Jake purchases a 4-bedroom, brick, 2-story traditional home in a neighborhood of other similar homes in hopes that the investment will prove, in the future, to be a sound one. Jake is operating on the principle of:

A. substitution.

B. regression.

C. conformity.

D. contribution.

C. conformity.

note: conformity The appraisal principle holding that the greater the similarity among properties in an area, the better they will hold their value. 

A market with increasing properties for sale because of a major manufacturer layoff is an example of:

A. situs.

B. expansion.

C. a buyers market.

D. a sellers market

A two-story home measures 65’ wide and 42’ deep with a basement. This home would contain how many square feet of gross living area?

A. 2,730 square feet.

B. 4,095 square feet.

C. 5,460 square feet.

D. 8,190 square feet.

C. 5,460 square feet.

65'widex42'deep = 2,730

2,730*2 (two-story home)=5,460

What is the gross living area in the diagram below?

[image]

A. 1040 sq. ft.

B. 1091 sq. ft.

C. 1260 sq. ft.

D. 1491 sq. ft.

B. 1091 sq. ft.

30x48= 1,440

20x20= 400 GARAGE

17x3= 51

1440-400+51=1,091

A property which has deferred maintenance is said to have:

A. physical deterioration.

B. functional obsolescence.

C. economic deterioration.

D. physical obsolescence 

A. physical deterioration.

note: Physical deterioration. A curable item is one in need of repair, such as painting (deferred maintenance), that would result in an increase in value equal to or exceeding its cost.

The income on a property that is used to satisfy the debt service and produce a profit is:

A. the gross potential income.

B. the net operating income.

C. the gross effective income.

D. the vacancy and collection income.

You are pricing a property and found four suitable comparables (I, II, III and IV) with the following adjusted sales prices:

I. $127,000

II. $131,000

III. $133,000

IV. $128,000

In your opinion, property II was the most similar to the subject property. You decided to “weight” it with 60% of the total value estimate. Accordingly, you decide to “weight” property I with 20%. Properties III and IV were least like the subject property and you gave them each 10% for a total of 100%. What is your estimate of what the property is worth?

A. $129,750

B. $131,000

C. $133,000

D. $130,100

D. $130,100

$127,000 x 20%= $25,400

$131,000 x 60%= $78,600

$133,000 x 10%= $13,300

$128,000 x 10% $12,800

$25,400+ $78,600 +$13,300+ $12,800= $130,100

When doing the sales comparison approach, the comparable property has a fireplace. The subject property does not have a fireplace. Which of the following adjustments should be made?

A. The subject property should be adjusted upwards.

B. The subject property should be adjusted downwards.

C. The comparable property should be adjusted upwards. D. The comparable property should be adjusted downwards.

The gross rent multiplier (GRM) would be used when estimating the value of a:

A. industrial warehouse.

B. income-producing residential duplex.

C. commercial office building.

D. vacant lot.

The process when net income is divided by an investor’s desired percent of return is called:

A. capitalization.

B. procession.

C. reconciliation.

D. contribution.

 A property had a land value of $120,000, a 2500 square foot house with a replacement cost of $150 per square foot, depreciation of $17,000 due to functional obsolescence, and $3,000 due to physical depreciation. Using the cost approach, what would be the estimated value of the property?

A. $515,000.

B. $495,000.

C. $478, 000.

D. $475,000.

D. $475,000.

note: cost approach= cost-depreciation + land

$2,500x$150= $375,000

$375,000- $17,000- $3000+$120,000=

$475,000

A property had a land value of $32,000, improvements of $140,000, and a straight line

depreciation rate of 1.25%. After 16 years, what would be the amount of depreciation? (M071714)

A. $21,600

B. $22,400

C. $28,000

D. $34,400

C. $28,000

$140,000 x (1.25%)= $1,750

$1,750x (16 years)= $28,000

While doing an appraisal on a subject property, an appraiser found a comparable property that 

recently sold for $295,000. The comparable property was older but had a garage that the subject 

property did not have. A $10,000 adjustment was made for the comparable being older and a 

$8,000 adjustment for the comparable having a garage. What is the estimated value of the 

subject property?

