned to the land. This is the principle of - ANS surplus productivity "The result of the cause and effect relationship among the forces that influence real property value" is the definition of the principle of - ANS change Which statement is FALSE concerning the highest and best use of land as though vacant? - ANS This analysis can only be applied if there are no existing improvements The concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income, in dollars, benefits, or amenities, at an increasing rate until a maximum return is reached. Then, income will decrease until the increment to value becomes increasingly less than the value of the added agent or agents" is the definition of the principle of - ANS increasing and decreasing returns Supply and demand will tend to move towards - ANS equilibrium