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92 Multiple choice questions

  1. ________ - the process of estimating the value of property through examination and comparison of actual sales of comparable properties; also called the direct market comparison or market data approach.
  2. Three of the following factors create value in real estate. Which one does not create value?
    a. Demand
    b. Utility
    c. Infiltration
    d. Scarcity
  3. ________ - the lessee's right to possess and use real estate during the term of a lease. This is generally considered a personal property interest.
  4. A person who determines the land value is called a real estate ________.
  5. Your client asked you to make a simple appraisal of his lot in Bagiuo, based on technical description and inspection of the property, you found out the following:
    Land area: 3,200 sqm
    Average price of land - P9,000 per sqm
    Unobstructed view(plus) - 15%
    Topography(minus) - 10%
    Plottage value(plus) - 6%
    What is the market value of the property? P________
  6. ________ - an improvement to property that is more than warranted by the property's highest and best use and thus not likely to contribute its cost to the total market value of the property.
  7. The average selling price of homes in a district can be ascertained by
    a. Assessed value
    b. An appraisal
    c. Comparative analysis
    d. None of the above
  8. ________ - a method of developing a discount rate based on (1) the rate of mortgage interest available, (2) the rate of return required on equity, and (3) the debt and equity share in the property. A variation of this method is used to compute an overall capitalization rate.
  9. In the economic sense, ________ refers to the displacement of the present residents with people of lower economic status or different cultural or social background.
  10. ________ - a method of valuing land to be used for subdivision development, it relies on accurate forecasting of market demand, including both forecast absorption (the rate at which properties will sell) and projected gross sales (total income that the project will produce); also called the land development method.
  11. ________ - properties that are substantially equivalent to the subject property.
  12. ________ - the current construction cost of a building having exactly the same utility as the subject property.
  13. ________ - a depreciated item that can be restored or replaced economically.
  14. ________ - the number of years elapsed since the original structure was built, sometimes referred to as historical or chronological age.
  15. ________ - the return of an investment; the right of an investor to get back the amount invested at the end of the term of ownership or over the productive life of the improvements.
  16. ________ - A building, wall, or fence that extends beyond the land of the owner and illegally intrudes on land of an adjoining owner or a street or an alley.
  17. ________ - the process of estimating the value of a property by adding the appraiser's estimate of the reproduction or replacement cost of property improvements, less depreciation, to the estimated land value.
  18. ________ - the value of goods and services in exchange for other goods and services, or money, in the marketplace; an economic concept of market value.
  19. ________ - for appraisal purposes, loss in value due to any cause including physical deterioration, functional obsolescence, and external obsolescence.
  20. ________ is a loss in value of a property because of external factors or events.
  21. In the computation of depreciation of real properties, the method that is widely used by practitioners is the ________.
  22. To be considered comparable to the subject property, a comparable property mush have been sold
    a. with a conventional mortgage
    b. for all cash
    c. without any form of secondary financing
    d. for credit
    e. in an arm's length transaction
  23. ________- a principle that the value of a commodity will rise as demand increases and/or supply decreases.
  24. The price of any commodity in its market at a specified time is called:
    a. Actual price
    b. Market price
    c. Nobel prize
    d. Par value
    e. None of the above
  25. ________ - the process of estimating the value of an income-producing property by capitalization of the annual net operating income expected to be produced by the property during its remaining economic life.
  26. ________ - the principle that no physical or economic condition ever remains constant.
  27. A building is depreciated at 2.5% per year on a straight line basis, what is the estimated useful life of the building? ________
  28. ________ - the greatest possible estate or right of ownership of real property, continuing without time limitation, sometimes called ________ absolute.
  29. ________ - the number of years of useful life left to a building from the date of appraisal.
  30. The difference between contract price and loanable amount is ________.
  31. ________ - the principle that a successful business attracts other such businesses, which may dilute profits.
