Practice Exam

Your score: 72%

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

Correct: 43/60 Incorrect: 17/60

Review answers below

Question 1

What phrase describes the amount that today's dollars grows to over time?

An investment

Future value

Present value

Principal

Present value describes today's dollars. Future value describes the value of those dollars over time, at
some point in the future. Present and future value are concepts related to the time value of money.

Question 2

Which of these items requires special attention from the appraiser when the subject property is
a manufactured home located in a mobile home park?

Lease term
 Method of attachment to the foundation

Number of tenants in the mobile home park

Quality of construction

Quality of construction and neighborhood are typically evaluated for any residential appraisal, but
lease term will affect the value of a manufactured home sited in a mobile home park.

Question 3

What rating scale do appraisers use to indicate the condition of the subject property and
comparable properties?

A range from C1 for "like new" to C6 for "major repairs needed"

A range from C1 for "repairs needed" to C6 for "like new"

A range from Q1 for exceptionally high quality to Q6 for the most basic quality

A range from Q6 for exceptionally high quality to Q1 for the most basic quality

Appraisers rate the conditions of properties on the URAR with ratings ranging from C1 for new
properties to C6 for properties in need of major repairs.

Question 4

When stating the problem, which of the following does the appraiser need to identify the
subject property?

A legal description and mailing address

The date of the value estimate

 The interest to be appraised

The name of the client

An appraiser will identify the subject property with a legal description and mailing address when stating
what problem the appraisal is intended to solve.

Question 5

The technique of expressing potential income as current value is called ______.

Capitalization

Cash flow

Reversion

Yield

Capitalization of expected income is the foundation of the income approach to appraisal.

Question 6

Joe is finally remodeling his parents' home from the late 1960s and, to his mother's delight, it's
time to install a new washer and dryer. As he is hooking up the new machines, what type of
wiring is he likely to encounter?

Aluminum

Copper

Gold
 Silver

Aluminum wiring is used where the current is heaviest-often where large appliances are plugged in.
Houses built between 1965 and 1972 also utilized aluminum branch circuit wiring.

Question 7

A potential building site is being appraised. A similar site sold last week for $125,000. However,
the subject site has a finished driveway, and is partially landscaped. The appraiser has
determined that the value of these two improvements is $7,000. If there are no other primary
differences between the sites, and the sales comparison method is used, what would the
appraisal value of the subject lot be?

$107,000

$118,000

$132,000

$139,000

The sales price of the comparable site without the improvements would be increased by $7,000 to
arrive at the appraisal value of the subject site: $132,000.

Question 8

How should the proximity of a comparable property be indicated in the sales comparison grid
of the URAR?

By distance in kilometers and direction relative to the subject property

By distance in kilometers from the subject property

By distance in miles and direction relative to the subject property

 By distance in miles from the subject property

Proximity to the subject property should be indicated by straight-line distance in miles and direction
relative to the subject property, for example, "1.5 miles NE."

Question 9

In the sales comparison approach, lenders like to see the appraiser determine a probable range
of values for a property by comparing a group of comparable sales to the subject. This process
is known as ______.

Aggregating sales

Bracketing

Depreciation

Market categorization

In bracketing, the appraiser attempts to include both superior and inferior units of comparison such as
age, transaction price, and more.

Question 10

Which of the following would be considered an arm's length transaction?

One in which the buyer and seller don't know one another

One in which the buyer and seller live in different states

One in which the property isn't listed on the MLS

 One in which the property's value is determined by nearby comparables

An arm's length transaction means that the property has no insider deals, and only the usual market
pressure applies.

Question 11

An amortization chart is an example of data presentation using a(n) ______.

Bar chart

Infographic

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 12

With which of the four methods used to measure depreciation does the appraiser use
comparable properties' sales prices to figure out the value of a depreciated item?

Age-life

Capitalized value

Market extraction

Observed condition
This is a description of the market extraction method. When using this method, the appraiser must
make sure there are enough comparables available to figure out that specific item's value.

