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Real Estate 306 Final Exam; Questions and Answers 100% Correct $14.99   Add to cart

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Real Estate 306 Final Exam; Questions and Answers 100% Correct

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  • Real Estate 306

Real Estate 306 Final Exam; Questions and Answers 100% Correct 3 approaches to value Correct answer-1. sales comparison (market) approach 2. cost approach 3. income approach sales comparison (market) approach Correct answer--value of RE can be determined by analyzing the sale prices of sim...

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  • August 8, 2024
  • 33
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Real Estate 306
  • Real Estate 306
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GOLDTUTORS
Real Estate 306 Final Exam; Questions and
Answers 100% Correct
3 approaches to value Correct answer-1. sales comparison (market) approach

2. cost approach

3. income approach




sales comparison (market) approach Correct answer--value of RE can be determined by
analyzing the sale prices of similar properties

-in a competitive market, close substitutes should sell for similar prices

-difficulty: how many truly close substitutes exist & how many of these have sold recently?

-"one price" rule (i.e. equivalent goods sell for equivalent prices)

*arbitrage not available in RE (can't buy & sell RE quickly)




cost approach Correct answer--setting a long-run equilibrium

-theory of substitution




estimated reproduction cost of improvements - estimated accrued depreciation = depreciated
cost of building improvements

+estimated value of site

= indicated value by cost approach



-assumption: cost of creating a property is related to its market value

, Real Estate 306 Final Exam; Questions and
Answers 100% Correct
income approach Correct answer--"income capitalization"

-theory of anticipation

-value in investment property is a function of the income it is expected to produce (& inherent
risk)

-mimics analytics B&S use



value = PV of expected future CFs (PV of anticipated income




-2 methods: ratio models (direct capitalization & gross rent multiplier) & discounted cash flow
(DCF)




assessed value Correct answer--value assigned by local government for property tax
purposes

-WI: the assessor's opinion of "market value"




when are value calculations required? Correct answer--property acquisition is
contemplated

-structure is: modernized, renovated, abandoned, demolished

-site is developed

-property is used for collateral for a loan




appraisal Correct answer--more narrow definition, estimation of value

, Real Estate 306 Final Exam; Questions and
Answers 100% Correct

market value Correct answer--most probable selling price, assuming normal sales
conditions

-may not be fundamental value

-typical buyer/seller interaction in a typical market




investment value Correct answer--value to a particular individual (investor)




transaction price Correct answer--price actually paid for a specific property




cost Correct answer--amount paid to build, create




why do we have to estimate market value? Correct answer--in markets with perfect
competition, all transactions take place at true market value

-in such markets, no need for B&S to search for true market value of an asset (revealed by
transaction prices of perfect substitutes)

-RE markets do not exist within perfectly competitive conditions




what about private RE markets? Correct answer--every property is unique

-traded in: illiquid, highly segmented, & inefficient markets

-search costs with matching B&S are significant

, Real Estate 306 Final Exam; Questions and
Answers 100% Correct
-even the few transactions of comparable properties that we do observe may not be indicative
of the value of the "subject" property

-"fee appraisers" needed to estimate market value of RE assets




who uses market value appraisals? Correct answer--buyers

-sellers

-corporate acquisitions, mergers or dissolutions, tax & accounting

-courts (divorce, eminent domain, settlement of estates, bankruptcy)

-mortgage lenders




professional appraisal practice Correct answer--imperfect information

-reliable data & analysis applies

-an appraisal is only as good as the appraiser & data available

-OPINION of value

-UNBIASED opinion of a 3rd PARTY with no direct interest in the property

-Uniform Standards of Professional Appraisal Practice (USPAP)

-Code of Ethics




licensing & certification Correct answer--Federal legislation passed in response to
collapse in RE markets in late 1980s

-requires appraisals to be state licensed or certified if they prepare federally related appraisals

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