CMI Exam Questions And 100% Correct Answers
Abatement - An incentive offered by local taxing jurisdictions to encourage companies
to expand operations or locate in their jurisdiction in exchange for an agreement to
abate the full amount of property taxes paid over a period of years by an agreed upon
percent; provided minimum spending thresholds are met.
actual age - Answers the number of years that have passed since the asset was
acquired or constructed (AKA: the historical age and/or chronological age)
age-life method - Answers a method used to estimate total depreciation using the cost
approach, this method does not allocate depreciation among its components (physical,
functional, external)
farmland appraisal technique - Answer a valuation methodology used by a number of
jurisdictions where land user for valid agricultural purposes is valued using more
favorable assessment ratio than non-agricultural land. an estimate of value is based
solely on on the property's agricultural ability
principle of anticipation - Answer a principle based upon the present use of future
income, coupled with the perception that value is generated by the anticipation of future
benefits. one of the principles impacting value
assessment level - Answer % of the properties market value that is to be taxed. For
example in CA the assessment level is 100% and in GA it's 40%
average daily rate - Respond with the room rental rate for a hotel or other short term
hostelry
band of investment method - Respond with A method in which capitalization rates
attributable to components of a capital investment are weighted and combined to derive
a weighted average rate attributable to the total investment
,Residual Technique Building residual technique - Answer a valuation technique where
the land values are known, along with the building and land capitalization rate and NOI.
We would estimate the income attribution to the land once the income to the land is
calculated. We determine the income to the building and calculate the value of the
building.
Capital Asset Pricing Model -Answer a model of relationships between expected risks
and expected return. The model is grounded in the theory that investors demand higher
returns for greater risks. It says that the return on an asset or a security is equal to the
risk-free return, such as the return on a short term treasury security plus a risk premium
capitalization rate - Any rate used to convert income to value. A ratio that states a
relationship between income and value. The rate includes annual capital recovery in
addition to interest components; it may also include an effective tax rate
cash equivalency - The process of converting a non-cash consideration or non-market
financial term into value stated in dollar
flows of cash Answer the periodic or total income assignable to a business enterprise
activity or property rental. Cash flows are used to arrive at an indicated value through
the DCF method
-the excess positive or negative income produced by an investment after deducting
operating expenses and debt service from gross income
classification of property - Answer the description of property based upon its class for
assessment purposes. Consequently, there may be different tax rates and assessment
ratios depending upon the kind of property
classified state - Answer there may be different assessment ratios for various kinds of
properties
non-classified state - Answer the properties are assessed at a single ratio
, Coefficient of dispersion - Answer a statistical measure that studies the degree of
consistency with the individual of valuation of real estate. It reflects the % deviation from
the median ratio. The smaller the coefficient of dispersion, the tighter the individual
ratios are. The median ratio and is more representative of a constant level of valuation.
Whereas the larger the coefficient of dispersion indicates an inconsistent level of
valuation.
- for residential property, 15% or less is good
- for commercial property, 20% or less is good
comparable sales - Answer a shortened term for similar property sales, rentals or
operating expenses used for comparison in the valuation process
Comparative unit method -Answer A method of estimating the dollar value of real
property by multiplying the area or volume of the structure by a cost per unit of area or
volume derived from known costs of similar structures that have been adjusted for time
and physical differences. It usually refers to the application of this method to total
building area. This provides the least amount of detail in the 3 methods of using the cost
approach and is mostly used in the field of property tax. Easier to utilize as data are
more accessible.
Components of asset cost - Answer the individual components that comprise the total
cost for a piece of equipment or property. The components can be either taxable or
non-taxable.
Personal Property: includes cost of equipment, freight, installation, sales tax, special
foundation needed, engineering, warranties etc.
Real Property: items to include land, construction costs, legal fees, architect fees, site
preparation costs, financing costs, commission fees etc.
consigned goods - Answer goods being offered for sale that are not owned by the seller.
