Texas SAE Real Estate Appraisal
Exam review with correct answers
$333 (150,000/450) (450X333) - CORRECT ANSWER-A lot with a front footage measuring 450 feet sold for $150,000. What was the cost per front foot? Round to the
nearest dollar.
$348 ($195,000/560)
(348X560) - CORRECT ANSWER-A lot with dimensions of 560 feet x 600 feet sold for $195,000. What was the cost per front foot?
$461,538 (The formula is $60,000 ÷ .13.) - CORRECT ANSWER-An appraiser is using the direct capitalization method to value an investment property, using the
following figures:
Net operating income = $60,000
Capitalization rate = 13%
Using the formula of NOI ÷ R = V, what's the market value?
1/3 (2X5=10 5X6=30 10/30) - CORRECT ANSWER-What's 2/5 x 5/6?
10-unit apartment building is being appraised. The annual NOI is $50,000. The value of the land is $75,000 and the land capitalization rate is 8%. The building
capitalization rate is 12%. - CORRECT ANSWER-Building Residual Formula
To calculate the total property value, add the land value and the building value together.
1.Land value x land cap rate = land NOI
$75,000 x 0.08 = $6,000 (In other words, $6,000 of the property's NOI can be attributed to the land.)
2. Total NOI - land NOI = building NOI
$50,000 - $6,000 = $44,000 (In other words, $44,000 of the property's NOI can be attributed to the building.)
3. Building NOI ÷ building cap rate = building value
$44,000 ÷ 0.12 = $366,667
4. Land value + building value = total property value
$75,000 + $366,667 = $441,667
10X (100,000/10,000) - CORRECT ANSWER-Using the gross income multiplier (GIM) valuation method, a property's sales price is divided by its gross income. If a
property has a sales price of $100,000 and gross income of $10,000, what is its GIM?
13% capitalization rate ($90,000 ÷ $700,000 = 0.13) (NOI ÷ V = R) - CORRECT ANSWER-The net operating income of a potential investment property is $100,000. A
comparable property sold recently for $700,000. It had an NOI of $90,000. What's the capitalization rate?
62.5 (250X.25) - CORRECT ANSWER-What's 25% of 250?
A fourth system sometimes used is - CORRECT ANSWER-Monument System -are permanent land markers, and are often used in the metes and bounds system, as
well. The monument system uses as its point of beginning a monument, which is typically a permanent physical, human-made, or natural feature.
A parcel of land, the structures on it, and shared common areas - CORRECT ANSWER-Ownership in a planned unit development consists of ______.
A simple formula that can be used to express the quantity survey method is: - CORRECT ANSWER-Direct costs + Indirect costs + Entrepreneurial profit = Total
reproduction cost new.
Abstraction method
Total sales price - cost of improvements less depreciation = land value
which is sometimes used for large parcels of land when there are few or no comparable sales available. It's not considered as accurate as the sales comparison method. -
CORRECT ANSWER-What method of land valuation uses the following calculation? Total sales price - cost of improvements less depreciation = land value
Abstraction Method - CORRECT ANSWER-A method of valuing land. The indicated value of the improvement is deducted from the sales price. when comparable vacant
land sales are hard to come by, like in rural areas.
Land value = total sales price - cost of improvements less depreciation
Total sales price = $400,000 - $40,000 (cost of improvements less depreciation) = $360,000 (value of land)
Abstraction method - CORRECT ANSWER-The ______ of land valuation is sometimes used when there's little comparable sales data available and large parcels of land
are involved.
Accrued Depreciation - CORRECT ANSWER-Which part of the cost approach equation is considered the most difficult part to estimate accurately?
__is considered the most difficult part of the cost approach equation to estimate accurately, partially because it can vary c onsiderably based on specific market conditions
as of the appraisal date. In addition, a buyer's measure of depreciation can also vary quite a bit, depending on the price range of homes in the local area.
aka CC&Rs, as you know—which also include both of the following:
Restrictions are one-third of conditions, covenants, and restrictions - CORRECT ANSWER--Restrictions are one-third of conditions, covenants, and restrictions
-Conditions, which are contingencies in which a property might be won or lost if the condition is violated.
-Covenants, which are agreements between two or more parties, and therefore enforceable in a court of law. If the agreement is violated, ownership—or tenancy, in the
case of a lease—can be terminated. Also, property owners who are inconsistent in enforcing their rights can lose their rights through the doc trine of laches.
Amount allocated to land: $200,000 ÷ 4 = $50,000 (or 25% of $200,000) - CORRECT ANSWER-A newly constructed home sells for $200,000. The relationship of land to
building value in the market is one to three. This means the area's building values are worth three times the value of land. Using this method, the amount allocated to the
land will be one of the four total parts, or 25%.
, An encroachment occurs - CORRECT ANSWER-when part of an improvement to the land (a building, fence, tree, etc.) extends over that property line into the next
property.
An estimate of value for a specific purpose, party, and property as of a specific date - CORRECT ANSWER-What is the definition of an appraisal?
Annual dollars per square foot - CORRECT ANSWER-An appraiser is comparing income from a multi-tenant office building to comparable properties, so he converts the
income for each property to ______.
Anticipated future income - CORRECT ANSWER-When discounted cash flow analysis is used, what's discounted?
_is discounted to a present value when this method is used.