Question 13

When property values remain at the same level and are at their highest monetary value, the
neighborhood is in what stage of the neighborhood life cycle?

Decline

Equilibrium

Growth

Rejuvenation

The equilibrium stage is characterized by stability or no market change when property values are at
their highest level.

Question 14

The ______ method of land valuation converts the amount of yearly income a site will produce
into a value using a capitalization rate.

Abstraction

Allocation

Ground rent capitalization

Sales comparison
This describes the ground rent capitalization method. When this method is used, the appraiser must
consider lease terms (amount of time remaining, rent paid, and other conditions) in order to compute
an accurate and complete appraisal.

Question 15

The ______ is some, but not all, of something.

Calculation

Part

Rate

Total

The part is some, but not all, of something. "Part" is a math term, and it's one of the few that makes
perfect sense!

Question 16

The government's authority at all levels to ensure the health, safety and welfare of its citizens,
which includes the control of public land use is the definition of ______.

Condemnation

Eminent domain

Police power

Sovereignty
While eminent domain and condemnation are part of this, police power defines a larger scope of
authority.

Question 17

Jan and Scott were offered an appraisal waiver by their lender. What is one advantage to
waiving the appraisal?

They can feel certain of the home's underlying value.

They're more likely to get approved.

They won't have to do a home inspection.

They won't have to pay for an appraisal.

Appraisal waivers can save borrowers money they would otherwise spend on a traditional appraisal,
but they carry risks of improper valuation.

Question 18

To determine property value with the cost approach, the appraiser subtracts the ______ from
the reproduction/replacement cost and then adds the site value.

Accrued depreciation

Capitalized income

Comparables from two other properties

Estimated property taxes

The formula for the cost approach is: reproduction/replacement cost - accrued depreciation + site
value = property value.

Question 19

Which type of cost included in the quantity survey method has to do with the cost of having to
pay for such things as permits, surveys, and the builder's overhead and profit?

Direct costs

Entrepreneurial profit

Indirect costs

Site costs

The costs involved in non-construction-related, but still necessary, expenses-including permits,

surveys, the builder's overhead and profit, and payroll taxes-are known as indirect costs.

Question 20

A young professional couple from out of state have been referred to you. The couple knows
nothing about the area and would like some demographic information before they buy a home
in the area. Basically, they'd like a breakdown by age of the population. Which of the following
would be the best tool to present this information?

Histogram

Line graph

Pie chart

Table
Pie charts work well to show parts of a whole so you can compare the sizes of different groups within
a population.

Question 21

The income capitalization approach to appraisal uses ______ as the I in the capitalization
formula V = I ÷ R.

Effective gross income

Gross operating income

Net operating income

Potential gross income

The net operating income represents potential income minus expenses and losses from vacancy and
uncollectable rent, so it provides the best estimate of capitalized value for income property.

Question 22

Based on the work environments described, which of these professionals is likely an

appraiser?

Dusty works in an office 100% of the time.

Pete's job is sort of like a construction worker's, with lots of heavy lifting and manual
labor

Renee engages in some desk work and some work in the field, but doesn't have to
perform any manual labor
 Sheila engages in lots of customer contact and collaborative conference-room
meetings throughout the day

The appraiser has to be good at problem solving and analysis, but must also be able to perform
physical inspections of a property.

Question 23

To determine the total reproduction cost new of a subject building using the quantity survey
method, the appraiser takes the sum total of the direct costs and adds that to both the ______
and the entrepreneurial profit.

Builder's profit

Estimated accrued depreciation

Indirect costs sum total

Site costs sum total

The formula for the quantity survey method is: Direct costs + Indirect costs + Entrepreneurial profit =
Total reproduction cost new

Question 24

All trusts have three parties: the trustor, the beneficiary, and the ______.

