rep ch 11

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  1. 1. The calculation of effective gross income reflects:
    A. depreciation
    B. vacancies and collection losses
    C. repairs and operating costs
    D. taxes
    • Question #1
    • Answer: B
    • Explanation: Effective gross income is calculated by subtracting vacancies and collection losses from the gross rental income.
  2. 2. Which of the following causes the greatest loss of property value?
    A. Wear and tear
    B. Obsolescence
    C. Lack of proper maintenance
    D. Physical deterioration
    • Question #2
    • Answer: B
    • Explanation: Functional and economic obsolescence cause much greater losses in property value than any type of physical deterioration.
  3. 3. The principle of substitution may be applied to which of the following appraisal methods?
    A. Cost approach
    B. Sales comparison approach
    C. Income approach
    D. All of the above
    • Question #3
    • Answer: D
    • Explanation: Substitution applies to all three appraisal methods.
  4. Question #4
    Answer: D
    Explanation: The income approach should be used, since the restaurant is a commercial property.
    • 4. What appraisal method should be used to determine the value of a restaurant building?
    • A. Sales comparison
    • B. Market data
    • C. Cost
    • D. Income
  5. Question #5
    Answer: B
    Explanation: Indirect methods of estimating depreciation are considered more accurate because they involve taking information from the market.
    • 5. To measure accrued depreciation most accurately, an appraiser should use:
    • A. direct methods
    • B. indirect methods
    • C. the straight-line method
    • D. the engineering method
  6. Question #6
    Answer: C
    Explanation: The purpose of an appraisal is usually to determine the value of a property. The "function" or "use" of an appraisal is the reason for having the property appraised. So the purpose and function of an appraisal are never the same.
    • 6. With real estate appraisals, it is important to differentiate between the purpose of an appraisal and:
    • A. the appraisal process overall
    • B. appraisal principles
    • C. the function or use of the appraisal
    • D. owner's amenities
  7. Question #7
    Answer: C
    Explanation: Management expenses are the income property expenses most easily overlooked.
    • 7. A potential purchaser of an income property is most likely to overlook what property expense?
    • A. Insurance
    • B. Depreciation
    • C. Management expenses
    • D. Risk
  8. Question #8
    Answer: D
    Explanation: The capitalization rate is used in the income approach, not the cost approach.
    • 8. Which of the following items would not be included in an appraisal using the cost approach?
    • A. Depreciation
    • B. Cost of improvements new
    • C. Land value
    • D. Capitalization rate
  9. Question #9
    Answer: A
    Explanation: Appraisers should take trends into account when appraising properties. A trend is typically a series of related changes with a chain of causes and effects.
    • 9. To an appraiser, a trend is:
    • A. related changes with discernable causes and effects
    • B. slight changes not included in the appraisal analysis
    • C. major zoning changes in government regulations
    • D. None of the above
  10. Question #10
    Answer: A
    Explanation: The gross multiplier method does not involve appraising the land. The value estimate is determined using the sale prices of comparable properties and the subject property's rental income.
    • 10. An appraiser would be least concerned with a separate site valuation when using which approach to value?
    • A. Gross multiplier method
    • B. Capitalization
    • C. Sales comparison
    • D. Income
  11. 11. An appraiser adjusts a rental property's gross income by deducting a vacancy factor. The resulting figure is the property's:
    A. net income
    B. taxable income
    C. gross income
    D. effective gross income
    • Question #11
    • Answer: D
    • Explanation: The effective gross income is calculated by deducting a vacancy factor and any collection losses from the gross income.
  12. 12. Where would the property value be stated in a narrative appraisal report?
    A. Neighborhood description
    B. Introduction
    C. Description of use
    D. Purpose of appraisal
    • Question #12
    • Answer: D
    • Explanation: A narrative appraisal report typically begins with a section containing the purpose of the appraisal and the final estimate of value.
  13. 13. Two properties, each worth $50,000, are combined into one larger parcel that has a value of $120,000. This increase in value is called:
    A. blockage
    B. appurtenance
    C. plottage
    D. appreciation
    • Question #13
    • Answer: C
    • Explanation: An increase in value that results when two or more contiguous properties are combined into a more valuable parcel under single ownership is called plottage. The increase in value is due to improved usability. This often occurs where larger parcels are needed for industrial or commercial uses.
  14. 14. Value is affected by all but which of the following?
    A. Physical and environmental factors
    B. Government regulations
    C. Private restrictions
    D. Economic trends
    • Question #14
    • Answer: C
    • Explanation: Social ideals and standards, economic trends, government regulations, and physical and environmental factors are the major forces affecting value.
  15. 15. In appraisal, "forecasting" involves estimating the value of a property based on its future utility by:
    A. predicting future market changes with certainty
    B. using the past as an absolute guide
    C. using the past as a guide along with adjustments for changing future conditions
    D. None of the above
    • Question #15
    • Answer: C
    • Explanation: The appraiser should use the past as a guide to the future, but make adjustments or future projections.
Card Set:
rep ch 11
2011-12-13 04:30:25
rep 11

rep ch 11
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