Mock Exam - Appraisal & Economics11. Cost and value are MOST likely to be similar under which of the following conditions?a. The property is newc. The property is special purposeb. The property is smalld. The property has no deferred maintenance2. Highest and best use analysis is used to determine which of the following factors?a. The type of property to put on a siteb. The amount of capital to invest in a site for improvementsc. Whether any existing building on a site should be demolishedd. All of the above3. A property has an appraised value of P1,000,000.00. The owner currently owes P600,000.00 in mortgage loans against the property. The owners equity is:a. P400,000.00c. P140,000.00 Solution: P1M 600K = P400Kb. P600,000.00d. P160,000.004. Which of the following valuation concepts is indicative of special purpose properties, such as churches or schools, when the continuation of the special use is assumed?a. Value in exchangec. Value in perpetuityb. Value in used. Book value5. Which of the following explanation BEST describes the term market place?a. The amount of money actually paid in a transactionb. The amount of the loanc. The amount of money necessary to replace the propertyd. Same term as market value6. What economic principles is BEST illustrated when an appraiser concludes that modernization of the plumbing system in the subject property will increase the value of the property by more than the cost of modernization?a. Anticipationc. Contributionb. Balanced. Substitution7. Which of the following statements is CORRECT with regards to the highest and best use of a parcel of land?a. Unimproved land does not have a highest and best use.b. If the improvement to the land is a house, then the highest and best use is always residential.c. The highest and best use can change over time.d. Highest and best use is strictly an economic concept and is not influenced by physical and legal considerations.

28. The total loan payment made on a parcel of real estate during any one year is generally referred to as:a. Debt servicec. mortgage constantb. equityd. cash flow

9. The test used to determine whether or not an article is a fixture depends on all of the following

a. Reasonable intent of the party attaching the object.b. Adaptation of the objectc. Cost of the item being attachedd. Method of attachment

10. The legal estate in land that provides the highest degree or extent of ownership rights recognized by law may be referred to by which of the following terms?a. Feec. Fee simple absoluteb. Fee simpled. All of the above

11. Which of the following actions is an example of the legal right of government based on police power?a. Taxationc. Eminent domainb. Escheatd. Zoning 12. In a voluntary conveyance of real estate, the conveys the title to the property and The_____________receives the title.a. Grantor, granteec. Owner, sellerb. Grantee, grantord. Grantee, grantor 13. All legal rights, such as riparian rights or easements, that go with the land when title to the land is transferred are known as:a. Encroachmentsc. Appurtenancesb. Amenitiesd. Easements 14. Numerous public and private limitations are placed on real property. Some are voluntary and others are involuntary. Which of the following limitations is NOT an example of a private involuntary limitation?a. Encroachmentc. Mechanics lienb. Adverse possessiond. Deed restriction

15. Reference to a plat map would be made in which of the following legal description methodsa. Lot and blockc. Street addressb. Rectangular surveyd. Monuments

316. Which of the following terms refers to the right of a person who owns a property free and clear of any leases?a. Leased fee estatec. Fee simple estateb. Leasehold estated. Lessees estate17. When a building, a part of a building, or an obstruction physically intrudes, overlaps, or trespasses the property of another, this is referred to as an:a. Escheatc. Encroachmentb. Easementd. Assemblage18. An appraisal is best defined as:a. An unbiased opinion of the most likely price for which a parcel of real estate would sell at a given date.b. An unbiased opinion of the nature, quality, value or utility of an interest in real estate and related personallyc. The process of developing an opinion as to market value or other defined value of a specified interest in a specified point in time.d. The process of studying the nature, quality, or utility of an interest in real estate in which a value estimate is not necessarily required.19. In the appraisal process, the property being appraised is referred to as the:a. Comparable propertyc. Subject propertyb. Assessed propertyd. Appraised property20. The appraisal process undertaken by an appraiser consists of many steps. What is the correct first step in the appraisal process?a. Definition of the problemb. Collection and analysis of datac. Analysis of highest and best used. Initial estimate of value21. The objective of undertaking an appraisal of real estate is to:a. Determine asking priceb. Estimate valuec. Establish loan valued. Identify legal rights and interest that may exist22. If comparable sale #1 sold for Php2,000,000 and has a two-car garage, adding Php100,000 to the value, and the subject property does not have a garage, the indicated value of the subject property would be found by:a. Adding Php100,000 to the comparable saleComparableP2,000,000.00

b. Subtracting Php100,000 from the comps comparable saleLess: Garage600,000.00

c. d. Adding Php100,000 to the subject property Subtracting Php100,000 from the subject propertyMarket ValueP1,400,000.00

423. When an appraiser is using the sales comparison approach, one of the elements of comparison that may have to be adjusted is often referred to as a time adjustment. What does the time adjustment provide?a. An adjustment for the period of time between when a listing is taken on property and when the property actually sells.b. An adjustment between the date of sale of a comparable and the date of the appraisal to allow for any changes over timec. An adjustment between the listing date of a comparable sale and the date the subject property is actually appraisedd. An adjustment for the period of time between the actual sale of a comparable for the appraisal assignment24. An appraiser has been asked to estimate the value of a lot. In the same neighborhood, the appraiser collects the following sales data:Lot SaleSales PriceTime of Sale

1Php144,2504months ago

2Php147,0502months ago

3Php145,6003months ago

The price appreciation for lots is estimated to be at the rate of 1% per month(simple, not compounded) Given the above information, what is the estimated value of the subject property?a. Php50,000c. P140,000.00b. Php100,000d. P150,000.00Solution:1. 144,250 x 1.04 =150,020.002. 147,050 x 1.02 =149,991.003. 145,600 x 1.03 =149,968.00 Total=449,979.00 / 3 = P149,993 or P150K25. Deferred maintenance usually results in which of the following losses in value?a. Incurable physical depreciationb. Curable physical depreciationc. Curable functional obsolescenced. Curable external obsolescence26. What terms applies to the effect on value of location or proximity to the intersection of two streets?a. Corner influencec. Externalityb. Amenityd. Plottage27. Functional obsolescence could be caused by which of the following?a. A ceiling that is too highc. A poor locationb. Deferred maintenanced. A worn-out roof