  32. Several houses valued at P1,000,000.00 and P2,000,000.00 were built in an area where an existing house valued at P3,000,000.00 is located. As a result, the value of the latter decreased. The real estate principle of value that applies to this situation is called the principle of :
    a. Substitution
    b. Improvement
    c. Progression
    d. Regression
  33. The use of borrowed funds to increase purchasing power is ideally to increase the profitability of an investment is ________.
  34. An investor is intending to buy a property, which has an annual income of P3,600,000.00. In his market study he found out that a comparable property with an annual gross income of P2,500,000.00 was recently sold for P17,800,000.00. Based on the gross income multiplier indicated by the comparable property, at how much should the investor buy the subject property? ________
  35. The right of an owner-lessor to receive the contract rent and reversion of the property at the end of the lease is called ________.
  36. The following are determinants of value in appraisals of realty except:
    a. Contribution
    b. Demand
    c. Purchasing value
    d. Scarcity
    e. Utility
  37. ________ - a lease commonly used for commercial property that provides for a rental based on the tenant's gross sales at the premises. It generally stipulates a base monthly rental, plus a percentage of any gross sales exceeding a certain amount.
  38. ________ - the principle that the purchase price of property is affected by the expectation of its future appeal and value.
  39. An appraisal technique in which comparative estimates are made between prices paid in actual transactions and the current listings is ________.
  40. ________ - an appraisal technique used to estimate reproduction or replacement cost, the appraiser multiplies the original cost of construction by a price index for the geographic area to allow for price changes.
  41. ________ - an estimate of quantity, quality, or value; the process through which conclusions of property value are obtained; also refers to the report setting forth the process of estimating value.
  42. Several houses valued at P1,000,000.00 and P2,000,000.00 were built in an area where an existing house valued at P3,000,000.00 is located. As a result, the value of the latter decreased. The real estate principle of value that applies to this situation is called the principle of ________.
  43. ________ - defects in a building or structure that detract from its value or marketability, usually the result of layout, design, or other features that are less desirable than features designed for the same functions in newer property.
  44. ________ - the process employed in estimating the value of a property by the use of an appropriate capitalization rate and the annual net operating income expected to be produced by the property.
  45. ________ refers to the use an object is put to, the services it renders and wants it satisfies.
  46. ________ - the percentage of a property's original cost that is returned to the owner as income during the remaining economic life of the investment.
  47. ________ - the basic appraisal premise that the market value of real estate is influenced by the cost of acquiring a substitute or comparable property.
  48. ________ - an improvement that is less than a property's highest and best use.
  49. ________ - the principle that buildings should be similar in design, construction, and age to other buildings in the neighborhood to enhance appeal and value.
  50. Which of the following is never considered as a factor in the valuation of a house and lot?
    a. Modification in zoning regulations
    b. Topography of the lot
    c. Conviction of the previous owner on charges of moral turpitude
    d. Functional obsolescence
  51. ________ - method of finding land value in which all improvement costs (less depreciation) are deducted from sales price. also called extraction.
  52. ________ - the ownership interest of a sublease.
  53. Income approach for an appraisal would be most widely used
    a. On a newly opened subdivision
    b. On commercial and investment property rented by tenants
    c. On property heavily mortgaged
    d. On property heavily insured
    e. none of the above
  54. ________ - a transaction in which both buyer and seller act willingly and under no pressure, with knowledge of the present conditions and future potential of the property, and in which the property has been offered on the open market for a reasonable length of time and there are no unusual circumstances.
  55. ________ - the current construction cost of an exact duplicate of the subject building.
  56. ________ - a lease of land only on which the lessee usually owns the building or is required to build as specified by the lease. Such leases are usually long-term net leases; the lessee's rights and obligations continue until the lease expires or is terminated for default.
  57. Added value inherent on a lot bounded by two streets.
    a. cooperate interest
    b. plottage value
    c. social value
    d. joint venture
    e. corner influence
  58. ________ - the subsequent increase in the unit value of a group of adjacent properties when they are combined into one property in a process called assemblage.
