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c. Bundle of Rights
d. All of the above (An appraiser or real property estimates the values of the land
and improvements thereon. However, the appraiser also estimates utility value
and the value of all ownership rights (the bundle of rights). Utility includes the
capacity to produce and affects judgment about the highest and best use of
the land.)
16. To analyze a leased property, an appraiser would consider:
a. Rent and other charges, date, parties, security and term
b. Covenants, right of assignment, option for renewal and provisions for disaster,
condemnation, improvements and repairs
c. Both A & B (The relationship of contract and economic rental levels is important
because of the effect on the value of the fee estate. Contract rent below eco.
rent creates a leasehold estate at the expense of the value of the fee interest.
When making a gross income estimate, the appraiser would secure copies of all
existing leases for study and would consider all the date in choices A & B
d. None of the above
17. A kiosk is:
a. A roof style
b. A method of home cooling
c. An information booth in a mall (A kiosk is a small, light structure with one or more
open sides often seen in shopping center malls as a photo shop, key shop or
newsstand)
d. A popular garden ornament
18. A salesperson obtained a listing and the salesperson stated that his broker will later
appraise the property to verify the listing price.
a. The broker cannot legally appraise the property
b. The broker may make an appraisal only if the broker is also a licensed or
certified appraiser (An appraiser must be licensed or certified for any
appraisal activity. The term appraisal does not include an opinion given by a
real estate licensee in the ordinary course of business, and such an opinion shall
not be referred to as an appraisal. A broker or salesperson may do a competitive market analysis, for example, but may not term it an appraisal.
c. The broker can make the appraisal but must charge a separate fee for this activity
d. The broker can make the appraisal if he prepares a narrative report that sets forth
his extensive qualifications
19. For purpose of determining effective gross income of an apartment building, the
Appraiser would deduct from gross income all of the following except:
a. Collection losses
b. Rent concessions
c. Vacancies
b. Apartment buildings
c. A residence
d. Vacant land
25. The amount an appraiser charges for an appraisal is established by the:
a. Agreement between the appraiser and the client (Appraisal fees are set by
agreement between appraiser and the client)
b. Government agencies such as BIR/DTI
c. Real Estate Commissioner of PRC
d. Appraisal Associations
26. An appraiser would consider all of the following as contributing to the stability of a
neighborhood except:
a. Homogeneity of buildings, people, and uses
b. Many families with children going to school
c. Increased density and rapid turnover of population (An increase in density and
rapid turnover may occur from undesirable causes. The Principle of Conformity
holds that maximum value is realized when a reasonable degree of homogeneity
is present, in buildings, uses of property and income levels of residents)
d. Residence in the path of urban directional growth
27. The value measure unit applied by an appraiser to express rental value of a
warehouse space most likely is which of the following?
a. Front meter
b. Square meter (The square meter method is ideally suited to warehouses, loft
buildings, store buildings, and structures of like character. The cubic meter
method is normally applied to apartments and many times to office buildings
(structures that have intricate interior finishes)
c. Cubic meter
d. Relationship between the size of the building and the size of the lot
28. An investor was going to have a building constructed that was to cost P 3,000,000
could, when completed; be leased for P 50,000 per month. The annual operating
expenses for the property would be P 120,000. The amount the investor could
invest in the land to realize a 12% return would be:
a. Nothing since it is not economically feasible
b. P 120,000
c. P 1,000,000
P 50,000 X 12 = P 600,000
P 600,000 - 120,000 = P 480,000 (net income)
P 480,000/ .12 = P 4,000,000
P 4,000,000 - 3,000,000 = P 1,000,000
d. P 3,000,000
29. In the capitalization of net income, the most difficult item for an appraiser to
establish is the:
a. Selection of a capitalization rate
b. Effective gross income
c. Determination of Net Income (Future net income is capitalized in the income
approach. It is difficult to be accurate in estimating any quantity in the future.
This difficulty in being accurate about future net income results primarily from
the difficulty in projecting future vacancy factors
d. Determination of Gross Income
30. The standards that a locally licensed or certified appraiser must follow are found in:
a. PVS (as per RESA)
b. IVS
c. USPAP
d. NAR
31. If an appraiser is using the Property Residual method, the unknown and desired
result is:
a. Land value
b. Net income
c. Property value
Land Residual is to determine Land value
Building Residual is to determine Building Value
Property Residual is to determine Property Value
d. Capitalization rate
32. A fee appraiser:
a. Assesses land for the government
b. Works full-time for a broker
c. Is a self-employed appraiser who appraises property for a fee
(A fee appraiser is one qualified by education, training and experience who is
qualified by education, training, and experience who is hired to estimate the
value of real and personal property based on experience, judgment, facts
and use of formal appraisal processes and is paid a fee for such services. A fee
real estate appraiser must now be licensed or certified)
d. Works full time for a lender
33. In the valuation process, an appraiser would be least concerned with:
a. The identification of real estate
b. The identification of the property rights being appraised
c. The assessed value (Assessed value could be misleading to an appraiser because
of the limitations placed on assessors by law. A, B, and D reflect essential data.)
