Advanced Residential Applications and Case Studies QUESTIONS WITH COMPLETE SOLUTION

Advanced Residential Applications and Case Studies QUESTIONS WITH COMPLETE SOLUTION Which of these is likely to be considered a complex property? A home with unfinished construction A home located in a transitional neighborhood A home located on a mountaintop with a view of three states Any of these Correct Answer: Any of these An appraisal on a complex single-family property having a transaction value of $2 million would require the services of Correct Answer: A Certified Residential or Certified General Appraiser A property can be complex because of Market conditions The appraiser's level of licensure The proposed loan amount All of these Correct Answer: Market conditions An ordinary-looking home can have a hidden issue that can make the property complex. T or F Correct Answer: True A non-complex property with four residential units and having a transaction value of $750,000 could be appraised by Correct Answer: A Certified General, a Certified Residential, or a Licensed Residential Appraiser Where should an appraiser look to find a definition of a "complex property"? Correct Answer: Code of Federal Regulations Which of these properties would likely be considered complex? A house constructed to resemble a shoe A 5,000 square foot home in a neighborhood of 2,000 square foot homes A typical single-family home with a leaking oil storage tank on the property All of these Correct Answer: All of these An appraisal on a complex property with three residential units and having a transaction value of $450,000 would require the services of Correct Answer: A Certified Residential or Certified General Appraiser How does location factor into the decision on whether or not a property is complex? Correct Answer: It sometimes makes a property complex Fee simple Estate Correct Answer: "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat."2 Life interest Correct Answer: Rights of use, occupancy, and control, limited to the lifetime of a designated party, sometimes referred to as the life tenant. leased fee interest is defined as Correct Answer: "The ownership interest held by the lessor, which includes the right to receive the contract rent specified in the lease plus the reversionary right when the lease expires. leasehold interest is defined as Correct Answer: The right held by the lessee to use and occupy real estate for a stated term and under the conditions specified in the lease."5 Ramon owns a home. He grants his Aunt Marie, the right to live in and occupy the home as long Ramon's father is still alive. This right is best described as a Correct Answer: Life estate pur autre vie Which of these is NOT a factor that can make a property complex? Form of ownership Assessed value Market conditions Property characteristics Correct Answer: Assessed value Sally, the owner, leases a house to Peter, on a long-term lease. What type of interest does Peter now hold in the property? Correct Answer: Leasehold interest John leases a house to Sarah. Sarah's interest is best described as a Correct Answer: Leasehold interest Market conditions which might make a property complex include Values increasing at an exceptional rate Values decreasing at an exceptional rate No sales due to a depressed local economy Any of these Correct Answer: Any of these Life estate Correct Answer: total rights of use, occupancy, and control, limited to the lifetime of a designated party" Eric owns a home. He grants his mother, Martha, the right to live in and occupy the home as long as she is alive. This right is best described as a Correct Answer: Life estate or life interest Typically, the ownership interest appraised in a market value appraisal of a residential property is Correct Answer: Fee simple estate A large detached garage costs $80,000 to construct, but it only adds $25,000 to the value of the property. This is an example of the principle of Correct Answer: Contribution What is an appraiser's best source for information about conventional residential mortgage underwriting guidelines? Correct Answer: Fannie Mae Making an estimate that is beyond the range of known data is Correct Answer: Extrapolation What does the course author mean by the statement "you must be a glass half full appraiser when dealing with complex properties"? Correct Answer: You must concentrate on the data you have, rather than the data you do not have What happens if you are appraising a property and you find there aren't any suitable comparable sales? Correct Answer: You may be able to develop the cost and/or income approaches Extrapolation Correct Answer: involves making an estimate beyond the range of known data. This concept is useful when the subject has characteristics outside the range of typical properties in the area. A home with a living area much larger than any comparable sales is an example where extrapolation would be used. Ch 1, Nontraditional Techniques Which group established levels of appraiser licensure and certification? Correct Answer: The Appraisal Qualifications Board Which type of classification applies to the appraisal of one to four residential units without regard to transaction value or complexity? Correct Answer: The Certified Residential Real Property Appraiser Classification An appraiser's role has been likened to that of a real estate "market doctor". What does this analogy mean? Correct Answer: The appraiser diagnoses the health of the market How many comparable sales should be used in the sales comparison approach for a complex property? Correct Answer: It depends The tenant's possessory interest created by a lease is the definition of what type of interest? Correct Answer: Leasehold interest All of the following are techniques related to the Sales Comparison Approach EXCEPT: Extrapolation Principle of Contribution Qualitative analysis Relative ranking Correct Answer: Principle of Contribution Contribution Correct Answer: is a Cost Approach technique. This principle holds that the value of