ACEABLE REAL ESTATE PRACTICE QUESTIONS NC PART 5

ACEABLE REAL ESTATE PRACTICE QUESTIONS (NC) PART 5

Flashcards Buyer Nancy has asked her agent, Brad, which of the homeowner's insurance policies she has examined are

best for her. Brad's best course of action would be to:

inform Nancy that this advice should come from an insurance professional the amount of money a property would bring in if it was leased at 100%

POTENTIAL GROSS INCOME

What is the primary difference between GRM and GIM?GIM considers additional income while GRM considers only rental income.Krista's lender told her that they would be having an appraisal done on the house she is trying to purchase with financing. Why would a lender require this?In the event of foreclosure on Krista, the value of the collateral property may be the lender's only means of recovering the loan amount.Lyn has an event-planning business that specializes in

"extreme" experiences: sky diving, wild animal encounters,

Fugu preparation classes, etc. She operates out of an old building she owns in a flood zone. When she gets commercial insurance, is she likely to get a standard package? Why or why not?No, because her needs are very specific and difficult to cover.Which of the following best describes an appraisal?data-driven What is the purpose of an umbrella policy? to increase liability coverage above normal limits Sarah is performing a comparative market analysis for her subject property, a four-bedroom house in the Sistene neighborhood. Which of the following would be the most appropriate comp(s)?two four-bedroom houses and one three-bedroom house in the Sistene neighborhood that have all sold within the past six months A property is 10 years old and has an additional 90 years of economic life left. Using age-life depreciation, what is the property's depreciation percentage?10% Cameron Road Center has amonthly NOIof $10,000 and a cap rate of 6%. What is its appraised value using the income capitalization approach?

$2,000,000

Krystyna bought an older home and is putting her DIY skills to use while replacing the door that connects her garage to her kitchen because it doesn't meet the fire-rate door requirement of current safety standards.What type of depreciation is Krystyna addressing?curable functional obsolescence Betty's home insurance covers replacement costs for her current wiring, which costs $120 a foot to install. Her home burns down. Local code has changed, and now requires wiring that costs $180 a foot to install. She has no law or ordinance riders. How much per foot must she pay for?$60 a foot What happens during the reconciliation step of the appraisal process?an appraiser weighs the relevance of each approach to value for the subject property

How are cap rates usually assigned when using the income method of valuation?using the cap rates of similar properties as a guide Peter is a new and very eager real estate agent who excitedly sets up an appointment with a prospective seller-client. Peter promises the client that he will come to their meeting "ready to impress" and will share with them an appraisal report on the seller's property.Which is probably the most accurate statement about Peter's promise?Peter used the wrong term if the report on the property's value is something he prepared himself.How are the terms appraisal, collateral, and LTV related?An appraisal establishes the value of the property that will serve as collateral for the loan. The LTV measures the gap between the loan amount and the collateral value.Which category of property owners are required to purchase flood insurance?people in the 100-year flood plain A field review of an appraisal report is done by athird-party appraiser Which of the following properties cannot depreciate?a tract of undeveloped land A buyer is looking to purchase a home with a Flood Zone C designation. Is this buyer required to carry flood insurance?Why or why not?No, it is considered a low-risk area for flooding.Yes, this is a high-risk area for flooding and requires flood insura Which of the following depreciation methods describes the market abstraction method?Determines land value relative to the total market value of a property.If the GNB has an effective gross income of $31,400,000 and $25,000,000 in operating expenses, what is its net operating income?

$6,400,000

more useful than potential gross income, but less useful than net operating income

EFFECTIVE GROSS INCOME

When a property purchase is being financed, who typically pays for an appraisal, and who chooses the appraiser?The buyer pays for the appraisal; the lender chooses the appraiser.calculates the percentage of expected annual income earned over a property's value

CAP RATE

A building has an EGI of $1,200,000 with operating expenses at $430,000. What is the NOI?

$770,000

Celine keeps uses her old newspaper collection as an altar for her many prayer candles. In the insurance world, what is this known as?a hazard Which of the following is automatically renewed at the end of each lease period until the landlord or tenant acts to terminate it?periodic estate Why is dwelling insurance more appropriate for landlords than homeowners insurance?It doesn't cover personal property (which belongs to the tenant).Which of these would be an example of specific data gathered by an appraiser?age of adobe tile roof on the subject property Licensees Sonny and Cher both perform a BPO. But Sonny cannot charge for his BPO, while Cher can charge for hers.Based on this information, please identify the

CORRECT statement.Sonny is a provisional broker.Bruno has what is known as a special form homeowners insurance policy. What type of insurance does Bruno have?HO-3

Handy Herman bought a small, two-bedroom home in the historic district of his town. He thought it was a good candidate for restoration. But, as it turns out, the home was built with a coal furnace set up that is not adaptable to a modern HVAC system.What classification of depreciation would this be?incurable functional obsolescence What requirements for BPOs/CMAs are included in the North Carolina Real Estate License Law and Appraisers Act? Select all that apply.-The BPO/CMA must estimate only the probable sales price in current market conditions-A BPO/CMA may NOT estimate the value or worth of a property.-A BPO/CMA must be provided in writing Imagine you are representing a first-time homebuyer in a real estate transaction. They are not experienced with homeownership and are planning to make an all-cash offer.What, if anything, should you tell them about property insurance?Remind your client about securing property insurance prior to closing. Explain that it's not required since there is no mortgage, but describe why it's beneficial. Stop short of picking their policy or offering detailed advice better left to an insurance professional Who typically requires a homebuyer to take out property insurance (or homeowners insurance) when buying a home?lenders After estimating the value of the property using the

applicable approaches to appraisal, an appraiser will:

reconcile the final value estimate If an appraiser can use all three approaches to value to evaluate a property, and they each give him a different value amount, what should he do with that information next?weigh the relevance of each approach before taking any other steps What connection does the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) have with appraisers?It mandates that states regulate and license appraisers.A seller does not feel like waiting for an appraiser so they ask their listing agent to do an appraisal for them. The listing agent agrees and performs the appraisal. The listing

agent acted:

illegally (unless they are also a licensed appraiser) A property is 20 years old and has an additional 80 years of economic life left. Using age-life depreciation, what is the property's depreciation percentage?20% less useful than effective gross incomePOTENTIAL GROSS INCOME Given this information about the Candy Factory Lofts, use the IRV formula to calculate the value (rounded to the

nearest dollar):PGI is $693,000EGI is $639,400NOI is

$609,900Cap rate is 5.25%

$11,617,143

Jillian is in the process of purchasing her first home. When should she expect to make her first property insurance payment?at closing An appraiser is reconciling the three approaches to obtain a final estimate of a subject property's value. Using the valuations and weights below, what will the appraiser's