d. The definition of value
34. An appraiser, when making an appraisal of real property, would be least concerned
with which of the following:
a. Assessed value
b. Sale price (An estimate of market value may be justified by market evidence,
whereas, a sale price may reflect caprice, unequal motivation or negotiating
position, unusual terms, or other factors that caused price to deviate from
value.)
c. Replacement cost
d. Comparable sales
35. The principle of value, which affirms that a purchaser will buy goods and services at
the lowest cost available, is:
a. Regression
b. Inflation
c. Retribution
d. Substitution (The principle of substitution states that when several similar
commodities, goods, or services are available, the one with the lowest price
attracts the greatest demand and widest distribution)
36. Quality, quantity, and durability are considered in the appraisal of an income
property. An appraiser takes into account the quality of income by means of which
of the following:
a. Capitalization rate (Quality of income establishes the interest rate portion of the
capitalization rate used in the appraisal of property and the greater the risk, the
higher the rate.)
b. Q, Q, and D
c. Capitalized income
d. Depreciation
37. The maximum possible income an income property can yield is:
a. Gross scheduled income (Among the choices, this would yield the maximum
possible income. Scheduled income represents the rent currently in effect on
the property in question as if the property were fully occupied. If the property
has space available, the gross scheduled income would be at the rent levels
currently obtainable for the space in the local market.
b. Effective gross income
c. Net income
d. Net spendable income
38. Which of the following is an indirect method of calculating accrued depreciation?
a. Age-life
b. Breakdown
c. Capitalized income (Sales Comparison and Income Capitalization are 2 of the
P 250,000
( 150,000)
P 100,000
52. If an appraiser was appraising a residence built in 1910, which of the following
would be use?
a. Cost of living index of 1910
b. Original cost of materials in 1910
c. Cost of living index that increased from 95 to 128
d. Todays cost of reproduction (The appraiser is interested in todays cost (less
depreciation) and value. He or she is not concerned about the original cost or
the cost of living index in 1910)
53. Which of the following would least likely affect the stabilization of value on a singlefamily residence in a residential neighborhood?
a. Zoning
b. Newness (Newness in itself would not be a stabilizing influence. Zoning regulations and private restrictions generally have as their primary function the protection and stabilization of property values. Availability of public transportation
has always been a significant factor influencing property values in most residential areas.
c. Private restrictions
d. Availability of public transportation
54. If the gross income on a commercial property is P 2,650,000 on a quarterly basis
and the expenses are 32% of the gross annual income, what is the net annual
income?
a. P 7,208,000
1. P 2,650,000 gross/qtr. X 4 qtrs = P 10,600,000 gross/year
2. P 10,600,000 gross/yr
X .32
=
- 3,392,000 expenses/yr
Total net annual income
P 7,208,000
b. P 10,600,000
c. P 1,430,000
d. P 3,390,000
55. It is known that a prudent buyer will not pay more for a property than he could
purchase another suitable property for if there is no undue delay in acquiring the
other property. This is considered the principle of:
a. Substitution (This is one expression of the principle of substitution)
b. Anticipation
c. Competition
d. Contribution
56. The basic economic characteristics that best expresses real estate value is :
a. High replacement cost
b. Proximity to high rentals
a. Depreciation
b. Capitalization of income (Capitalization of net income is unrelated to the cost
approach to appraisal)
c. Land value
d. Cost of improvements new
70. Why are more buildings torn down than fall down?
a. Taste and environmental changes occur faster than buildings wear out
(More buildings are torn down than fall down. This destruction of often
physically sound improvements is caused by changes in the arts and by building
obsolescence. Environmental, aesthetic and historical considerations are increasingly important in governmental view of highest and best use.)
b. Newly constructed buildings are being built better than before
c. The scope of urban renewal is expanding rapidly
d. Zoning is no longer an effective means of controlling land use
71. There are 3 main causes of depreciation. Which one of these finds its origin in
social sources which is the basis of the old axiom, known in social circles, that
the more houses are torn down than fall down?
a. Economic obsolescence (When business district of a city moves into a residential
district, land values usually increase. If the land is under improved with a
residence and is not realizing its highest and best use, its value is not as great as
it should be. These extraneous changes result in economic obsolescence.
