Mock Exam - Appraisal & Economics

1. Cost and value are MOST likely to be similar under which of the
following conditions?
a. The property is new c. The property is special purpose
b. The property is small d. The property has no deferred
maintenance
2. Highest and best use analysis is used to determine which of the
following factors?
a.
b.
c.
d.

The type of property to put on a site

The amount of capital to invest in a site for improvements
Whether any existing building on a site should be demolished
All of the above

3. A property has an appraised value of P1,000,000.00. The owner

currently owes P600,000.00 in mortgage loans against the
property. The owners equity is:
a.
b.

P400,000.00 c. P140,000.00 Solution: P1M 600K = P400K

P600,000.00 d. P160,000.00

4. Which of the following valuation concepts is indicative of special

purpose properties, such as churches or schools, when the
continuation of the special use is assumed?
a.
b.

Value in exchange
Value in use

c. Value in perpetuity
d. Book value

5. Which of the following explanation BEST describes the term market

place?
a.
b.
c.
d.

The amount of money actually paid in a transaction

The amount of the loan
The amount of money necessary to replace the property
Same term as market value

6. What economic principles is BEST illustrated when an appraiser

concludes that modernization of the plumbing system in the subject
property will increase the value of the property by more than the
cost of modernization?
a. Anticipation
b. Balance

c. Contribution
d. Substitution

7. Which of the following statements is CORRECT with regards to the

highest and best use of a parcel of land?
a. Unimproved land does not have a highest and best use.
b. If the improvement to the land is a house, then the
highest and best use is always residential.
c. The highest and best use can change over time.
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d. Highest and best use is strictly an economic concept and is

not influenced by physical and legal considerations.

8. The total loan payment made on a parcel of real estate during any
one year is generally referred to as:
a.
b.

Debt service
equity

c. mortgage constant
d. cash flow

9. The test used to determine whether or not an article is a fixture

depends on all of the following
a.
b.
c.
d.

Reasonable intent of the party attaching the object.

Adaptation of the object
Cost of the item being attached
Method of attachment

10. The legal estate in land that provides the highest degree or
extent of ownership rights recognized by
law may be referred to by
which of the following terms?
a.
b.

Fee
Fee simple

c. Fee simple absolute

d. All of the above

11. Which of the following actions is an example of the legal

right of government based on police power?
a.
b.

Taxation
Escheat

c. Eminent domain
d. Zoning

12. In a voluntary conveyance of real estate, the

conveys the
title to the property and The________________receives the title.
a.
b.

Grantor, grantee
Grantee, grantor

c. Owner, seller
d. Grantee, grantor

13. All legal rights, such as riparian rights or easements, that go

with the land when title to the land is transferred are known as:
a.
b.

Encroachments
Amenities

c. Appurtenances
d. Easements

14. Numerous public and private limitations are placed on real

property. Some are voluntary and others are involuntary. Which of
the following limitations is NOT an example of a private involuntary
limitation?
a.
b.

Encroachment
Adverse possession

c. Mechanics lien
d. Deed restriction

15. Reference to a plat map would be made in which of the following

legal description methods
2

a.
b.

Lot and block

Rectangular survey

c. Street address
d. Monuments

16. Which of the following terms refers to the right of a person who
owns a property free and clear of any leases?
a. Leased fee estate
b. Leasehold estate

c. Fee simple estate

d. Lessees estate

17. When a building, a part of a building, or an obstruction

physically intrudes, overlaps, or trespasses the property of
another, this is referred to as an:
a. Escheat
b. Easement

c. Encroachment
d. Assemblage

18. An appraisal is best defined as:

a. An unbiased opinion of the most likely price for which a parcel
of real estate would sell at a given date.
b. An unbiased opinion of the nature, quality, value or utility of
an interest in real estate and related personally
c. The process of developing an opinion as to market value or
other defined value of a specified interest in a specified
point in time.
d. The process of studying the nature, quality, or utility of an
interest in real estate in which a value estimate is not
necessarily required.
19. In the appraisal process, the property being appraised is referred
to as the:
a. Comparable property
b. Assessed property

c. Subject property
d. Appraised property

20. The appraisal process undertaken by an appraiser consists of many

steps. What is the correct first step in the appraisal process?
a.
b.
c.
d.

Definition of the problem

Collection and analysis of data
Analysis of highest and best use
Initial estimate of value

21. The objective of undertaking an appraisal of real estate is to:

a.
b.
c.
d.

Determine asking price

Estimate value
Establish loan value
Identify legal rights and interest that may exist

22. If comparable sale #1 sold for Php2,000,000 and has a two-car

garage, adding Php100,000 to the value, and the subject property
does not have a garage, the indicated value of the subject property
would be found by:
a .
b .

Adding Php100,000 to the

Subtracting
from the
comparable Php100,000
sale
comps comparable sale

Comparab P2,000,000
Less:
le
.00
600,000.00
Garage

c .
d .

Adding Php100,000 to the subject

property Subtracting Php100,000
from the subject property

Market
Value

P1,400,000
.00

23. When an appraiser is using the sales comparison approach, one

of the elements of comparison that may have to be adjusted is
often referred to as a time adjustment. What does the time
adjustment provide?
a. An adjustment for the period of time between when a listing is
taken on property and when the property actually sells.
b. An adjustment between the date of sale of a comparable and
the date of the appraisal to allow for any changes over time
a. An adjustment between the listing date of a comparable
sale and the date the subject property is actually appraised
c. An adjustment for the period of time between the actual sale
of a comparable for the appraisal assignment

24. An appraiser has been asked to estimate the value of a lot. In

the same neighborhood, the appraiser collects the following sales
data:
Lot Sale
1
2
3

Sales Price
Php144,250
Php147,050
Php145,600

Time of Sale
4months ago
2months ago
3months ago

The price appreciation for lots is estimated to be at the rate of 1% per

month
(simple, not compounded) Given the above information, what
is the estimated value of the subject property?
a.
b.

Php50,000
Php100,000

c. P140,000.00
d. P150,000.00

Solution:
1.
144,250 x 1.04 = 150,020.00
2.
147,050 x 1.02 = 149,991.00
3.
145,600 x 1.03 = 149,968.00
Total
=
449,979.00 / 3 = P149,993 or P150K
25. Deferred maintenance usually results in which of the following
losses in value?
a.
b.
c.
d.