528. The building cost estimate method that replicates the contractors development of a bid, and is the most comprehensive way to estimate building costs, is known as the:a. Unit-in-place methodc. Breakdown methodb. Quantity survey methodd. Comparative unit method29. Included in the cost approach to value is all of the following components EXCEPT:a. Replacement costc. Acquisition costb. Highest and best use of the landd. Accrued depreciation30. In regard to accrued depreciation , which of the following terms does NOT belong together?a. Physical deterioration-curableb. Functional obsolescence-incurablec. Economic obsolescence-curabled. Functional obsolescence-curable31. The combining of two or more into a single ownership with the value of the assembled lots being more than the sum of the values of the individual lots is referred to as:a. Highest and best usec. Escheatb. Economic rentd. Plottage32. Another term used to denote the actual age of a building isa. Chronological agec. Economic ageb. Effective aged. Depreciated age33. A building has a roof that originally had an expected life of 25 years. The roofs effective age is 15 years. A new roof will cost Php100,000 to install. Using a straight-line method, what amount of depreciation would be charged for the roof?a. Php40,000c. P80,000.00 Solution: P100K x 15/25 =P60Kb. Php60,000d. P100,000.0034. The basic capitalization formula used in the income approach to value contains three components. Those three components are:a. Market, cost, incomec. Physical, functional, economicb. Value, rate, incomed. Potential, gross, net income

35. What is the gross income multiplier for a property with a current market value of Php570,000 and rents for Php5,000 per month?a. 9c. 10Solution: P570K / P5K x 12mos. = 9.5b. 9.5d. 10.5

636. The peso amount of rent received from a parcel of real estate when rented in an open, competitive market is referred to as:a. Economic rentc. Ground rentb. Contract rentd. Gross rent37. A mortgage loan for P300,000 at 9 percent per annum for 30 years has been made. What is the amount of interest for the first month?a. Php163.90c. P2,250.00Solution: P300K x .09/12 x 1mo. = P2250.00b. Php900.00d. P2,413.9038. What does the range of a group of variables indicate to the appraiser?a. The value of the highest sampleb. The difference between the lowest and the highest valuesc. The average for the groupd. The percentage variation from the mean39. Which of the following types of lease does NOT provide at least some protection to the lessor against inflation?a. Flat leasec. Reappraisal leaseb. Index leased. Graduated lease40. Which of the following statements is CORRECT in regard to assessed value?a. The assessed value must equal the market valueb. The assessed value is used primarily to calculate property taxesc. The assessed value is used primarily to calculate property insuranced. The assessed value will never exceed cost41. A father sells his home to his daughter and her husband. Such a sale would NORMALLY be described as which of the following sales?a. Arms-length salec. Distorted sale or unrepresentative saleb. Illegal saled. Forced sale42. In collection data, an appraiser concludes that comparable properties have increased in value at a 6-percent annual compound rate during the previous two years. The proper time adjustment to make for a comparable that sold two years ago for Php1,000,000 is;a. Php60,000c. P123,600.00 (1.06)2b. Php120,000d. P1,123,600.00Solution: P1M x (1.06) 2 - P1M = P123,600.00

743. Which of the following actions is NOT characteristic of market value?a. Sale as soon as possiblec. Typical financingb. Well informed buyersd. Typically motivated sellers44. Which of the following factors is NOT normally considered to affect the supply of real estate?a. Volume of new constructionc. Land use and city growthb. Standing stockd. Competition45. What term best describes the effect of a power plant on the value of a nearby home?a. Balancec. Contributionb. Externalitiesd. Conformity46. Which of the following appraisal principles holds that market value is indicated by the value of another property with similar utility?a. Supply and demandc. Competitionb. Substitutiond. Balance47. The specific use of a parcel of land that gives that land the greatest residual of income is referred to as the lands:a. Intrinsic usec. Income producing useb. Highest and best used. Efficient use48. The proper or most correct placement of an improvement to land, such as the construction of a house, is normally strongly influenced by the application of which of the following economic principles?a. Conformityc. Escheatb. Encroachmentd. Substitution49. The term lenders often use to refer to the relative amount of money they will lend on a specific parcel of property is known as:a. Gross rent multiplierc. Value to loan ratiob. Debt-to-equity rationd. Loan to value ratio50. Effective demand in the marketplace for housing varies MOST directly with which of the following conditions?a. Purchasing powerc. Building codesb. Interest ratesd. Building cycles

851. A worn path crosses an owners property. What legal doctrine would require a potential purchaser to take note of the fact that there may be an unrecorded prescriptive easement against that property?a. Actual noticec. Lis pendensb. Constructive noticed. Escheat52. An individual owner of a condominium unit is in default on payment of the property taxes to the local government. Of the following choices, which is the only one legally available to the taxing authority?a. Levy the tax on the entire condominium projectb. Foreclose against the individual unitc. Place a lien on the common areasd. Foreclose against the homeowners association53. The legal right of government to acquire private property for a public use or purpose with just compensation is known as:a. Police powerc. Condemnationb. Eminent domaind. Escheat54. In regard to the legal concept of land, what is a landowner entitled to in addition to the surface rights?a. Nothingb. Air rights onlyc. Everything below the surface onlyd. Everything above and below the surface55. The term real estate is generallya. Air and subsurface rightsb. Surface rights onlyc. Machinery and equipmentd. Legal interests and rights inherent in ownership56. Which of the following activities is NOT a public limitation on real estate?a. Building codesc. Adverse possessionb. Zoningd. Fire codes57. If the metes-and-bounds method of legally describing land is being used, which of the following statement is CORRECT?a. The starting point must be a natural benchmarkb. There must be a definite point of beginningc. Monuments cannot be used as part of the descriptiond. No other method, such as lot-and-block, can be used as part of the description