Attorney in fact

Broker

Founder
 Trustee

The parties to a trust include the trust creator (commonly called the trustor), the trustee (the person
established as being in charge of carrying out the terms of the trust), and the beneficiary (the person
who receives the benefits of the trust).

Question 25

There are many advantages to holding property within a trust. One of the most important
advantages is that some trusts ______.

Avoid probate

Need not be reviewed by an attorney

Require probate

Typically take years to sort out

The process of probate can take up to a year or more before the property is disbursed to the heirs.
Property held within a trust can avoid probate.

Question 26

A _____ is the top number of a fraction.

Denominator

Improper

Numerator

Proper
A numerator is the top number of a fraction that shows how many parts there are. For instance, in the
fraction 5/6, there are five equal parts, each is a sixth of the whole.

Question 27

A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is
estimated at $6,000. What's the gross rent multiplier?

100x

10x

83x

8.3x

Gross rent multiplier is sales price divided by monthly gross rent ($600,000 / $6,000 = 100). Improperly
calculating GRM could lead an investor to purchase a property that turns out to be a poor investment.

Question 28

Which of these items could indicate a potential flaw in an appraisal report?

Adjustments to comparables use a percentage instead of a dollar amount

Adjustments to condition on all comparables is listed as $10,000

Some adjustments to comparables are shown as negative while others are positive

Street address of subject property has a spelling error

An across-the-board adjustment to comparables is unlikely, and is an item that can be questioned.

Spelling errors aren't going to affect the appraised value, and should be ignored.
Question 29

Which of these groups is responsible for ensuring that states follow the minimum standards
required of appraisers as stated in the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989?

Appraisal Practices Board

Appraisal Qualifications Board

Appraisal Standards Board

Appraisal Subcommittee

The Appraisal Subcommittee monitors the way appraiser standards are upheld within each state.

Question 30

Joe gave land to a school, but still wanted to have some control over its use, so a deed was
prepared that gave the school title as long as the land is used for educational purposes. What
type of interest does the school have?

Fee simple conditional

Fee simple determinable

Fee simple subject to a condition subsequent

Legal life estate

A fee simple determinable has limitations as to what can or can't be done with a property. It uses
phrases such as "so long as," "while," or "during" to describe the required condition.
Question 31

Which of the following is true about the capitalization process?

It converts income to value.

It doesn't consider capital recapture.

It provides a rate of depreciation for assets.

The same capitalization rate is used for every investment.

Capitalization converts income to value using a capitalization rate, which is an expected rate of return
on an investment.

Question 32

To determine property value with the cost approach, the appraiser subtracts the accrued
depreciation from the ______ and then adds the site value.

Capitalized income

Comparables from two other properties

Listing price

Reproduction/replacement cost

The formula for the cost approach is: reproduction/replacement cost - accrued depreciation + site
value = property value.
Question 33

To whom may an appraiser reveal a property's value estimate?

The buyer

The buyer's agent

The client

The seller

The appraiser may not reveal the value estimate to anyone but the client (whomever engages the
appraiser), no matter who pays the appraisal fee. In federally related loan transactions (which
comprise nearly all residential real estate loans), the lender, by law, is the only entity who may engage
the appraiser, and appraisers must be pre-qualified by lending institutions.

Question 34

A(n) ______ fraction is where the numerator is less than the denominator.

Denominator

Improper

Numerator

Proper

A proper fraction is one in which the numerator is less than the denominator. For instance, 4/5 is a
proper fraction, whereas 3/1 would be an improper fraction because the numerator (3) is more than
the denominator (1).

Question 35
The Kelloggs are purchasing a house they tried to purchase three months earlier, but there was
a sale fail due to their own financing issues. Now they are approved through a new lender, and
don't want to have to pay for a second appraisal. Can they use the first appraisal report?

No, but the new lender must pay for the new appraisal

No, the Kelloggs must pay for a new appraisal

Yes, but they must pay an additional fee to the appraiser to recertify the appraisal

Yes, provided it is within four months of the original appraisal

A new appraisal must be ordered because a new lender is involved.