Incurable physical depreciation

Curable physical depreciation
Curable functional obsolescence
Curable external obsolescence

26. What terms applies to the effect on value of location or

proximity to the intersection of two streets?
a.
Corner influence
c. Externality
b.
Amenity
d. Plottage
27. Functional obsolescence could be caused by which of the following?
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a.
b.

A ceiling that is too high

Deferred maintenance

c. A poor location
d. A worn-out roof

28. The building cost estimate method that replicates the contractors
development of a bid, and is the most comprehensive way to
estimate building costs, is known as the:
a.
b.

Unit-in-place method
Quantity survey method

c. Breakdown method
d. Comparative unit method

29. Included in the cost approach to value is all of the following

components EXCEPT:
a.
b.

Replacement cost
c. Acquisition cost
Highest and best use of the land d. Accrued depreciation

30. In regard to accrued depreciation , which of the following

terms does NOT belong together?
a.
Physical deterioration-curable
b.
Functional obsolescence-incurable
c.
Economic obsolescence-curable
d.
Functional obsolescence-curable
31. The combining of two or more into a single ownership with the
value of the assembled lots being more than the sum of the
values of the individual lots is referred to as:
a.
b.

Highest and best use

Economic rent

c. Escheat
d. Plottage

32. Another term used to denote the actual age of a building is

a.
b.

Chronological age
Effective age

c. Economic age
d. Depreciated age

33. A building has a roof that originally had an expected life of 25

years. The roofs effective age is 15 years. A new roof will cost
Php100,000 to install. Using a straight-line method, what amount
of depreciation would be charged for the roof?
a.

Php40,000
15/25 =P60K
b.
Php60,000

c. P80,000.00 Solution: P100K x

d. P100,000.00

34. The basic capitalization formula used in the income

approach to value contains three components. Those three
components are:
a.
b.

Market, cost, incomec. Physical, functional, economic

Value, rate, income d. Potential, gross, net income
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35. What is the gross income multiplier for a property with a

current market value of Php570,000 and rents for Php5,000
per month?
a.

9
9.5
b.
9.5

c. 10 Solution: P570K / P5K x 12mos. =

d. 10.5

36. The peso amount of rent received from a parcel of real estate
when rented in an open, competitive market is referred to as:
a.
b.

Economic rent
Contract rent

c. Ground rent
d. Gross rent

37. A mortgage loan for P300,000 at 9 percent per annum for 30 years
has been made. What is the amount of interest for the first month?
a.

Php163.90
c. P2,250.00
09/12 x 1mo. = P2250.00
b.
Php900.00
d. P2,413.90

Solution: P300K x .

38. What does the range of a group of variables indicate to the

appraiser?
a.
b.
c.
d.

The
The
The
The

value of the highest sample

difference between the lowest and the highest values
average for the group
percentage variation from the mean

39. Which of the following types of lease does NOT provide at least
some protection to the lessor against inflation?
a.
b.

Flat lease
Index lease

c. Reappraisal lease
d. Graduated lease

40. Which of the following statements is CORRECT in regard to

assessed value?
a.
b.

The assessed value

The assessed value
property taxes
c.
The assessed value
property insurance
d.
The assessed value

must equal the market value

is used primarily to calculate
is used primarily to calculate
will never exceed cost

41. A father sells his home to his daughter and her husband. Such a
sale would NORMALLY be described as which of the following
sales?
a.

Arms-length sale
unrepresentative sale
b.
Illegal sale

c. Distorted sale or
d. Forced sale

42. In collection data, an appraiser concludes that comparable

properties have increased in value at a 6-percent annual
compound rate during the previous two years. The proper time
6

adjustment to make for a comparable that sold two years ago

for Php1,000,000 is;
a.
b.

c. P123,600.00 (1.06) 2
d. P1,123,600.00

Php60,000
Php120,000
Solution: P1M x (1.06)

- P1M = P123,600.00

43. Which of the following actions is NOT characteristic of market

value?
a.
b.

Sale as soon as possible

c. Typical financing
Well informed buyers d. Typically motivated sellers

44. Which of the following factors is NOT normally considered to

affect the supply of real estate?
a.
b.

Volume of new construction c. Land use and city growth

Standing stock
d. Competition

45. What term best describes the effect of a power plant on the
value of a nearby home?
a.
b.

Balance
Externalities

c. Contribution
d. Conformity

46. Which of the following appraisal principles holds that market value
is indicated by the value of another property with similar utility?
a.
b.

Supply and demand

Substitution

c. Competition
d. Balance

47. The specific use of a parcel of land that gives that land the
greatest residual of income is referred to as the lands:
a.
b.

Intrinsic use
Highest and best use

c. Income producing use

d. Efficient use

48. The proper or most correct placement of an improvement to

land, such as the construction of a house, is normally strongly
influenced by the application of which of the following economic
principles?
a.
b.

Conformity
Encroachment

c. Escheat
d. Substitution

49. The term lenders often use to refer to the relative amount of
money they will lend on a specific parcel of property is known as:
a.
b.

Gross rent multiplier

Debt-to-equity ration

c. Value to loan ratio

d. Loan to value ratio

50. Effective demand in the marketplace for housing varies MOST

directly with which of the following conditions?
7

a.
b.

Purchasing power
Interest rates

c. Building codes
d. Building cycles

51. A worn path crosses an owners property. What legal doctrine

would require a potential purchaser to take note of the fact that
there may be an unrecorded prescriptive easement against that
property?
a.
b.

Actual notice
c. Lis pendens
Constructive notice d. Escheat

52. An individual owner of a condominium unit is in default on

payment of the property taxes to the local government. Of the
following choices, which is the only one legally available to the
taxing authority?
a.
Levy the tax on the entire condominium project
b.
Foreclose against the individual unit
c.
Place a lien on the common areas
d.
Foreclose against the homeowners association
53. The legal right of government to acquire private property for a
public use or purpose with just compensation is known as:
a.
b.

Police power
c. Condemnation
Eminent domain d. Escheat

54. In regard to the legal concept of land, what is a landowner entitled

to in addition to the surface rights?
a.
Nothing
b.
Air rights only
c.
Everything below the surface only
d.
Everything above and below the surface
55. The term real estate is generally
a.
a.
b.
c.