b. Functional obsolescence
c. Straight line depreciation
d. Physical deterioration
72. An apartment house under construction has many prospective renters. The city
now wants to widen the street. This change results in a 10% loss of renters. This
loss would be an example of:
a. Economic obsolescence (Economic obsolescence is a loss in value due to factors
outside of the subject property that adversely affect its value.)
b. Functional obsolescence
c. Physical obsolescence
d. Physical deterioration
73. Which of the following is an indirect method to determine accrued depreciation?
a. Age-life method
b. Capitalized income
Depreciation
Indirect Methods
Direct Methods
1. Capitalized Income
1. Straight Line (Age-life)
2. Market Data (Comparative)
2. Engineering
3. Breakdown (Cost-to-cure)
c. Cost approach
d. Engineering method
74. A roof which slopes upward from all four sides and is joined at the ridge is called a:
a. Gable roof
b. Gambrel roof
c. Mansard roof
d. Hip roof
75. Among the following, the best definition of capitalization is:
a. The highest rate of return on an investment
b. The minimum rate of return on an investment
c. The result of dividing net income by a percentage rate of return to determine
value (The process of capitalization is dividing net income by a percentage rate
of return to determine value. The capitalization rate is the relationship between
value and net income not net worth)
d. The relationship between value and net worth
76. Which of the following would not be used to determine net income for an income
Property?
a. Vacancies
b. Management fees
c. Mortgage interest (For determining net income in the income approach to
appraisal, mortgage interest is a personal expense of the owner, not an operating
expense of the property. Choices A, B, and D are all allowable deductions in
establishing net operating income for appraisal purposes.)
d. Maintenance costs
77. While appraising a single family residence that is renting for P 6,400/mo. the
Appraiser finds that the home across the street recently sold for P 900,000 and
Had been renting at the time of sale for P 6,000/mo. Based on this data, the
Appraised value would be:
a. P 900,000
b. P 960,000
P 900,000/6,000 = 150
150 x 6,400 = P 960,000
c. P 1,100,000
d. P 1,240,000
78. A prudent buyer would not pay more for a parcel of real estate than he would
Have to pay for another similar parcel based on the Principle of:
a. Balance
b. Supply and demand
c. Highest and best use
d. Substitution (The principle of substitution holds that when 2 or more substantially similar properties are available, the one with the lower price receives the
greater demand)
79. An income property showed a value of P 8,000,000 when capitalized at a rate
Of 9%. A new investor wishing to purchase the same property engaged an
appraiser who used a capitalization rate of 12%. According to the appraiser,
the value would be:
a. P 8,000,000
b. P 6,000,000
R X V = I
.09 X P 8,000,000 = I
.09 X P 8,000,000 = P 720,000
.12 X V
= P 720,000
V = P 720,000/.12
V = P 6,000,000
c. P 3,000,000
d. P 2,240,000
80. In which of the following appraisal approaches may an appraiser be asked to
Predict the future value of a property?
a. Market
b. Cost
c. Capitalization
In the income approach (capitalization), an appraiser may be asked to project a
series of possible developments on a site in order to establish the highest and
best use of the land. In that sense, the appraiser would be predicting values of
certain hypothetical future developments. Generally, the value conclusion in an
appraisal report can be made for any date in the past, but not for any date in
the future. Capitalization is based on the principle of anticipation
d. Summation
81. If there is a transition from a buyers market to a sellers market, which of the
following would be the result?
a. It would have no effect on the price
b. Sales prices would increase because of an increase in demand and a lag in
supply
c. Sales prices would decrease because of a decrease in demand and an
increase in supply
( In the income approach (capitalization) an appraiser may be asked to
Project a series of possible developments on a site in order to establish the
Highest and best use of the land. In that sense, the appraiser would be predicting values of certain hypothetical future developments. Generally, the
value conclusion in an appraisal report can be made for any date in the past
but not for any date in the future. Capitalization is based on the principle of
anticipation.)
d. It would cause a decrease in land development and construction of new
homes
82. An investor who owned a 40-unit apartment building found that his vacancy
Factor had increased by P 4,000/mo. If the property is capitalized at 12%,
What is the loss in value of the property due to the increased vacancy factor?
a. P 40,000
b. P 48,000
c. P 400,000
Cap. Rate x Value change = Net Income Change
.12
x V
= P 48,000
V
= P 48,000/.12
V
= P 400,000
d. P 4,000,000
83. The most difficult step for an appraiser in the gain over the Sales Comparison
Approach is to:
a. Collect data
b. Analyze data
c. Adjust the comparable to the subject property
(Once all of the elements of comparison between the comparable sales and
Subject property have been identified, they must be analyzed and adjustments
made. Adjustments must be supported with data from the market. Techniques
include the use of matched pairs, through the use of regression analysis and
other complex mathematical techniques, percentage adjustments, or such
devices as rating grids. Appraisers do not usually average data.)
