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General Comprehensive Examination






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General Comprehensive Examination. Appraisal Institute. Associate Guidance Seminar. What is it?. Two day examination that is the near culmination of the process for achieving the MAI designation. Why Do We Have It?. Common requirement for most professional designations and licenses
General Comprehensive Examination

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Slide 1

General Comprehensive Examination

Appraisal Institute

Associate Guidance Seminar

Slide 2

What is it?

  • Two day examination that is the near culmination of the process for achieving the MAI designation

Appraisal Institute

Slide 3

Why Do We Have It?

  • Common requirement for most professional designations and licenses

  • Measure competence as tested previously through required course examinations

  • Ascertains judgment capacity that has not been tested previously

Appraisal Institute

Slide 4

Why Do We Have It?

  • Measure of one’s ability to perform in complex real world situations

  • Promotes and maintains the market’s perception of worth for the MAI designation

Appraisal Institute

Slide 5

Who Is Eligible?

  • Active general associate members who have completed all education requirements, standards, and the 4-year college degree requirement

Appraisal Institute

Slide 6

History

  • Until recently was considered essentially the last step in the designation process

  • May now take the comp prior to completion of the Demonstration Report and Experience Credit

  • Has evolved through the years

    • Essay

    • Multiple Choice

    • One Module

    • Multiple Module

Appraisal Institute

Slide 7

What is Covered?

  • Anything in the body of knowledge of the Appraisal Institute is fair game.

    • All AI courses and seminars

    • 13th Edition of Appraisal of Real Estate

    • Recognized principles and procedures

    • Standards and Ethics (including USPAP)

    • Dictionary of Real Estate Appraisal

    • And so on, and so on

Appraisal Institute

Slide 8

What to Expect

  • Administered through testing centers – high level of security

  • Most of what will appear on the modules has a direct correlation to what is taught in the upper level courses.

  • Some of the questions will require that you perform at a more advanced level not (necessarily to pass)

Appraisal Institute

Slide 9

Current Format

  • Four Module Examination

  • Schedule for 2009

    Thursday, January 29 – Friday January 30

    Wednesday, April 22 – Thursday, April 23

    Tuesday, July 28 – Wednesday, July 29

    Wednesday, October 28 – Thursday, October 29

    Note: Exams may be taken only on the scheduled date at Pearson VUE Professional Testing Centers.

    Pearson VUE testing center information & locations around the U.S. can be found at

    http://www.pearsonvue.com/ai/

    For more information send email to comp@appraisalinstitute.org

Appraisal Institute

Slide 10

Module I

  • General theory and concepts

  • First morning (for those taking more than one module that day) or first day (morning or afternoon) for those needing only this module

  • 100 questions

  • 3.5 hours available for completion

Appraisal Institute

Slide 11

Module I

  • General concepts

    • Introduction to value

      • Principles and definitions

      • Nature of real estate

      • Definition of problem data

      • Knowledge of financing

  • Statistics

  • Taxes

  • USPAP and the Code of Ethics

  • Market conditions

  • Reconciliation and conclusions

Appraisal Institute

Slide 12

Module II

  • 50 questions

  • Second morning for those taking more than one module or second day (morning or afternoon)for those needing only this module

  • 3.5 hours to complete

  • General Market Analysis and Highest and Best Use

  • Advanced Sales Comparison and Cost Approaches

Appraisal Institute

Slide 13

Module II

  • Cost Approach

    • Concepts of cost approach

    • Land value

    • Improvements

    • Depreciation

  • Highest and Best Use

  • Feasibility

Appraisal Institute

Slide 14

Module III

  • 50 questions

  • First afternoonfor those taking more than one module or first day(morning or afternoon) for those needing only this module

  • 4.0 hours to complete

  • Advanced Income Cap

  • Advanced Applications

Appraisal Institute

Slide 15

Module III

  • Income Capitalization Approach

    • Concepts of income approach

    • Income and expenses

    • Capitalization and discounting

    • GRM/GIM

    • Rates

  • Value of Partial Interest

    • Physical and legal divisions

    • Economic and financial divisions

Appraisal Institute

Slide 16

Module IV

  • 50 questions

  • Second afternoon for those taking more than one module or second day (morning or afternoon) for those needing only this module

  • 4.0 hours to complete

  • Advanced Sales Comparison and Cost Approaches

Appraisal Institute

Slide 17

Module IV

  • Sales Comparison Approach

    • Concepts of sales comparison

    • Units of comparison

    • Elements of comparison

    • Sales Analysis

  • Cash Equivalence

Appraisal Institute

Slide 18

What You Need

  • A financial calculator (specific HP or TI models)

  • You are responsible for knowing how to use the calculator

  • Everything else is provided

    • You will have an erasable white board in lieu of graph paper and/or scratch paper

  • You will not be allowed to take any personal items into the testing room

Appraisal Institute

Slide 19

How Do I Receive Credit?