Air and subsurface rights

Surface rights only
Machinery and equipment
Legal interests and rights inherent in ownership

56. Which of the following activities is NOT a public limitation on real

estate?
a.
b.

Building codes
Zoning

c. Adverse possession
d. Fire codes

57. If the metes-and-bounds method of legally describing land is

being used, which of the following statement is CORRECT?
a.

The starting point must be a natural benchmark

8

b.
c.
d.

There must be a definite point of beginning

Monuments cannot be used as part of the description
No other method, such as lot-and-block, can be used as
part of the description

58. Which of the following terms refer to the legal interest belonging to
a person who is leasing property from someone else?
a.
b.

Leased fee estate

Leasehold estate

c. Fee simple estate

d. Lessees estate

59. Which of the following terms refers to the stages that a

neighborhood goes through over time?
a.
b.

Revitalization
Growth cycle

c. Life cycle
d. Change

60. The term appraisal refers to:

a.
b.

The process of estimating the market value of a property

The valuation of a market and how it affects property
values
c.
The process of estimating the most likely sales price of a
property
d.
The act or process of developing an opinion of value
61. The date of valuation for an appraisal is determined by which of
the following?
a.
b.
c.
d.

The actual date the appraisal is signed

The date the appraisal assignment is accepted
The date the property is actually inspected
Whatever date is specified in the appraisal report

62. What is the PRIMARY purpose of economic base analysis?

a. To forecast future economic growth in an area and divide
that growth between basic and non-basic industries
b. To forecast changes in local zoning ordinances
c. To determine property tax rates and the likely amount of
taxes due on property
d. To forecast inflation rates
63. In using the sales comparison approach, the appraiser finds that in
terms of location, sale #1 is superior to the subject property but is
inferior to sale #2. The correct procedure would be to adjust:
a.
Both sales down to the subject property
b.
Both sales up to the subject property
c.
Sale #1 down and sale#2 up
d.
Sale#1 up and sale #2 down
64. A single-family residence located on a busy street rents for Php500
per month less than similar rental properties located on other
streets in the same area. The average gross rent multiplier in this
9

neighborhood is 110. What is the lump sum peso adjustment for the
locational obsolescence of the residence?
a.
P500
c. P50,000.00
b.
P6,000
d. P55,000.00 Solution: 110 x P500 =
P55K

65. The adjustment in the sales comparison approach that involves

comparing two properties with similar features and characteristics
but different dates of sale is referred to as the:
a.
b.
c.
d.

Loan closing adjustment

Time adjustment (market conditions)
Appreciation in value adjustment
Time value of money adjustment

66. The building cost method that finds the cost of the component parts of
a building through standard cost estimates and then adjusts for the
condition of the component, time and location is known as the:
a.
Unit-in-place method c. Break-down method
b.
Quantity survey method
d. Comparative unit method
67. Marias house was built 12 years ago. Because he keeps it in
excellent condition, it shows only as much wear as a typical fiveyear-old house. Marias house therefore has an effective age of:
a.
b.

5 years
7 years

c. 12 years
d. 17 years

68. Which of the following methods is the MOST detailed in estimating

the costs of reproducing a building as part of the cost approach to
value?
a.
b.

Unit-in-place
Quantity survey

c. Comparative unit
d. Trade breakdown

69. The cost approach to value takes into consideration all of the
following factors EXCEPT:
a.
b.
a.
c.

Value of the land

Replacement (reproduction) cost of the improvements
Original sales price
Physical defects

70. When using the cost approach to value, an appraiser should value the
land as though:
a.
b.
c.
d.

It has been improved with a building

It is currently being used with an interim use
It is vacant and available for highest and best use
Zoning ordinances are not

71. A tract of land containing four hectares recently sold for

Php600 per square meter. What is the estimated land value?
10

a.
b.

P600,000.00
P2,400,000.00
P24M

c. P6,000,000.00 Solution:
d. P24,000,000.00 4 x 10,000 x 600 =

72. What is the correct percentage of accrued depreciation for a 15year old building if the building has an effective age of 20 years and
a remaining economic life of 30 years?
a.
20 percent
c. 40 percent
Solution: 20/ 20
+30
b.
30 percent
d. 60 percent
73. What term applies to the rent specifies in a lease?
a.
Base rent
c. Contract rent
b.
market rent
d. Gross rent
74. The sales comparison approach is said to be the most reliable
when which of the following market exists?
a.
Active market
c. Buyers market
b.
Inactive market
d. Sellers market
75. Numerous elements should be identified when an appraiser is
attempting to sue the sales comparison approach to value. which of
the following lists BEST explains those elements of comparison?
a.
Demand, supply, utility, transferability
b.
Physical, functional, economic, locational
c.
Date of sale, location, physical condition, condition of sale
d.
Location, location, location, location
76. What term is used to describe tangible and intangible factors that
enhance the desirability and thus add to the value of real estate?
a.
b.

Amenities
Goodies

c. Enhancements
d. Negative externalities

77. In the short run, which of the following conditions has the MOST
effect on real estate prices?
a.
b.
c.
d.

More
More
More
More

changes in demand than changes in supply

changes in supply than changes in demand
inflation than demand
sellers than buyers

78. What term is used to describe the value to a typical investor?

a.
b.

Market value
Investment value

c. Sale value
d. Use value

79. Which of the following statements applies to a property with a

nonconforming use?
a. The existing nonconforming use is the highest and best use
11

b. A nonconforming use is likely to arise from changes in zoning

c. A nonconforming use property may be under improved but
cannot be over improved
d. In the sales comparison approach, an appraiser does
not have to make a separate adjustments for the
nonconforming use

80. Owner A gives owner B an easement across As land to shorten

the distance B has to travel to reach land he owns. The land B
owns has benefited by this easement and is known as the:
a.
b.

Dominant estate
Servient estate

c. Lien estate
d. Estate in gross

81. A description of the surface features of a parcel of land such as e;evation or

drainage is known as its:
a.
Location
c. Topography
b.
Plottage
d. Restrictive covenant
82. An owner of a parcel of land leases the land to a tenant for ten years. The next
day the owner sells the land to a third party. Which of the following statements is
CORRECT?
a.

