Q&A Hero

Q: Again considering the same seller loan offer as in the previous question, suppose you face a 35% marginal income tax rate and so does the marginal investor in the debt market. Now basing your decision on investment value, how much more should you be willing to pay for the property than you otherwise think it is worth, due to the financing offer?(a) Zero, by definition.(b) $26,497(c) $55,973 (d) $86,602

Q: A seller has offered you a $1,000,000 interest-only 5 year loan at 6% (annual payments), when market interest rates on such loans are 8%. Basing your decision on market values, how much more should you be willing to pay for the property than you otherwise think it is worth, due to the financing offer?(a) Zero, by definition.(b) $26,497(c) $79,854(d) $98,412

Q: The NOI is $40,000; there are $5,000 in tenant improvement expenditures paid for by the landlord; there is a $200,000 interest-only loan at 8 percent annual interest; the depreciable cost basis of this residential property is $300,000; the owner's tax bracket is 33 percent. What is the Equity After-Tax Cash Flow (EATCF)?(a) $14,680(b) $27,800(c) $30,680(d) $35,000

Q: The difference between the net operating income (NOI) and the equity before-tax cash flow (EBTCF) is: (a) Property Tax Expense and capital expenditures. (b) The debt service and capital expenditures. (c) Property taxes and income taxes. (d) Interest expense and depreciation expense.

Q: A non-residential commercial property which cost $500,000 is considered to have 30 percent of its total value attributable to land. The annual depreciation expense chargeable against taxable income is:(a) $18,182(b) $15,873(c) $13,967(d) $8,974

Q: After-tax cash flow will exceed before-tax cash flow whenever: (a) Taxable income is negative. (b) Capital expenditures exceed net operating income. (c) The building is fully depreciated. (d) Interest and depreciation expenses are less than net operating income.

Q: All of the following are true about the "property before-tax (PBT) shortcut", except*: (a) The PBT shortcut is useful not only because it simplifies the investment analysis but because it avoids the necessity of estimating after-tax parameters that may be difficult to observe without error. (b) The shortcut is made possible by the existence of a reasonably well functioning market for the type of investment asset in question. (c) The shortcut works for estimating market value always, and for estimating investment value for investors who are typical of the marginal investors in the relevant asset market. (d) At the PBT level the investor's own subjective opportunity cost of capital can be used as the discount rate in order to estimate that investor's "investment value" (IV) for the property.

Q: Assuming riskless debt, if the return risk is 15% with a 40% Loan/Value Ratio, then with a 80% Loan/Value Ratio the return risk is:(a) 7.5%(b) 15%(c) 30%(d) 45%

Q: Which statement is true ex ante? (a) Leverage normally increases the owner's income return (cash yield) if you pay market value for the property. (b) Leverage normally increases the owner's income return (cash yield) if you pay more than market value for the property. (c) Leverage normally increases the owner's total return (including appreciation) if you pay market value for the property. (d) Leverage normally increases the owner's total return (including appreciation) if you pay more than market value for the property.

Q: Suppose you analyze a particular deal and it appears that for an investment of $1,000,000 your client can obtain a positive NPV of over $500,000. Your client is typical of the type of high tax bracket individual investors who commonly purchase and sell this type of property, and indeed typically determine equilibrium prices in the asset market in which these properties are sold. What should you do? (a) Reject the deal out of hand because it costs twice as much as its NPV. (b) Phone your client right away on your cell phone and urge her to pounce on this deal before it "gets away" - the seller must have made a mistake in their offering price! (c) Buy the property with cash, take out an 80% loan-to-value ratio mortgage, and laugh all the way to the bank with $200,000 of arbitrage profits! (d) Sharpen your pencil, double-check your assumptions and analysis, try to find what is unique about your client.