The seller will remit some agreed upon percentage of the sales price to the owner upon
sale
contract rent - Answer the amount of rent called for in the lease between the lessor and
the lessee. The use of contract rent implies a "leased fee" appraisal
Abatement - An incentive offered by local taxing jurisdictions to encourage companies
to expand operations or locate in their jurisdiction in exchange for an agreement to
abate the full amount of property taxes paid over a period of years by an agreed upon
percent; provided minimum spending thresholds are met.
actual age - Answers the number of years that have passed since the asset was
acquired or constructed (AKA: the historical age and/or chronological age)
age-life method - Answers a method used to estimate total depreciation using the cost
approach, this method does not allocate depreciation among its components (physical,
functional, external)
farmland appraisal technique - Answer a valuation methodology used by a number of
jurisdictions where land user for valid agricultural purposes is valued using more
favorable assessment ratio than non-agricultural land. an estimate of value is based
solely on on the property's agricultural ability
principle of anticipation - Answer a principle based upon the present use of future
income, coupled with the perception that value is generated by the anticipation of future
benefits. one of the principles impacting value
assessment level - Answer % of the properties market value that is to be taxed. For
example in CA the assessment level is 100% and in GA it's 40%
average daily rate - Respond with the room rental rate for a hotel or other short term
hostelry
band of investment method - Respond with A method in which capitalization rates
attributable to components of a capital investment are weighted and combined to derive
a weighted average rate attributable to the total investment
,Residual Technique Building residual technique - Answer a valuation technique where
the land values are known, along with the building and land capitalization rate and NOI.
We would estimate the income attribution to the land once the income to the land is
calculated. We determine the income to the building and calculate the value of the
building.
Capital Asset Pricing Model -Answer a model of relationships between expected risks
and expected return. The model is grounded in the theory that investors demand higher
returns for greater risks. It says that the return on an asset or a security is equal to the
risk-free return, such as the return on a short term treasury security plus a risk premium
capitalization rate - Any rate used to convert income to value. A ratio that states a
relationship between income and value. The rate includes annual capital recovery in
addition to interest components; it may also include an effective tax rate
cash equivalency - The process of converting a non-cash consideration or non-market
financial term into value stated in dollar
flows of cash Answer the periodic or total income assignable to a business enterprise
activity or property rental. Cash flows are used to arrive at an indicated value through
the DCF method
-the excess positive or negative income produced by an investment after deducting
operating expenses and debt service from gross income
classification of property - Answer the description of property based upon its class for
assessment purposes. Consequently, there may be different tax rates and assessment
ratios depending upon the kind of property
classified state - Answer there may be different assessment ratios for various kinds of
properties
non-classified state - Answer the properties are assessed at a single ratio
, Coefficient of dispersion - Answer a statistical measure that studies the degree of
consistency with the individual of valuation of real estate. It reflects the % deviation from
the median ratio. The smaller the coefficient of dispersion, the tighter the individual
ratios are. The median ratio and is more representative of a constant level of valuation.
Whereas the larger the coefficient of dispersion indicates an inconsistent level of
valuation.
- for residential property, 15% or less is good
- for commercial property, 20% or less is good
comparable sales - Answer a shortened term for similar property sales, rentals or
operating expenses used for comparison in the valuation process
Comparative unit method -Answer A method of estimating the dollar value of real
property by multiplying the area or volume of the structure by a cost per unit of area or
volume derived from known costs of similar structures that have been adjusted for time
and physical differences. It usually refers to the application of this method to total
building area. This provides the least amount of detail in the 3 methods of using the cost
approach and is mostly used in the field of property tax. Easier to utilize as data are
more accessible.
Components of asset cost - Answer the individual components that comprise the total
cost for a piece of equipment or property. The components can be either taxable or
non-taxable.
Personal Property: includes cost of equipment, freight, installation, sales tax, special
foundation needed, engineering, warranties etc.
Real Property: items to include land, construction costs, legal fees, architect fees, site
preparation costs, financing costs, commission fees etc.
consigned goods - Answer goods being offered for sale that are not owned by the seller.
The seller will remit some agreed upon percentage of the sales price to the owner upon
sale
contract rent - Answer the amount of rent called for in the lease between the lessor and
the lessee. The use of contract rent implies a "leased fee" appraisal
