Real Estate Appraisal
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Course Introduction
Real Estate Appraisal is a comprehensive course focused on the fundamental principles and practices of property valuation. Students will explore various appraisal methods, techniques for determining market value, and the factors influencing real estate prices. The course covers the roles and responsibilities of appraisers, legal and regulatory frameworks, and the application of appraisal concepts to a variety of property types, including residential, commercial, and industrial properties. Practical exercises and case studies are used to develop analytical skills in property assessment, report writing, and ethical considerations in valuation practices.
Recommended Textbook
Real Estate Principles 11th Edition by Charles
J. Jacobus
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Page 2
Chapter 1: Nature and Description of Real Estate
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Sample Questions
Q1) Timber on land becomes ____________________ property. Answer: personal
Q2) A condominium parking stall would be considered to "run with the land" and would be considered to be an ____________________.
Answer: appurtenance
Q3) Buildings or other improvements do not need to be mentioned in the deed because they are considered to be part of the ____________________.
Answer: land
Q4) A farmer owns a 60 acre farm planted in potatoes. The potatoes are always personal property.
A)True
B)False Answer: True
Q5) Mineral rights are considered personal property.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Rights and Interests in Land
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Sample Questions
Q1) The system under which individuals are given the right to own land is the _________________________.
Answer: allodial system
Q2) A woman who lived in a retirement home and had no relatives, told her friend that she wanted her to have all of her property after she died, however she never made a will. Upon her death, her estate would
A) pass to the friend, since that was her wish.
B) pass to the retirement home where she lived.
C) escheat to the state.
D) pass to an entity determined by the probate court.
Answer: C
Q3) Deed restrictions are examples of
A) government limitations on land.
B) private control of land.
C) police power.
D) Increased power in the hands of the zoning authority.
Answer: B
Q4) A properly recorded easement on real property is an ____________________. Answer: encumbrance
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Chapter 3: Forms of Ownership
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Sample Questions
Q1) Property owned before marriage and property acquired after marriage by gift, inheritance, or purchase with separate funds are all considered the couple's community property.
A)True
B)False
Answer: False
Q2) Because of the survivorship feature, tenancy in common has loosely been labeled a "poor man's will."
A)True
B)False
Answer: False
Q3) A deed grants a parcel of land to Betty and Art, with no further distinction as to tenancy. Betty and Art would own the property as
A) joint tenants.
B) community property.
C) partners.
D) tenants in common.
Answer: D
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Chapter 4: Transferring Title
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Sample Questions
Q1) Which of he following would defeat a claim of adverse possession?
A) A permission to enter
B) Exclusive occupancy
C) Visible possession
D) Continuous possession
Q2) A person who makes a will is called
A) a devisee.
B) a testator.
C) a legatee.
D) an executor.
Q3) In real estate, the word "convey" means to transfer.
A)True
B)False
Q4) A landowner can break an adverse claim by all of the following EXCEPT
A) forcibly removing the adverse occupant.
B) giving the adverse occupant permission to stay.
C) preventing the trespassers from entering.
D) observing the adverse occupant.
Q5) The deed from that is considered to be the best for the buyer is the _________________________ deed.
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Chapter 5: Recordation Abstracts and Title Insurance
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Sample Questions
Q1) Standard owner's title insurance premiums are paid only once, when the policy is issued.
A)True
B)False
Q2) Notice of ownership given by one's presence on his land is called
A) constructive notice.
B) public notice.
C) inquiry notice.
D) attendant notice.
Q3) Standard owner's title insurance coverage insures against all of the following EXCEPT
A) unrecorded encroachments.
B) recorded easements.
C) recorded liens.
D) forgery of documents.
Q4) Notice given by the public records and by visible possession, coupled with the legal presumption that all persons are thereby notified is called ____________________ notice.
Q5) A report made by a title insurance company showing current title condition is called a _________________________.
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Chapter 6: Contract Law
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Sample Questions
Q1) All of the following are real estate contracts EXCEPT
A) an exclusive right to sell listing.
B) a sales agreement.
C) a closing statement.
D) a lease.
Q2) When the prospective tenant signed the lease, he indicated that he would be using the building to sell appliances. Later, the landlord discovered that illegal bingo games were being played there. What can the landlord do?
A) He can do nothing as long as the tenant is current with the rent.
B) He can declare the lease void and start eviction proceedings.
C) He must have a conversation with the tenant to try to persuade him to stop the illegal activity.
D) He can organize a boycott.
Q3) Which of the following are considered to be legally competent?