Question 36

Which of the following statements about a license is true?

A license is a permanent privilege

A license is assignable

A license is inheritable

Licenses may be revoked by the owner at any time, unless a termination date has
been specified by contractual agreement

A license is temporary, and at the discretion of the property owner. A license is not assignable or
inheritable.

Question 37

What data will appraisers need to gather to use the sales comparison approach?
 Sales prices for past transactions involving the subject property

Sales prices for similar properties in other cities

Sales prices on recently sold properties similar to the subject property

The cost of materials needed to reconstruct the property

When using the sales comparison approach, appraisers need information on the sales prices of
recently sold properties that are similar to, and in the same market as, the subject property.

Question 38

At which level of government are building codes generally enforced?

Board

Federal

Local

State

Although codes can be established at the local, state, and federal level, they're generally enforced by
local or county authorities.

Question 39

An appraiser wants to make sure that the values she is using for operating expenses and net
income are valid by comparing them with similar properties. What tool can she use to do this
effectively?
 The breakeven ratio

The effective income ratio

The net income ratio

The operating expense ratio

With the operating expense ratio, an appraiser can compare similar properties' expenses. If there's a
discrepancy, the formula can be used to compare specific expenses, such as utilities or insurance, to
locate where the issue lies.

Question 40

For most residential properties, the highest and best use of the property is relatively obvious.
What is it?

The current use

The estimated use

The former use

The potential use

Even with many commercial properties, a property will likely already be used at its highest and best
use value.

Question 41

When prices go down because there are too many homes on the market and too few buyers,
this is an example of ______.
 Competition

Conformity

Progression

Regression

Competition is related to supply and demand. Multiple similar properties on the market creates
competition, causing a value decrease (lower prices) because the supply exceeds demand. Fewer
homes on the market means less competition, increasing demand and driving prices upward.

Question 42

An appraiser's workday is likely to involve which of these activities?

Carpentry and mechanical work

Claims adjusting

Research and data analysis

Sales and negotiation

An appraiser's typical workday primarily involves research, analysis, property inspection, and report
writing.

Question 43

What's the best advice when challenging an appraisal?

Be specific and concise about why the value opinion is different in your mind.
 Blame it on the appraiser.

Don't bother asking the appraiser to explain why certain adjustments were made or
not made.

Suggest a minimum value for the appraiser to meet.

Appraisers take their job seriously and are experts in their field. Asking diplomatically how the
appraiser arrived at the appraised value is appropriate, however.

Question 44

What's the purpose of the Appraiser Independence Requirements?

To define appraiser licensure categories

To encourage appraiser membership in professional organizations

To ensure equitable pay for all appraisers

To protect against fraudulent home valuations

Fannie Mae requires all transactions to comply with AIR in order to prevent fraudulent valuations.

Question 45

Which of the following is a true statement about a site containing wetlands?

The presence of wetlands affects use of the property and should always be noted on
appraisal reports.

The presence of wetlands almost always means the site will have a higher appraisal
value.
 The presence of wetlands always means the site has less overall value.

The presence of wetlands does not affect use or value.

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

Question 46

Which of the following is needed in order for the sales comparison approach to yield reliable
results?

Accurate information about the cost of construction materials

A gross rent multiplier

Assessor's parcel number

Sufficient sales data about recently sold comparable properties

Without enough accurate information about recent sales of comparable properties, the sales
comparison approach is not reliable.

Question 47

Which of the following is an example of an easement?

A path providing neighborhood access to a pond cuts through part of Hillary's property.

Michael installed a basketball hoop next to his driveway, six inches outside his
property.
 The city seized a formerly private parcel of land for public use.

The state took ownership of Don's property when no heirs could be located following
his death.

An easement allows a person the right to use or cross over another's property for a specific reason.
Residents of a neighborhood using the path that crosses through Hillary's property is an example.