958. Which of the following terms refer to the legal interest belonging to a person who is leasing property from someone else?a. Leased fee estatec. Fee simple estateb. Leasehold estated. Lessees estate59. Which of the following terms refers to the stages that a neighborhood goes through over time?a. Revitalizationc. Life cycleb. Growth cycled. Change60. The term appraisal refers to:a. The process of estimating the market value of a propertyb. The valuation of a market and how it affects property valuesc. The process of estimating the most likely sales price of a propertyd. The act or process of developing an opinion of value61. The date of valuation for an appraisal is determined by which of the following?a. The actual date the appraisal is signedb. The date the appraisal assignment is acceptedc. The date the property is actually inspectedd. Whatever date is specified in the appraisal report62. What is the PRIMARY purpose of economic base analysis?a. To forecast future economic growth in an area and divide that growth between basic and non-basic industriesb. To forecast changes in local zoning ordinancesc. To determine property tax rates and the likely amount of taxes due on propertyd. To forecast inflation rates63. In using the sales comparison approach, the appraiser finds that in terms of location, sale #1 is superior to the subject property but is inferior to sale #2. The correct procedure would be to adjust:a. Both sales down to the subject propertyb. Both sales up to the subject propertyc. Sale #1 down and sale#2 upd. Sale#1 up and sale #2 down64. A single-family residence located on a busy street rents for Php500 per month less than similar rental properties located on other streets in the same area. The average gross rent multiplier in this neighborhood is 110. What is the lump sum peso adjustment for the locational obsolescence of the residence?a. P500c. P50,000.00b. P6,000d. P55,000.00 Solution: 110 x P500 = P55K

1065. The adjustment in the sales comparison approach that involves comparing two properties with similar features and characteristics but different dates of sale is referred to as the:a. Loan closing adjustmentb. Time adjustment (market conditions)c. Appreciation in value adjustmentd. Time value of money adjustment66. The building cost method that finds the cost of the component parts of a building through standard cost estimates and then adjusts for the condition of the component, time and location is known as the:a. Unit-in-place methodc. Break-down methodb. Quantity survey methodd. Comparative unit method67. Marias house was built 12 years ago. Because he keeps it in excellent condition, it shows only as much wear as a typical five-year-old house. Marias house therefore has an effective age of:a. 5 yearsc. 12 yearsb. 7 yearsd. 17 years68. Which of the following methods is the MOST detailed in estimating the costs of reproducing a building as part of the cost approach to value?a. Unit-in-placec. Comparative unitb. Quantity surveyd. Trade breakdown69. The cost approach to value takes into consideration all of the following factors EXCEPT:a. Value of the landb. Replacement (reproduction) cost of the improvementsc. Original sales priced. Physical defects70. When using the cost approach to value, an appraiser should value the land as though:a. It has been improved with a buildingb. It is currently being used with an interim usec. It is vacant and available for highest and best used. Zoning ordinances are not71. A tract of land containing four hectares recently sold for Php600 per square meter. What is the estimated land value?a. P600,000.00c. P6,000,000.00Solution:b. P2,400,000.00d. P24,000,000.004 x 10,000 x 600 = P24M

1172. What is the correct percentage of accrued depreciation for a 15-year old building if the building has an effective age of 20 years and a remaining economic life of 30 years?a. 20 percentc. 40 percentSolution: 20/ 20 +30b. 30 percentd. 60 percent73. What term applies to the rent specifies in a lease?a. Base rentc. Contract rentb. market rentd. Gross rent74. The sales comparison approach is said to be the most reliable when which of the following market exists?a. Active marketc. Buyers marketb. Inactive marketd. Sellers market75. Numerous elements should be identified when an appraiser is attempting to sue the sales comparison approach to value. which of the following lists BEST explains those elements of comparison?a. Demand, supply, utility, transferabilityb. Physical, functional, economic, locationalc. Date of sale, location, physical condition, condition of saled. Location, location, location, location76. What term is used to describe tangible and intangible factors that enhance the desirability and thus add to the value of real estate?a. Amenitiesc. Enhancementsb. Goodiesd. Negative externalities77. In the short run, which of the following conditions has the MOST effect on real estate prices?a. More changes in demand than changes in supplyb. More changes in supply than changes in demandc. More inflation than demandd. More sellers than buyers78. What term is used to describe the value to a typical investor?a. Market valuec. Sale valueb. Investment valued. Use value79. Which of the following statements applies to a property with a nonconforming use?a. The existing nonconforming use is the highest and best useb. A nonconforming use is likely to arise from changes in zoningc. A nonconforming use property may be under improved but cannot be over improvedd. In the sales comparison approach, an appraiser does not have to make a separate adjustments for the nonconforming use

1280. Owner A gives owner B an easement across As land to shorten the distance B has to travel to reach land he owns. The land B owns has benefited by this easement and is known as the:a. Dominant estatec. Lien estateb. Servient estated. Estate in gross

