Topic 2 - Economic Aspects of Appraisal

1) A mortgage secured by personal property is called: [0305]

A. A fixed rate mortgage

B. A package mortgage

C. A personal mortgage

* D. A chattel mortgage

2) The principle of _________ influences all property. [2094]

* A. Change.

B. Substitution

C. Conformity

D. Anticipation

3) A property owner adds a new bathroom to his home at a cost of $9,000.  The value of the home was $60,000 prior to the addition and $65,000 after the addition was completed.  What is the indicated value of this addition? [9019]

A. $14,000

B. $19,000

C. $9,000

* D. $5,000

4) Insurable value is the concept based on: [0177]

A. Assessed value

* B. Replacement cost

C. Highest and best use

D. Market value

5) Surplus productivity sets the value of which of the factors of production. [2002]

A. Capital

B. Labor

* C. Land

D. Management

6) When doing a highest and best use analysis, the land is valued: [0245]

A. As if it is in its present state of use

* B. As if vacant

C. As if it will be improved

D. As compared with all previous uses

7) What is the term that refers to a single mortgage that secures more than one property? [0320]

A. Convertible mortgage

B. Wraparound mortgage

C. Participation mortgage

* D. Blanket mortgage

8) For leverage to be positive, the interest rate on borrowed money would be: [0288]

A. Equal to the property yield

B. More than the property yield

C. Equal to the prime rate

* D. Less than the property yield

9) Price is: [3079]

A. A concept

B. The same as cost

* C. History

D. The same as value

10) What is consistent use? [0993]

A. Land cannot be valued on a basis other than the highest and best use

B. Land must be used in a fashion consistent with use of similar land

* C. Land cannot be valued based on a use that is different from the improvements

D. Improvements must be built in a manner consistent with current building codes

11) The existing use is the highest and best use when: [0246]

* A. The value of the site plus the value of the structures is greater than the value of the site alone

B. The structures on the site are new or nearly new

C. The structures on the site in good condition

D. There are usable structures on the site

12) The expectation of benefits to be derived in the future illustrates the economic concept of: [3071]

A. Supply and demand

B. Change

C. Competition

* D. Anticipation

13) What is the best example of value in use? [3121]

A. Shopping center

B. Apartment

C. Multi-family

* D. Church

14) What is the annual payment on a $180,000 mortgage @ 9% for 9 years? [3006]

* A. $30,023.78

B. $32,136.56

C. $31,705.79

D. $26,823.22

15) Are market value and price equal? [0183]

A. Never

B. Always

* C. Often

D. Only when the property is income property

16) Value that is determined by the individual for his own personal goals or needs is: [0194]

A. Market value

B. Investment value

C. Personal use value

* D. Value in use

17) Land should not be valued on the basis of one use while improvements are valued on the basis of another is found in the appraisal concept of: [3073]

A. Conformity

B. Anticipation

* C. Consistent use

D. Contribution

18) When the supply of houses goes up and demand goes up at about the same pace, price tends to: [0264]

A. Go up

B. Prices are erratic in this scenario

* C. Stabilize

D. Go down

19) For a use to be considered a possible highest and best use: [0247]

A. The use must minimize taxes

B. The use must create a positive cash flow

* C. The use must be possible and legal

D. The maximum lot area must be put to use

20) Value is maximized when houses in a subdivision are similar but not identical.  This phenomenon illustrates: [0226]

A. Competition

B. Anticipation

C. Surplus productivity

* D. Conformity

21) Which of the following statements is true regarding the market value and the sale price of a property at the time it was sold? [0206]

A. The price will always exceed the market value at the time of sale

B. The market value will always exceed the price at the time of sale

* C. The market value may be more or less than the price depending on the buyer and seller

D. The market value and price are the same at the time of sale

22) Adjustments made in the sales comparison approach to value are governed by the economic principle of: [2006]

A. Anticipation

* B. Contribution

C. Change

D. Substitution

23) The Grantor is the: [0277]

A. A third party

* B. Seller

C. Note holder

D. Buyer

24) Name two components of a mortgage payment: [0306]

* A. Principal and interest

B. Interest and time

C. Interest and term

D. Principal and term

25) What type of value is sought during a forced sale? [0181]

A. Investment value

B. Value in use

* C. Liquidation value

D. Market value

26) Which of the following is true about the relationship between market value and sales price at the time of sale? [0214]

A. Price will always exceed market value

B. Market value and price are the same

* C. Price could be more or less than the market value depending on the motivations of the buyer and seller and details of the transaction

