IAAO Course 300 Test Questions with Answers Graded A+
Scope of Work Rule - ANSWER -1. Identify Model Development - ANSWER -1.
the problem to be solved Specification
2. Determine and perform the scope of work 2. Calibration
necessary to develop credible assignment results 3. Quality Assurance
3. Disclose the scope of work in the report
Specification - ANSWER -What data to
Scope of work acceptability - ANSWER - include in the model and in what format
When it meets or exceeds:
1. Expectations of parties who are regularly 1. Additive
intended users for similar assignments and 2. 2. Multiplicative
What an Appraiser's peers actions would be in 3. Hybrid (generic)
performing the same or similar assignments
Additive Model Structure - ANSWER -Each
Economic Basis of Model Building - of the variables are independent from the other
ANSWER -Supply factors relate to variables. A change in one variable does not
availability and thus reflect such things as Cost, directly impact any other variables
interest rates, and economic conditions. Demand
factors include characteristics to buyers, such as MV = ($/sqft x sqft) + ($/plumbing fixture x
construction quality, condition, and location. #fixtures) + ($/car stall x #/cars) + ...
Basic Cost Model Structure - ANSWER - Multiplicative Model Structure - ANSWER -
MV = LV + BV Each of the variables are interdependent. Any
change to one variable will have an impact on all
of the other variables.
Basic Sales Comparison Basic Model Structure -
ANSWER -MVs = Sc + ADJc
Hybrid (generic) Model Structure -
ANSWER -Combines both additive and
multiplicative model structures
Basic Income Models - ANSWER -1. NOI
Model
MV = NOI / OAR
Finding Net Operating Income (NOI) -
2. GI Model ANSWER -1. Potential Gross Income (PGI)
MV = GI x GIM 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) -
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, IAAO Course 300 Test Questions with Answers Graded A+
any money lost from units not being rented or
from people not paying rent 1. I / R = V
2. I / V = R
3. Plus Miscellaneous Income (Misc Inc) - 3. R x V = I
income from secondary sources, such as
clubhouse rentals, health club memberships,
storage rentals, and vending or laundry
machines Gross Income (GI) - ANSWER -Market rent
at 100% occupied. Also known as PGI.
4. Equals Effective Gross Income (EGI) - this
100% of the actual money made by the real
property operation.
Gross Income Multiplier (GIM) - ANSWER -
5. Minus Allowable Expenses and Reserves (Exp Sale price divided by gross income.
& 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 Capitalization by using Gross Income Multiplier -
conditioners, etc. Reserves are expensed on a ANSWER -Gross income times gross
prorated basis (ie. Carpet lasts 5 years so if it
income multiplier equals market value
costs $2, = $400 allowable deduction per
year)
GI x GIM = V
6. Equals Net Operating Income (NOI) - the
income remaining after expenses and reserves.
This is the "I" in the IRV formula
Expense Ratio - ANSWER -Expresses
expenses as a percentage of effective gross
income
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 Steps in the Cost Approach - ANSWER -1.
value. Estimate the value of the land as if vacant and
available to be developed to its highest and best
use
2. Estimate cost new (RCN)
Direct Capitalization Rate - ANSWER -Net
operating income (NOI) divided by the market
3. Estimate accrued depreciation - the loss in
value (sale price) of the property.
value from any and all causes
4. Subtract depreciation from RCN
IRV Formula - ANSWER -The equation to 5. Add in the land value
find value from net operating income and a
capitalization rate.
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Scope of Work Rule - ANSWER -1. Identify Model Development - ANSWER -1.
the problem to be solved Specification
2. Determine and perform the scope of work 2. Calibration
necessary to develop credible assignment results 3. Quality Assurance
3. Disclose the scope of work in the report
Specification - ANSWER -What data to
Scope of work acceptability - ANSWER - include in the model and in what format
When it meets or exceeds:
1. Expectations of parties who are regularly 1. Additive
intended users for similar assignments and 2. 2. Multiplicative
What an Appraiser's peers actions would be in 3. Hybrid (generic)
performing the same or similar assignments
Additive Model Structure - ANSWER -Each
Economic Basis of Model Building - of the variables are independent from the other
ANSWER -Supply factors relate to variables. A change in one variable does not
availability and thus reflect such things as Cost, directly impact any other variables
interest rates, and economic conditions. Demand
factors include characteristics to buyers, such as MV = ($/sqft x sqft) + ($/plumbing fixture x
construction quality, condition, and location. #fixtures) + ($/car stall x #/cars) + ...
Basic Cost Model Structure - ANSWER - Multiplicative Model Structure - ANSWER -
MV = LV + BV Each of the variables are interdependent. Any
change to one variable will have an impact on all
of the other variables.
Basic Sales Comparison Basic Model Structure -
ANSWER -MVs = Sc + ADJc
Hybrid (generic) Model Structure -
ANSWER -Combines both additive and
multiplicative model structures
Basic Income Models - ANSWER -1. NOI
Model
MV = NOI / OAR
Finding Net Operating Income (NOI) -
2. GI Model ANSWER -1. Potential Gross Income (PGI)
MV = GI x GIM 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) -
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, IAAO Course 300 Test Questions with Answers Graded A+
any money lost from units not being rented or
from people not paying rent 1. I / R = V
2. I / V = R
3. Plus Miscellaneous Income (Misc Inc) - 3. R x V = I
income from secondary sources, such as
clubhouse rentals, health club memberships,
storage rentals, and vending or laundry
machines Gross Income (GI) - ANSWER -Market rent
at 100% occupied. Also known as PGI.
4. Equals Effective Gross Income (EGI) - this
100% of the actual money made by the real
property operation.
Gross Income Multiplier (GIM) - ANSWER -
5. Minus Allowable Expenses and Reserves (Exp Sale price divided by gross income.
& 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 Capitalization by using Gross Income Multiplier -
conditioners, etc. Reserves are expensed on a ANSWER -Gross income times gross
prorated basis (ie. Carpet lasts 5 years so if it
income multiplier equals market value
costs $2, = $400 allowable deduction per
year)
GI x GIM = V
6. Equals Net Operating Income (NOI) - the
income remaining after expenses and reserves.
This is the "I" in the IRV formula
Expense Ratio - ANSWER -Expresses
expenses as a percentage of effective gross
income
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 Steps in the Cost Approach - ANSWER -1.
value. Estimate the value of the land as if vacant and
available to be developed to its highest and best
use
2. Estimate cost new (RCN)
Direct Capitalization Rate - ANSWER -Net
operating income (NOI) divided by the market
3. Estimate accrued depreciation - the loss in
value (sale price) of the property.
value from any and all causes
4. Subtract depreciation from RCN
IRV Formula - ANSWER -The equation to 5. Add in the land value
find value from net operating income and a
capitalization rate.
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