a component is based on its contribution to the whole property. This is known as the contributory value. USPAP includes five basic rules that apply in all appraisal and appraisal review assignments: Correct Answer: the ETHICS RULE the COMPETENCY RULE the RECORD KEEPING RULE the SCOPE OF WORK RULE the JURISDICTIONAL EXCEPTION RULE COMPETENCY RULE Correct Answer: An appraiser must: (1) be competent to perform the assignment; (2) acquire the necessary competency to perform the assignment; or (3) decline or withdraw from the assignment. In all cases, the appraiser must perform competently when completing the assignment. Competency requires: Correct Answer: the ability to properly identify the problem to be addressed; and the knowledge and experience to complete the assignment competently; and recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment If an appraiser determines that he or she is not competent prior to agreeing to perform an assignment, the appraiser must: Correct Answer: disclose the lack of knowledge and/or experience to the client before accepting the assignment; take all steps necessary or appropriate to complete the assignment competently; and describe, in the report, the lack of knowledge and/or experience and the steps taken to complete the assignment competently. When facts or conditions are discovered during the course of an assignment that cause an appraiser to determine, at that time, that he or she lacks the required knowledge and experience to complete the assignment competently, the appraiser must: Correct Answer: notify the client, and take all steps necessary or appropriate to complete the assignment competently; and describe, in the report, the lack of knowledge and/or experience and the steps taken to complete the assignment competently. Once an appraiser has orally notified the client of any lack of necessary knowledge or experience Correct Answer: It is still necessary to disclose this in the appraisal report The five basic rules of USPAP, which cover all of appraisal and appraisal review assignments, include all of the following EXCEPT JURISDICTIONAL EXCEPTION RULE COMPETENCY RULE CONFIDENTIALITY RULE SCOPE OF WORK RULE Correct Answer: CONFIDENTIALITY RULE An appraiser might overcome a lack of necessary knowledge or experience by Correct Answer: Seeking the assistance of another appraiser If an appraisal assignment cannot be completed competently Correct Answer: The appraiser must turn down or withdraw from the assignment If an appraiser determines he or she lacks necessary knowledge or experience to competently complete an assignment, the appraiser Correct Answer: May still accept the assignment The COMPETENCY RULE is relevant to Correct Answer: The appraisal of all kinds of properties An appraiser is offered an appraisal assignment which he knows is beyond his level of competency. He must notify the client of any lack of necessary knowledge or experience Correct Answer: Prior to accepting the assignment In developing a real property appraisal, an appraiser must: Correct Answer: (a) identify the client and other intended users; (b) identify the intended use of the appraisers opinions and conclusions; (c) identify the type and definition of value and ascertain whether the value is to be the most probable price: (i) in terms of cash; or (ii) in terms of financial arrangements equivalent to cash; or (iii) in other precisely defined terms; and (iv) if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, identify the terms of such financing and any influences on value; Comment: When reasonable exposur Standards Rule 1-2 (b Correct Answer: requires you to identify your client's intended use, because that intended use will have a direct impact on your scope of work decision. Standards Rule 1-1 (a) Correct Answer: states that the appraiser must "be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal" Standards Rule 1-2 (c) Correct Answer: requires you to determine the type and definition of value, and gives some specific direction if the appraisal is of market value. You are appraising a single-family home for a local mortgage lender. When inspecting the property, you discover that the inside of the home has been gutted down to the studs. When should you notify your client about the condition of the property? Correct Answer: As soon as you discover it Most appraisal assignments are based on a _______ effective date. Correct Answer: Current Most definitions of market value require an appraiser to value the property Correct Answer: With no unusual or atypical financing terms Based on financing terms equivalent to cash With no unusual or atypical concessions Why is it important to identify the intended use of an appraisal? Correct Answer: It is essential in making the scope of work decision You are appraising a single-family home for a mortgage lender. At the property, you find that there is a leaking oil storage tank on the property. What should you do? Correct Answer: Notify the client about the problem as soon as is feasible What is the first step in the appraisal process? Correct Answer: Problem identification SCOPE OF WORK RULE "For each appraisal or appraisal review assignment, an appraiser must: Correct Answer: identify the problem to be solved; determine and perform the scope of work necessary to develop credible assignment results; and disclose the scope of work in the report. Scope of work includes, but is not limited to: Correct Answer: the extent to which the property is identified; the extent to which tangible property is inspected; the type and extent of data researched; and the type and extent of analyses applied to arrive at opinions or conclusions. Disclosure Obligations Correct Answer: The report must contain sufficient information to allow the client and other intended users to understand the scope of work performed. The information disclosed must be appropriate for the intended use of the assignment results. Credible Correct Answer: worthy of belief. Appraiser's Peers Correct Answer: Other appra