81. A description of the surface features of a parcel of land such as e;evation or drainage is known as its:Locationc. TopographyPlottaged. Restrictive covenant82. An owner of a parcel of land leases the land to a tenant for ten years. The next day the owner sells the land to a third party. Which of the following statements is CORRECT?The new owner has an option as to whether to accept the terms of the leaseThe tenant may voluntarily terminate the leaseThe tenants leasehold is not affectedThe tenant legal interest is automatically terminated by operation of law83. Which of the following approaches to value uses market data?Income approachDirect sales comparison approachCost approachAll three approaches84. Which of the following estimates would result in a capitalization rate of 20 percent?Potential gross income P1,000,000; value P5,000,000Effective gross income P1,000,000, value P5,000,000Net operating income P1,000,000, value P5,000,000 Solution: P1M / 5M = 20%Cash flow P1,000,000, value P5,000,00085. In estimating the net operating income of a building, one of the necessary steps is the calculation of other income. Which of the following items is NOT considered other income?Parking feesTelephone switchboard servicesTV closed-circuit connection feesEscalation clauses in leases86. A leasehold interest may be created only if the contract rent is:a. Greater than market rentc. Less than market rentb. Equal to market rentd. A flat rent

1387. Suppose a propertys NOI and value are not expected to change over an investment holding period. What would be the relationship between the overall rate and the property yield rate?a. The overall rate would be less than the property yield rateb. The overall rate would be equal to the property yield ratec. The overall rate would be greater than the property yield rated. More information is required to determine the relationship between the overall rate and the property yield rate88. Which of the terms BEST describes a pattern of income or cash flow that is regular and predictable?a. Reversionc. Annuityb. Leased. Payment89. A property has NOI of Php1,000,000, interest payment of Php800,000 and principal payments of Php100,000. What is the debt coverage ratio?a. 0.80c. 1.11b. .0.90d. 1.25Solution: P800K + P100K / P1M = .9090. A small restaurant contains an oven and a freezer, each of which cost Php9,000 and has estimated useful life of 10 years. Carpeting costs Php35,000 and has an estimated useful life of seven years. What annual reserve for replacement would be appropriate for these items?a. P5,900.00c. P6,800.00Solution: 9K x 2 /10 = 1,800b. P6,070.00d. P5,000.0035K /7= 5,0006,80091. If a property has an overall capitalization rate of .095 and a mortgage at a 75 percent loan-to value ratio having an annual mortgage constant of .11, what is the equity dividend rate?Supporting Computation:a. 0.05c. 0.070.75 x .11 = .0825 Bankb. 0.06d. 0.090.25 x .05 = .0125 Investor.09592. The term effective rate refers to the:a. Loan constant on a mortgageb. True rate of return considering all relevant financing expensesc. Interest rate after inflation is consideredd. Rate at which future payments are discounted to present cash flows

1493. What is the present value of a 40-year net income of Php10,000 per year if payments are in advance and the net income is discounted at a rate of 12 percent? (Factor=8.233030)a. P82,330c. P92,210.00b. P82,438d. P92,330.0094. When a propertys vacancy and bad debts is subtracted from the propertys gross (potential) income, which of the following incomes is derived?a. Effective gross incomec. Taxable incomeb. Net operating incomed. Cash flow income95. The basic equation used in the income approach to value is:a. Rate divided by income equals valueb. Income divided by rate equals valueNOI / Cap. Rate = Market Valuec. Rate times income equals valued. Rate plus income equals value96. One of the standard techniques used by appraisers when analyzing the income of property is to divide the income being generated between the land and the improvements and then to capitalize the residual income to the improvements into a value estimate. Such a technique is referred to as the:a. Land residual techniquec. Property residual techniqueb. Building residual techniqued. Plottage residual technique97. The income approach to value:a. Is based on the principle of anticipationb. Translated the ability of property to generate income into an indication of valuec. Requires an estimate of net operating income of propertyd. All of the above are correct98. The lump sum that an investor receives at the termination of an investment is referred to as the:a. Remainderc. Lump sumb. Reversiond. Gain99. Which of the following land uses is generally NOT considered income property?a. Hotelsc. Office buildingsb. Undeveloped landd. Apartment buildings100. A collection of retail stores with a common parking area and generally one or more large department, discount, or food stores; and sometimes including an enclosed mall or walkway, is commonly referred to as a:a. Mallc. Mixed-use developmentb. Retail complexd. Shopping center

15101. What is the distinction between the terms market price and market value?a. Market price is synonymous with replacement cost, while market value is the same as assessed valueb. Market price is what the seller asks for, while market value is what the buyer actually paysc. Market price is what the property sells for, while market value is what the sales price should be to a typical buyerd. Market price is what is currently owned on the property, while market value is what is bought for102. What type of analysis identifies land uses that are legally permissible, physically possible and financially feasible?a. Sensitivityc. Feasibilityb. Highest and best used. Supply and demand103. Included in the definition of highest and best use are certain tests or criteria that must be met. Which of the following conditions is NOT a certain in determining the highest and best use of land?a. Physically possiblec. Financially feasibleb. Legally permissibled. Supply and demand104. When two or more individual parcels are legally encumbered by one mortgage and one of the parcels is to be freed from the encumbrance, the instrument used is a(n):a. Partial release of mortgagec. Sub assignment of mortgageb. Satisfaction agreementd. Estoppel certificate105. Which of the following statement is NOT necessarily correct about a local zoning ordinances?a. Zoning can establish height restrictions on buildingb. Zoning prevents decline in property values within a certain zoning districtc. Zoning is often used to separate incompatible land usesd. Zoning establishes setback requirements for improvements on land106. A mortgage secured by a legal claim against two or more separate properties is referred to as a:a. Wraparound mortgagec. Blanket mortgageb. Participation mortgaged. Ground lease mortgage107. The property tax due on real estate is calculated by what method?a. Dividing the tax rate by the assessed valueb. Multiplying the tax rate by the assessed valuec. Dividing the tax rate by the most probable sales priced. Multiplying the tax rate by the most probable sales price108. Which of the following statement is CORRECT in regard to a condominium form of ownership?a. A condominium is a legal form of property ownershipb. A condominium provides each unit owner with a proprietary leasec. A condominium provides the same legal interest as a cooperatived. A condominium may not be owned by tenants in common.