The
lease
b.
The
c.
The
d.
The
law

new owner has an option as to whether to accept the terms of the

tenant may voluntarily terminate the lease
tenants leasehold is not affected
tenant legal interest is automatically terminated by operation of

83. Which of the following approaches to value uses market data?

a.
b.
c.
d.

Income approach
Direct sales comparison approach
Cost approach
All three approaches

84. Which of the following estimates would result in a capitalization rate of 20

percent?
a.
b.
c.

Potential gross income P1,000,000; value P5,000,000

Effective gross income P1,000,000, value P5,000,000
Net operating income P1,000,000, value P5,000,000 Solution: P1M /
5M = 20%
d.
Cash flow P1,000,000, value P5,000,000
85. In estimating the net operating income of a building, one of the necessary steps
is the calculation of other income. Which of the following items is NOT
considered other income?

86. A leasehold interest may be created only if the contract rent is:
a.
b.

Greater than market rent

c. Less than market rent
Equal to market rent d. A flat rent

12

87. Suppose a propertys NOI and value are not expected to change
over an investment holding period. What would be the relationship
between the overall rate and the property yield rate?
a.
b.

a. The overall rate would be less than the property yield rate
The overall rate would be equal to the property yield rate
The overall rate would be greater than the property yield
rate
b. More information is required to determine the
relationship between the overall rate and the property
yield rate

88. Which of the terms BEST describes a pattern of income or cash flow
that is regular and predictable?
a.
Reversion
c. Annuity
b.
Lease
d. Payment
89. A property has NOI of Php1,000,000, interest payment of
Php800,000 and principal payments of Php100,000. What is the
debt coverage ratio?
a.
b.

0.80
.0.90
= .90

c. 1.11
d. 1.25

Solution: P800K + P100K / P1M

90. A small restaurant contains an oven and a freezer, each of which

cost Php9,000 and has estimated useful life of 10 years. Carpeting
costs Php35,000 and has an estimated useful life of seven years.
What annual reserve for replacement would be appropriate for these
items?
a. P5,900.00 c. P6,800.00
b. P6,070.00

d. P5,000.00

35K /7 =

Solution: 9K x 2 /
10 = 1,800
5,0
00
6,8
00

91. If a property has an overall capitalization rate of .095 and a

mortgage at a 75 percent loan-to value ratio having an annual
mortgage constant of .11, what is the equity dividend rate?
Supporting Computation:
a. 0.05
c. 0.07
0.75 x .11 = .0825 Bank
b. 0.06
d. 0.09
0.25 x .05 = .0125
Investor
13

.095
92. The term effective rate refers to the:
a.
b.

Loan constant on a mortgage

True rate of return considering all relevant financing
expenses
c.
Interest rate after inflation is considered
d.
Rate at which future payments are discounted to present
cash flows

93. What is the present value of a 40-year net income of Php10,000

per year if payments are in advance and the net income is
discounted at a rate of 12 percent? (Factor=8.233030)
a.
b.

P82,330
P82,438

c. P92,210.00
d. P92,330.00

94. When a propertys vacancy and bad debts is subtracted from the
propertys gross (potential) income, which of the following incomes
is derived?
a.
Effective gross income c. Taxable income
b.
Net operating income d. Cash flow income
95. The basic equation used in the income approach to value is:
a.
Rate divided by income equals value
b.
Income divided by rate equals value
NOI / Cap. Rate =
Market Value
c.
Rate times income equals value
d.
Rate plus income equals value
96. One of the standard techniques used by appraisers when analyzing
the income of property is to divide the income being generated
between the land and the improvements and then to capitalize the
residual income to the improvements into a value estimate. Such a
technique is referred to as the:
a.
Land residual technique
c. Property residual
technique
b.
Building residual technique d. Plottage residual
technique
97. The income approach to value:
a.
Is based on the principle of anticipation
b.
Translated the ability of property to generate income into an
indication of value
c.
Requires an estimate of net operating income of property
d.
All of the above are correct
98. The lump sum that an investor receives at the termination of an
investment is referred to as the:
a.
Remainder
c. Lump sum
b.
Reversion
d. Gain
99. Which of the following land uses is generally NOT considered
income property?
a.
Hotels
c. Office buildings
b.
Undeveloped land
d. Apartment buildings
100. A collection of retail stores with a common parking area and
14

generally one or more large department, discount, or food stores;

and sometimes including an enclosed mall or walkway, is commonly
referred to as a:
a.
Mall
c. Mixed-use development
b.
Retail complex
d. Shopping center

101. What is the distinction between the terms market price and
market value?
a. Market price is synonymous with replacement cost, while
market value is the same as assessed value
b. Market price is what the seller asks for, while market value is
what the buyer actually pays
c. Market price is what the property sells for, while market value is
what the sales price should be to a typical buyer
d. Market price is what is currently owned on the property, while
market value is what is bought for
102. What type of analysis identifies land uses that are legally
permissible, physically possible and financially feasible?
a.
Sensitivity
c. Feasibility
b.
Highest and best use
d. Supply and demand
103. Included in the definition of highest and best use are certain tests
or criteria that must be met. Which of the following conditions is
NOT a certain in determining the highest and best use of land?
a.
Physically possible
c. Financially feasible
b.
Legally permissible
d. Supply and demand
104. When two or more individual parcels are legally encumbered by
one mortgage and one of the parcels is to be freed from the
encumbrance, the instrument used is a(n):
a.
Partial release of mortgage c. Sub assignment of
mortgage
b.
Satisfaction agreement
d. Estoppel certificate
105. Which of the following statement is NOT necessarily
correct about a local zoning ordinances?
a.
Zoning can establish height restrictions on building
b.
Zoning prevents decline in property values within a certain
zoning district
c.
Zoning is often used to separate incompatible land uses
d.
Zoning establishes setback requirements for
improvements on land
106. A mortgage secured by a legal claim against two or more separate
properties is referred to as a:
a.
Wraparound mortgage
c. Blanket mortgage
b.
Participation mortgage
d. Ground lease mortgage
107. The property tax due on real estate is calculated by what method?
a.
Dividing the tax rate by the assessed value
b.
Multiplying the tax rate by the assessed value
c.
Dividing the tax rate by the most probable sales price
15

d.