  • All modules are graded separately

  • Must pass all four modules to receive credit for the requirement

  • No limit on number of times you can sit

  • Receive credit for each module passed

  • Must take all modules for which passing grade has not been achieved

Appraisal Institute

Slide 20

What are the Questions Like?

  • All questions are multiple choice with only one correct answer

  • Many incorrect answers relate to something done wrong in the problem (distracter)

  • Questions generally categorized on the basis of:

    • Hard 0% to 29% score correctly

    • Difficult 30% to 49% score correctly

    • Medium 50% to 74% score correctly

    • Easy 75% or more score correctly

Appraisal Institute

Slide 21

How Many of Each?

  • No hard and fast rules.

    • Most are Easy and Medium

    • Only a few are Very Hard

Appraisal Institute

Slide 22

Rule of Thumb

  • Get all the easy ones and a good share of the medium ones

  • You don’t have to get all the hard and very hard ones to pass.

  • You will probably get some of them right just by guessing.

  • The hard questions are for the elite to show their stuff; the very hard for the very elite

Appraisal Institute

Slide 23

Possible Basic Cap ExampleWhat is RO?

  • 10,000 square feet

  • Market rent - $14 psf net

  • Market vacancy - 6% of GSI

  • Recoverable Operating Expenses - $6 psf

  • Non recoverable expenses - $0.25 psf

  • Sale price - $1,320,000

Appraisal Institute

Slide 24

Appraisal Institute

Slide 25

10,000 square feet

Market rent - $14 psf

Contract rent - $11 psf

Market vacancy - 5%

Contract vacancy -1%

Recoverable expenses - $6 psf

Non recoverable expenses - $0.25 psf

Sale price - $1,200,000

RO – 9.5%

Possible Advanced Cap ExampleWhat is RLH?

Appraisal Institute

Slide 26

Appraisal Institute

Slide 27

10,000 square feet

Market rent - $14 psf level

Contract rent - $11 psf level

Market vacancy - 5%

Contract vacancy - 1%

Recoverable expenses - $6 psf

Non recoverable expenses - $0.25 psf

Sale price - $1,200,000

RO – 9.5%

YO - 12%

Assume monthly payments

Possible Mod III ExampleMinimum Remaining Lease Term?

Appraisal Institute

Slide 28

Minimum Remaining Lease Term

Appraisal Institute

Slide 29

Pass Scores and Percentages

  • Statistical information concerning the comprehensive examination is held in confidence

  • Many Associates take one or more modules more than once

  • High initial rate of success with Modules I and II. Mod II generally has a lower initial rate of success than Mod I

  • Lower initial rate of success with Modules III and IV

  • Module III traditionally has lowest pass rate, It helps to be current on course work.

Appraisal Institute

Slide 30

Where is the Exam Given?

  • Pearson Vue testing centers (nationwide and Canada, some foreign countries)

  • Locate a testing center near you by visiting Pearson Vue/AI on the web

  • Space-available basis only; applying before the Appraisal Institute deadline does NOT guarantee a seat at any specific testing center

Appraisal Institute

Slide 31

Keys to Success

  • Proficiency with course work

  • Statistical evidence strongly suggests:

    • associates who do wellon the corresponding course exams have a greater chance of passing.

    • associates with marginal passing scoreson the corresponding course exam have a poor chance of passing.

    • Most of you have a feel of how well you did on an exam if your really think about it.

Appraisal Institute

Slide 32

Keys to Success

  • Associate members are provided with an exam critique for Level II curriculum, if they receive a failing grade.

  • Use this information in preparing for the comprehensive exam. The critique indicates topics where one or more questions were missed and where these topics are covered in the course materials.

Appraisal Institute

Slide 33

Keys to Success

Chronological proximity of Courses

  • Statistical evidence strongly suggests that associates who have taken the corresponding courses within the last two years have a better chance of passing

  • By far the highest level of success is enjoyed by those who have taken the corresponding course within the last twoyears and had a high passing score on the exam

Appraisal Institute

Slide 34

Other Noted Advantages

  • Folks who work in multiple appraiser offices with proficient MAI designated appraisers tend to have less difficulty

  • Folks who are regularly exposed to more complicated appraisal situations tend to be more successful

Appraisal Institute

Slide 35

Observation 1

  • Some associates view passage of the Comprehensive Examination as being a right bestowed as a result of taking the courses and passing the exams. It’s not!!

  • There is no alternative to hard work to prepare for the test.

Appraisal Institute

Slide 36

Observation 2

  • Many appraisers know how to manipulate prepared financial software but don’t really understand what it all means. They will usually fail (and often complain).

  • The comprehensive exam requires you to understand the fundamental principles that underlie the correct answer

Appraisal Institute

Slide 37

How Should I Prepare?

  • Be diligent with the course work; don’t fear sitting in the front row; be aware (and not embarrassed) that you may have to take a course more than once

  • When studying for the comp the best thing you can do is have a firm grasp on the problems in the course manuals; know not just how to get the right answer but what it all means

Appraisal Institute

Slide 38

How Should I Prepare?