Q: Suppose the lease on a certain space will expire at the beginning of 2008. You believe that the probability of the existing tenant renewing is 50 percent. If he renews, you will need to spend only an estimated $5.00/SF to upgrade his space. If he does not renew, it will take $25.00/SF to modernize the space, even then you expect 6 months of vacancy. What expected cash flow forecast should you put in year 2008 of your pro-forma for this space, if you expect triple-net market rents on new leases in 2008 to be $20/SF?(a) $17.50/SF(b) $15.00/SF(c) zero(d) - $10.00/SF

Q: Normally, what relation should be most common between the expected "going-in" and expected "going-out" cap rate? (a) The going-in cap rate should be higher than the going out. (b) The going-out cap rate should be at least as high as the going-in rate. (c) There is no particular relation between the two.

Q: You are trying to apply a multi-year DCF analysis to evaluate an investment property with some long-term leases in it. You observe that other properties with similar lease structure and risk have been selling at cap rates around 11% (based on NOI with no capital reserve). You believe these other properties typically face capital expenditures on the order of 1% of property value per year in the long run, and that given such expenditures their net cash flows and values would reasonably be expected to grow in the long run at about 3% per year. What discount rate should you apply to your subject property in your DCF valuation?(a) The Treasury bond rate because of the long-term leases.(b) 10%(c) 13%(d) 14%

Q: The table below shows the projected cash flows (including reversion) for Property A and Property B. If both properties sell at fair market value for a cap rate (initial and terminal cash yields) of 8%, then which statement below correctly describes the relative investment risk in the two properties?Annual net cash flow projections for two properties ($ millions)Year12345678910A$1.0000$1.0300$1.0609$1.0927$1.1255$1.1593$1.1941$1.2299$1.2668$18.10B$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$13.50

Q: The table below shows two 10-year cash flow projections (in $ millions, including reversion) for the same property. The upper row is the projection that will be presented by the broker trying to sell the building, the bottom row is the realistic expectations. Suppose that it would be relatively easy for any potential buyers to ascertain that the most likely current market value for the property is about $10 million. What is the most likely amount of "disappointment" in the ex post annual rate of total return earned by an investor who buys this property believing the broker's cash flow projection?Year12345678910Presented$1.0000$1.0300$1.0609$1.0927$1.1255$1.1593$1.1941$1.2299$1.2668$14.7439Realistic$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$1.0000$11.0000(a) 0.00%(b) 1.00%(c) 3.00% (d) 26.68%

Q: The expected return on an investment in a property is inversely related to the price you pay for the property fundamentally because: (a) The future cash flows the property can generate are independent of the price you pay for the property today. (b) The return must include a risk premium. (c) Inflation must be subtracted out. (d) The investor faces a budget constraint.

Q: In which of the following situations would it be most appropriate to measure an investment manager's performance using the IRR rather than the time-weighted average periodic return? (a) Client hires manager to place capital as soon as possible. (b) Client requires a large proportion of its invested capital to be liquid at all times for withdrawal on demand. (c) Client gives manager a line of capital with discretion over when to acquire and dispose of illiquid assets. (d) All of the above.

Q: Which of the following is true about typical real estate investment (unlevered, at the direct property level) and inflation risk? (a) Real estate investment appreciation returns do not generally keep pace with inflation in the long run, but real estate investment provides a hedge against inflation risk in that unexpected changes in inflation tend to be positively correlated with changes in property value in the short to medium term. (b) Real estate investment appreciation returns generally at least equal the inflation rate in the long run, but real estate does not provide a good hedge against inflation risk in that unexpected changes in inflation do not tend to be positively correlated with changes in property value in the short to medium term. (c) Real estate investment appreciation returns generally at least equal the inflation rate in the long run, and real estate investment provides a hedge against inflation risk in that unexpected changes in inflation tend to be positively correlated with changes in property value in the short to medium term. (d) Real estate investment appreciation returns do not generally keep pace with inflation in the long run, and real estate does not provide a good hedge against inflation risk in that unexpected changes in inflation do not tend to be positively correlated with changes in property value in the short to medium term.