Multiplying the tax rate by the most probable sales price

108. Which of the following statement is CORRECT in regard to a

condominium form of ownership?
a.
A condominium is a legal form of property ownership
b.
A condominium provides each unit owner with a
proprietary lease
c.
A condominium provides the same legal interest as a
cooperative
d.
A condominium may not be owned by tenants in common.

Additional : Appraisal, Principles & Economics

1. List the physical characteristic of land that best fits each

description.
a. Land is not standardized.
1. non-homogeinity 2. Immobility 3.indestructibility 4. fixity
a.

Location of land cannot be changed.

1. non-homogeinity 2. Immobility 3.indestructibility 4. Fixity
b. Land is durable and does not wear out.
(indestructibility) 1. non-homogeinity 2.
Immobility 3.indestructibility 4. Fixity
2. List the economic characteristic of land that best fits each
description.
a.
Investments in land are long term.
1. fixity
2. Modification
3. Situs
4. scarcity
b.
Changes in land will affect its value.
1. fixity
2. Modification
3. Situs
4. scarcity
c.
Buyers prefer some locations over others. (situs)
1. fixity
2. Modification
3. Situs
4. scarcity
d.

The supply of land is fixed. (scarcity)

1. fixity
2. Modification
3. Situs

4. scarcity

3. Are the following statements true (T) or false (F)?

a. Lands indestructibility makes it easily regulated by local
government. F
b. Scarcity means that we do not have enough land to satisfy
demand. T
c. The characteristic of modification means that the changes
will always increase a propertys value. F
4. Supply the term that best matches each of the following
descriptions.
a. Divides real estate markets into submarkets (market
segmentation) 1. Market segmentation 2. Demographics 3.
Land-use plan 4. Subdivision
b. Details the characteristics of the population (demographics)
1. Market segmentation 2. Demographics 3. Land-use plan 4.
Subdivision
16

5. List the components included in each of the following terms:

a. Land
: earth surface, below and above; natural things
attached
a.
Real estate
:
same as above ; artificial
things attached
b.
Real property : land and real estate + interest or rights of
ownership
b. It is possible for one person to own the air rights
and another person to own the remaining rights
to the same parcel of land. True

e. Trees and shrubs found naturally growing on the

property would be considered improvements. False
f. Land that is unimproved also might be called raw land. True
g. Laws recognized by the courts based on custom and usage. (common
law)
h. Rights a property owner has in anything below the surface.
(subsurface rights)
i. Additions to the property that are created artificially rather than by
nature. (improvements)
j. Rights a property owner has in anything above the surface. (air
rights)
k. A legal system that recognizes private ownership of land. (allodial
system)
l. The listing agreement between the broker and seller list the item.
(listing contract)
m. Another name for personal property is chattel property. True
n. A trade fixture is considered real property. False, fixture is real
property.
o. Objects can be converted from personal property to real
property, but not from real property to personal property.
False. Example: Coconut trees cut to coco lumber.
e. An item that was once personal property but has been
attached to the real estate and has become real property
(fixture)
p. Annual crops on the property that are cultivated by the owner
(emblements or fruits)
q. The process of changing real property to personal property
(severance)
r. A type of fixture that remains personal property and can be removed
by the tenant. Trade fixture
s. The process of changing personal property to real property.
(attachment)

6. Multiple Choice
a.

The physical characteristic of real property that no two parcels of

land are exactly alike is called
a. Immobility b. Situsc. Non-homogeneity d. Indestructibility

b.

The economic characteristics of real property include all of the

following except
a. Non-homogeneity
b. Situs
c.
Scarcity
d. Fixity (permanence of investment)
c. Which of the following factors would not be considered when
determining whether an item of personal property has become real?
a. Method of attachment
b. Value of the item
c. Permanence of the installationd. Agreement between the
parties
17

d.

A shopping mall is an example of what type of real estate?

a. Industrial
b. Commercial c. Residential
Special purpose

d.

e.

Laws developed through the years by the courts based on custom

and usage are referred to as
a. The allodial system b. Common law
c. Statute law d.
Emblements

f.

The economic characteristic of scarcity refers to which of the

following?
a.
No two parcels of land are exactly alike
b.
There may not be enough land in certain areas to satisfy
demand
c.
People prefer certain areas
d.
The real estate industry has run out of land to continue
sufficient development

g. Included in the term real property

a.
Is anything permanently affixed to the land
b.
Are the air rights to the property
c.
Are mineral rights to the property
d.
All of the above
h. The economic characteristic of situs refers to which of the following?
a.
No two parcels of land are exactly alike.
b.
There may not be enough land in certain areas to satisfy
demand
c.
People prefer certain areas
d.
Land cannot be destroyed
i. A warehouse is an example of what type of real estate?
a. Residential
b. Special purpose
c. Industrial
d. Commercial
j. A system of laws that recognizes private ownership of land is referred
to as
a. The allodial system b. Common law
c. Statute law
d. Feudal law
k. Of the following items, which would be considered personal property?
a. A stores display counters b. A garage
c. An installed dishwasher
d. Growing bushes
l. In the real estate market, supply and demand interact to affect
property prices. Which of the following relationship is not correct?
a.
When demand decreases, prices increase
b.
When supply increase, price decrease
c.
When demand decreases, price decrease
d.
When supply decreases, price increase
m. The physical characteristics of real property include all of the
following except
a. Nonhomogeneity
b. Immobility
c. Situs
d.
Indestructibility
n. Which of the following factors would not be considered when
determining whether an item of personal property has become real?
a.
Agreement between the parties
b.
Method of attachment
c.
Permanence of the installation
d.
The length of time the item was been attached to the property
o. In the real estate market there are several factors that affect the
supply and demand of real estate. Which of the following would not
affect the supply of real estate?
a.
The demographics of the countys population
b.
The availability of building supplies
c.
Changes in the local governments zoning codes
d.
The availability of skilled construction labor
18

