REAL 5080 EXAM 1 QUESTIONS & VERIFIED
ANSWERS
Real Estate - Answers - tangible (physical) asset
- manmade improvement permanently attached to the land
Improvement on the land
- buildings, fences, walls, decks and other structures
- other "fixtures"- items that were personal property until they became permanently
attached to some part of the real estate
Land and associated natural features of real estate - Answers - Sub- surface: oil, coal
and other minerals
Surface: soil and vegetation (except mature crops)
Supra-Surface: air space (and light)
Bundle of Rights - Answers - The interests, benefits and rights inherent in the ownership
of land
- this has an impact on the value of the property
- the study of real estate includes the study of issues that influence the bundle of rights
Appraisal - Answers - a written statement independently and impartially prepared by a
qualified appraiser setting forth a defined value of an adequately described property as
of a specific date, supported by the presentation and analysis of relevant market
information
Who estimates value? - Answers - - lender
- govt: tax purposes
- insurance companies: how to replace value
- brokers
, - owners of similar properties
- developers: to see cost and profit of land to build on
Appraisal Process: description of problem - Answers - 1. identification of property rights
to be valued
2. definition of value
3. date of value
4. limiting conditions ( property rights, easements (can limit use of property)
Market and Subject and Property Analysis - Answers - 1. Location- physical and what is
around it
2. Expected or highest and best use- we want the highest return on land "what would go
well here"
3. Property specific characteristics- size, age, what its made of
Sales Comparison Approach - Answers - Equivalent goods should sell for equivalent
prices
- real estate is heterogenous meaning no 2 structures are alike
2 basic steps
1. collection of information (key characteristics) of subject and comparable properties
2. adjust price of comparable properties to account for differences between each
comparable and the subject
Complications
- no perfect substitutes
- often few comparable properties
- which comparable to use?
- how to use information to make adjustments
- how to reconcile value estimates
Cost Approach - Answers - Physical approach to real estate
ANSWERS
Real Estate - Answers - tangible (physical) asset
- manmade improvement permanently attached to the land
Improvement on the land
- buildings, fences, walls, decks and other structures
- other "fixtures"- items that were personal property until they became permanently
attached to some part of the real estate
Land and associated natural features of real estate - Answers - Sub- surface: oil, coal
and other minerals
Surface: soil and vegetation (except mature crops)
Supra-Surface: air space (and light)
Bundle of Rights - Answers - The interests, benefits and rights inherent in the ownership
of land
- this has an impact on the value of the property
- the study of real estate includes the study of issues that influence the bundle of rights
Appraisal - Answers - a written statement independently and impartially prepared by a
qualified appraiser setting forth a defined value of an adequately described property as
of a specific date, supported by the presentation and analysis of relevant market
information
Who estimates value? - Answers - - lender
- govt: tax purposes
- insurance companies: how to replace value
- brokers
, - owners of similar properties
- developers: to see cost and profit of land to build on
Appraisal Process: description of problem - Answers - 1. identification of property rights
to be valued
2. definition of value
3. date of value
4. limiting conditions ( property rights, easements (can limit use of property)
Market and Subject and Property Analysis - Answers - 1. Location- physical and what is
around it
2. Expected or highest and best use- we want the highest return on land "what would go
well here"
3. Property specific characteristics- size, age, what its made of
Sales Comparison Approach - Answers - Equivalent goods should sell for equivalent
prices
- real estate is heterogenous meaning no 2 structures are alike
2 basic steps
1. collection of information (key characteristics) of subject and comparable properties
2. adjust price of comparable properties to account for differences between each
comparable and the subject
Complications
- no perfect substitutes
- often few comparable properties
- which comparable to use?
- how to use information to make adjustments
- how to reconcile value estimates
Cost Approach - Answers - Physical approach to real estate