  • Examinees who are not subject to the Level II curriculum may order course materials by emailing associate@appraisalinstitute.organd making the request to order.

Appraisal Institute

Slide 39

How About When I Take the Exam?

  • Relax and take your time

  • Use good test taking skills

    • Don’t get bogged down on questions you don’t understand; come back to them at the end

    • Eliminate answers that are most obviously incorrect; improve your chances if you have to guess

    • Don’t second guess your first instincts

    • Answer everything

Appraisal Institute

Slide 40

Comp Exam Application and Sample questions

  • You may find the Comp Exam Guidebook, Application, and sample questions on our website at www.appraisalinstitute.org under downloads.

Appraisal Institute

Slide 41

Sample question #1

Four years ago, a seller carried back a $100,000

purchase-money mortgage, with 20 years amortization,

8.5%, and monthly payments. The loan cannot be assumed

by a subsequent buyer. Currently, mortgages on similar real

estate are yielding 12%. The market value of the real estate is

$150,000. The current net operating income is $16,500.

Appraisal Institute

Slide 42

Sample question #1

  • What would happen to the market value of the real estate if the loan could be assumed?

    • Increase significantly

    • Decrease significantly

    • Remain the same

    • Increase slightly

Appraisal Institute

Slide 43

Sample #2 – stem questions

The next two questions are based on the following information:

A small parcel of speculative land was purchased for $60,000 with $17,000 down and the balance of $43,000 financed at 10% with monthly payments of $300 and a balloon in five years.

1. What will the loan balance be (nearest $100) after five years?

2. If the interest rate is not 10%, causing the loan balance to be $50,000 after five years, and the purchaser is to receive a 15% equity yield, what must the sale price (nearest $100) be in five years?

Appraisal Institute

Slide 44

Sample #2 – stem questions

  • What will the loan balance be (nearest $100) after five years?

    • $47,300

    • $47,500

    • $67,400

    • $94,000

      Keystrokes for HP12C are: f FIN 5 g n 10 g i 43,000 PV 300 CHS PMT FV. Note that the loan should be analyzed on a monthly basis and has a negative amortization.

      4th proposed answer results from overlooking CHS, the 3rd from mixing monthly and annual parameters, and the 1st from performing the calculations annually.

*

Appraisal Institute

Slide 45

Sample #2 – stem questions

2. If the interest rate is not 10%, causing the loan balance to be $50,000 after five years, and the purchaser is to receive a 15% equity yield, what must the sale price (nearest $100) be in five years?

1) $ 58,500

2) $ 59,900

3) $108,500

4) $120,000

FV of $17,000 for 5 years at 15% = $34,193

FV of $3,600/year for 5 years at 15% = 24,273

Mortgage Balance at end of 5 years = 50,000

TOTAL $108,466

The $300/month interest payment becomes a part of the investment in the property. Therefore, it must be included in the calculations. Keystrokes for HP12C are: f FIN 5 n 15 i 17000 chs PV 3600 chs PMT FV 50,000 +. The correct answer to this question does not depend on choosing the correct answer to the previous question.

*

Appraisal Institute

Slide 46

Sample #3

The subject property is a mountain resort. Incremental value is based on skier visits. Sales in the subject’s region form a consistent curvilinear pattern, as shown below (lower line).

The trend for a more

desirable region is

also shown

(higher line).

Based on this market information, what type of location adjustment

is indicated for sales in the more desirable region?

Appraisal Institute

Slide 47

Sample #3

1) Downward dollar adjustment

2) Upward dollar adjustment

3) Downward percent adjustment

4) Upward percent adjustment

*

Appraisal Institute

Slide 48

Feedback from your examination

Module III Income Capitalization Approach

August 2005 Comp Exam Critique

This critique is to be used as a study guide only, not a tool to calculate your score.

Note: The following sessions correspond with the Advanced Income Capitalization course materials.

RANGE OF NUMBER OF QUESTIONS MISSED

Basic Capitalization Concepts 4 – 7

Projecting Cash Flows 0 – 3

Investment Analysis Concepts 0 – 3

Property Yield Capitalization 2 – 5

Leverage 0 – 3

Stabilizing Income & Equity Yield Capitalization 8 – 11

Risk Analysis 0 – 3

Applications 6 – 9

Supporting the Discount Rate 0 - 3

Appraisal Institute

Slide 49

Questions?

Associate & Prospective Member Services Team

312-335-4111

associate@appraisalinstitute.org

Appraisal Institute

Slide 50

Appraisal Institute

The Appraisal Institute is a global membership association of professional real estate appraisers, with 22,000 members and 92 chapters throughout the world. Organized in 1932, its mission is to support and advance its members as the choice for real estate solutions and uphold professional credentials, standards of professional practice and ethics consistent with the public good. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations.

Appraisal Institute


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