p. The term land includes all of the following except

a.
Trees growing on the property
b.
The propertys surface
c.
Below the property to the center of the earth
d.
A shed constructed on the property
q. An office building is an example of what type of real estate?
a. Residential
b. Special purpose
c. Industrial
d. Commercial
r. A mobile home on a permanent foundation most likely would be
considered
a.
Chattel property
b. A trade fixture
b.
Real property
d. Personal property
s. The economic characteristic of fixity refers to which of the following
statements?
a.
Investments in real estate are usually for the long term
b.
Land cannot be destroyed
c.
Land cannot be removed
d.
No two parcels of land are exactly alike
t. All of the following are true regarding emblements except they
a.
Are also called fructus industrials
b.
Include cultivated crops
c.
Are considered real property
d.
Are also called fruits of industry
u. Services provided by the real estate industry include all of the
following except
a.
Bringing home buyers and sellers together
b.
Managing real estate for investors
c.
Selling homeowners insurance
d.
Estimating the value of real estate
v. Which of the following is considered to be personal property?
a. Trees growing on the property
b. Trade fixtures installed on the
property
c. A garage
d. A driveway
w. Which economic characteristic of real estate refers to the concept
that changes in a parcel of land affect its value either favorably or
unfavorably?
a. Fixity
b. Scarcity c. Nonhomogeneity
d.
Modifications
x. A tenant occupies a rental unit in an apartment building and installs
new wooden kitchen cabinets. At the end of the lease the tenant wishes
to remove the cabinets. Which of the following is true regarding removal
of the cabinets?
a.
The cabinets can be removed by the tenant
b.
The cabinets can be removed, but the tenant owes compensation
19

c.
d.

to the property owner

The cabinets must stay, but the tenant is entitled to compensation
The cabinets must stay

y. A church is an example of what type of real estate?

a.
Residential
b.
Special purpose
a.
Industrial
c.
Commercial
z. A restaurant owner occupying a leased space in a commercial
building installs a large neon sign in the window. The sign would
probably be considered
a. An emblements
b. A trade fixture c. Real property d. A fixture
7. Multiple Choice
a. What physical characteristic makes real estate easy for local
governments to tax and cause it to be heavily influenced by changes in
the surrounding areas?
a. Indestructibility
b. Nonhomogeneity
c. Immobility
d. Situs
b. Which of the following is included in the definition of real estate but
not in the definition of land?
a.
The air rights
b.
The propertys surface
c.
Below the property to the center of the earth
d.
Fixtures on the property
c. Which economic characteristic of real estate refers to the concept
that the supply of land is limited and therefore strong demand in certain
areas will increase property values?
a.
Fixity
b.
Scarcity
c.
Nonhomogeneity
d.
Modifications
d. Under what circumstances might a nonconforming use be brought back
into conformance with zoning laws?
a.
Following reasonable time for phasing out (like industrial to
commercial)
b.
The structure is destroyed
c.
The non-conforming use is abandoned.
d.
Title to the property is transfered
8. Supply the term that best matches each of the following descriptions.
a. The government power to create laws to protect the public health
and safety and promote the general welfare (police power)
b. Local laws that regulate the control and use of land. (zoning laws)
c. Use in existence prior to the zoning law that is allowed to continue.
(non-conforming use)
d. Changing an area from higher-density use to lower-density use.
(downzoning)
e. Permission for a property owner to use the land in a way not allowed
20

under the zoning law. (variance )

f. Enacted to protect the public health and safety from inferior
construction practices. (building codes)
g. Permission granted by a local government to build a specific
structure. (building permit)
a. A document issued by a local government permitting a new
building to be occupied that is issued only if the building is
in compliance with building codes (certificate of occupancy)
h. Wanted by someone with the purchasing power to obtain it.
(demand)
i. Refers to the supply of something in relation to the demand for it.
(scarcity)
j. Satisfies a need. (utility)

l.

l. Ability to pass title to someone else (transferability)

The total in pesos for replacing the land and constructing the
improvements on the property (cost)
m. The most probable price for a property if payment is
made in cash and the parties are knowledgeable,
well informed, and acting without pressure (market
value)
n. What a property actually sells for (price)
o. The process of estimating and supporting an opinion of value
(appraisal)

9. Name the economic principle that best fits each description. (Principles of
Values)
a. A propertys value is diminished by P10,000 because it lacks a
garage. (contribution)
b. An owner adds a fourth bedroom to her home and realizes a
significant gain in property value. The addition of a fifth bedroom
a year later results in only a modest increase in value. (increasing
and diminishing balance)
c. A prospective buyer believes a suburb will be passing a rent control
ordinance. (anticipation)
d. After reviewing a property, a buyer decides that its greatest value
could be realized if a strip mall were built on it. (HBU)
e. A developer decides to assemble four adjacent lots so than an office
building can be built. (plottage)
f. A propertys value passes through a renewal phase. (change)
g. A property owners house is worth approximately the same as
other similar houses on the block. (substitution)
h. A homeowners property value suffers because it is next to a
house that has become rundown. (regression)
i. A homeowners property value benefits because it is next to a house
that recently has been renovated. (progression)
j. The value of property is maximized if it is used in the same way as
neighboring properties. (conformity)
k. The value of real estate does not remain constant. (change)
l. Effect on the value of property based on some future event.
(anticipation)
m. Effect of an improvement on a propertys value. (contribution)
n. Property values change as these two forces adjust
themselves in the real estate market. (supply and
demand)
o. Process of merging lots. (assemblage or consolidation)
p. The value of a better property will decrease if it is near a poorer
quality property. (regression)
q. Combining lots to increase the value of the new larger lot over the
sum of the smaller ones. (plottage)
r. The value of a poorer property will increase if it is near a better
quality property. (progression)
s. The one legal use that provides a property its greatest value. ( HBU)
t. The maximum value of a property is equal to the cost of
purchasing an equally desirable property. (substitution)
10. Name the step of the appraisal process that best fits each description.
(Appraisal Process)
21

a. The market data, cost and income analysis is performed. ( 3

approaches)
a.
This step includes the type of value to be estimated. (define the
problem)
b.
The appraiser correlates the results to arrive at a value.
(reconciliation)
b. This step includes information about the area where the property is
located, as well as about the property itself. (collect, analyze data)
c. The last step in the process can take many formats. (prepare
appraisal report)
d. The appraiser identifies the types of data needed and data sources.
(appraisal planning)
11. List the four areas for making adjustments under the sales comparison
approach.
a.
Terms of sale (condition of sale)
b.
Time element
c.
Others (Location and physical character size, shape,
elevation, terrain

12. What type of property is best suited for the

sales comparison approach?
Residential property; old house and
lot

13. Supply the term that best matches each of the following descriptions.
a.

Property similar to the property that has recently sold. (comparable

properties)
b.
The property being appraised. (subject property)
c.
The sales price of the comparable properties after adjustments are
made. (adjusted sales price)
14. What three types of depreciation are used in the cost approach?
Physical deterioration, functional and economic obsolescence
15. List the methods used to determine the cost of improvements on the
subject property.
a.
Quantity survey method
b.
Unit in place method
c.
Per square meter method
d.
Per cubic meter method
e.
Index method
16. Name the types of depreciation for each of the following examples.
a.
Bedrooms with no closets (functional)
b.
An apartment building located near a noisy factory (economic)
c.
A building with defective air-conditioning equipment (physical)
d.
A condo building located in an area with traffic congestion
(economic)
17. List
a.
b.
c.
d.

the four steps to estimating value using the cost approach.

