12 Ch7 The Sales Comparison Approach quiz Flashcards
When trying to extract an adjustment for market conditions, what is likely the best indicator for the appraiser?
A sale and re-sale of the same property
On the URAR appraisal form, which approach or approaches is/are required?
Sales comparison approach
What tends to be a leading indicator of changes in the real estate market?
Rents. Rents tend to be a “leading indicator” of changes in the market. That is, rents will typically move up or down before a change is seen in sale prices. Ch 7, Market Conditions (Time) Adjustments
An advantage of using older sales located nearby and making market conditions adjustment is
A market conditions adjustment is one of the easiest adjustments to support
The one weakness of the sales comparison approach is that
It requires an adequate number of recently sold, nearby comparable sales
A simple trend line that shows price change over a period of time is a
Linear regression
A complex property is located in a declining market. The appraiser finds sales of similar properties in the local market, but they are over one year old. Which statement is TRUE regarding these sales?
They can be a reliable indictor of value if a market conditions adjustment is made
The terms “market conditions adjustment” and “time adjustment” are often used interchangeably. Which is the more correct term?
Market conditions adjustment
When the subject is located in an area that is unique, and it is not possible to find sales from another market area, the only option may be
Going back farther in time
Properties with unique locational characteristics that may require an appraiser to go back in time to find comparable sales might include
Homes located in historic districts, Homes located in golf course communities, Waterfront properties
The one weakness of the sales comparison approach is that
It requires an adequate number of recently sold, nearby comparable sales
The sales comparison approach is based largely on the principle of
Substitution
Appraiser Claire is trying to extract and support an adjustment for current market conditions. Which of these is likely to be the best indicator of a market conditions adjustment?
A property that sold one year ago, and re-sold last month
When trying to extract an adjustment for market conditions, what is likely the best indicator for the appraiser?
A sale and re-sale of the same property
There were 45 sales in the subject’s market area over the last 9 months. There are currently 30 properties on the market. What is the monthly absorption rate?
- 45 sales divided by 9 months equals 5 per month. Ch 7, Inventory Analysis Section
When analyzing comparable listing and sales prices, Form 1004MC requires the appraiser to calculate and report the
Median
The 1004MC Market Conditions Addendum was created for
All 1-4 family appraisals for loans being sold to Fannie Mae or Freddie Mac
When filling out the “Inventory Analysis” section of the 1004MC Market Conditions Addendum, the appraiser should include
Only those properties that are competitive with the subject
There were 126 sales in the subject’s market area over the last 7 months. There are currently 162 properties on the market. What is the monthly absorption rate?
- 126 sales divided by 7 months equals 18 per month. Ch 7, Inventory Analysis Section
There were 45 sales in the subject’s market area over the last 9 months. There are currently 30 properties on the market. How many months of inventory is currently on the market?
- 45 sales divided by 9 months equals 5 per month. 30 properties divided by 5 equals 6 months of available inventory. Ch 7, Inventory Analysis Section
When filling out the 1004MC form, what should the appraiser use for the number of competing listings in the “Current - 3 Month” time period?
The number of competing listings available on the effective date
There were 126 sales in the subject’s market area over the last 7 months. There are currently 162 properties on the market. How many months of inventory is currently on the market?
9
When filling out the 1004MC Market Conditions Addendum, what should an appraiser do if not all of the required information is available?
Explain the attempt to obtain the information
After the 1004MC form was created by Fannie Mae, it was later adopted by
Department of Veterans Affairs (VA) and HUD/FHA. This requirement only applies to appraisals for 1-4 unit residential mortgage loans that are being sold to Fannie Mae and Freddie Mac on the secondary mortgage market. Subsequently, HUD/FHA, VA and some other institutions adopted it as well, but it has not achieved universal acceptance. Ch 7, Market Conditions Addendum
What is another name for the market survey technique?
Contingent Valuation Method
An appraiser is valuing a property located next door to an automobile salvage yard. He has no sales of properties adjacent to salvage yards, so he uses recent sales of properties in the same general area, and makes an adjustment for the subject’s view. What is this technique called?
Discount factor
How can an appraiser extract and support a location adjustment from one market area to another?
Compare land sale prices for similar lots, Compare sale prices of common “benchmark” homes, Compare rental amounts for similar homes
Which of these appraisal assignments is MOST likely to require an appraiser to extract and use a bonus value?
A model home
An appraiser is valuing a property with water frontage. She has no sales of waterfront properties, so she uses sales of non-waterfront properties in the subject’s area and makes an adjustment for the water frontage. What is this technique called?
Bonus factor
Typically, an adjustment for discount or bonus factor is
Expressed as a percentage
Why are mortgage underwriters wary of appraisal reports in which all of the comparable sales are located several miles away from the subject?
Appraisers can inflate values by ignoring sales in the neighborhood and using sales that are further away in better locations
When an appraiser goes outside the local market area to find comparable sales, and makes location adjustments, the report should
Explain and support the reasons for expanding the search area, Explain why the alternate location is considered similar to the subject’s area, Explain the rationale behind location adjustments
The technique in which you interview market participants is called the
Market survey technique
In a typical residential appraisal, the most emphasis is usually placed on:
The Sales Comparison Approach
Which section of Form 1004MC assists the appraiser in analyzing important supply and demand factors in order to reach a conclusion regarding housing trends and market conditions?
Inventory Analysis
Valuing individual parts of a property and adding the component values together is the definition of:
Componentizing Value
In which of the following situations might a bonus or discount factor be appropriate?
When appraising a golf course lot, When appraising a property with a uniquely-shaped home, When appraising a property that is located alongside a freeway.
There were 45 sales in the subject’s market area over the last 9 months. There are currently 30 properties on the market. How many months of inventory is currently on the market?
- 45 sales divided by 9 months equals 5 per month. 30 properties divided by 5 equals 6 months of available inventory. Ch 7, Inventory Analysis Section
There were 45 sales in the subject’s market area over the last 9 months. There are currently 30 properties on the market. What is the monthly absorption rate?
5