A) Corporations
B) Persons of unsound mind
C) Minors
D) A 15 year old woman
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8
Chapter 7: Real Estate Sales Contracts
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Q1) Earnest money is required to make a sales contract enforceable.
A)True
B)False
Q2) The printed portions of a standard residential sales contract refer to all the following EXCEPT
A) title insurance.
B) liens.
C) discount rates.
D) closing date.
Q3) The phrase "as is" when used in real estate contracts means the buyer is accepting the property without
A) a survey.
B) a title report.
C) new financing.
D) warranty as to physical condition.
Q4) A rider is any addition annexed to a document and made part of the document by reference.
A)True
B)False
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Chapter 8: Mortgage and Note
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Sample Questions
Q1) Which of the following claims against a real property interest would be the first to be satisfied?
A) First trust deed
B) Second trust deed
C) Property taxes
D) Newly filed IRS tax lien
Q2) If an owner of a single-family residence defaults on his mortgage, it can
A) not be foreclosed if an ALTA title insurance policy insured it.
B) be foreclosed on.
C) not be foreclosed on if the mortgage went into effect before 1978.
D) only be foreclosed on if an ALTA title insurance policy insured it.
Q3) The right of the mortgagor to reclaim his property upon payment in full of the obligation is
A) reconveyance.
B) redemption.
C) recapture.
D) right of deficiency.
Q4) Any mortgage with a lower priority than the first mortgage is known as a ____________________ mortgage.
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Chapter 9: Deed of Trust
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Sample Questions
Q1) A deed for reconveyance would be signed by the A) beneficiary.
B) trustor.
C) trustee.
D) grantee.
Q2) The basic purpose of the deed of trust, also referred to as a trust deed, is the same as a ____________________.
Q3) The borrower under a deed of trust arrangement is called the A) trustor.
B) beneficiary.
C) trustee.
D) holder in due course.
Q4) The borrower under a deed of trust is called the A) trustor.
B) beneficiary.
C) trustee.
D) grantor.
Q5) A trust deed can be used to secure a mortgage. A)True B)False
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Chapter 10: Lending Practices
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Sample Questions
Q1) Interest paid on a real estate mortgage loan is normally paid annually and in advance.
A)True B)False
Q2) A mortgage lender will lend based on a proportion of the appraisal or sale price, whichever is less. This is called the loan-to-value ratio.
A)True B)False
Q3) The difference between the market value of a property and the debt owed against it is called the owner's ____________________.
Q4) Usually, the borrower of a FHA loan is also responsible for the A) mortgage insurance premium.
B) funding fees.
C) private mortgage insurance.
D) estoppel certificate.
Q5) After December 1, 1986, the FHA would no longer allow a ____________________ assumption of an FHA insured loan.
Q6) The word point means 1% of the _________________________.
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Chapter 11: The Loan and the Consumer
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Q1) With regard to truth in lending laws, "Only $1,000 down payment" is legally permissible to advertise, without further explanation.
A)True
B)False
Q2) Under the truth in lending act, the cost of credit extended must be expressed as an actual percentage rate.
A)True
B)False
Q3) The Truth in Lending Act covers credit extended for a
A) business or commercial transaction.
B) large apartment building.
C) mobile home which is used as a residence.
D) loan secured by a car valued at $30,000.
Q4) Which of the following contains a trigger term under Regulation Z and requires further disclosure?
A) "Assumable VA loan"
B) "Buy for less than $600 a month"
C) "Cash price, only $79,500"
D) "Rent for only $499 per month"
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Chapter 12: Sources of Financing
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Sample Questions
Q1) Which of the following is most likely to specialize in large, commercial participation loans?
A) Mortgage banks
B) Savings and loans
C) Farmers home loan association
D) Life insurance companies
Q2) There is no limit to the cost of a home under the Farmer Mac program.
A)True
B)False
Q3) Usury laws are established by the federal statutes.
A)True
B)False
Q4) Loan contracts sometimes call for a ____________________ penalty in return for giving the borrower the right to repay the loan early.
Q5) FNMA was organized by the federal government to buy FHA mortgage loans from lenders.
A)True
B)False
Q6) Both fiat money and real savings represent ____________________ labor and materials.
Page 14
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Chapter 13: Types of Financing
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Sample Questions
Q1) Equity mortgages are typically first lien mortgages that are used to tap the increase in equity resulting from rising home prices and first loan principal reductions.
A)True
B)False
Q2) The phrase "taking back paper" applies to
A) a cash sale.
B) conventional loans.
C) VA loans.
D) seller financing.
Q3) "Rich uncle " financing is a variation of equity sharing.
A)True
B)False
Q4) In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer
A) lower initial interest rates.
