REAL 5080 EXAM 2 QUESTIONS & VERIFIED
ANSWERS
Highest and best use analysis - Answers - the single us that maximizes the value of
land
Criteria (scoping) - H&B use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
If land values are maximized in more than one use, identify which use gives the highest
return
Maximally productive - H&B use - Answers - value individual land uses as if vacant
Expected use analysis - Answers - relaxing the legally permissible constraint (zoning).
Value is the expected value of a representative set of feasible uses
Result: a set of feasible uses being identified
Criteria - expected use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
Maximally productive - expected use - Answers - value individual land uses in each
possible zoning category as if vacant
Weigh result by probability of outcome
Most probable use analysis - Answers - the single most probable use of the land
Result:
Criteria (scoping) - most probable use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
Maximally productive - most probable use - Answers - value individual land uses in most
probable as if vacant
When appraising land as if vacant - Answers - when sufficient comparable are available,
collect comparable with consistent (matching) definitions of maximally productive. For
example, if using highest and best use premise, collect comparable with matching
highest and best use
, Appraising land as improved - Answers - -choices: remain, renovate, or redevelop
-develop when: value as if vacant minus demolition cost is greater than the current
value
Interim uses - Answers - an interim use is one which is currently the highest and best
use of the site, but which is likely to be suspended by another use in a relatively short
period of time
Consistent use requirement
Improvement must be valued in the same use as the land - Answers - means the
improvement must be valued in the same use as land
-vacant (multifamily) improvements-$0, land-$1 mil
-current use (single) land-$30,000, improvements-$150,000
Appraisal process - Answers - -description of problem
-market and subject property analysis
-estimating value: application of relevant appraise approaches
-reconciliation of value estimates and value reporting value
Description of problem - Answers - -identification of property rights to be valued
-definition of value
-date of value
-limiting conditions
Market and subject property analysis - Answers - -location
-property characteristics
-expected or highest and best use
Estimating value: application of relevant appraisal approaches - Answers - -sales
comparison
-cost
-income
Reconciliation of value estimates and value reporting value - Answers - -final value
estimate
-appraisal report
Basic premise of sale comparison approach/direct sales comparison - Answers - the
value of a property can be estimated based on the selling price of similar properties
-law of price
Necessary conditions of basic premise - sales comparison - Answers - -market price is
acceptable evidence of market value (not necessary as long as it is adjustable)
-comparable bundles of rights will sell for comparable prices (law of one price, principle
of substitution). This is an important assumption since real estate is a heterogeneous
good
ANSWERS
Highest and best use analysis - Answers - the single us that maximizes the value of
land
Criteria (scoping) - H&B use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
If land values are maximized in more than one use, identify which use gives the highest
return
Maximally productive - H&B use - Answers - value individual land uses as if vacant
Expected use analysis - Answers - relaxing the legally permissible constraint (zoning).
Value is the expected value of a representative set of feasible uses
Result: a set of feasible uses being identified
Criteria - expected use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
Maximally productive - expected use - Answers - value individual land uses in each
possible zoning category as if vacant
Weigh result by probability of outcome
Most probable use analysis - Answers - the single most probable use of the land
Result:
Criteria (scoping) - most probable use - Answers - -legally permissible
-physically possible
-financially feasible
-maximally productive
Maximally productive - most probable use - Answers - value individual land uses in most
probable as if vacant
When appraising land as if vacant - Answers - when sufficient comparable are available,
collect comparable with consistent (matching) definitions of maximally productive. For
example, if using highest and best use premise, collect comparable with matching
highest and best use
, Appraising land as improved - Answers - -choices: remain, renovate, or redevelop
-develop when: value as if vacant minus demolition cost is greater than the current
value
Interim uses - Answers - an interim use is one which is currently the highest and best
use of the site, but which is likely to be suspended by another use in a relatively short
period of time
Consistent use requirement
Improvement must be valued in the same use as the land - Answers - means the
improvement must be valued in the same use as land
-vacant (multifamily) improvements-$0, land-$1 mil
-current use (single) land-$30,000, improvements-$150,000
Appraisal process - Answers - -description of problem
-market and subject property analysis
-estimating value: application of relevant appraise approaches
-reconciliation of value estimates and value reporting value
Description of problem - Answers - -identification of property rights to be valued
-definition of value
-date of value
-limiting conditions
Market and subject property analysis - Answers - -location
-property characteristics
-expected or highest and best use
Estimating value: application of relevant appraisal approaches - Answers - -sales
comparison
-cost
-income
Reconciliation of value estimates and value reporting value - Answers - -final value
estimate
-appraisal report
Basic premise of sale comparison approach/direct sales comparison - Answers - the
value of a property can be estimated based on the selling price of similar properties
-law of price
Necessary conditions of basic premise - sales comparison - Answers - -market price is
acceptable evidence of market value (not necessary as long as it is adjustable)
-comparable bundles of rights will sell for comparable prices (law of one price, principle
of substitution). This is an important assumption since real estate is a heterogeneous
good
