50 MCQ-LAND VALUE BY MARKET APPROACH AND BUILDING VALUE BY COST ESTIMATION METHOD FOR OWNER OCCUPIED BUNGALOWS- FACTORIES- PUBLIC BUILDINGS
What is the primary basis for determining land value using the market approach?
A) Land productivity
B) Comparable sales
C) Zoning laws
D) Land size
Answer: B) Comparable sales
Which factor is most important in selecting comparables for land valuation?
A) Age of the building
B) Location
C) Land fertility
D) Property ownership history
Answer: B) Location
The market approach for land valuation is also known as:
A) Cost approach
B) Income approach
C) Direct comparison method
D) Residual approach
Answer: C) Direct comparison method
Which of the following is not typically adjusted when using the market approach?
A) Time of sale
B) Size of the land
C) Land shape
D) Property tax rates
Answer: D) Property tax rates
In a rising market, how should sales prices be adjusted?
A) Decrease
B) No adjustment
C) Increase
D) Adjust based on demand
Answer: C) Increase
What is the purpose of adjusting comparable sales in the market approach?
A) To standardize the land value
B) To inflate prices
C) To reflect unique property features
D) To include non-real estate factors
Answer: C) To reflect unique property features
Which method is often used alongside the market approach for land value verification?
A) Residual method
B) Cost method
C) Income method
D) Land residual technique
Answer: D) Land residual technique
Which data is least relevant when using the market approach?
A) Recent sales of similar properties
B) Current listings
C) Lease terms of neighboring buildings
D) Zoning regulations
Answer: C) Lease terms of neighboring buildings
Which of the following is considered a limitation of the market approach?
A) Availability of sufficient comparable sales
B) Adjusting for property differences
C) Seasonal fluctuations in value
D) All of the above
Answer: D) All of the above
Which situation would make the market approach less reliable?
A) A highly active market
B) A stagnant market
C) A market with frequent transactions
D) A market with high transparency
Answer: B) A stagnant market
Which of the following is a key component of the cost estimation method for building valuation?
A) Replacement cost
B) Market value of land
C) Income potential
D) Capitalization rate
Answer: A) Replacement cost
What does the cost estimation method typically involve for building valuation?
A) Estimating depreciation
B) Assessing rental income
C) Estimating construction cost
D) Comparing recent sales
Answer: C) Estimating construction cost
Depreciation in the cost estimation method is usually accounted for as:
A) Accrued interest
B) Diminished utility
C) Salvage value
D) Economic obsolescence
Answer: B) Diminished utility
Which type of cost is typically estimated in the cost approach?
A) Historical cost
B) Replacement cost
C) Market cost
D) Rental cost
Answer: B) Replacement cost
Which factor is least considered in the cost estimation method?
A) Age of the building
B) Functional obsolescence
C) Surrounding land value
D) Condition of the building
Answer: C) Surrounding land value
What is the first step in applying the cost estimation method?
A) Estimating depreciation
B) Estimating the cost of improvements
C) Estimating land value
D) Estimating market trends
Answer: B) Estimating the cost of improvements
Which method is often used to estimate the cost of construction for new buildings?
A) Quantity survey method
B) Income approach
C) Market comparison approach
D) Hedonic pricing
Answer: A) Quantity survey method
In the cost approach, which is subtracted from the replacement cost to arrive at the building value?
A) Land value
B) Depreciation
C) Market adjustment
D) Zoning impact
Answer: B) Depreciation
Which of the following represents a form of depreciation?
A) Physical deterioration
B) Economic obsolescence
C) Functional obsolescence
D) All of the above
Answer: D) All of the above
What does the term ‘economic obsolescence’ refer to in building valuation?
A) Wear and tear on the building
B) Deterioration of the physical structure
C) External factors that decrease value
D) Lack of modern amenities
Answer: C) External factors that decrease value
Which method in the cost approach is best suited for unique or specialized buildings?
A) Unit-in-place method
B) Income capitalization method
C) Quantity survey method
D) Market comparison method
Answer: C) Quantity survey method
Which of the following is a limitation of the cost approach?
A) Accurate land valuation
B) Estimating depreciation
C) Availability of cost data
D) Market fluctuations
Answer: B) Estimating depreciation
Which method involves calculating the cost of all components and then summing them?
A) Quantity survey method
B) Unit-in-place method
C) Comparative unit method
D) Market comparison method
Answer: A) Quantity survey method
Which of the following is not a cost component in the cost estimation method?
A) Labor costs
B) Materials cost
C) Profit margin
D) Land acquisition cost
Answer: D) Land acquisition cost
Which cost approach method is most commonly used for public buildings?
A) Comparative unit method
B) Quantity survey method
C) Unit-in-place method
D) Income capitalization method
Answer: B) Quantity survey method
Which of the following is least relevant to the cost approach?
A) Income potential
B) Building materials
C) Construction method
D) Building design
Answer: A) Income potential
In the cost approach, what is the impact of high construction quality on building value?
