Practice Exam

Your score: 57%

You have failed the exam.
Passing score: 70.0
SCORING BREAKDOWN

Correct: 34/60 Incorrect: 26/60

Review answers below

Question 1

A(n) ______ is the professional who the buyer and lender hire to give an opinion of value of the
property.

Appraiser

Credit analyst

Real estate agent

Underwriter

The appraiser provides the buyer and lender with an appraisal report which contains the appraiser's
estimate of the property's value.

Question 2

Your clients are interested in purchasing a piece of land that has several acres of wetlands.
Because of this, ______.

The site cannot be developed

 The site comes with added regulatory baggage and potential costs

The site has significantly less overall value

The site will have a higher appraisal value

Wetlands are a complex category of land valuation. Their monetary value incorporates both public and
private interests, and should always be noted on appraisal reports. Because wetlands are highly
regulated areas, their value comes with added baggage.

Question 3

Veronica uses a ______ to show how many homes were sold each quarter of the last year.

Bar chart

Histogram

Pie chart

Table

A bar chart compares behavior or values between different categories.

Question 4

Basic property rights include the rights of possession, control, exclusion, enjoyment, and
______.

Destruction

Disposition
 Encroachment

Reliction

Disposition is the right to sell or convey property.

Question 5

Which legal description method is regulated by the U.S. Department of the Interior's Bureau of
Land Management?

Governmental

Lot and block

Metes and bounds

Rectangular government survey

The U.S. Department of the Interior's Bureau of Land Management regulates the rectangular survey
system.

Question 6

Henry's estimating a residential structure's accrued depreciation cost by comparing the

structure's effective age with its total economic life. Which method is Henry using to measure
depreciation?

Age-life

Capitalized Value

Market Extraction
 Observed Condition

The age-life method is the easiest way to measure depreciation. It assumes that throughout the life of
a structure, depreciation happens at an even, steady rate.

Question 7

An appraisal is being done on several acres of gorgeous land with rolling hills. Six months ago,
a comparable lot sold for $70,000, but it didn't have anything for a view except steel and glass
buildings in the distance. The appraiser uses the sales comparison method, and determines
that the subject property's view is worth an extra $12,000 on top of the comparable. Assuming
there aren't any other primary differences between the two lots, what would be the appraised
value of the subject lot?

$58,000

$70,000

$72,000

$82,000

Remember, adjustments are made to the subject property. In this case, the subject property is worth
$12,000 more than the comparable (which was sold for $70,000), so the subject property appraises at
$82,000.

Question 8

A ______ is a professional on-site measurement of lot lines, dimensions, and elements of a

property.

Abstract

Appraisal
 Inspection

Survey

This describes a survey, which is sometimes required to verify, clarify, correct, or create a legal
description.

Question 9

Which one of the following expenses listed on the appraiser's operating statement is classified
as a fixed expense?

Administration

Insurance

Trash removal

Utilities

Insurance on the property will remain a fixed expense regardless of the level of use that property has.

Question 10

The legal description for Sara's property appears to include part of her neighbor's yard. Which
of the following could help to verify her property's boundaries?

Abstract

Appraisal

Inspection
 Survey

Surveys can be used to verify, clarify, correct, or create a legal description. They are an on-site
measurement of the lot lines and dimensions of a property.

Question 11

Axel is using the cost service index method to find the reproduction cost of a structure. By
what other name is this method known?

Index

Quantity survey

Square-foot

Unit-in-place

The index method is also known as the cost service index method because it uses a cost reporting or
indexing service to determine both the current cost index and the cost index at the time of construction.

Question 12

The Swansons left the family property to their son, Jason, with the stipulation that he does not
build on it. The type of estate Jason holds is ______.

Fee simple absolute

Fee simple defeasible

Leasehold

Qualified lease
Under a fee simple defeasible estate, the property holder owns the property with all legal rights, but
subject to a condition.

Question 13

Your client Frank is interested in selling a 54,450-square-foot lot. A comparable property in the
vicinity sold for $3,500 per acre. What would be reasonable list price for Frank's property?