Q: Which of the following is an example of "negative feedback" in the real estate system? (a) Since the stock of built space cannot readily shrink, rents will fall when demand falls. (b) Lenders make money by issuing loans, so they tend to keep the capital flowing to developers even during down markets. (c) Real estate markets exhibit inertia, so market participants rationally extrapolate past rent trends into the future. (d) Growth in space usage demand stimulates increased rents or improved prospects for future rents, which increases the present value of real estate assets, which improves the profitability of new development projects.

Q: All of the following are fundamental causal determinants of cap rates in the property asset market, except: (a) The opportunity cost of capital (as determined in the capital market). (b) The expected growth in property rents (as determined in the space market). (c) The risk perceived for the property (as determined in the space and capital market). (d) The net income divided by the property price.

Q: Total development costs (including sufficient profit for the developers) are $200/SF. Cap rates in the asset market are 10%. What is the "replacement cost rent" in this market? (a) $20.00/SF. (b) $16.00/SF. (c) $12.50/SF. (d) $10.00/SF.

Q: MonthNew DrawCurrent InterestNew Loan Balance1$500,0002$700,0003$400,000Fill in the table below assuming end-of-month draws, 8% interest per annum compounded monthly, and no payments owed for either interest or principal during the construction.

Q: Based on the information below, analyze whether the development project should be undertaken, and state what is the maximum land value that could support economic development. Also compute the "canonical" OCC of investment in this development project, and compare that to the project's going-in IRR at the given land price. State clearly any assumptions you feel you must make beyond the information provided. You must clearly show your work and steps for full credit (and you may ignore the potential value of waiting to invest later). Time zero price of the site is $1,000,000. Total construction cost is projected to be $3,000,000, and construction is expected to take 1 year (T =1), with payment for work done owed to the contractor projected to occur in a single payment of $3,000,000 at the end of the 1-year construction phase. Construction completion is expected to be followed by 1 year of absorption (lease-up), that can be represented by a single projected net operating cash flow at the end of year 2 of negative $200,000. Stabilized operation beginning at the end of Year 2 includes projected NOI = $400,000/yr with projected growth of 1% per year thereafter based on rental market projections. OCC (going-in IRR) for investments in stabilized property projected to be 8% per annum. OCC for lease-up asset investments is 200 basis-points greater than the OCC for stabilized investment. OCC of construction cost cash flows is 3.50%.

Q: A certain housing development has the following projected equity net cash flows per year (in thousands):Year12345Project net cash flows($8,000)($4,000)$2,000$6,000$10,000There are to be two classes of investors providing the equity capital. A preferred investor is committed to provide $6 million with a 10% preferred return (computed on a current basis, accumulated with compounding). The subordinated (or residual) equity partner will put in the first $3 million, and then whatever is required after the preferred investor puts in their $6 million.Set up the projected capital accounts of these two classes of investors with their projected cash flows each year, and compute the projected IRR for: (a) The underlying project equity as a whole; (b) The preferred equity investor; and (c) The subordinated equity investor.Please use the following template to help you organize and present your answer. (You may use the back of the page for computations.)

Q: A certain development project has the following capital structure, with going-in expected returns as indicated for each component of the capital structure based on a realistic pro-forma of the underlying project:- Construction Loan: 6.00%- Mezzanine Loan: 8.00%- Preferred Equity: 12.00%- Residual Equity Class A ("money partner"): 25.00%- Residual Equity Class B ("managing partner"): 60.00%Plausible "optimistic" and "pessimistic" sensitivity analysis on the underlying project results in the following expected outcomes for each of the above slices:OptimisticPessimisticConstruction Loan:6.00%2.00%Mezzanine Loan:8.00%0.00%Preferred Equity:12.00%-5.00%Residual Equity Class A ("money partner"):60.00%-10.00%Residual Equity Class B ("managing partner"):150.00%-25.00%The riskfree interest rate is 4%. Based only on the information given, which piece (or pieces) of the capital structure would you most, and least, prefer to invest in, and why? (Show your work.)