Additional : Appraisal, Principles & Economics161. List the physical characteristic of land that best fits each description.a. Land is not standardized.1. non-homogeinity 2. Immobility 3.indestructibility 4. fixityb. Location of land cannot be changed.1. non-homogeinity 2. Immobility 3.indestructibility 4. Fixityc. Land is durable and does not wear out. (indestructibility) 1. non-homogeinity 2. Immobility 3.indestructibility 4. Fixity2. List the economic characteristic of land that best fits each description.a. Investments in land are long term.1. fixity2. Modification3. Situs4. scarcityb. Changes in land will affect its value.1. fixity2. Modification3. Situs4. scarcityc. Buyers prefer some locations over others. (situs)1. fixity2. Modification3. Situs4. scarcityd. The supply of land is fixed. (scarcity)1. fixity2. Modification3. Situs4. scarcity3. Are the following statements true (T) or false (F)?a. Lands indestructibility makes it easily regulated by local government. Fb. Scarcity means that we do not have enough land to satisfy demand. Tc. The characteristic of modification means that the changes will always increase a propertys value. F4. Supply the term that best matches each of the following descriptions.a. Divides real estate markets into submarkets (market segmentation) 1. Market segmentation 2. Demographics 3. Land-use plan 4. Subdivisionb. Details the characteristics of the population (demographics)1. Market segmentation 2. Demographics 3. Land-use plan 4. Subdivision5. List the components included in each of the following terms:a. Land: earth surface, below and above; natural things attached b. Real estate:same as above; artificial things attachedc. Real property : land and real estate + interest or rights of ownershipd. It is possible for one person to own the air rights and another person to own the remaining rights to the same parcel of land. True

e. 17Trees and shrubs found naturally growing on the property would be considered improvements. Falsef. Land that is unimproved also might be called raw land. Trueg. Laws recognized by the courts based on custom and usage. (common law)h. Rights a property owner has in anything below the surface. (subsurface rights)i. Additions to the property that are created artificially rather than by nature. (improvements)j. Rights a property owner has in anything above the surface. (air rights)k. A legal system that recognizes private ownership of land. (allodial system)l. The listing agreement between the broker and seller list the item. (listing contract)m. Another name for personal property is chattel property. Truen. A trade fixture is considered real property. False, fixture is real property.o. Objects can be converted from personal property to real property, but not from real property to personal property. False. Example: Coconut trees cut to coco lumber.p. An item that was once personal property but has been attached to the real estate and has become real property (fixture)q. Annual crops on the property that are cultivated by the owner (emblements or fruits)r. The process of changing real property to personal property (severance)s. A type of fixture that remains personal property and can be removed by the tenant. Trade fixturet. The process of changing personal property to real property. (attachment)6. Multiple Choicea. The physical characteristic of real property that no two parcels of land are exactly alike is calleda. Immobility b. Situsc. Non-homogeneityd. Indestructibilityb. The economic characteristics of real property include all of the following excepta. Non-homogeneityb. Situsc. Scarcityd. Fixity (permanence of investment)c. Which of the following factors would not be considered when determining whether an item of personal property has become real?a. Method of attachmentb. Value of the itemc. Permanence of the installationd. Agreement between the partiesd. A shopping mall is an example of what type of real estate?a. Industrialb. Commercialc. Residentiald. Special purposee. Laws developed through the years by the courts based on custom and usage are referred to asa. The allodial system b. Common lawc. Statute lawd. Emblementsf. The economic characteristic of scarcity refers to which of the following?a. No two parcels of land are exactly alikeb. There may not be enough land in certain areas to satisfy demandc. People prefer certain areasd. The real estate industry has run out of land to continue sufficient development

18g. Included in the term real propertya. Is anything permanently affixed to the landb. Are the air rights to the propertyc. Are mineral rights to the propertyd. All of the aboveh. The economic characteristic of situs refers to which of the following?a. No two parcels of land are exactly alike.b. There may not be enough land in certain areas to satisfy demandc. People prefer certain areasd. Land cannot be destroyedi. A warehouse is an example of what type of real estate?a. Residentialb. Special purposec. Industriald. Commercialj. A system of laws that recognizes private ownership of land is referred to asa. The allodial systemb. Common lawc. Statute lawd. Feudal lawk. Of the following items, which would be considered personal property?a. A stores display countersb. A garagec. An installed dishwasherd. Growing bushesl. In the real estate market, supply and demand interact to affect property prices. Which of the following relationship is not correct?a. When demand decreases, prices increaseb. When supply increase, price decreasec. When demand decreases, price decreased. When supply decreases, price increasem. The physical characteristics of real property include all of the following excepta. Nonhomogeneityb. Immobilityc. Situsd. Indestructibilityn. Which of the following factors would not be considered when determining whether an item of personal property has become real?a. Agreement between the partiesb. Method of attachmentc. Permanence of the installationd. The length of time the item was been attached to the propertyo. In the real estate market there are several factors that affect the supply and demand of real estate. Which of the following would not affect the supply of real estate?a. The demographics of the countys populationb. The availability of building suppliesc. Changes in the local governments zoning codesd. The availability of skilled construction labor