d. Average data
84. What is the indicated value of a property that produces a gross monthly
income of P24,000 and the appropriate multiplier is 10.72?
a. P 250,000
b. P 1,080,360
c. P 2,250,100
d. P 3,087,360
(Gross monthly P 24,000 x 12 months = P 288,000
Gross multipliers x Gross income
= Value estimates
10.72
x P 288,000
= P 3,087,360
85. Mr. Santos built a P 2,500,000 house in a neighborhood in which houses are
valued between P 1,000,000 to P 1,500,000. Any resulting loss of value
would be an example of:
a. Physical depreciation
b. Functional Obsolescence
c. Economic Obsolescence (Economic obsolescence is a loss in value due to factors
away from or outside of the subject property. The principle of regression expresses the concept that the value of a superior property is adversely affected by
its association with an inferior property of the same type. This placement of the
P 2,500,000 house would result in economic obsolescence.
d. Physical Obsolescence
86. The recognized definition of highest and best use includes the term:
a. Net Return (Highest and best use is that use which at the time of an appraisal is
most likely to produce the greatest net return to the land and/or buildings over
a given period of time.)
b. Effective gross income
c. Multiple units
d. Income production
87. A lot on which there was a structure of no value was appraised for highest
and best use. The appraiser would:
a. Appraise the value of the land and deduct the cost of demolition
(An appraiser making a site valuation would estimate the value of the lot at its
highest and best use. A structure that prevents the highest and best use of the
site is an underimprovement, with negative value. The cost of demolition of
such a structure would be deducted from the value of the lot at its highest and
best use, to establish the present value.)
b. Ignore the structures salvage cost
c. Appraise the value of the land and add the cost of demolition
d. Appraise the value of the land and ignore the cost of demolition
88. A recommendation for the best appraisal method to be used to estimate the
value of a vacant parcel of land would be:
a. Income approach
b. Cost approach
c. Sales comparison approach (The sales comparison approach or market data
approach lends itself well to the appraisal of land, residences and other
types of improvements that exhibit a high degree of similarity, and for which
a ready market exists.)
d. An average of the first two methods
89. An owner of an apartment building under construction has many prospective
renters. The city now wants to widen the street from 10 m to 15 meters. The
result is a 10% loss of prospective renters. This loss would be an example of:
a. Physical deterioration
b. Physical obsolescence
c. Functional obsolescence
value.)
b. Residents in the area have the same income
c. Minor change in zoning regulation
d. Most families are from the same religious and ethnic group
99. An appraiser using the land residual approach is attempting to determine
a. Building value
b. Land value (The land residual technique of the income approach is used to
determine the value of the land.)
c. Capitalization rate
d. Income
100. The fluctuation (activities) of the money market is extremely important to the real
estate business. When interest rates go up and income of a property is fixed,
capitalized value of the property will:
a. Increase
b. Be unaffected in a short term
c. Decrease (When interest rates increase, it indicates that investors are asking
for a higher rate of return on their investment. This results in higher capitalization rates. If the capitalization rate increases and the income stays the same,
the value of the property decreases.)
d. Tend to stabilize
101. In order to arrive at an effective gross income for rental properties, an appraiser
should deduct which of the following from gross income:
a. Real property taxes
b. Repairs
c. Vacancies and collection losses (Effective gross income is that income remaining after deducting vacancies and collection losses from gross income)
d. Depreciation
102. An appraiser in evaluating a residence will consider all of the ff. to be signs of
economic obsolescence except:
a. A residence near an airport with constant noise of take-offs and landings
b. An air-condition/heating system that does not work (Economic obsolescence
is affected by influences outside of the property. Air conditioning and heating
problems occur on the property and are functional obsolescence.)
c. Adverse zoning
d. Proximity of a nuisance
103. In appraising a property using the market data approach, how would an appraiser
treat the value of a feature found in the comparable property but not found in the
subject property?
a. Add the value of the amenity to the subject property
b. Subtract the value of the amenity from the sales price of the comparable
property (The appraiser would subtract the value of the amenity from the sale
price of the comparable property in order to get an indication of the value of
the subject property.)
c. Disregard the value of the feature, as no 2 properties are exactly alike
d. Treat the amenity as not included in the valuation
104. If an appraiser does not adhere to appraisal standards for the purpose of
defrauding a financial institution, the appraiser could be guilty of:
a. A misdemeanor
b. Violating PRBRES Rules and Regulations
c. An ethics violation
d. A felony (Submitting false information to a lender for the purpose of inducing
the lender to make a loan is a felony.)