IAAO 300 COMPLETE COURSE REVIEW 2024 LATEST
EXAM 250 QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES (VERIFIED ANSWERS) |
ALREADY GRADED A+
Scope of Work Rule - ANSWER: 1. Identify the problem to be solved
2. Determine and perform the scope of work necessary to develop credible
assignment results
3. Disclose the scope of work in the report
Scope of work acceptability - ANSWER: When it meets or exceeds:
1. Expectations of parties who are regularly intended users for similar assignments
and 2. What an Appraiser's peers actions would be in performing the same or similar
assignments
Economic Basis of Model Building - ANSWER: Supply factors relate to availability and
thus reflect such things as Cost, interest rates, and economic conditions. Demand
factors include characteristics to buyers, such as construction quality, condition, and
location.
Basic Cost Model Structure - ANSWER: MV = LV + BV
Basic Sales Comparison Basic Model Structure - ANSWER: MVs = Sc + ADJc
Basic Income Models - ANSWER: 1. NOI Model
MV = NOI / OAR
2. GI Model
MV = GI x GIM
Model Development - ANSWER: 1. Specification
2. Calibration
3. Quality Assurance
Specification - ANSWER: What data to include in the model and in what format
1. Additive
2. Multiplicative
3. Hybrid (generic)
Additive Model Structure - ANSWER: Each of the variables are independent from the
other variables. A change in one variable does not directly impact any other variables
MV = ($/sqft x sqft) + ($/plumbing fixture x #fixtures) + ($/car stall x #/cars) + ...
, Multiplicative Model Structure - ANSWER: Each of the variables are interdependent.
Any change to one variable will have an impact on all of the other variables.
Hybrid (generic) Model Structure - ANSWER: Combines both additive and
multiplicative model structures
Finding Net Operating Income (NOI) - ANSWER: 1. Potential Gross Income (PGI) 100%
occupancy at market rent (market rent is the prevailing rent in the open market, not
the rent called for in a lease)
2. Minus Vacancy and Collection Loss (V&C) - any money lost from units not being
rented or from people not paying rent
3. Plus Miscellaneous Income (Misc Inc) - income from secondary sources, such as
clubhouse rentals, health club memberships, storage rentals, and vending or laundry
machines
4. Equals Effective Gross Income (EGI) - this 100% of the actual money made by the
real property operation.
5. Minus Allowable Expenses and Reserves (Exp & Res) - expenses that have to do
with the operation of the real estate and not the business. Reserves are items that
will wear out before the bone structure, such as carpet, roof, air conditioners, etc.
Reserves are expensed on a prorated basis (ie. Carpet lasts 5 years so if it costs
$2, = $400 allowable deduction per year)
6. Equals Net Operating Income (NOI) - the income remaining after expenses and
reserves. This is the "I" in the IRV formula
Capitalization Rate - ANSWER: The term capitalization means to convert income into
an estimate of value. A capitalization rate is used in converting net income (NOI) into
an estimate of value.
Direct Capitalization Rate - ANSWER: Net operating income (NOI) divided by the
market value (sale price) of the property.
IRV Formula - ANSWER: The equation to find value from net operating income and a
capitalization rate.
1. I / R = V
2. I / V = R
3. R x V = I
Gross Income (GI) - ANSWER: Market rent at 100% occupied. Also known as PGI.
Gross Income Multiplier (GIM) - ANSWER: Sale price divided by gross income.
EXAM 250 QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES (VERIFIED ANSWERS) |
ALREADY GRADED A+
Scope of Work Rule - ANSWER: 1. Identify the problem to be solved
2. Determine and perform the scope of work necessary to develop credible
assignment results
3. Disclose the scope of work in the report
Scope of work acceptability - ANSWER: When it meets or exceeds:
1. Expectations of parties who are regularly intended users for similar assignments
and 2. What an Appraiser's peers actions would be in performing the same or similar
assignments
Economic Basis of Model Building - ANSWER: Supply factors relate to availability and
thus reflect such things as Cost, interest rates, and economic conditions. Demand
factors include characteristics to buyers, such as construction quality, condition, and
location.
Basic Cost Model Structure - ANSWER: MV = LV + BV
Basic Sales Comparison Basic Model Structure - ANSWER: MVs = Sc + ADJc
Basic Income Models - ANSWER: 1. NOI Model
MV = NOI / OAR
2. GI Model
MV = GI x GIM
Model Development - ANSWER: 1. Specification
2. Calibration
3. Quality Assurance
Specification - ANSWER: What data to include in the model and in what format
1. Additive
2. Multiplicative
3. Hybrid (generic)
Additive Model Structure - ANSWER: Each of the variables are independent from the
other variables. A change in one variable does not directly impact any other variables
MV = ($/sqft x sqft) + ($/plumbing fixture x #fixtures) + ($/car stall x #/cars) + ...
, Multiplicative Model Structure - ANSWER: Each of the variables are interdependent.
Any change to one variable will have an impact on all of the other variables.
Hybrid (generic) Model Structure - ANSWER: Combines both additive and
multiplicative model structures
Finding Net Operating Income (NOI) - ANSWER: 1. Potential Gross Income (PGI) 100%
occupancy at market rent (market rent is the prevailing rent in the open market, not
the rent called for in a lease)
2. Minus Vacancy and Collection Loss (V&C) - any money lost from units not being
rented or from people not paying rent
3. Plus Miscellaneous Income (Misc Inc) - income from secondary sources, such as
clubhouse rentals, health club memberships, storage rentals, and vending or laundry
machines
4. Equals Effective Gross Income (EGI) - this 100% of the actual money made by the
real property operation.
5. Minus Allowable Expenses and Reserves (Exp & Res) - expenses that have to do
with the operation of the real estate and not the business. Reserves are items that
will wear out before the bone structure, such as carpet, roof, air conditioners, etc.
Reserves are expensed on a prorated basis (ie. Carpet lasts 5 years so if it costs
$2, = $400 allowable deduction per year)
6. Equals Net Operating Income (NOI) - the income remaining after expenses and
reserves. This is the "I" in the IRV formula
Capitalization Rate - ANSWER: The term capitalization means to convert income into
an estimate of value. A capitalization rate is used in converting net income (NOI) into
an estimate of value.
Direct Capitalization Rate - ANSWER: Net operating income (NOI) divided by the
market value (sale price) of the property.
IRV Formula - ANSWER: The equation to find value from net operating income and a
capitalization rate.
1. I / R = V
2. I / V = R
3. R x V = I
Gross Income (GI) - ANSWER: Market rent at 100% occupied. Also known as PGI.
Gross Income Multiplier (GIM) - ANSWER: Sale price divided by gross income.