Q: What does each partner bring to the deal in a typical real estate development joint venture arrangement between a local entrepreneur and national capital source? What does each partner expect to get out of the deal?

Q: Discuss the statement: "Developers don"t really use the NPV Rule in making development decisions."

Q: Why is it important to apply separate DCF analyses to the development (construction) phase and to the stabilized operational phase of an investment in a development investment?

Q: Operational leverage (in development projects)

Q: Pro Rata Pari Passu

Q: Hurdle (or "Critical") Value (of underlying asset, built property):

Q: According to real option theory, even if construction were instantaneous and the property market were perfectly liquid, it might be optimal not to immediately build a project whose value currently exceeds its construction cost, because:a) There is sufficient probability that the value of the project will rise sufficiently in the future, and building today is mutually exclusive with building in the future.b) There is sufficient probability that the value of the project will fall sufficiently far in the future such that you would lose money if you built it today.c) There is never any reason to exercise a call option before its expiration date.d) The cost of construction can be invested at a rate less than the cap rate (or current cash yield) of the completed project.

Q: The NPV investment decision rule is applicable even in the case of a real option, such as a real estate development investment decision, because:a) The NPV rule states that any investment with a positive NPV should be undertaken.b) The real options nature of development enables a negative NPV investment to be rational.c) The NPV rule will insure that a development project that presents a higher IRR will be chosen over one that presents a lower IRR.d) The NPV rule requires making the decision that maximizes the NPV over all mutually exclusive alternatives, and building today versus waiting are mutually exclusive alternatives on a given piece of land.

Q: What we have called in class the "canonical" formula for determining the OCC of a development project investment is based on all of the following except:a) Equilibrium exists within the market for developable land.b) Equilibrium exists across the markets for developable land, stabilized (built) properties, and bonds (or instruments with low-risk debtlike cash flows).c) The investor will be irreversibly committed to completing the subject development project.d) Development is a "real option" in which the developer/landowner has the flexibility to postpone development.

Q: In translating construction cost cash flows across time to arrive at the present certainty-equivalent value of the construction cost as of time zero, the opportunity cost of capital (OCC) that should be used as the discount rate is best described as follows:a) Use the contract interest rate on the construction loan.b) Use a rate equal to or only slightly above the riskfree interest rate.c) Use the development phase OCC reflecting the leverage in the construction project.d) Use the yield on long-term Government bonds.

Q: All of the following are characteristics of the classical "Simple Financial Feasibility Analysis" (SFFA) procedure for real estate development projects, except:a) The procedure is easy to understand and apply without advanced or specialized financial knowledge or knowledge of the capital markets (other than the local mortgage market).b) The procedure can be applied from either a "front door" or "back door" perspective.c) It generally assumes the developer will take out the largest mortgage possible upon completion of the project, and that the project cost will equal its value for applying lender's loan/value criteria.d) It is based fundamentally on the NPV investment evaluation principle and therefore is consistent with wealth maximization.

Q: For the same property as above, suppose the underwriting criteria is a maximum loan/value ratio (LTV) of 80%, and we estimate property value by direct capitalization using a rate of 7% on the stated NOI. By this criterion what is the maximum loan amount?a) $80,000b) $8,000,000c) $11,177,084d) $11,428,571e) $14,285,714

Q: Consider a 6.5% loan amortizing at a 20-year rate with monthly payments. What is the maximum amount that can be loaned on a property whose net operating income (NOI) is $1,000,000 per year, if the underwriting criteria specify a debt service coverage ratio (DCR) no less than 120%?a) $69,444b) $8,000,000c) $9,314,236 d) $11,177,084e) $13,412,500

Q: Consider a 30-year (monthly-payment), 6%, $300,000 mortgage with 3 points prepaid interest up front. What is the yield to maturity?a) 5.87%b) 6.00%c) 6.29%d) 6.50%e) Insufficient information to answer the question.

