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VALUATION AND APPRAISAL II QUESTIONS WITH ANSWERS.
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VALUATION AND APPRAISAL IIQUESTIONS WITH ANSWERS.
When would the cost approach to appraisal be most appropriately used? ANS - new property.
The cost approach to appraisal is most appropriate for appraising new property.
A lesser-valued property will be worth more because of the presence of a greater-valued property
nearby. This is known as the principle of: ANS - progression.
The principle of progression means a lesser-valued property will be worth more because of the presence
of greater-valued properties nearby.
When appraising income producing properties, the appraiser is concerned with the effective gross
income. Which of the following with respect to effective gross income is the appraiser concerned with?
a. functional obsolescence.
b. physical deterioration.
c. interest on the loans.
d. vacancy. ANS - correct answer is d. vacancy.
The effective gross income is the total annual income from the property minus any vacancy or rental
losses.
The word value as used in appraising real property is most nearly comparable to: ANS - worth.
What a property is said to be worth is its value.
Of the following, which is a correct statement concerning the cost method of appraisal?
,a. it sets the upper limit of value.
b. little difficulty is encountered in estimating the replacement cost of new structures.
c. serious difficulties often arise in obtaining an accurate computation of accrued depreciation.
d. all of the above are correct statements. ANS - correct answer is d. all of the above are correct
statements.
The cost approach tends to set the upper limit of value for a property. It is not difficult to estimate the
replacement cost of new structures, but it is difficult to estimate depreciation in older buildings. The
cost approach is also used with unique or one of a kind buildings where it is difficult to find comparables.
A good example of the most incurable functional obsolescence is: ANS - closely aligned pillars inside of
a store.
In order to correct closely aligned pillars one could run into major structural strength situation. This
could be quite costly.
An appraisal has been requested for a residential home. The home is actually 10 years old but because it
has been exceptionally cared for, the appraiser places its age at 6 years. This would be known as: ANS -
effective age.
Actual age is the real age of the building. Effective age is not determined by the actual age of a building,
but by its condition and usefulness.
In the appraisal field of real estate there are many ways an appraiser can arrive at a capitalization rate.
Which of the following could be used to determine a capitalization rate? ANS - the band of investment
theory.
The band of investment theory is a method of developing a capitalization rate by applying mortgage
rates and equity rates of comparable properties.
The amount of money left over after an owner of an income producing property has paid all of his
expenses, including principal and interest payments, is called: ANS - cash flow.
, definition: cash flow is the net income generated by a property before depreciation and other non cash
expenses.
Which of the following is not classified as obsolescence?
a. poor floor plan.
b. massive cornices.
c. old fashioned kitchen fixtures.
d. worn out roof. ANS - correct answer is d. worn out roof.
This is an example of physical deterioration.
An appraiser, in determining the value of real property, would give consideration to which of the
following?
a. the desire of a person for the desired thing
b. the relationship of the value of the property in exchange for other property.
c. effective demand, as evidenced by purchasing power and relative scarcity.
d. all of the above. ANS - correct answer is d. all of the above.
All of these have an influence on value.
How are the improvements and the land valued when using the cost approach? ANS - separately by
more than one approach.
The value of the land is determined using the principles of substitution and the value of the
improvements is determined using the cost approach.
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