REE 4103 EXAM 2 QUESTIONS WITH
REVISED ANSWERS – UPDATED
When reconciling the adjusted sales price of comparables, the greatest emphasis
should be given to: - Answer-none of the above
You are analyzing a sale in which the mathematical calculation of cash equivalency
calls for a $10,000 downward adjustment. However, by use of several paired data sets,
you find that the market only recognizes a $4,000 downward adjustment. What is the
adjustment for financing? - Answer-$4,000
Valuation assignment for the subject property is for both the building and land.· A
Comparable Office Bldg owned and sold separately from its site (land), which is subject
to a 99-year ground lease.
· The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or
$50/sf.· Assume the annual ground rent is $250,000, which is consistent with the market
· Market Land Capitalization rate is 11%. If no other adjustments were made except for
the value of the land, what would be the final adjusted sales price of this comparable? -
Answer-$6,272,727.27
A conditions of sale adjustment reflects - Answer-The differences between the
motivations of the seller and buyer on the date of sale of a comparable and the typical
motivation of buyers and sellers as described in the definition of value
Comparable sale sold for $142,562 with down payment of 7% Seller financed mortgage
for a 41-year term pmt @ 4% interest compounded monthly with a 12 year
balloon.Homes in area are typically held for 41 years
Market derived interest rate is 11%.What is the cash equivalency sale price of the
comparable? - Answer-
Consider a 10,000 sf strip shopping center that sold five years ago for $300,000 and
then sold again recently for $345,000.The indicated average annual appreciation of the
shopping center would be? - Answer-$9,000
Comparable sale sold for $150,000 with down payment of $30,000 · Seller financed
mortgage for a 30-year term @ 7% interest compounded monthly.
· Homes in area are typically held for 30 years
· Market derived interest rate is 9% compounded monthly. (Implicit in this method is the
assumption that the difference between the market interest rate and the contract rate
will remain constant for the entire 30 years)
What is the adjusted sale price after taking into consideration financing terms? -
Answer-$129,222.04
,Valuation assignment for the subject property is for both the building and land.· A
Comparable Office Bldg owned and sold separately from its site (land), which is subject
to a 99-year ground lease.
· The comparable 80,000 sf bldg sold (separately from the land) for $4,000,000, or
$50/sf.· Assume the annual ground rent is $150,000, which is consistent with the
market· Market Land Capitalization rate is 11%.
If no other adjustments were made except for the value of the land, what would be the
final adjusted sales price of this comparable? - Answer-$5,363,636.36
In a market value appraisal assignment, the appraiser found prices were increasing at
about 3% per year compounded annually. The appraiser found several comparable
sales but they were not very recent transactions. She decided to make an adjustment to
compensate for price increases in this market. These adjustments are called - Answer-
market conditions adjustments
Cost is: always the same as value, always the same as price or never exceeds value -
Answer-none of the above
Replacement cost new refers to the cost of: - Answer-constructing a building that would
have similar or equivalent utility
Depreciation is - Answer-The difference between the reproduction or replacement cost
and the market value of the improvements as of the effective date of appraisal
A building that is too large for the neighborhood is an example of functional
obsolescence in the form of overimprovement. Another example of functional
obsolescence is: - Answer-an awkwardly shaped floor plan in an office building
Book depreciation refers to - Answer-Losses in value from an accounting perspective on
the balance sheet of a business tax return
Which principle of value best affirms that the maximum value of property generally
cannot exceed the cost of its replacement - Answer-substitution
Direct costs are - Answer-Expenditures for the labor and material used in the
construction of the improvements
The cost approach is typically very effective when - Answer-The improvements are
newer and represent the highest and best use of the site
In the cost approach the site is valued as if it were - Answer-Vacant and available for
development to its highest and best use
Reproduction cost is: - Answer-the cost new of an exact replica of the subject
, Entrepreneurial incentive is - Answer-The amount of money entrepreneurs expect to
receive as a reward for their efforts
In the cost approach, the valuation of land involves the principle of: - Answer-Highest
and Best use
The market loss caused by depreciation in an older structure may be offset by all of the
following except - Answer-strong supply relative to demand
The cost approach is most applicable when the property being appraised: - Answer-has
relatively new improvements that represent the highest and best use of the land
The cost approach is not useful for - Answer-checking value approaches
In the subject property's neighborhood, improved properties are selling for prices in a
range of $140,000 to $160,000. Research reveals a typical land value-to-total property
value ratio of 20%. What is the range of value for a similar site in this neighborhood? -
Answer-$28,000 to $32,000
Land can be valued by - Answer-Sales comparison, land residual, allocation, and
extraction
You are asked to appraise a vacant building lot. The neighborhood is about 75% built
up. Most lots in the area are from 55 to 65 feet wide; the lot under appraisal is 60 feet.
Comparable sales indicate that lots are selling at $120 to $150 per front foot. What is a
good estimate of the price range for this lot? - Answer-$7,200 to $9,000
Residential sites are often valued using - Answer-A price per square foot
The subdivision development analysis technique is - Answer-Is very applicable when
the main criteria of value is the number of lots that can be developed out of a parcel of
land
Price per front foot is - Answer-a physical unit of comparison
The land valuation technique that relies on an analysis of ratios of land value to property
value is - Answer-allocation
Land is always valued considering - Answer-Its highest and best use as though vacant.
To estimate its market value, the land under an improved property is best compared to
sales of vacant land that - Answer-Have the same or similar highest and best use
If the site represents 40% of the total value in a particular neighborhood, how much land
value would be allocated from a $200,000 sale of a single family home? - Answer-
$80,000.00