$3,500

$4,375

$4,955

$5,250

One acre = 43,560 square feet. Figure his lot acreage first (54,450 ÷ 43,560 = 1.25 acres). Since the
two lots are comparable, calculate the price of the comp ($3,500 x 1.25 = $4,375), which is a good list
price for Frank's lot.

Question 14

A 30-unit income-producing property has a sales price of $6 million. Annual gross income is
estimated at $500,000. What's the gross income multiplier?

10x

12x

14x

8x
The gross income multiplier is the sales price divided by gross income. Improperly calculating GIM
could lead an investor to purchase a property that turns out to be a poor investment.

Question 15

What is gross rent multiplier?

A method to analyze the potential value of smaller residential investment properties

A number that helps set the list price of an investment property

A process to estimate the income a large investment property will produce

A way to determine the value of commercial properties

When you're working with investors who will have tenants in smaller residential properties, the gross
rent multiplier (GRM) is one method among several that should be used to analyze the potential value
of a given real estate investment.

Question 16

What's the price a property would be expected to sell for after suitable exposure to the market,
assuming no exceptional factors are influencing the parties' decisions or financing availability?

Insured value

Investment value

Market value

Mortgage value
Keep in mind that a property's sales price is not necessarily equal to its market value, because many
circumstances can sway property price.

Question 17

Common examples of ______ are seen in houses where there are bedrooms on a level without
any bathrooms, or where the access to one bedroom is through another bedroom.

External deterioration

External obsolescence

Functional obsolescence

Physical deterioration

Functional obsolescence is a form of depreciation or loss in value caused by defects in design, or

design features that are no longer desirable.

Question 18

What effect does the presence of an endangered species have on a site?

It always increases the overall value.

It can either increase or decrease the economic value.

It usually decreases the economic value.

It usually increases the economic value.

The presence of an endangered species usually decreases the economic value of a site, because it
reduces the amount of land that can be used or developed.
Question 19

The principle of ______ says that value is created and maintained when the characteristics of a
property conforms to its neighborhood.

Anticipation

Conformity

Contribution

Substitution

This describes the principle of conformity. A property that conforms to its neighborhood will be valued
more highly than an identical property in a neighborhood of homes that aren't similar to the subject
property.

Question 20

Which of the following is a drawback to applying the cost approach to residential property?

Builders' costs vary widely in a specific area.

Not all residential properties are the same.

The appraiser's opinion of value might not match the seller's asking price.

The VA doesn't allow the cost approach to be used with residential properties.

Builders' costs vary depending on the number of projects they have undertaken, as well as the
individual builder's profit margin.
Question 21

If an appraiser were using three comparables, which factor would weigh most heavily?

Location

Physical condition of property

Sales price

Time on market

Location is a key factor in appraisal value.

Question 22

What step in the appraisal process must be completed before the final appraisal value can be
reported?

Reconciliation

The cost approach

The income approach

The sales comparison approach

Appraisers may use one, two, or all three approaches to valuation, depending on the subject property.
Before reporting the final appraisal value, though, the appraiser must reconcile the values from the
approaches used.

Question 23
Which of the following is a common way appraisers reconcile values from the three
approaches?

Arithmetic average

Random sampling

Standard deviation

Weighted average

In a weighted average, the appraiser multiplies the value from each approach by its weight (or
percentage), adds them together, and then divides the total by the sum of approaches used.

Question 24

Which value-influencing DUST factor has to do with the number of properties on the market?

Diligence

Scarcity

Transferability

Utility

The S in DUST is for scarcity. This factor is related to demand, and reflects the supply of property, or
lack thereof.

Question 25

You're acting as the buyer's agent in a residential transaction. Your client's lender has hired an
appraiser to determine the mortgage value of the property. How is the appraiser paid?
 From a commission based on the property's sales price

From a commission based on the property value found by the appraiser

Through a fee typically paid by the buyer

Through the Appraiser Payment Fund that all lenders must contribute to

The appraisal fee is typically paid by the buyer and is shown on the Closing Disclosure.