Appraisal Standards Board (ASB) - CORRECT ANSWER-one of the provisions of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)
was to create the
Appraisal Standards Board (ASB) - CORRECT ANSWER-writes, amends, and interprets the Uniform Standards of Professional Appraisal Practice (USPAP), which
outlines the ethical and performance standards that appraisers in the U.S. are to follow.
Appraiser - CORRECT ANSWER-Which professional is hired by the buyer and lender to give an opinion of value of the property?
Appraiser Independence Requirements
Fannie Mae instituted Appraiser Independence Requirements for all federally related transactions. - CORRECT ANSWER-The ______ stipulate that an appraiser for a
federally related transaction must be licensed in the state where the property is located and also be knowledgeable about the local market.
Appraiser Qualifications Board (AQB) - CORRECT ANSWER-establishes minimum education and experience requirements.
Appraiser Trainee - CORRECT ANSWER-The _________ is required to perform appraisals under the supervision of an appraiser who has qualifications consistent with
the type of property under appraisal.
Appraiser trainees
minimum federal qualifications
states may establish more stringent requirements.
Appraisers must be licensed in the state where they work. - CORRECT ANSWER-Must have minimum of 75 hours of appraisal education. No experience required
experience is acquired under supervision by a certified residential or certified general appraiser. Scope of practice Any pro perty that the supervising appraiser is qualified
to appraise
Appraisers use the set of procedures defined in USPAP to develop their appraisals, but USPAP is more than that - CORRECT ANSWER-Its intent is to protect consumers
by ensuring an ethical, systematic process is used to arrive at valid appraisal values.
Blueprint - CORRECT ANSWER-A visual depiction of a building, including room layout and locations of doors and windows, is called what?
Building residential technique - CORRECT ANSWER-If the value of the land is known, but the value of the building isn't, which residual income technique would be used?
Building Residual Formula - CORRECT ANSWER-Here's how the process works:
1. Multiply the land value by the land capitalization rate to get the amount of NOI attributable to the land.
2. Subtract the land NOI from the total NOI to determine the amount of NOI attributable to the building.
3. Divide the building NOI by the building capitalization rate to determine the value of the building.
4. To calculate the total property value, add the land value and the building value together.
Note: The appraiser calculates an annual amount needed to cover the expected replacement of structures and systems that will eventually wear out. This is called the
reserves for replacement.
Building Residual Technique - CORRECT ANSWER-calculates how much residual income the building alone earns, while also providing a value estimate for the building.
It's used when land values are available or can easily be determined, but the building value is difficult to estimate.
appraiser must know:
The land value
The land capitalization rate and building (aka improvements) capitalization rate (based on market estimates)
The amount of NOI the entire property generates in a year (building and land together)
Building specifications
explain the blueprint and any features that may not be visible on that building plan. - CORRECT ANSWER-Which of these is a written description of a blueprint?
Built-in sandbox
Fixture attached to the property - CORRECT ANSWER-Maggie, an appraiser, has been asked to do an appraisal on a specific property that has been put up for sale.
Maggie is identifying fixtures in the backyard. Which of the following will she mark as a fixture in her report?
Capitalization Rate - CORRECT ANSWER-is the expected rate of return on an investment
Capitalization Rates and Risk - CORRECT ANSWER-Lower-risk investments are more sought after, and are valued higher than their high-risk counterparts. So, an
investment with a higher capitalization rate involves higher risk, which results in a lower value and a lower selling price. Similarly, an investment with a lower capitalization
rate involves lower (or less) risk, which results in a higher value and a higher selling price.
Certified General Real Property Appraiser minimum qualifications - CORRECT ANSWER-300 hours of certified residential real property appraiser courses and other
required courses; Bachelor's degree or higher
Minimum of 3,000 hours (at least 1,500 in non-residential properties) of acceptable experience obtained over at least 18 months
Scope of practice All types of real property
Certified Residential Real Property Appraiser minimum qualifications - CORRECT ANSWER-200 hours consisting of 150 hours licensed real property curriculum, plus an
additional 50 hours of required courses; bachelor's degree or higher in any subject
Minimum of 1,500 hours of applicable experience obtained over at least 12 months
Residential: any one- to four-unit properties with no value or complexity restrictions; vacant land to be developed as one- to four-unit residential property; no subdivisions
requiring development analysis
Co-ownership - CORRECT ANSWER-Title ownership held by more than one person, also called concurrent ownership.
Complete the cost approach section of the URAR form - CORRECT ANSWER-As part of completing an appraisal using the cost approach method, what must appraisers
do?
Conditions Enforcement - CORRECT ANSWER-The property/title can revert to the owner—the grantor—if the property owner violates any stated contingencies.
Condo Unit - CORRECT ANSWER-Which of the following properties requires the appraiser to include information about the monthly fees charged by the property
management, the location of the subject property within a community, and the areas considered private or public?
Contingent Remainderman - CORRECT ANSWER-A remainderman whose legal name is not specified (such as, first born child)
Conventional Life Estate - CORRECT ANSWER-Created by a property owner who will then grant or transfer the property to an individual for a lifetime. The recipient of th e
life estate can use and even hold title to the property during their lifetime.
Convert monthly rental income to annual dollars per room
GRM and GIM are methods of capitalizing income. Finding market rent involves comparing properties based on a common unit of m easure, which for residential
properties is by the room. - CORRECT ANSWER-An appraiser is working to find the market rent for a 10-unit apartment building. In order to compare the subject property
to similar properties, she will ______.