D. Market value will always exceed price

27) Value in exchange is synonymous with: [0188]

A. Value in use

B. Liquidation value

C. Investment value

* D. Market value

28) The improvement is a large old house that is not the highest and best use of the site.  There is insufficient demand for alternative uses so the house is not torn down.  What is the house. [3070]

A. Marginal use

* B. Interim use

C. Highest and best use

D. Nonconforming use

29) What is the term that refers to the relative amount of money that a lender will lend on a property? [0278]

A. Debt/equity ratio

B. Value-to-loan ratio

C. Gross rent multiplier

* D. Loan-to-value ratio

30) A mortgage secured by a combination of real and personal property is: [0303]

A. A personal mortgage

B. A chattel mortgage

* C. A package mortgage

D. A fixed rate mortgage

31) When several properties have essentially the same utility, the one with the lowest price will attract the greatest demand.  What economic principle does this demonstrate? [0255]

* A. Substitution

B. Surplus productivity

C. Highest and best use

D. Anticipation

32) When might an appraiser evaluate property as of a future date? [0212]

A. If the market is stable and there is no inflation

B. Never - appraising as of a future date is against the USPAP

C. If the current use is the highest and best use

* D. If the value is appropriately defined for a future date

33) Value created from the expectation of future benefits is related to: [0221]

A. Balance

* B. Anticipation

C. Surplus productivity

D. Conformity

34) Part of Atlanta's growth is caused by its mild climate with changing seasons.  What force causes this? [0175]

A. Governmental

B. Economic

C. Social

* D. Environmental

35) Which of the following best defines the term district? [3068]

A. The area defined by a zoning district

B. A geographical area with complementary land uses

C. The area served by a single public school district

* D. A geographical area with homogeneous land uses

36) Value is: [3078]

A. Precise

B. The same as price

C. The same as cost

* D. A concept

37) Which policy is determined by the Federal Reserve Board? [0285]

A. Fiscal

B. Financial

C. Economic

* D. Monetary

38) What is gentrification? [0335]

* A. A period where neighborhood properties are renovated and improved

B. The process of identifying and analyzing submarkets within a larger market

C. A period of diminishing demand

D. The perception that value is created by the expectation of benefits to be received in the future

39) If demand for cluster houses increases in a particular area, what will happen? [0267]

A. Builders will build more townhouses

B. More owners will decide to sell their townhouses

* C. Prices will go up

D. All of the above

40) The act or process of estimating real property value is called: [0178]

A. Market value

B. Value in use

C. Market analysis

* D. Appraisal

41) A buyer pays $100,000 for property.  The price includes an outdoor portable Jacuzzi tub worth $3,000.  The buyer purchased the house and the Jacuzzi tub for market value.  What is the market value of the house? [0207]

A. $103,000

* B. $97,000

C. The market value of the house cannot be determined

D. $100,000

42) The difference between the value of a house and the amount of all outstanding debt is: [0281]

A. Fee simple

B. Liquidity

* C. Equity

D. Sales price

43) A swimming pool is installed at a cost of $15,000.  An appraisal of the property prior to the installation of the pool indicated a value of $90,000 for the property. Following the installation, the property was valued at $100,000.  What appraisal concept does this illustrate?! [9013]

A. Balance

B. Substitution

C. Conformity

* D. Contribution

44) What is the difference between an interest-only mortgage and a fully amortized mortgage? [0314]

* A. The method of principal repayment

B. The length of the loan

C. The loan-to-value ratio

D. The interest rate

45) Which is true regarding the four forces that affect value? [3075]

* A. Forces may overlap making it difficult to determine the exact cause of value fluctuations

B. Economic forces affect value to a greater degree than the other forces

C. Neither is true

D. Both are true

46) The difference between the value that the owner has in real estate in excess of the liens against it is referred to as: [0283]

A. Capital

B. Principal

* C. Equity

D. Debt

47) What is the value to a specific buyer? [0184]

* A. Value in use

B. Assessed value

C. Market value

D. Liquidation value

48) What is the most probable price as of a given date at which real property should sell to a knowledgeable buyer in a competitive market? [0218]

* A. Market value

B. Market price

C. Value in use

D. Investment value

49) The term MSA, as used in market analysis and feasibility studies, denotes a: [0169]

A. Municipal Statistical Area

B. Municipal School Area

C. Metropolitan Study Area

* D. Metropolitan Statistical Area

50) Which economic principle would apply if an international airport were built near a residential subdivision? [0235]

A. Substitution

B. Conformity

C. Anticipation

* D. Externalities