Question 26

Appraisers develop an estimate of market rent for residential properties by ______ and
comparing rents across the subject and comparable properties.

Calculating a gross income multiplier

Calculating a gross rent multiplier

Converting monthly contract rent to scheduled rent

Converting monthly rental income to annual dollars per room

GRM and GIM are methods of capitalizing income. Finding market rent involves comparing properties
based on a common unit of measure, which for residential properties is the room.

Question 27

Which of the following does an appraiser take into consideration when determining site value?

Location
 Location, amenities, and improvements

Location and amenities

Location and improvements

When determining site value for the cost approach method, the appraiser uses the sales comparison
method and compares the subject property's location and amenities with those of similar, nearby sites.

Question 28

Appraisers usually gather some specific data about the property before they go visit it. Which
of the following information would an appraiser usually gather ahead of the site visit?

A notarized copy of the seller's disclosure statement

A sketch of the property's shape

The status of title zoning and codes

The written, signed consent form from the real estate agent who last listed the
property

Appraisers tend to gather some specific property data-such as the legal description, tax rates, status
of title zoning and codes, and a copy of the purchase agreement for the property-before they go visit
the property.

Question 29

Which of the following actions toward an appraiser would be considered improper?

Asking an appraiser to consider additional, appropriate property information

 Asking an appraiser to correct errors in the appraisal report

Asking an appraiser to remove information about adverse property conditions from an

appraisal report

Giving an appraiser additional details, substantiation, or explanation for the

appraiser's value conclusion

Real estate licensees can ask appraisers to consider additional (relevant) information and to correct
errors in reports. They cannot ask an appraiser to hide or remove information relevant to the value,
such as adverse property conditions.

Question 30

Suppose an appraiser tells a seller a ballpark range of value for the listed property. What is this
considered, per USPAP?

A comment that means nothing

A formal opinion of value

An informal estimate

Fraud

Per USPAP, an oral quote or range of numbers stated by a licensed professional appraiser constitutes
rendering an opinion of value. And this is against ethical standards.

Question 31

Which of the following is true regarding the purchase of a condominium?

If the prospective buyer has the financial means to buy the condominium, neither the
association nor the residents can block the purchase.
 The condominium association can reject the prospective buyer's application for any
reason.

The condominium residents can reject the prospective buyer's application for any
reason.

The Uniform Condominium Act requires state approval of all purchases.

With a condominium, ownership is very easy. You pay, you're in. This can be a boon or a drawback
depending on whether you like your new neighbors.

Question 32

Which type of depreciation is nearly always considered incurable?

External deterioration

External obsolescence

Functional obsolescence

Physical deterioration

Because there's nothing the property owner can do to fix undesirable or hazardous influences that
exist outside the property, external obsolescence is considered incurable.

Question 33

In which type of framing are the framing members much larger and spaced much farther apart?

Balloon
 Platform

Post-and-beam

Sub-form

This is a description of post-and-beam framing.

Question 34

Which of the following is a limitation of using the sales comparison approach to valuation?

It's easy for clients to understand.

It shows what the market is doing.

It's simple to do.

It's sometimes difficult to know if a transaction was really arm's length.

The sales comparison approach depends on sufficient amounts of accurate sales information about
comparable properties. Whether a transaction was conducted at arm's length may be difficult to
determine.

Question 35

Your first-time buyer, Abigail, is extremely nervous that she won't be able to afford the loan
payments on her new home. Although she has a job that pays well, she's not great with
numbers and she's never had to live within a budget. Which of the following could you use to
present Abigail with a sample amortization schedule?

Histogram
 Line graph

Pie chart

Table

Tables make use of columns and rows to allow comparison of many different bits of data, which is
necessary in an amortization chart.

Question 36

Which of these principles of value is related to how a change to a portion of a property impacts
the value as a whole?

