IAAO Course 300 Exam Questions With
Correct Answers
Scope of Work Rule - answer✔1. Identify the problem to be solved
2. Determine and perform the scope of work necessary to develop credible assignment results
3. Disclose the scope of work in the report
Scope of work acceptability - answer✔When it meets or exceeds:
1. Expectations of parties who are regularly intended users for similar assignments and 2. What
an Appraiser's peers actions would be in performing the same or similar assignments
Economic Basis of Model Building - answer✔Supply factors relate to availability and thus
reflect such things as Cost, interest rates, and economic conditions. Demand factors include
characteristics to buyers, such as construction quality, condition, and location.
Additive Model Structure - answer✔Each of the variables are independent from the other
variables. A change in one variable does not directly impact any other variables
MV = ($/sqft x sqft) + ($/plumbing fixture x #fixtures) + ($/car stall x #/cars) + ...
Multiplicative Model Structure - answer✔Each of the variables are interdependent. Any change
to one variable will have an impact on all of the other variables.
Hybrid (generic) Model Structure - answer✔Combines both additive and multiplicative model
structures
Finding Net Operating Income (NOI) - answer✔1. Potential Gross Income (PGI) 100%
occupancy at market rent (market rent is the prevailing rent in the open market, not the rent
called for in a lease)
2. Minus Vacancy and Collection Loss (V&C) - any money lost from units not being rented or
from people not paying rent
3. Plus Miscellaneous Income (Misc Inc) - income from secondary sources, such as clubhouse
rentals, health club memberships, storage rentals, and vending or laundry machines
4. Equals Effective Gross Income (EGI) - this 100% of the actual money made by the real
property operation.
5. Minus Allowable Expenses and Reserves (Exp & Res) - expenses that have to do with the
operation of the real estate and not the business. Reserves are items that will wear out before the
bone structure, such as carpet, roof, air conditioners, etc. Reserves are expensed on a prorated
basis (ie. Carpet lasts 5 years so if it costs $2, = $400 allowable deduction per year)
6. Equals Net Operating Income (NOI) - the income remaining after expenses and reserves. This
is the "I" in the IRV formula
Capitalization Rate - answer✔The term capitalization means to convert income into an estimate
of value. A capitalization rate is used in converting net income (NOI) into an estimate of value.
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