A) Decreases value
B) No impact
C) Increases value
D) Depreciates faster
Answer: C) Increases value
The cost approach is most applicable when:
A) The building is new
B) There are plenty of comparable sales
C) The building is very old
D) The building generates high rental income
Answer: A) The building is new
Which element is subtracted from the replacement cost to determine the depreciated value of a building?
A) Land value
B) Depreciation
C) Economic obsolescence
D) Functional obsolescence
Answer: B) Depreciation
Which method is used to estimate the cost of materials, labor, and overhead separately?
A) Unit-in-place method
B) Quantity survey method
C) Comparative unit method
D) Sales comparison method
Answer: B) Quantity survey method
In cost estimation, what does the term ‘functional obsolescence’ mean?
A) Wear and tear due to usage
B) Reduction in utility due to outdated design
C) Loss in value due to market conditions
D) Structural damage
Answer: B) Reduction in utility due to outdated design
When using the market approach, which factor is least likely to require adjustment?
A) Property location
B) Building age
C) Property size
D) Market trends
Answer: D) Market trends
What does ‘adjusting for time’ involve in the market approach?
A) Comparing properties sold at different times
B) Adjusting prices based on inflation
C) Evaluating the duration of property ownership
D) All of the above
Answer: B) Adjusting prices based on inflation
Which of the following is an example of external obsolescence?
A) Outdated fixtures
B) Nearby industrial development
C) Physical wear and tear
D) Design inefficiencies
Answer: B) Nearby industrial development
In the market approach, what should be done if there are no directly comparable sales?
A) Use cost approach only
B) Adjust data from less comparable sales
C) Use income approach
D) Ignore market conditions
Answer: B) Adjust data from less comparable sales
Which type of land feature is least likely to impact its market value?
A) Proximity to schools
B) Shape of the land
C) Proximity to industrial areas
D) Historical significance
Answer: D) Historical significance
The term ‘plottage value’ refers to:
A) The value of land improvements
B) The combined value of adjoining land parcels
C) The cost of land development
D) The depreciation of land
Answer: B) The combined value of adjoining land parcels
What is the impact of a new highway construction on land value using the market approach?
A) Decrease in value
B) No impact
C) Increase in value
D) Decrease or increase based on location
Answer: C) Increase in value
What is the primary challenge when valuing land with significant zoning restrictions?
A) Lack of comparable sales
B) Difficulty in estimating market trends
C) Adjusting for restricted uses
D) High development costs
Answer: C) Adjusting for restricted uses
Which of the following is a typical component of replacement cost in the cost approach?
A) Depreciation
B) Land cost
C) Materials and labor
D) Market value
Answer: C) Materials and labor
What is the main difference between replacement cost and reproduction cost?
A) Replacement cost includes land value; reproduction cost does not
B) Replacement cost is for a similar structure; reproduction cost is for an exact replica
C) Reproduction cost is usually lower than replacement cost
D) Replacement cost accounts for depreciation; reproduction cost does not
Answer: B) Replacement cost is for a similar structure; reproduction cost is for an exact replica
In the cost approach, what does ‘economic obsolescence’ typically refer to?
A) Wear and tear on the building
B) External factors reducing property value
C) Functional design inefficiencies
D) Natural disasters
Answer: B) External factors reducing property value
Which of the following is least likely to be included in the cost approach calculation for a factory?
A) Equipment cost
B) Building construction cost
C) Inventory value
D) Land cost
Answer: C) Inventory value
What is the purpose of the ‘unit-in-place method’ in cost estimation?
A) To estimate the cost of construction per unit area
B) To estimate total cost based on individual components
C) To assess the cost of land improvements
D) To evaluate the cost of materials alone
Answer: B) To estimate total cost based on individual components
Which method is often preferred for valuing specialized public buildings, such as schools or hospitals?
A) Sales comparison method
B) Cost approach
C) Income capitalization method
D) Market approach
Answer: B) Cost approach
In the cost approach, which type of obsolescence is most directly affected by changes in technology?
A) Physical obsolescence
B) Functional obsolescence
C) Economic obsolescence
D) Environmental obsolescence
Answer: B) Functional obsolescence
When using the cost approach, how is the value of land typically treated?
A) Included in the construction cost
B) Subtracted from the total cost
C) Ignored in the calculation
D) Estimated separately and added to the total cost
Answer: D) Estimated separately and added to the total cost
Which factor is not considered in calculating the depreciated cost of a building?
A) Physical deterioration
B) Functional obsolescence
C) Market demand
D) Economic obsolescence
Answer: C) Market demand
In the cost approach, the term ‘functional obsolescence’ refers to:
A) Wear and tear on the structure
B) Reduction in value due to outdated design
C) External factors decreasing value
D) Deterioration of materials
Answer: B) Reduction in value due to outdated design
Which of the following is typically not included in the cost estimation of a building under the cost approach?
A) Cost of structural improvements
B) Cost of building permits
C) Cost of land acquisition
D) Cost of landscaping
Answer: C) Cost of land acquisition
