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Real Estate Investment FINA 4201 Quiz 1-5 questions with answers
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Real Estate Investment FINA 4201 Quiz 1-5 questions with answers
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Real Estate Investment FINA 4201 Quiz1-5 questions with answers
Real estate appraisers generally distinguish among the concepts of market value, investment
value, and transaction value. Which of the following statements best describes the concept
of market value?
A. It is an estimate of the most probable selling price of a property in a competitive market.
B. It is the value a particular investor places on a property.
C. It is the price we observe when a property is sold.
D. It is the maximum amount that a seller would be willing to accept. - ANSWERS✔✔ A. It
is an estimate of the most probable selling price of a property in a competitive market.
In real estate markets, a transaction occurs only when the investment value of the buyer
exceeds the investment value of the seller. The buyer's investment value is the ________ that
he or she would be willing to pay for a particular property, while the seller's investment
value is the _______ that he or she would be willing to accept.
A. minimum; minimum
B. minimum; maximum
C. maximum; minimum
D. maximum; maximum - ANSWERS✔✔ C. maximum; minimum
Which of the following approaches for calculating the market value of a property involves
estimating the dollar value associated with replacing the property new, as well as
determining the loss in value due to physical, functional, and external obsolescence?
A. income approach
,B. sales comparison approach
C. cost approach
D. investment approach - ANSWERS✔✔ C. cost approach
The process in which an appraiser weighs the relative reliability of value indicators for the
property being valued is more commonly referred to as:
A. depreciation
B. deterioration
C. reproduction
D. reconciliation - ANSWERS✔✔ D. reconciliation
Adjustments for physical characteristics are intended to capture the dimensions in which a
comparable property differs physically from the subject property. If the only physical
difference between the subject property and the comparable is that the comparable does not
have a fireplace, which of the following adjustments should take place?
A. The transaction price of the comparable property should be adjusted downward.
B. The transaction price of the comparable property should be adjusted upward.
C. The transaction price of the subject property should be adjusted downward.
D. The transaction price of the subject property should be adjusted upward. - ANSWERS✔✔
B. The transaction price of the comparable property should be adjusted upward.
The cost approach to valuation assumes the market value of a new building is similar to the
cost of constructing it today. Which of the following terms refers to the expenditure required
to construct a building of equal utility using modern construction techniques, materials, and
design that eliminates outdated aspects of the structure?
A. reproduction cost
, B. replacement cost
C. fixed cost
D. variable cost - ANSWERS✔✔ B. replacement cost
At the conclusion of the traditional sales comparison approach to valuation, the appraiser
evaluates and reconciles the final adjusted sale prices into a single value for the subject
property. This single value is commonly referred to as:
A. indicated value
B. investment value
C. transaction value
D. replacement value - ANSWERS✔✔ A. indicated value
Accrued depreciation is the difference between the current market value of a building and
the total cost to reproduce it new. One reason for this difference is related to changes in
tastes, preferences, technical innovations, or market standards. This is commonly referred to
as:
A. physical deterioration
B. functional obsolescence
C. external obsolescence
D. tax depreciation - ANSWERS✔✔ B. functional obsolescence
While it is often sufficient to rely on informal methods of estimating the market value of real
estate assets, the complexity and large dollar value of many real estate decisions dictate that
formal estimates based on methodical collection and analysis of relevant market data should
be utilized. The unbiased written estimate of the market value of a property is commonly
referred to as a(n):
A. arm's length transaction
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