Residential Market Analysis and Highest & Best Use Mckissock Questions with Correct Solutions

A property owner constructs a six-car garage at a cost of $80,000. It only adds $40,000 in value to the property. What economic principle does this best demonstrate? - Contribution What are the four agents of production? - land, labor, capital, coordination The principle of contribution is most closely associated with: - the Sales Comparison Approach (The contributory value of a given amenity is the public's perception of its actual contribution to value when considering the overall value of the property as a whole) When supply is higher than demand, the value of a product: - declines Finish the sentence: Profit encourages ___________. - competition What is another name for the principle of inclining and declining periods? - Integration and Disintegration An appraiser must value the land and the improvements based on the same use. Which economic principle or theory does this demonstrate? - Consistent Use (The Consistent Use Theory holds that the land and the buildings must all be valued considering the same highest and best use of the property. The appraiser cannot value the land under one use and the improvements under another use) When analyzing the life cycle for a neighborhood, which stage is characterized by equilibrium of supply and demand? - Stability The principle of surplus productivity is associated with which approach to value? - Income Approach What does USPAP say about market value? - appraisers are cautioned to identify the exact definition of market value and its authority What type of value recognizes the cost to replace the improvements but does not include the land value? - insurance value The amount of money that a financial institution is willing to lend the borrower on a particular property is the: - loan value Which statement is TRUE about property purchase loans and down payments? - The greater the down payment, the less chance the borrower will default. A single-family home is situated in a growing commercial area. The highest and best use is to raze the home and construct a commercial building. A client asks an appraiser to value the property as a single-family home, and not under its highest and best use as a commercial site. What type of value is this client asking for? - value in use What type of value is based on the property's current use? - value in use Why does insurance value typically not include the value for the land? - land typically cannot be destroyed Assessed value is also known as: - ad valorem value (assessing property owners taxes) Most real property appraisal assignments are intended to develop an opinion of: - market value What type of value includes an operating business with both tangible and intangible assets? - going concern value The market value of a property is $255,000 and the loan-to-value ratio is 70%. What is the loan value for this property? - $178,500 What type of value is generally considered equivalent to market value? - value in exchange How is the type of value used in an appraisal assignment determined? - the appraiser identifies the type of value, based on the intended use of the appraisal The definition of market value included in USPAP Advisory Opinion 22: - is only an example When valuing a piece of real property, the appraiser is really valuing: - the rights of ownership In relation to real property, the term SLUGER refers to: - bundle of rights Which stage of the life cycle does not happen in every neighborhood or property? - Renewal When analyzing the life cycle for a neighborhood, what problem is often faced by appraisers? - the growth cycle may have passed before they realize it Data that has already been compiled and is deemed to be reliable is: - secondary data source The subject property's assessment record would be considered ________ data. - specific data The comparable sales used in an appraisal assignment are considered ______ data. - specific data What type of data would pertain to a specific property being appraised? - specific data Which of these would NOT be an example of general data? - site size Most specific data are gathered from a: - primary data source In the purchase of a residential property, how does the principle of anticipation apply to the buyer's actions? - buyer typically anticipates the value of the property will increase What does USPAP state about cost? - it is a fact, or an estimate of fact Once the appraiser has gathered all the data, the next step in the process is: - isolating the information that is relevant to the assignment When writing an appraisal report, charts and graphs may be used to replace parts of the narrative explanation. - True In order to produce credible assignment results, an appraiser should: - verify all data What is the likely result of an announcement of the closing of an industrial plant that is a region's major employer? - decreasing property values When we refer to "purchasing power", which question are we asking? - Are prospective purchasers able to purchase this property? In a "seller's market", an appraiser is most likely to find: - a small number of properties available