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Residential Market Analysis and Highest and Best Use

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Residential Market Analysis and Highest and Best Use market analysis Correct Answer: is a study of the market, as a whole, as well as the investigation of conditions of a component of that market, as reflected for a specific type of property. "The separation and identification of the parts of ...

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  • September 16, 2022
  • 37
  • 2022/2023
  • Exam (elaborations)
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Residential Market Analysis
and Highest and Best Use
market analysis Correct Answer: is a study of the market, as a whole, as well as the investigation
of conditions of a component of that market, as reflected for a specific type of property.

"The separation and identification of the parts of the whole" is part of the process of: Correct
Answer: analysis

When an appraiser is analyzing the subject property's market area, which question is LEAST
likely to be asked?
Where is the property located?
What defines the boundaries of the property's neighborhood?
Who owns the property?
What are the trends for this neighborhood? Correct Answer: Who owns the property?

USPAP states that credible assignment results require _________. Correct Answer: Support

A study of the market as a whole, as well as the investigation of conditions of a component of
that market, for a particular type of property, is the definition of: Correct Answer: market
analysis

"A place where goods and services are exchanged" is the definition of a: Correct Answer:
Market

Some of the other perceived benefits derived from income producing properties may include:
Correct Answer: Projected income to be received;
Using the property as a tax shelter;
Probable appreciation of the asset; and
Use of the property for a personal business.

The principle of anticipation is very often associated with Correct Answer: The income
approach

The principle of anticipation is also related to the principles of: Correct Answer: Supply and
demand
Competition
Change

The principle of balance is closely related to the following principles: Correct Answer: Four
agents of production
Conformity

,Contribution
Surplus productivity

The principle of competition relates to the following principles: Correct Answer: Anticipation
Supply and demand
Opportunity cost

The principle of conformity is related to the following principles: Correct Answer: Balance
Progression and regression

The principle of externalities is related to the following principles: Correct Answer: Inclining
and declining periods
Progression and regression
Supply and demand

Real Property contains a mix of the four agents of production: Correct Answer: Capital
(buildings and equipment);
Coordination (management);
Labor (wages); and
Land.

The principle of the Four Agents of Production is related to the following principles: Correct
Answer: Balance
Contribution
Opportunity Cost
Surplus Productivity

Which of these can increase conformity in a neighborhood?
Covenants, Conditions and Restrictions
zoning ordinances
ordinances specifying minimum site sizes and setbacks
all of these Correct Answer: All of these

Perceived benefits from the ownership of income-producing property would include all of the
following EXCEPT:
income to be received
appreciation
physical depreciation
tax shelter Correct Answer: physical depreciation

The principle of contribution is most closely associated with: Correct Answer: the Sales
Comparison Approach

Appraiser Anne wants to convert a property's anticipated income into an indication of value.
Which approach to value is best suited for this purpose? Correct Answer: Income Approach

,A property owner constructs a six-car garage at a cost of $80,000. It only adds $40,000 in value
to the property. What economic principle does this best demonstrate? Correct Answer:
Contribution

If a property is over-improved, or under-improved:
it should be torn down
the four agents of production are out of balance
an appraiser should not mention this in an appraisal report for mortgage lending
all of these Correct Answer: the four agents of production are out of balance

What are the four agents of production? Correct Answer: land, labor, capital, coordination

Which of these would be an external factor that could affect the value of a single-family home?
an award-winning community library
a highly-rated school system
an auto wrecking yard located across the street
all of these Correct Answer: All of these

When supply is higher than demand, the value of a product: Correct Answer: declines

A person purchases a four-plex because it has a strong income stream. This is an example of the
principle of: Correct Answer: anticipation

When supply and demand are in balance in a market, this produces: Correct Answer: Equlibrium

The value of a fireplace in a single-family home is determined by: Correct Answer: what a
buyer perceives as its worth, and how much he will pay for it

Finish the sentence: Profit encourages ___________. Correct Answer: competition

The four stages of the life cycle are: Correct Answer: Growth (inclining - demand)
Stability (stable)
Decline (loses desirability)
Revitalization (restoration of deteriorated properties)

Substitution is often associated with the Correct Answer: Cost Approach

Highest and best use involves the appraiser's consideration of several factors: Correct Answer:
What are the legally permissible uses to which the subject can be put?
What are the physically possible uses to which the subject can be put?
Of these uses, which are financially feasible?
Of these, which is maximally productive?

The principle of substitution is associated with which approach(es) to value? Correct Answer:
Both the Sales Comparison and Cost approaches

, An investor is looking at two properties, but will only purchase one of them. Each is similar in
utility and location, and has an annual net operating income of $20,000. One has a listing price of
$220,000, while the other is listed at $200,000. The investor purchases the $200,000 property.
Which economic principle is demonstrated in this example? Correct Answer: Substitution

When analyzing the life cycle for a neighborhood, which stage is characterized by equilibrium of
supply and demand? Correct Answer: Stability

If two substantially similar homes are offered for sale in a neighborhood at the same time, which
one will sell first? Correct Answer: the one with the lower price

Which stage of the life cycle does not happen in every neighborhood or property? Correct
Answer: Renewal

When analyzing the life cycle for a neighborhood, what problem is often faced by appraisers?
Correct Answer: the growth cycle may have passed before they realize it

When analyzing the life cycle for a neighborhood, which stage is characterized by a strong
demand and rising values? Correct Answer: Growth

The value of a fair quality home will be enhanced if it is located in a neighborhood of all good
quality homes. What economic principle does this demonstrate? Correct Answer: Progression

Which economic principle relates to the advantages of an alternate investment? Correct Answer:
Opportunity Cost

Which of these is an example of the principle of progression? Correct Answer: Fair quality
home in a neighborhood of good quality homes

Substitution Correct Answer: The principle of substitution holds that an informed buyer will not
spend more for a property, or an amenity in a property, if he or she could buy it elsewhere at a
more reasonable cost.

Progression and Regression Correct Answer: The principle of progression states that when a
property is inferior to those surrounding it, its value will be enhanced by the presence of the
superior properties.

If there are not enough homes available in a market to satisfy demand, what will happen to home
prices? Correct Answer: they will increase

What is another name for the principle of inclining and declining periods? Correct Answer:
Integration and Disintegration

The principle of surplus productivity is associated with which approach to value? Correct
Answer: Income Approach

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