Question 48

Stella is an appraiser who's using the direct capitalization method to calculate a value for an
investment property. Which of the following is true?

The subject property's income is expected to vary a lot over time.

This method considers anticipated resale value.

This method considers future income streams.

This method converts a single year's expected income into a market value.

The direct capitalization method converts a single year's expected income into a value. It doesn't
consider future resale value or future income streams, and is primarily used with properties where
yearly income doesn't vary a lot over time.

Question 49

Which factor influences property value and addresses questions such as, "What's the market
like?" and "Are there more buyers than sellers, or vice versa?"

Demand

Scarcity
 Transferability

Utility

Demand looks at the market and the number of buyers vs. sellers.

Question 50

When cold water enters a gas water heater, the gas turns on. When the water heats up, the
thermostat inside the heater ______.

Beeps to alert the user that the water's ready

Increases the flame

Lowers the flame

Turns off

As the water heats up, the thermostat in a gas water heater lowers the flame so that the temperature
is more regulated.

Question 51

What's another name for the building plan?

Blueprint

Building drawing

Construction outline
 Home plan

The building plan is often referred to as a blueprint.

Question 52

Sandy absolutely, positively hates stairs. Which style of home might appeal to her?

Colonial

Gothic revival

Ranch

Split level

A ranch-style home is one level, so its lack of stairs will probably be the most appealing to Sandy.

Question 53

The ______ measures the cost to reproduce a property, including land acquisition and
construction costs.

Cost approach

Income approach

Indirect approach

Sales comparison approach

The cost approach to finding appraised value measures value as a cost of production, including land
acquisition and construction costs.
Question 54

For which of these properties would gross rent multiplier be calculated?

Apartment building with 50 units

Condominium building with 20 units

Duplex used as a rental property

Single-family, owner-occupied home

Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with
four or fewer units. Properties with five or more units use gross income multiplier.

Question 55

Which two operating statement ratios will equal one when added together?

Net income ratio and breakeven ratio

Operating expense ratio and breakeven ratio

Operating expense ratio and net income ratio

Potential income ratio and effective income ratio

The operating expense ratio and the net income ratio are reciprocals of each other, so they will equal
one when added together.
Question 56

Which of the four methods used to find the reproduction cost of a structure requires the
appraiser to know every facet of building construction?

Index

Quantity survey

Square-foot

Unit-in-place

Because the quantity survey method requires that each stage of the construction be broken down into
separate costs for the materials and labor, the appraiser must know both the materials and labor costs
for the project.

Question 57

Susan is positively obsessed with tea. She wants to be able to have a hot cup of tea at a
moment's notice, but doesn't want yet another clunky appliance crowding her kitchen counter.
What could she install to solve this dilemma?

A larger gas-powered hot water heater in the basement

A new burner on her stove

An outlet for her new electric kettle

A tankless water heater

Installing a tankless water heater underneath her kitchen sink would give Susan piping hot water on
demand, which would suit her needs to a "tea."
Question 58

Using the square-foot method, once an appraiser has calculated the cost per square foot for
the living area of the subject building, what other factors go in to finding the reproduction cost?

None; the cost per square foot of the subject building's living area equals the
reproduction cost

The cost of the non-living areas and improvements of the subject property

The cost per square foot of the living areas of three comparable properties

The estimated accrued depreciation of the subject building

In addition to the cost per square foot for the living area of the subject building, the square-foot method
takes into consideration the cost of both the subject property's non-living areas and improvements.

Question 59

Which of the following view factors would explain a beneficial view rating?

Industrial view

Limited sight

Park view

Railroad tracks

A view of a park could be described as "B;Prk" in the Site section of the URAR.

Question 60
Items that fall into the incurable physical deterioration category can be broken down into long-
lived or short-lived. Which of the following is an example of a short-lived item?

Ceilings

Foundation

Framework

Roof

Short-lived items are items that may be replaced/fixed more than once over the life of the property, like
its roof, gutters, cabinets, and wall coverings.