Q: The NOI is $1,000,000, the debt service is $800,000 of which $700,000 is interest, the depreciation expense is $250,000. What is the Before-tax Cash Flow to the equity investor (EBTCF) if there are no capital improvement expenditures or reversion items this period?a) $50,000b) $182,500c) $200,000d) $300,000e) $750,000

Q: A REIT has expected total return on equity of 15%, interest on their debt is 9%, and their debt-to-total-value ratio is 40%. What is the REIT's average cost of capital?a) 9.0%b) 10.4%c) 12.6%d) 15.0%e) Insufficient information to answer this question.

Q: Consider a 20-year (monthly-payment), 8%, $80,000 mortgage with 2 points prepaid interest up front. What is the yield to maturity? a) 8.00% b) 8.12% c) 8.20% d) 8.27%

Q: Describe the call option model of land value. What is the "underlying asset" in this model? What is the "exercise price"? What is the typical maturity of the land development option?

Q: In the following situation:Today (time 0)Next Year (Yr.1)Probability100%50%50%Value of Developed Property$1000$700$1300Development Cost (exclu land)$800$800$800Suppose no further value after next year, construction is instantaneous, the riskfree interest rate is 4%, the expected return (OCC) on unlevered investments in developed property is 7.5%, what is the value today of the land? And should development be undertaken now or should you wait.

Q: Consider a $5,000,000, 9%, 25-year mortgage with monthly payments. Compute the first three payments and the loan balance after the third payment for each of the following loan types: (a) Interest-only, (b) CAM, (c) CPM.

Q: Based on the following information, develop a front door "Simple Financial Feasibility Analysis" (SFFA) for this project estimating the required minimum market gross rent per SF that will support development. 40,000 NRSF office building project. Acquisition & construction cost = $1,500,000; Estimated operating costs (to landlord) = $100,000/yr. Projected stabilized occupancy = 95%. Permanent loan available on completion @ 9% (interest-only loan) with 130% debt service coverage requirement on the net operating income, and 75% maximum loan-to-value ratio. Show your work.

Q: Is it appropriate, and if so, why is it appropriate, to apply a riskless or nearly riskless OCC to construction cost cash flows in the typical development project? Yes, it is appropriate, because construction costs either have little volatility or they are typically not much correlated with financial markets, giving them effectively little risk (that cannot be diversified away, hence, little risk that would be "priced" in the capital markets).

Q: Why is it that construction loans are almost always used to finance all or most of the construction costs in a development investment, even when the investor has plenty of cash that could be used to pay for construction?

Q: What are the major line items in the operating budget of a development project, and why does it usually make sense for such a budget to consider only a single year's operation of the building?

Q: American option:

Q: Back-door feasibility analysis:

Q: Phased risk regimes (in development projects):

Q: The replicating portfolio of a development option (land) consists of: a) A long position in an asset like the stabilized building to be built and a short position (borrowing) in a riskless bond. b) A short position in an asset like the stabilized building to be built and a long position (lending) in a riskless bond. c) Long positions in both the stabilized building and a bond. d) Short positions in both the stabilized building and a bond.

Q: All of the following are typical types of real options found in development projects or developable land ownership, except: a) The wait option b) The phasing option c) The switch option d) The refinance option

Q: The opportunity cost of capital (discount rate) applicable on an unlevered basis to assets that are not yet leased up ("speculative built properties") is best described as: a) Usually about 50 to 200 basis-points above the OCC for the same property with stabilized occupancy, based in part on analysis of the "interlease" discount rate implied in the property market. b) Usually about 300 to 500 basis-points above the OCC for the same property with stabilized occupancy, based in part on analysis of the "interlease" discount rate implied in the property market. c) Usually about 50 to 200 basis-points below the OCC for the same property with stabilized occupancy, based on the typical upward slope of the yield curve in the bond market, because lease-up is near term. d) Usually about 300 to 500 basis-points below the OCC for the same property with stabilized occupancy, based on the typical upward slope of the yield curve in the bond market, because lease-up is near term.