B) gifts such as appliances, trips, etc.
C) lower insurance rates.
D) lower down payments.
Q5) The interest rate on an ARM is tied to a(n)____________________ rate.
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Chapter 14: Taxes and Assessments
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Q1) Local government programs and services are financed primarily through state income taxes.
A)True
B)False
Q2) In a residential neighborhood, the assessment for installation of storm sewers, curbs, and gutters is made on a _________________________ basis.
Q3) Real property taxes are levied by the government and become a lien monthly.
A)True
B)False
Q4) A lot measured 50' on a county road and 80' deep. The county assessor valued the lot at $15,000. The tax rate is $100 per front foot. The tax bill is
A) $1,500.
B) $5,000.
C) $8,000.
D) incalculable without the millage rate.
Q5) A public improvement benefits the general public and is financed through a general property tax.
A)True
B)False
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Chapter 15: Title Closing and Escrow
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Q1) In prorating rents, the dollar amount is a credit to the seller and a debit to the buyer.
A)True
B)False
Q2) During a "dry closing" the money is disbursed to the seller.
A)True
B)False
Q3) The HUD Settlement Statement required of all federally related real estate lenders is known as the ____________________.
Q4) One advantage of the escrow closing method is that it can eliminate personal confrontation between buyer and seller.
A)True
B)False
Q5) The deposit of documents and funds with a ____________________ third party plus instructions as to how to conduct the closing is called an escrow closing.
Q6) The person placed in charge of an escrow is called an escrow
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Chapter 16: Real Estate Leases
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Sample Questions
Q1) The Certified Property Manager (CPM)designation is available from the Organization of Property Managers.
A)True
B)False
Q2) The total transfer of a tenant's rights to another person is called
A) an option.
B) a sublet.
C) a waiver.
D) an assignment.
Q3) A residential apartment tenant would be expected to pay the landlord for A) normal wear and tear.
B) damage to the apartment caused by the tenant.
C) any change in the apartment.
D) sun-faded carpet.
Q4) A written lease agreement is still legal even though it fails to include the terms of the lease.
A)True
B)False
Q5) A lease where the tenant pays a fixed rent and the landlord pays all property taxes is a ____________________ lease.
Page 18
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Chapter 17: Real Estate Appraisal
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Sample Questions
Q1) An apartment building sells for $600,000 and has a gross rent multiplier of 6.0.how much annual rent does the building produce?
A) $60,000
B) $100,000
C) $10,000
D) $36,000
Q2) Which appraisal method would be most useful in appraising an unusual building which has a very limited and specific use?
A) Cost approach
B) Net income
C) Capitalization
D) Market comparison
Q3) The owner of a beautiful old house was told that because of the location of the property, bordered by two very busy streets, that it would have more value if the house was torn down and the empty lot put on the market. This is an example of highest and best use.
A)True
B)False
Q4) The property to be appraised is known as the ____________________ property.
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Chapter 18: Licensing Laws and Professional Affiliation
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Q1) A recovery fund is a state-operated fund that can be tapped to pay real estate brokers who have claims against other brokers.
A)True
B)False
Q2) Interpretations of various articles of the REALTORS® Code of Ethics is known as the ____________________ of Practice.
Q3) Who can sell real property WITHOUT a license?
A) Anyone, as long as they only sell one property per year
B) An attorney, acting within his duties as an attorney
C) Anyone, as long as they do not sell more than $100,000 worth of property in any one year
D) A judge who is helping out a friend
Q4) For a corporation to be granted a license as a real estate broker, all officers must be licensed as real estate brokers.
A)True B)False
Q5) A ____________________ is a person or legal entity license to act independently in conducting a real estate brokerage business.
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) A listing that does not require the listing agent to show that he or his subagents are the procuring cause in order to earn a commission is
A) an exclusive right to sell listing.
B) an exclusive agency listing.
C) a net listing.
D) illegal.
Q2) A listing automatically will expire when the listing salesperson dies.
A)True
B)False
Q3) A broker is employed to find a buyer using an exclusive right to sell listing. He finds one at the seller's price and terms. If the seller then refuses to sell, the broker is entitled to a full commission.
A)True B)False
Q4) A listing agreement is a(n)____________________ contract between a property owner and a real estate broker.
Q5) A ____________________ broker is a full service broker who charges less than the prevailing commission rates in his community.
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Chapter 20: The Principal-Broker Relationship: Agency
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Q1) Two buyers purchase a home through a broker. After the close of escrow, the buyers discover a structural problem with the property, which the seller had not disclosed to anyone, including the broker. The buyers attempted to rescind their agreement. If they succeed, what commission is the broker entitled to in this case?