19p. The term land includes all of the following excepta. Trees growing on the propertyb. The propertys surfacec. Below the property to the center of the earthd. A shed constructed on the propertyq. An office building is an example of what type of real estate?a. Residentialb. Special purposec. Industriald. Commercialr. A mobile home on a permanent foundation most likely would be considereda. Chattel propertyb. A trade fixtureb. Real propertyd. Personal propertys. The economic characteristic of fixity refers to which of the following statements?a. Investments in real estate are usually for the long termb. Land cannot be destroyedc. Land cannot be removedd. No two parcels of land are exactly aliket. All of the following are true regarding emblements except theya. Are also called fructus industrialsb. Include cultivated cropsc. Are considered real propertyd. Are also called fruits of industryu. Services provided by the real estate industry include all of the following excepta. Bringing home buyers and sellers togetherb. Managing real estate for investorsc. Selling homeowners insuranced. Estimating the value of real estatev. Which of the following is considered to be personal property?a. Trees growing on the propertyb. Trade fixtures installed on the propertyc. A garaged. A drivewayw. Which economic characteristic of real estate refers to the concept that changes in a parcel of land affect its value either favorably or unfavorably?a. Fixityb. Scarcityc. Nonhomogeneityd. Modificationsx. A tenant occupies a rental unit in an apartment building and installs new wooden kitchen cabinets. At the end of the lease the tenant wishes to remove the cabinets. Which of the following is true regarding removal of the cabinets?a. The cabinets can be removed by the tenantb. The cabinets can be removed, but the tenant owes compensation to the property ownerc. The cabinets must stay, but the tenant is entitled to compensationd. The cabinets must stay

20y. A church is an example of what type of real estate?a. Residentialb. Special purposec. Industriald. Commercialz. A restaurant owner occupying a leased space in a commercial building installs a large neon sign in the window. The sign would probably be considereda. An emblementsb. A trade fixture c. Real property d. A fixture7. Multiple Choicea. What physical characteristic makes real estate easy for local governments to tax and cause it to be heavily influenced by changes in the surrounding areas?a. Indestructibilityb. Nonhomogeneityc. Immobilityd. Situsb. Which of the following is included in the definition of real estate but not in the definition of land?a. The air rightsb. The propertys surfacec. Below the property to the center of the earthd. Fixtures on the propertyc. Which economic characteristic of real estate refers to the concept that the supply of land is limited and therefore strong demand in certain areas will increase property values?a. Fixityb. Scarcityc. Nonhomogeneityd. Modificationsd. Under what circumstances might a nonconforming use be brought back into conformance with zoning laws?a. Following reasonable time for phasing out (like industrial to commercial)b. The structure is destroyedc. The non-conforming use is abandoned.d. Title to the property is transfered8. Supply the term that best matches each of the following descriptions.a. The government power to create laws to protect the public health and safety and promote the general welfare (police power)b. Local laws that regulate the control and use of land. (zoning laws)c. Use in existence prior to the zoning law that is allowed to continue. (non-conforming use)d. Changing an area from higher-density use to lower-density use. (downzoning)e. Permission for a property owner to use the land in a way not allowed under the zoning law. (variance )f. Enacted to protect the public health and safety from inferior construction practices. (building codes)g. Permission granted by a local government to build a specific structure. (building permit)h. A document issued by a local government permitting a new building to be occupied that is issued only if the building is in compliance with building codes (certificate of occupancy)i. Wanted by someone with the purchasing power to obtain it. (demand)j. Refers to the supply of something in relation to the demand for it. (scarcity)k. Satisfies a need. (utility)

l. 21Ability to pass title to someone else (transferability)m. The total in pesos for replacing the land and constructing the improvements on the property (cost)n. The most probable price for a property if payment is made in cash and the parties are knowledgeable, well informed, and acting without pressure (market value)o. What a property actually sells for (price)p. The process of estimating and supporting an opinion of value (appraisal)9. Name the economic principle that best fits each description. (Principles of Values)a. A propertys value is diminished by P10,000 because it lacks a garage. (contribution)b. An owner adds a fourth bedroom to her home and realizes a significant gain in property value. The addition of a fifth bedroom a year later results in only a modest increase in value. (increasing and diminishing balance)c. A prospective buyer believes a suburb will be passing a rent control ordinance. (anticipation)d. After reviewing a property, a buyer decides that its greatest value could be realized if a strip mall were built on it. (HBU)e. A developer decides to assemble four adjacent lots so than an office building can be built. (plottage)f. A propertys value passes through a renewal phase. (change)g. A property owners house is worth approximately the same as other similar houses on the block. (substitution)h. A homeowners property value suffers because it is next to a house that has become rundown. (regression)i. A homeowners property value benefits because it is next to a house that recently has been renovated. (progression)j. The value of property is maximized if it is used in the same way as neighboring properties. (conformity)k. The value of real estate does not remain constant. (change)l. Effect on the value of property based on some future event. (anticipation)m. Effect of an improvement on a propertys value. (contribution)n. Property values change as these two forces adjust themselves in the real estate market. (supply and demand)o. Process of merging lots. (assemblage or consolidation)p. The value of a better property will decrease if it is near a poorer quality property. (regression)q. Combining lots to increase the value of the new larger lot over the sum of the smaller ones. (plottage)r. The value of a poorer property will increase if it is near a better quality property. (progression)s. The one legal use that provides a property its greatest value. ( HBU)t. The maximum value of a property is equal to the cost of purchasing an equally desirable property. (substitution)10. Name the step of the appraisal process that best fits each description. (Appraisal Process)a. The market data, cost and income analysis is performed. ( 3 approaches)b. This step includes the type of value to be estimated. (define the problem)c. The appraiser correlates the results to arrive at a value. (reconciliation)d. This step includes information about the area where the property is located, as well as about the property itself. (collect, analyze data)e. The last step in the process can take many formats. (prepare appraisal report)f. The appraiser identifies the types of data needed and data sources. (appraisal planning)11. List the four areas for making adjustments under the sales comparison approach.a. Terms of sale (condition of sale)b. Time elementc. Others (Location and physical character size, shape, elevation, terrain

