12 Ch7 The Sales Comparison Approach quiz

Question 1

When trying to extract an adjustment for market conditions, what is likely the best indicator for the appraiser?

Answer 1

A sale and re-sale of the same property

Question 2

On the URAR appraisal form, which approach or approaches is/are required?

Answer 2

Sales comparison approach

Question 3

What tends to be a leading indicator of changes in the real estate market?

Answer 3

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

Question 4

An advantage of using older sales located nearby and making market conditions adjustment is

Answer 4

A market conditions adjustment is one of the easiest adjustments to support

Question 5

The one weakness of the sales comparison approach is that

Answer 5

It requires an adequate number of recently sold, nearby comparable sales

Question 6

A simple trend line that shows price change over a period of time is a

Answer 6

Linear regression

Question 7

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?

Answer 7

They can be a reliable indictor of value if a market conditions adjustment is made

Question 8

The terms “market conditions adjustment” and “time adjustment” are often used interchangeably. Which is the more correct term?

Answer 8

Market conditions adjustment

Question 9

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

Answer 9

Going back farther in time

Question 10

Properties with unique locational characteristics that may require an appraiser to go back in time to find comparable sales might include

Answer 10

Homes located in historic districts, Homes located in golf course communities, Waterfront properties

Question 11

The one weakness of the sales comparison approach is that

Answer 11

It requires an adequate number of recently sold, nearby comparable sales

Question 12

The sales comparison approach is based largely on the principle of

Answer 12

Substitution

Question 13

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?

Answer 13

A property that sold one year ago, and re-sold last month

Question 14

When trying to extract an adjustment for market conditions, what is likely the best indicator for the appraiser?

Answer 14

A sale and re-sale of the same property

Question 15

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?

Answer 15

5. 45 sales divided by 9 months equals 5 per month. Ch 7, Inventory Analysis Section

Question 16

When analyzing comparable listing and sales prices, Form 1004MC requires the appraiser to calculate and report the

Answer 16

Median

Question 17

The 1004MC Market Conditions Addendum was created for

Answer 17

All 1-4 family appraisals for loans being sold to Fannie Mae or Freddie Mac

Question 18

When filling out the “Inventory Analysis” section of the 1004MC Market Conditions Addendum, the appraiser should include

Answer 18

Only those properties that are competitive with the subject

Question 19

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?

Answer 19

18. 126 sales divided by 7 months equals 18 per month. Ch 7, Inventory Analysis Section

Question 20

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?

Answer 20

6. 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

Question 21

When filling out the 1004MC form, what should the appraiser use for the number of competing listings in the “Current - 3 Month” time period?

Answer 21

The number of competing listings available on the effective date

Question 22

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?

Answer 22

9

Question 23

When filling out the 1004MC Market Conditions Addendum, what should an appraiser do if not all of the required information is available?

Answer 23

Explain the attempt to obtain the information

Question 24

After the 1004MC form was created by Fannie Mae, it was later adopted by

Answer 24

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

Question 25

What is another name for the market survey technique?

Answer 25

Contingent Valuation Method

Question 26

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?

Answer 26

Discount factor

Question 27

How can an appraiser extract and support a location adjustment from one market area to another?

Answer 27

Compare land sale prices for similar lots, Compare sale prices of common “benchmark” homes, Compare rental amounts for similar homes

Question 28

Which of these appraisal assignments is MOST likely to require an appraiser to extract and use a bonus value?

Answer 28

A model home

Question 29

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?

Answer 29

Bonus factor

Question 30

Typically, an adjustment for discount or bonus factor is

Answer 30

Expressed as a percentage

Question 31

Why are mortgage underwriters wary of appraisal reports in which all of the comparable sales are located several miles away from the subject?

Answer 31

Appraisers can inflate values by ignoring sales in the neighborhood and using sales that are further away in better locations

Question 32

When an appraiser goes outside the local market area to find comparable sales, and makes location adjustments, the report should

Answer 32

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

Question 33

The technique in which you interview market participants is called the

Answer 33

Market survey technique

Question 34

In a typical residential appraisal, the most emphasis is usually placed on:

Answer 34

The Sales Comparison Approach

Question 35

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?

Answer 35

Inventory Analysis

Question 36

Valuing individual parts of a property and adding the component values together is the definition of:

Answer 36

Componentizing Value

Question 37

In which of the following situations might a bonus or discount factor be appropriate?

Answer 37

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.

Question 38

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?

Answer 38

6. 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

Question 39

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?

Answer 39

5