Estimate RCN of improvement
Estimate depreciation from all causes
Deduct depreciation from RCN
Add land value

18. What type of property is best suited for the cost approach?
Special purpose properties or relatively new buildings
19. Supply the term that best matches the each of the following descriptions
(Cost approach & depreciation)
a.

Cost of duplicating property exactly as it is constructed

(reproduction cost new)
b. Cost of producing improvements similar or equivalent to the
subject property (replacement cost new)
c.
Cost of curing the defect does not exceed the increase in property
value (curable depreciation)
d. Cost of curing the defect exceeds the increase in property value
(incurable depreciation)
22

e.

Refers to the physical wear and tear on the property (physical

depreciation)
f.
Refers to obsolete features in the building (functional
obsolescence)
g. Refers to features external to the building (economic obsolescence)
20. List the five steps to estimate value using the income approach.
a.
Estimate potential gross income
b.
Deduct : allowance for vacancy and bad debts = Effective Gross
Income
c.
Deduct: operating expenses = Net Operating Income

d.
e.

Determine capitalization rate

Divide NOI by capitalization rate = Value

21. List the effect on value in the following situations: Market value
increases or decreases?
a.
Rate increases
( value decreases)
b.
Rate decreases
(value increases)
c.
Expenses increase ( value decreases)
d.
Expenses decrease (value increases)
22. What type of property is best suited for the
Commercial properties or income
properties
23. Supply the term that best matches each of the following descriptions. ( See
Operating Statement)
a. Anticipated income from rent and all other sources (PGI)
b. Potential gross income less uncollected rent and vacancies
(EGI)
c. Effective gross income less operating expenses (NOI
24. What is the formula for finding
the GRM?
Selling Price of comparable / Gross Monthly Rental of
25. What is the formula for finding
the GIM?
Selling Price of comparable / Effective Gross Income of
26. What type of property is best suited for
Residential
rented
property
27. What type of property is best suited for
the GIM?
Commercial and industrial

28. Multiple
Choice
1. The income approach would be best used in
appraising a(n)
a.
Single-family residence.
b.
Church.
c.
Apartment building.
2. The sales comparison (market data) approach can be used effectively
in an appraisal if
a.
Current construction costs are available.
b.
The property generates income.
c.
Depreciation for the property can be calculated.
d.
There are recent sales of similar properties.

23

3. One of the concepts used in appraisal is highest and best use,

which refers to
a.
The propertys current use.
b.
The legal use that will yield the greatest return.
c.
Acquiring title to the property through long-standing use.
d.
Acquiring a zoning variance for a more valuable use.
4. Which of the following methods is used to calculate the gross rent
multiplier?
a.
Divide the sales price by gross rent.
b.
Multiply the capitalization rate by net income.
c.
Divide net income by the capitalization rate
d.
Multiply gross rent by the capitalization rate
5. Which of the following steps is used in the cost approach to
estimating property value?
a.
Estimate the market value of the land
b.
Determine the capitalization rate
c.
Determine the vacancy rate
d.
Identify several similar buildings that have recently sold
6. A property appraisal is the
a. Selling price.
B. Depreciable basis.
c. Estimate of market value. D. Utility value.
7. In the cost approach to estimating value, the type of depreciation
that is always considered incurable is
a. Physical deterioration.
B. Functional obsolescence.
c. Economic obsolescence.
D. Market obsolescence.
8. What is the gross rent multiplier for a property if the annual gross
income from a building is P66,000, net operating income is P29,500
and the building sells for P561,000?
a.
6.5
c. 8.1
b.
7.2
d. 8.5 Solution: P561K / P66K = 8.5
9. To determine the listing price of a residential property, an appraiser
most likely would use a(n)
a. Income analysis.
B. Cost analysis.
c. Competitive market analysis. D. Assessment analysis.
10. To determine the listing price of a church, an appraiser most likely
would use a(n)
a. Income analysis
b. Cost analysis
c. Market analysis.
D. Data comparison analysis.
11. If an expensive home is built in an area consisting of less expensive
homes, its value will be affected by the concept of
a. Functional obsolescence
b. Regression
c.
Contribution
d. Progression
24

12. In performing an appraisal of a single-family residence, the

appraiser reduced its value because of functional obsolescence. The
appraiser was referring to
a. Proximity to a waste incinerator b. Special assessments on the
property.
c. A cracked foundation.
D. A one-car garage.

13. To determine the listing price of an office building, an appraiser

most likely would use a(n)
a. Income analysis
b. Cost analysis.
c. Market analysis.
D. Data comparison analysis.
14. According to the principle of conformity, the highest value for a
house is obtained if its location is
a. Next to an office building
b. In a residential
development
c. Near a shopping center
d. Across the street from a
church
15. Which of the following would an appraiser most likely
consider functional obsolescence? a. Deterioration of the
property b. Location next to a noisy factory
c. A leaky roof
d. A house in an exclusive area with a one
car garage
16. A competitive market analysis (CMA) is frequently prepared by a
real estate agent to estimate the most probable sales price of a
property. This method is based on the
a.
b.