Contribution

Impact on value

Plottage

Progression

The principle of contribution says that a change to a portion of a property impacts the overall value.
For example, adding a swimming pool could add to the value for some buyers and detract from the
value for others.

Question 37

When the land value is known, but the building value is unknown, the ______ technique can be
used.

Building residual
 Capital recapture

Direct capitalization

Land residual

The building residual technique calculates how much residual income the building earns, and provides
a value estimate for the building.

Question 38

Which of these is an example of a house style?

Art deco

Factory-built

One-story

Two-story

Art deco is an example of a house style. The other choices are house types, which are much broader
categories. Each type of house has many styles.

Question 39

The ______ is one of the primary agencies enforcing green regulations and standards.

Department of Environmental Quality

Department of Housing and Urban Development

Environmental Protection Agency

 The U.S. Department of Energy

The EPA is one of the primary agencies enforcing green regulations and standards.

Question 40

If Vlad the appraiser runs into a valuation issue that he's not sure how to address, which group
will be most likely to provide guidance for him?

Appraisal Practices Board

Appraisal Qualifications Board

Appraisal Standards Board

Appraisal Subcommittee

The Appraisal Practices Board provides appraiser guidance on valuation issues.

Question 41

Which line item in the Cost Approach section in the URAR form is used to capture the
appraiser's opinion of value for the property?

Depreciated Cost of Improvements

Indicated Value By Cost Approach

Opinion of Site Value

Total Estimate of Cost-New

The appraiser's opinion of value for the property is entered on the Indicated Value By Cost Approach
line. This figure is the sum total of the site value, the cost-new estimate, and the "as-is" value of site
improvements (if needed), less the accrued depreciation cost.

Question 42

A residential income property under appraisal has a potential gross income of $200,000. The
effective gross income is $170,000, reflecting a 15% vacancy and loss rate. After constructing
the operating statement, the appraiser arrives at a figure of $105,000 for total expenses. Which
calculation represents the NOI for this property?

$170,000 - $105,000 = $65,000

$170,000 - ($170,000 x .15) = $144,500

$200,000 - $105,000 = $95,000

$200,000 - $170,000 = $30,000

The NOI is the amount remaining after total expenses are deducted from effective gross income.

Question 43

What type of heating system uses a boiler to produce steam, which is transferred to rooms
through a pipe?

Forced warm air system

Hot water system

Radiant system

Steam system
A steam system uses a boiler to produce steam to heat a home. This is slightly different from a hot
water system in which the water is heated, but not to the point that it becomes steam.

Question 44

The sales comparison grid in the URAR presents what type of information needed by an
appraiser using the sales comparison approach?

Observable

Qualitative

Quantitative

Statistical

The sales comparison grid in the URAR is a table of mostly quantitative information about the subject
property and three comparable properties.

Question 45

What must a foundation wall or floor have if it's in contact with the soil?

A radon detector

A radon detector and drainage field

A sump pump

A vapor barrier and termiticide

A vapor barrier prevents moisture from reaching the house, and a termiticide applied to building
materials or the ground helps to prevent pest damage.
Question 46

In what part of a narrative appraisal report would you expect to find a glossary of terms, a flood
hazard map, and qualifications of appraiser and company profile?

Addendum

Cover letter

Overview and summary

Value conclusions

Information that supports the data presented in the report would be included in the addendum.

Question 47

When discounted cash flow analysis is used, income that will be received in the future is
discounted. Why?

To account for inflation and the time value of money

To provide a higher rate of return

To provide shareholders a larger dividend

To save money on income taxes

Discounting accounts for inflation and the time value of money.

Question 48

How is gross rent multiplier calculated?

Divide the gross monthly rent by the sales price of comparable properties

Divide the sales price of comparable properties by the gross monthly rent

Multiply the property's list price by the gross monthly rent

Multiply the sales price of comparable properties by the gross monthly rent

Gross rent multiplier is found by dividing the sales price of comparable properties by the gross monthly
rent. The resulting figure is the multiplier that can be applied to the subject property's gross rent to find
value.