2212. What type of property is best suited for the sales comparison approach? Residential property; old house and lot13. Supply the term that best matches each of the following descriptions.a. Property similar to the property that has recently sold. (comparable properties)b. The property being appraised. (subject property)c. The sales price of the comparable properties after adjustments are made. (adjusted sales price)14. What three types of depreciation are used in the cost approach?Physical deterioration, functional and economic obsolescence15. List the methods used to determine the cost of improvements on the subject property.a. Quantity survey methodb. Unit in place methodc. Per square meter methodd. Per cubic meter methode. Index method16. Name the types of depreciation for each of the following examples.a. Bedrooms with no closets (functional)b. An apartment building located near a noisy factory (economic)c. A building with defective air-conditioning equipment (physical)d. A condo building located in an area with traffic congestion (economic)17. List the four steps to estimating value using the cost approach.a. Estimate RCN of improvementb. Estimate depreciation from all causesc. Deduct depreciation from RCNd. Add land value18. What type of property is best suited for the cost approach?Special purpose properties or relatively new buildings19. Supply the term that best matches the each of the following descriptions (Cost approach & depreciation)a. Cost of duplicating property exactly as it is constructed (reproduction cost new)b. Cost of producing improvements similar or equivalent to the subject property (replacement cost new)c. Cost of curing the defect does not exceed the increase in property value (curable depreciation)d. Cost of curing the defect exceeds the increase in property value (incurable depreciation)e. Refers to the physical wear and tear on the property (physical depreciation)f. Refers to obsolete features in the building (functional obsolescence)g. Refers to features external to the building (economic obsolescence)20. List the five steps to estimate value using the income approach.a. Estimate potential gross incomeb. Deduct : allowance for vacancy and bad debts = Effective Gross Incomec. Deduct: operating expenses = Net Operating Income

d. 24. What is the formula for finding the GRM?Selling Price of comparable / Gross Monthly Rental of comparable25. What is the formula for finding the GIM?Selling Price of comparable / Effective Gross Income of comparable (for one year)26. What type of property is best suited for the GRM? Residential rented property27. What type of property is best suited for the GIM? Commercial and industrial properties21. List the effect on value in the following situations: Market value increases or decreases?Rate increases( value decreases)Rate decreases(value increases)Expenses increase( value decreases)Expenses decrease(value increases)23. Supply the term that best matches each of the following descriptions. ( See Operating Statement)22. What type of property is best suited for the income approach? Commercial properties or income properties28. Multiple Choice2. The sales comparison (market data) approach can be used effectively in an appraisal ifCurrent construction costs are available.The property generates income.Depreciation for the property can be calculated.There are recent sales of similar properties.1. The income approach would be best used in appraising a(n)Single-family residence.Church.Apartment building.School.Anticipated income from rent and all other sources (PGI)Potential gross income less uncollected rent and vacancies (EGI)Effective gross income less operating expenses (NOIThe yield an investor will expect for investing money in the property (CAP RATE)23Determine capitalization ratee. Divide NOI by capitalization rate = Value

243. One of the concepts used in appraisal is highest and best use, which refers toa. The propertys current use.b. The legal use that will yield the greatest return.c. Acquiring title to the property through long-standing use.d. Acquiring a zoning variance for a more valuable use.4. Which of the following methods is used to calculate the gross rent multiplier?a. Divide the sales price by gross rent.b. Multiply the capitalization rate by net income.c. Divide net income by the capitalization rated. Multiply gross rent by the capitalization rate5. Which of the following steps is used in the cost approach to estimating property value?a. Estimate the market value of the landb. Determine the capitalization ratec. Determine the vacancy rated. Identify several similar buildings that have recently sold6. A property appraisal is thea. Selling price.B. Depreciable basis.c. Estimate of market value.D. Utility value.7. In the cost approach to estimating value, the type of depreciation that is always considered incurable isa. Physical deterioration.B. Functional obsolescence.c. Economic obsolescence.D. Market obsolescence.8. What is the gross rent multiplier for a property if the annual gross income from a building is P66,000, net operating income is P29,500 and the building sells for P561,000?a. 6.5c. 8.1b. 7.2d. 8.5Solution: P561K / P66K = 8.59. To determine the listing price of a residential property, an appraiser most likely would use a(n)a. Income analysis.B. Cost analysis.c. Competitive market analysis. D. Assessment analysis.10. To determine the listing price of a church, an appraiser most likely would use a(n)a. Income analysisb. Cost analysisc. Market analysis.D. Data comparison analysis.11. If an expensive home is built in an area consisting of less expensive homes, its value will be affected by the concept ofa. Functional obsolescenceb. Regressionc. Contributiond. Progression12. In performing an appraisal of a single-family residence, the appraiser reduced its value because of functional obsolescence. The appraiser was referring toa. Proximity to a waste incineratorb. Special assessments on the property.c. A cracked foundation.D. A one-car garage.

2513. To determine the listing price of an office building, an appraiser most likely would use a(n)a. Income analysisb. Cost analysis.c. Market analysis.D. Data comparison analysis.14. According to the principle of conformity, the highest value for a house is obtained if its location isa. Next to an office buildingb. In a residential developmentc. Near a shopping centerd. Across the street from a church15. Which of the following would an appraiser most likely consider functional obsolescence? a. Deterioration of the property b. Location next to a noisy factoryc. A leaky roofd. A house in an exclusive area with a one car garage16. A competitive market analysis (CMA) is frequently prepared by a real estate agent to estimate the most probable sales price of a property. This method is based on thea. Gross rent multiplierc. Market approachb. Cost approachd. Income approach17. The last house in a new development sold for twice the price paid for the first houses sold in the same development. The higher price is a result ofa. Supply and demandb. Conformityc. Progressiond. Contribution18. Which of the following appraisal methods requires that the appraiser calculate the amount of accrued depreciation?a. Cost approachb. Income approachc. Sales comparison approachd. Gross income multiplier19. Which of the following is considered economic obsolescence?a. A leaky roofb. Abandoned buildings in the areac. Outmoded plumbing fixtures d. A cracked foundation20. A group of investors making very high profits from a shopping mall most likely would be concerned with the principle ofa. Conformityb. Progressionc. Competitiond. Contribution21. An appraiser calculates the replacement cost of a building when using thea. Cost approachb. Sales comparison approachc. Income approachd. Gross rent multiplier22. An appraiser estimating the value of a property with a net income of P40,000 decides to use an 8 percent capitalization rate instead of a 10 percent rate. Use of the lower rate results ina. A 2 percent decrease in the appraised valueb. A P1000,000 increase in the appraised valuec. A P1000,000 decrease in the appraised valued. No change in the appraised value23. The economic effect of an improvement on a propertys value is indicated by the appraisal principle ofa. Reproductionb. Contributionc. Progressiond. Diminishing returns