Q: Consider the investment evaluation of a real estate development in which the property to be built is projected to reach stabilized occupancy at the end of Year 2 (two years from the time the investment decision must be made and construction will begin). The project is speculative in that there are no leases signed as of Time Zero (the present, when the investment decision must be made). The property level opportunity cost of capital is considered to be 9% for stabilized investments, and 10% for assets not yet stabilized (lease-up investments). Which of the following is true? a) Property level before-tax cash flows beyond Year 2 should be discounted back to the end of Year 2 at 9%, and the projected stabilized asset value as of the end of Year 2 should be discounted two years to Time Zero at 10%. b) Property level before-tax cash flows beyond Year 2 should be discounted back to the end of Year 2 at 10%, and the projected stabilized asset value as of the end of Year 2 should be discounted two years to Time Zero at 9%. c) Property level before-tax cash flows beyond Year 2 should be discounted all the way back to Time Zero at the 10% rate. d) Property level before-tax cash flows beyond Year 2 should be discounted all the way back to Time Zero at the 9% rate.

Q: Suppose a construction project anticipates end-of-month draws of $400,000, $300,000, and $600,000 consecutively. What will be the balance owed at the end of the third month if the interest on the loan is 7% per annum (nominal annual rate, compounded monthly), and no payments of either principal or interest are required during the construction period? a) $1,306,430. b) $1,314,051. c) $1,378,960. d) Cannot be computed with the information given.

Q: For the same property as above, suppose the underwriting criteria is a maximum loan/value ratio (LTV) of 75%, and we estimate property value by direct capitalization using a rate of 11% on the stated NOI. By this criterion what is the maximum loan amount?(a) $2,789,406(b) $3,409,091(c) $3,844,614(d) $4,000,000(e) $4,139,619

Q: Consider an 8.5% loan amortizing at a 25-year rate with monthly payments. What is the maximum amount that can be loaned on a property whose net operating income (NOI) is $500,000 per year, if the underwriting criteria specify a debt service coverage ratio (DCR) no less than 125%?a) $2,789,406b) $3,409,091c) $3,844,614d) $4,000,000e) $4,139,619.

Q: Two loans have the same interest rate and maturity. Loan A has a 15-year amortization rate. Loan B has a 30-year amortization rate. In comparing these two loans from a borrower's perspective:a) The advantage of Loan A is lower monthly payments and lower balloon payment at maturity.b) The advantage of Loan B is lower monthly payments and lower balloon payment at maturity.c) The advantage of Loan A is lower monthly payments but its disadvantage is a higher balloon at maturity.d) The advantage of Loan B is lower monthly payments but its disadvantage is a higher balloon at maturity.

Q: Suppose a property has a cap rate of 10% and you can borrow at a mortgage constant of 11%. If you borrow 75% of the property price, what will be your equity yield? a) 7.00% b) 8.25% c) 10.00% d) 11.00% e) Cannot be determined from the information given.

Q: Suppose the riskfree rate of return is 7%, and the expected total return on the property free & clear is 11%, and you have a target total expected return of 15%. Assuming you can borrow at the riskfree rate, what Loan/Value ratio must you obtain for this real estate investment to meet your target expected return? a) 0% b) 25% c) 50% d) 75% e) 80%

Q: A property has a McDonald's restaurant on it, which can earn $50,000 per year. In any other use (including another brand of restaurant), the most it can earn is $40,000 per year. Assuming a discount rate of 10% and constant cash flow in perpetuity, what is the "investment value" of this property to McDonalds, and what is its "market value"? a) Both investment value and market value are $400,000. b) Both investment value and market value are $500,000. c) Investment value is $400,000 and market value is $500,000. d) Investment value is $500,000 and market value is $400,000.