A. $295,000.

B. $297,000.

C. $303,000.

D. $305,000.

B. $297,000

Comp Inferior Add "older" $10,000

Comp Better Subtract "garage" $8000

$295,000+$10,000-$8,000= $297,000

When using the income approach to arrive at the estimate of the property's value, the 

capitalization rate would be divided into the:

A. annual gross income.

B. annual effective gross income.

C. annual total expenses.

D. annual net income.

When estimating the value of a property using the income approach, which of the following 

would NOT be considered an operating expense?

A. Property taxes.

B. Insurance costs.

C. Maintenance expenses.

D. Mortgage payments (debt service)

The gross rent multiplier (GRM) on a residential property would be determined by:

A. dividing the sale price by the monthly rental income.

B. dividing the sale price by the fixed costs.

C. multiplying the sale price by the monthly income.

D. multiplying the sale price by the fixed costs. ^

An investor is considering the purchase of a commercial office building. The annual gross 

income is $140,000 and annual expenses are $42,000. The investor wants a 10% investment 

return. What is the estimate market value of the property?

A. $420,000

B. $980,000

C. $1,400,000

D. $1,820,000

B. $980,000

I= $140,000-$42,000= $98,000

R= 10%

V=?

(I/RV)

$98,000/10%= $980,000

An income property is valued at $350,000 when capitalized at 6%. What is the value when 

capitalized at 7%?

A. $210,000.

B. $250,000.

C. $300,000.

D. $425,000.

C. $300,000

IRV (Create 2 Ts)

T1: I=?, R=6%, V= $350,000

I= 6%x $350,000= $21,000

T2: I=$21,000, R=7%, V=?

V= $21,000/7%

=$300,000

An historic mansion has been converted to a ten-unit rental property. When appraising the

property, the appraiser would most likely give the greatest weight to which appraisal approach? 

A. Sales comparison.

B. Cost.

C. Income.

D. Gross rent multiplier

C. Income

note:  The income approach is used for valuation of income-producing properties such as:

1.apartment buildings

2. office buildings

3. retail stores

4.shopping centers

and is based on anticipation. 

The present replacement cost of a house is estimated at $93,000. The estimated depreciation is 

$8,000, and the land is valued at $5,500. What is the estimated property value according to the 

replacement cost method?

A. $85,000

B. $90,500

C. $95,500

D. $106,500

B. $90,500

$93,000-$8000+$5,500= $90,500

When estimating the gross living area (GLA) of a residential property which of the following 

areas would most likely be included? 

A. Finished basement.

B. Heated garage.

C. Covered deck.

D. Upstairs bedrooms with walk-in closets. 

A licensee representing an investor locates an income property that has a net operating income 

of $12,000 a year. If the investor requires a 12% rate of return, what is the property’s value to 

the investor? 

A. $100,000

B. $120,000

C. $144,000

D. $156,000

A. $100,000

I= $12,000

R= 12%

V= value?

(I/r*V)

V=$12,000/12%= 100,000

In determining the replacement cost of a commercial warehouse, an appraiser would MOST 

LIKELY be interested in:

A. square footage of the improvement.

B. cubic footage of the improvement.

C. front footage of the lot.

D. square footage of the lot.

Which of the following terms describes the final step in the valuation process, in which the 

various appraisal approaches are weighed to arrive at a final value estimate?

A. Reconciliation.

B. Averaging.

C. Leveraging.

D. Adjusting

A. Reconciliation

note: Reconciliation is the process by which the validity and reliability of the results of the approaches to value are weighed objectively to determine the appraiser’s final opinion of value.

When interest rates increase on residential home loans, which of the following is MOST 

LIKELY to occur?

A. More new buyers would be looking for homes.

B. Prices on residential properties would remain unchanged.

C. Prices on residential properties would decrease.

D. Prices on residential property would increase.