Gross rent multiplier

Cost approach

c. Market approach
d. Income approach

17. The last house in a new development sold for twice the price paid
for the first houses sold in the same development. The higher price is
a result of
a. Supply and demand
b. Conformity
c. Progression
d. Contribution
18. Which of the following appraisal methods requires that the appraiser
calculate the amount of accrued depreciation?
a. Cost approach
b. Income approach
c. Sales comparison approach
d. Gross income multiplier
19. Which of the following is considered economic obsolescence?
a. A leaky roof
b. Abandoned buildings
in the area
c. Outmoded plumbing fixtures d. A cracked
foundation
20. A group of investors making very high profits from a shopping mall
most likely would be concerned with the principle of
a. Conformity b. Progression
c. Competition
d.
Contribution
21. An appraiser calculates the replacement cost of a building when
using the
a. Cost approach
b. Sales comparison approach
c. Income approach
d. Gross rent multiplier
25

22. An appraiser estimating the value of a property with a net income of

P40,000 decides to use an 8 percent capitalization rate instead of a
10 percent rate. Use of the lower rate results in
a.
A 2 percent decrease in the appraised value
b.
A P1000,000 increase in the appraised value
c.
A P1000,000 decrease in the appraised value
d.
No change in the appraised value
23. The economic effect of an improvement on a propertys value is
indicated by the appraisal principle of
a. Reproduction b. Contribution
c. Progression d.
Diminishing returns

24. All of the following statements describing the capitalization rate are
false except
a.
The rate is divided by net income to determine value
b.
An increase in the rate results in an increase in value
c.
The rate increase when the investments risk increase
d.
The rate represents the return on the investment
25. An appraiser who calculates the cost of reproducing a building is
finding the
a.
Present value of the building
b.
Current cost to duplicate the building
c.
Depreciated value of the building
d.
Current cost to build a similar building using cheaper materials
26. A property has a monthly net income of P1,800, and an appraiser
believes a 9 percent rate of return is appropriate for the property. Its
value would be estimated at
a. P20,000.00
b. P21,600.00c. P240,000.00 d.
P2,400,000.00
Solution: P1,800.00 x 12mos. / .09 = P240K
27. An investor who follows the concept that the whole is worth more
than the parts is using the concept of
a. Depreciation b. Progression c. Plottage
d. Contribution
28. An appraiser who calculates the cost of constructing an older
building using modern techniques and materials is finding the
buildings
a. Unit cost b. Replacement cost
c. Reproduction cost d.
Operating cost
29. Physical deterioration is a result of all of the following except
a. Poor floor plan b. Cracked sidewalks
c. Peeling paint
d. Broken windows
30. For a property to have all of the following must be present except
a. Competition
b. Utility
c. Demand d. Transferability
31. An incurable cause of property depreciation is
a. Physical deterioration
b. Functional obsolescence
c. Zoning obsolescence d. Economic obsolescence
32. Which of the following is not an approach to estimating property
value?
a. Income approach
b. Cost approach
c. Assessment approach
d. Sales comparison approach
33. An investor is willing to pay a premium for a commercial property
because he believes there will be an increase in the areas
population. The investors decision is based on the concept of
a. Anticipation b. Competition c. Conformity d. Contribution
26

34. An appraiser estimating the value of vacant land is using the

a. Cost approach
b. Income approach
c. Sales comparison approach d. Gross income multiplier approach

35. When using the sales comparison approach, all of the following are
important characteristics in selecting comparables except
a. Sale dates of the properties
b. Location of the properties
c. Cost to the sellers
d.Number of rooms
36. An investor investigates the zoning code for a property to determine
how much should be offered for the property. The investors decision
will be based on the concept of
a. Anticipation
b. Competition
c. Highest and best use
d. Contribution
37. To calculate net operating income in an appraisal, all of the
following are deductible from gross effective income except
a. Loan payments
b. Repairs c. Cleaning expenses
Legal fees

d.

38. Which of the following is deducted from potential gross income to

calculate gross effective income when using the income approach?
a. Legal expenses
b. Repairs
c. Loan payments
d. Vacancy loss
39. Estimating the value of property requires a systematic set of
procedures. The first step in the appraisal process is typically to
a.
Develop an appraisal plan
b.
Collect general data on the area
c.
Define the purpose of the appraisal
d.
Estimate the value of the land
40. What is the value of a property that produces gross income of
P94,000 and the GIM is 8.5?
a. P66,583
b. P110,588 c. P132,706 d.
P799,000
Solution: GIM of 8.5 x EGI of P94K = P799K
41. An appraiser would use the cost approach as the primary appraisal
method for a
a. Parking garage b. Condominium c. Shopping mall d. Public
school
42. An investor purchased a property for P450,000. If the property has
annual net income of P36,000, the capitalization rate on the
investment is :
a. 6.6 percent
b. 8 percent
Solution:
36K/450K =
c. 9 percent
d. 12.5 percent
43. If appraising a newly built single-family house, an appraiser would
be most interested in the
a.
Cost of constructing the house
b.
Capitalization rate of the house
c.
Location of the house
d.
Gross rent multiplier
27

44. To calculate the monthly gross rent multiplier of a property

a.
Multiply the monthly gross income by 12
b.
Divide the purchase price by the gross monthly income
c.
Divide the capitalization rate by the monthly gross income
d.
Divide the annual gross income by the purchase price

45. Using the cost approach, an appraiser determines that the value of
a property at P230,000. If the appraiser estimated the cost of
replacing the structures on the property at P160,000 and the land
value at P90,000, what was the amount of accrued depreciation
estimated by the appraiser for the property?
a. P10,000
b. P20,000 c. P60,000 d. P90,000
Solution : P160K + P90K = P250K - P230K = P20K
46. An apartment building has six units that rent for P750 a month. If
the purchase price of the property is P486,000, the propertys annual
gross income multiplier is
a. 7
b. 9
Solution: 486K / 750K x 12 x
6units = 9
c. 54
d. 108
47. An appraiser calculates a separate value for the land when using
the
a.
Sales comparison approach
b.
Income approach
c.
Cost approach
d.
Gross rent multiplier approach
48. If an appraiser uses more than one appraisal method and assigns
different weights to the results of each, she is using
a.
Substitution
b.
Contribution
c.
Replacement
d.
Reconciliation
49. An apartment building has a capitalization rate of 6 percent. If the
expenses on the property increases by P6,000 while the rents remain
the same, the property value will
a.
Decrease by P60,000
Solution : Say NOI of P1M / 10% =
P10M
b.
Increase by P6,000
P1M - P6K = P994,000 / 10% =
P9,940,000.00
c.
Decrease by P36,000
P10M - P9,940,000.00 =
P60,000.00
d.

Decrease by P100,000