A) Full commission
B) Expenses only
C) None
D) Full commission minus expenses
Q2) The broker writes an offer on one of his own listings. He should inform the buyer that he is an agent of the seller as well as the buyer prior to closing.
A)True
B)False
Q3) The duty of ____________________ care implies competence and expertise on the part of the broker.
Q4) Errors and omission insurance may cover intentional acts to deceive.
A)True
B)False
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Sample Questions
Q1) An agent, in the course of listing a property, was told by the seller that he would not sell to persons of a certain race. The agent should
A) try to change the seller's mind.
B) refuse to take the listing with that exception.
C) take the listing and ignore the wishes of the seller.
D) inform the seller he is in violation of fair housing laws.
Q2) A law requiring lenders to have a plan to make lendable funds available for all low-income neighborhoods it serves as well as more affluent neighborhoods is the A) Community Reinvestment Act.
B) Fair Housing Act of 1968.
C) Equal Credit Law of 1978
D) Presidential Order of 1970.
Q3) The illegal practice of inducing panic selling in a neighborhood for financial gain is called
A) steering.
B) block busting.
C) testing.
D) discrimination.
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Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) Under the right-to-use plan of timesharing, the purchaser holds title to real property. A)True
B)False
Q2) The rules by which an owner's association operates are known as A) bylaws.
B) covenants, conditions, and restrictions.
C) house rules.
D) ordinances.
Q3) In a planned unit development, a developer would be likely to dedicate to the public all of the following EXCEPT A) streets.
B) roads.
C) parks.
D) common elements.
Q4) The rules that govern how an owner's association will be run are called
Q5) ____________________ timesharing is a method of dividing up and selling a living unit at a vacation facility for specified lengths of time each year.
24
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Chapter 23: Property Insurance
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Q1) Section II of a homeowner insurance policy provides liability protection for the named insured but not the members of the named insured's family who lives with the insured.
A)True
B)False
Q2) ____________________ insurance is the foundation of property damage policies.
Q3) The concept of insurance is to
A) reimburse the insured for financial losses.
B) insure that a loss-causing event will not occur.
C) both a and b.
D) neither a nor b.
Q4) The liability coverage of a homeowner policy
A) applies to the insured premises.
B) provides protection away from the premises.
C) both a and b.
D) neither a nor b.
Q5) Policies that cover a large number of named perils are known as ____________________ form policies (HO-2).
Page 25
Q6) The insured is one who is ____________________ by insurance.
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Chapter 24: Land-Use Control
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Q1) Land-use controls may be imposed by
A) state governments.
B) local governments.
C) subdivision developers.
D) all of the above.
Q2) A parcel of land 330' Ă— 1320' was subdivided into 8 lots. How many acres were contained in each lot?
A) .125
B) 1.25
C) 5.45
D) 8
Q3) To prepare a master plan a city or regional planning commission is usually created.
A)True
B)False
Q4) Zoning laws compensate an owner for loss of property value due to zoning. A)True B)False
Q5) A(n)____________________ allows an individual landowner to vary from zoning requirements.
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Chapter 25: Real Estate and the Economy
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Q1) To ____________________ the debt is the creation of money by the Federal Reserve to purchase Treasury securities.
Q2) The advent of the secondary mortgage market
A) made available previously untapped sources of money for real estate mortgage loans.
B) contributed to real estate speculation and inflation in the late 1970s.
C) both a and b.
D) neither a nor b.
Q3) The creation of excessive amounts of money by the government would have little effect on monetary inflation.
A)True
B)False
Q4) When too much money chases too few goods, it is known as A) cost-push inflation.
B) demand-pull inflation.
C) real-cost inflation.
D) deflation.
Q5) The future demand for housing as seen by looking at the population and the ability of people to obtain income at various age levels is known as ____________________ demand.
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Chapter 26: Investing in Real Estate
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Q1) To be considered a good investment, when a property which generates a negative cash flow is sold,
A) there must be a substantial increase in property value.
B) there need be little increase in property value.
C) the investor is best off if the property has decreased in value.
D) there must be a substantial down payment.
Q2) If an investor has to dip into cash reserves to keep a property going, the property has a ____________________ cash flow.
Q3) The type of depreciation in which a fixed yearly sum is subtracted from the depreciable value of the property is called
A) sum of the years digits.
B) straight-line.
C) double declining balance.
D) accelerated.
Q4) In an effort to encourage individuals to rebuild older structure, Congress has had a policy of giving ____________________ tax credits.
Q5) In a typical limited partnership, the organizers are the limited partners. A)True B)False
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