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17 Cards in this Set

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In arriving at an estimate of value based on selling prices, the appraiser is most interested in the date the?

buyer and seller agreed on the price.

The buyer and seller agree on a price, and the contract is signed. This would indicate the market value of property on that date. Values taken at any later date would defeat the willing seller-willing buyer concept.

In the appraisal of property, the principle of substitution would apply to?

the cost approach, the income approach and the sales comparison approach.

The principle of substitution applies to all three approaches to estimating value.

The maximum possible income an income property can yield is?

gross scheduled income.

Among the choices presented, gross scheduled income would yield the maximum possible income an income property can yield. "Scheduled income" represents the rent currently in effect on the property in question as if the property were fully occupied. If the property has space available, the gross scheduled income would be at the rent levels currently obtainable for the space in the local market. This represents the maximum income the property could achieve.

Which would LEAST likely affect the stabilization of value on a single-family residence in a residential neighborhood?


Newness in itself would not be a stabilizing influence. Zoning regulations and private restrictions generally have as their primary function the protection and stabilization of property values. Availability of public transportation has always been a significant factor influencing property values in most residential areas.

The recognized definition of highest and best use includes the term?

net return.

The BRE defines highest and best use as "that use which at the time of an appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time."

The standards that a state-licensed or state-certified appraiser must follow are found in the?


USPAP stands for Uniform Standards of Professional Appraisal Practice.

All of these statements about depreciation are true EXCEPT?


It is a loss of value from any cause, it can be a loss of value due to wear and tear, it includes all influences that reduce the value of property below replacement cost.


It always is concerned with intrinsic factors but never with extraneous factors.

Depreciation can be from either inherent (inside) or extraneous (outside) factors.

A comprehensive method of estimating a building cost including labor, material, overhead, and profit is considered in which method?

Quantity survey

All building cost estimates should include both direct construction costs and indirect costs. Direct costs are those for material and labor, generally including the contractor's overhead and profit. However, the most comprehensive method of cost estimating is the quantity survey method.

The prudent buyer, in purchasing a new home in a new subdivision tract, would most likely choose a home located?

In the center of the tract.

To avoid the main artery along which the bus runs and to avoid the lights, noise, and congestion of the shopping center, the prudent buyer will look to the center of the tract. The surrounding homes create a buffer from these other influences. A key lot tends to be less valuable than lots that are otherwise comparable.

In doing a feasibility study for residential development, taking into consideration local economic conditions, all of these items would be necessary EXCEPT?


Analysis of economic basis, Target markers and local zoning codes.


Specific data related to the proposed project.

A feasibility study for residential development must identify all economic factors that should be considered in developing detailed for a proposed project. The specific data should be established after the feasibility study.

In the capitalization of net income, the most difficult item for an appraiser to establish is the?

determination of net income.

Net income is more difficult to determine than gross income or effective gross income because it involves attaining information on both fixed and variable expenses. Capitalization rates are often based on comparative data readily available to an appraiser.

Which approach to a value estimate tends to set the upper limit of value?

Replacement cost

The cost to replace a like property usually sets the upper limit of value.

An appraiser is called upon to appraise a property on which there was a building of no value. The appraiser should?

appraise for highest and best use and deduct the cost of demolition.

If there is an existing structure on the property, the appraiser will value the land for its highest and best use as if vacant, but must allow a reduction for the cost of removal of the structure.

The approach in which income is projected to a future date and discounted to today's rates to attract investors relates to a technique known as?

capitalization of income.

Capitalization of (net) income is an appraisal approach in which net income is projected to a future date and discounted to today's rates to attract investors.

When property tax increases and all other items remain the same, an income property?

decreases in value by more than the amount of the taxes.

The property will decrease in value by more than the amount of the taxes based on the reduced annual net income (assume a $500 tax increase and a 10% capitalization rate; loss of value would be $5,000).

The expenditure of dollars necessary for the creation of an improved residential property is called its?


Cost, as it applies to real estate, means the amount expended (labor, material, and/or money) in acquiring or producing the commodity.

In which appraisal approach may an appraiser be asked to predict the future value of a property?


In the income approach (capitalization) an appraiser may be asked to project a series of possible developments on a site in order to establish the highest and best use of the land. In that sense the appraiser would be predicting values of certain hypothetical future developments. Generally, the value conclusion in an appraisal report can be made for any date in the past, but not for any date in the future. Capitalization is based on the principle of anticipation.