2624. All of the following statements describing the capitalization rate are false excepta. The rate is divided by net income to determine valueb. An increase in the rate results in an increase in valuec. The rate increase when the investments risk increased. The rate represents the return on the investment25. An appraiser who calculates the cost of reproducing a building is finding thea. Present value of the buildingb. Current cost to duplicate the buildingc. Depreciated value of the buildingd. Current cost to build a similar building using cheaper materials26. A property has a monthly net income of P1,800, and an appraiser believes a 9 percent rate of return is appropriate for the property. Its value would be estimated ata. P20,000.00b. P21,600.00c. P240,000.00d. P2,400,000.00Solution: P1,800.00 x 12mos. / .09 = P240K27. An investor who follows the concept that the whole is worth more than the parts is using the concept ofa. Depreciationb. Progression c. Plottaged. Contribution28. An appraiser who calculates the cost of constructing an older building using modern techniques and materials is finding the buildingsa. Unit costb. Replacement costc. Reproduction cost d. Operating cost29. Physical deterioration is a result of all of the following excepta. Poor floor planb. Cracked sidewalksc. Peeling paintd. Broken windows30. For a property to have all of the following must be present excepta. Competitionb. Utilityc. Demandd. Transferability31. An incurable cause of property depreciation isa. Physical deteriorationb. Functional obsolescencec. Zoning obsolescenced. Economic obsolescence32. Which of the following is not an approach to estimating property value?a. Income approachb. Cost approachc. Assessment approachd. Sales comparison approach33. An investor is willing to pay a premium for a commercial property because he believes there will be an increase in the areas population. The investors decision is based on the concept ofa. Anticipationb. Competition c. Conformityd. Contribution34. An appraiser estimating the value of vacant land is using thea. Cost approachb. Income approachc. Sales comparison approachd. Gross income multiplier approach

2735. When using the sales comparison approach, all of the following are important characteristics in selecting comparables excepta. Sale dates of the propertiesb. Location of the propertiesc. Cost to the sellersd.Number of rooms36. An investor investigates the zoning code for a property to determine how much should be offered for the property. The investors decision will be based on the concept ofa. Anticipationb. Competitionc. Highest and best used. Contribution37. To calculate net operating income in an appraisal, all of the following are deductible from gross effective income excepta. Loan paymentsb. Repairsc. Cleaning expensesd. Legal fees38. Which of the following is deducted from potential gross income to calculate gross effective income when using the income approach?a. Legal expensesb. Repairsc. Loan paymentsd. Vacancy loss39. Estimating the value of property requires a systematic set of procedures. The first step in the appraisal process is typically toa. Develop an appraisal planb. Collect general data on the areac. Define the purpose of the appraisald. Estimate the value of the land40. What is the value of a property that produces gross income of P94,000 and the GIM is 8.5?a. P66,583b. P110,588c. P132,706d. P799,000Solution: GIM of 8.5 x EGI of P94K = P799K41. An appraiser would use the cost approach as the primary appraisal method for aa. Parking garageb. Condominium c. Shopping malld. Public school42. An investor purchased a property for P450,000. If the property has annual net income of P36,000, the capitalization rate on the investment is :a. 6.6 percentb. 8 percentSolution:36K/450K =c. 9 percentd. 12.5 percent43. If appraising a newly built single-family house, an appraiser would be most interested in thea. Cost of constructing the houseb. Capitalization rate of the housec. Location of the housed. Gross rent multiplier44. To calculate the monthly gross rent multiplier of a propertya. Multiply the monthly gross income by 12b. Divide the purchase price by the gross monthly incomec. Divide the capitalization rate by the monthly gross incomed. Divide the annual gross income by the purchase price

45. Using the cost approach, an appraiser determines that the value of a property at P230,000. If the appraiser estimated the cost of replacing the structures on the property at P160,000 and the land value at P90,000, what was the amount of accrued depreciation estimated by the appraiser for the property?a. P10,000b. P20,000c. P60,000d. P90,000Solution : P160K + P90K = P250K - P230K = P20K46. An apartment building has six units that rent for P750 a month. If the purchase price of the property is P486,000, the propertys annual gross income multiplier isa. 7b. 9Solution: 486K / 750K x 12 x 6units = 9c. 54d. 10847. An appraiser calculates a separate value for the land when using thea. Sales comparison approachb. Income approachc. Cost approachd. Gross rent multiplier approach48. If an appraiser uses more than one appraisal method and assigns different weights to the results of each, she is usinga. Substitutionb. Contributionc. Replacementd. Reconciliation49. An apartment building has a capitalization rate of 6 percent. If the expenses on the property increases by P6,000 while the rents remain the same, the property value willa. Decrease by P60,000Solution : Say NOI of P1M / 10% = P10Mb. Increase by P6,000P1M - P6K = P994,000 / 10% = P9,940,000.00c. Decrease by P36,000P10M - P9,940,000.00 = P60,000.00d. Decrease by P100,000