  59. ________ - a method of computing accrued depreciation in which the cost of a building is depreciated at a fixed annual percentage rate; also called the straight-line method
  60. The compensation paid for the use of the capital is called:
    a. Amortization
    b. Capital formation
    c. Interest
    d. Payment
    e. None of the above
  61. An estimate or an opinion of value is
    a. Conclusion
    b. Adjustment
    c. Analysis
    d. Computation
    e. None of the above
  62. ________ is the principle of value which states that the value of a property tends to be enhanced when there is reasonable homogeneity in use.
  63. ________ - the principle that any improvement to a property, whether to vacant land or a building, is worth only what it adds to the property's market value, regardless of the improvement's actual cost.
  64. In the cost approach to value, physical deterioration is estimated by the formula.
    a. Economic Life divided by chronological age
    b. Chronological life divided by economic life
    c. Economic Life divided by effective age
    d. Effective age divided by economic life
  65. ________ - an appraiser's written opinion to a client of the value south for the subject property as of the date of appraisal, giving all details of the appraisal process.
  66. ________ refers to that use which will yield the maximum return at a given time.
  67. ________ - rent paid for the right to use and occupy land according to the terms of a ground lease.
  68. ________ - the period of time during which a structure may reasonably be expected to perform the function for which it was designed or intended.
  69. The rate of return earned by an investor which does not include allowance for capital recover is ________.
  70. ________ - provisions in a deed limiting the future uses of the property. It may take any forms: they may limit the density of buildings, dictate the type of structures that can be erected, and prevent buildings from being used for specific purposes or used at all. This may impose a myriad of limitations and conditions affecting the property rights appraised.
  71. ________ - the age of a building based on the actual wear and tear and maintenance, or lack of it, that the building has received.
  72. The study of current supply and demand conditions in a particular area for a specific type of property is ________.
  73. ________ - loss of value from forces outside the building or property, such as changes in optimum land use, legislative enactments that restrict or impair property rights, and changes in supply-demand relationships
  74. Using the 4-3-2-1 rule (depth rule), a 5 hectare belonging to different owners was sold for P10,000,000.00, what is the share of lot owners owning the first quarter abutting the road? P________
  75. ________ - the lessor's interest and rights in the real estate being leased.
  76. The ratio that expresses the relation between gross income and sales price of a property is ________.
  77. ________ - the percentage rate applied to the income a property is expected to produce to derive an estimate of the property's value; includes both an acceptable rate of (yield) and return of the actual amount invested (recapture).
  78. The increase in value of real estate without any expense of the owner is ________.
  79. ________ - the legally and physically possible use of land that is likely to produce the highest land (or property) value, it considers the balance between site and improvements as well as the intensity and length of uses.
  80. ________ - exists when there are more properties for sale in a particular area than there are buyers.
  81. ________ is the principle which states that when two or more commodities with substantially the same utility are available, the one with the lowest price receives the greatest demands and the widest distribution.
  82. ________ - a method of finding the reproduction cost of a building in which the costs of erecting or installing all of the component parts of a new building, including both direct and indirect costs, are added.
  83. ________ - a rate of investment return derived, by comparing the net income and sales prices of comparable properties.
  84. Income approach to value is an application of the principle of ________.
  85. The selling price of a real estate is usually based on its:
    a. Speculative value
    b. Exchange value
    c. Intrinsic value
    d. Market value
    e. None of the above
  86. Which of the following is not essential in the determination of Fair market value?
    a. Knowledgeable and prudent seller & buyer
    b. Reasonable exposure of the property in the open market
    c. Assessed value indicated in the Tax declaration
    d. willing seller and willing buyer
  87. ________ - the sum of the discount and capital recapture rates for a building.
  88. An appraisal technique which holds that the value of property tends to be enhanced by association with superior properties is ________.
  89. ________ - the approaches used in the appraisal of the real property.
  90. ________ - a method of capitalization using net income remaining to building after interest on land value has been deducted.
  91. ________ - the appraisal principle that states that the greatest value of a property will occur when the type and size of the improvements are proportional to each other as well as to the land.
  92. ________ - the statistical study of human populations, especially in reference to size, density and distribution. Demographic information is of particular importance to people involved in market analyses and highest and best use analyses in determining potential land uses of sites.