Q: An investor believes that a certain property is worth $10,000,000. The seller refuses to sell it for that amount, but has offered to provide a 5-year interest-only loan for $5,000,000 at 4% interest (annual payments at the ends of the years, first payment due in one year). Market interest rates on such a loan are currently 6.5%. How much should the investor be willing to pay for the property from an investment value perspective (taking the loan deal) if the investor faces a 30% marginal income tax rate? (Ch15) a) $10,000,000 b) $10,383,588 c) $10,403,023 d) $10,519,460 e) Insufficient information to answer the question.

Q: When a jurisdiction concluded that environmental impact reports are required on any new development in an area, the likely immediate result is thata. Developed properties suffer b. Vacant land values increasec. Vacant land values decrease d. None of the above

Q: If there are no comparables available, which method can be used to appraise vacant commercial land?a. The market method b. The allocation methodc. The land residual method d. None of the above

Q: In a recent appraisal of a three bedroom home in a good location, the appraiser has analyzed three comparable sales. A summary follows:DataComparable #1 Comparable #2 Comparable #3Price paid$250,000$225,000$295,000LocationInferior EqualSuperior Lot sizeLarger than subject Smaller than subjectSmaller than subjectAmenities & ConditionEqual to subjectSuperior to subjectSuperior to subjectDollar Adjustments Indicated by Market StudyLocation difference = $30,000; Lot size difference = $25,000;Amenities and condition difference = $10,000;Problem:Relying upon the comparables and the adjustments indicated, what is the best value conclusion for the subject property?a. $220,000 b. $240,000c. $255,000 d. $270,000

Q: Which of these procedures would be recommended when adjusting the sales of six-room houses with large size differences? a. Apply the average square foot price derived from sales b. Use the median price per room c. Adjust each sale by the cost of the size difference d. Graph the sales to explore the effect of size upon selling price

Q: To adjust the sale price of a comparable sale with a 15% better location than the subject property, you shoulda. Add 15% b. Subtract 15%c. Multiply the sale price by 1.15. d. None of the above

Q: To select the unit of comparison for an appraisal a. Choose a feature that is the most common among the sales b. Select an important property variable c. Always use a physical unit d. None of the above

Q: Which of the following usually is the most useful technique to derive dollar amounts in the adjustment of sales?a. Price per square foot b. Price per unitc. Gross rent multiplier d. Paired sales

Q: In the sales comparison approach, the price of a comparable property should be adjusted for which of the following? a. Favorable or unfavorable financing b. Cash sale c. Typical third-party financing d. None of the above

Q: Which of the following statistical methods can be used to discover the "central tendency" among the sales? a. Mean b. Median c. Mode d. All of the above

Q: While actual sales are preferred in the sales comparison approach, listings and offers in some market conditions may help bracket the value because a. Listings may indicate an upper limit of value b. Offers may indicate a lower limit of value c. Both of the above d. None of the above

Q: Besides the date and terms of sale, useful transaction data to gather in the sales comparison approach include a. The legal description of the property b. Names of buyer and seller c. Whether the sale included personal property d. All of the above

Q: For sales to be considered valid comparables, they should bea. Competitive properties b. Qualified as open-marketc. Close in time of sale to the date of value d. All of the above

Q: The first step in the sales comparison approach is to a. Investigate sales of comparable property b. Analyze and compare sales c. Adjust the sales d. Arrive at an indicated value

Q: An architectural style that features a steep roof as well as half timbering on the exterior is calleda. English b. Mediterraneanc. Contemporary Colonial d. New England Colonial

Q: The choice of materials in construction should not depend upona. The lowest possible cost b. Climatec. Availability d. Durability and style

Q: The part(s) of the structure to be excluded when calculating the total living area ofcondominiums is/area. Garage b. Porchc. Exterior walls d. All of the above