Question 49

Which of the following is true about radon?

It's a man-made chemical.

It's a naturally occurring gas.

It's a problem outdoors.

It's safe at any level.

Radon is a naturally occurring gas that's usually not a problem outdoors, where it's released into the
atmosphere. It's considered unsafe at any level.

Question 50

The mean, median, and mode are called ______.

 Central representations

Measures of average tendency

Measures of central tendency

Measures of dispersion

Statistics use these three measures of central tendency to determine an average that represents the
group.

Question 51

An appraiser is assigned to appraise a new manufactured home that hasn't yet been placed on
the site where it will be attached to a foundation. What approach to appraisal is recommended
for this assignment?

Cost approach

Income approach

Personal property approach

Sales comparison approach

A new manufactured home is similar to new construction of a site-built home, so the cost approach is
recommended.

Question 52

Which of the following is a key consideration and starting reference for a metes and bounds
description?
 Base line

Benchmark

Point of beginning

Principal meridian

A key consideration is the point of beginning. Unless it's easily identifiable, the rest of the description
won't be of much use to anyone, because everything is based off of that point. The point of beginning
is also the ending.

Question 53

The Crows gave their son, Gibson, the family property, so long as he doesn't join his friend's
rock band. If he joins the band, the property goes back to them. What type of estate is this?

Fee simple absolute

Fee simple defendable

Fee simple determinable

Fee simple subject to a condition subsequent

With fee simple determinable, the property holder owns the property subject to a condition. If the
condition is breached, then the property will go back to the original owner.

Question 54

Which of the following is an advantage of using the sales comparison approach to valuation?

It depends on sufficient amounts of accurate sales data.

 It requires accurate adjustments.

It's accurate if transactions are arms' length.

It shows what the market is doing.

The sales comparison approach, if sufficient accurate sales data is available, can give a "snapshot" of
the market value of a property.

Question 55

In the Site section of the Uniform Residential Appraisal Report, how is property of less than
one acre noted?

By the amount of square feet

By the number of square yards

By the percentage of a football field it contains

By the percentage of an acre it contains

Property of less than one acre (or 43,560 square feet) is reported in square feet. Property of more than
an acre is reported to two decimal points, followed by "ac" (for example, a 2.31-acre property would be
listed as "2.31 ac").

Question 56

In many areas of the country, Marcellus shale has become a hot commodity. This type of rock
produces gas, which can be mined, stored, and sold. Abe learned that his family farmstead sat
over a rich deposit of Marcellus shale. What type of rights does Abe have relative to this shale?

Air rights
 Sub-surface rights

Surface rights

Water rights

Sub-surface rights are the rights to use underground resources, such as shale. These are also called
mineral rights.

Question 57

If an adjustment is needed for a specific feature, when should an appraiser make this
adjustment?

First, before adjusting anything else

Last, after adjusting for all other factors

Second, after adjusting for sales and financing concessions

Third, after adjusting for time

Appraisers should make any dollar adjustments for specific features last, after applying any needed
percentage adjustments.

Question 58

Which of the following is a framing member?

Footings

Rafters
 Soffits

Sticks

Studs, joists, and rafters are all framing members.

Question 59

Donna is about to do an appraisal of a two-story home that's under contract. Which of the
following tasks can she do before her site visit?

Get a copy of the subject property's purchase agreement.

Meet with the subject property's buyers and sellers to understand the parties'
intentions.

Note the site's surface features and look out for any obvious natural or environmental
hazards.

Sketch the property to show its shape and the location of the street.

Appraisers tend to gather some specific property data-such as the legal description, tax rates, status
of title zoning and codes, and a copy of the purchase agreement-before they go visit the property.

Question 60

You decide to install a fence around your property and want to know how many linear feet you
have to determine the cost of the fencing. The property is a 475-foot by 150-foot rectangle.
What's the linear footage?

1,250 linear feet

3 linear feet
 625 linear feet

71,250 linear feet

Remember to add the length of the four sides together to determine the linear footage.