approaches to valuation

Question 1

The values, classification and exemptions that are applied, must also be deemed
equitable. BCA uses three primary tests for valuation equity:

Answer 1

Assessment to Sale Ratio or ASR is the ratio of the assessed value to the sale
price of a property.

Co-efficient of Dispersion or COD is the average deviation of a group of numbers
from the median, expressed as a percentage.

Price-related differential or PRD is a measure of assessment regressivity (lower
valued properties are assessed higher relative to their market value) or
progressivity (higher valued properties are assessed higher, relative to their
market value.

Question 2

Actual value is defined in the Assessment Act as the market value of the __________
interest in land and improvements.

Answer 2

fee simple

Question 3

Market value

Answer 3

“The estimated amount for which a property should
exchange on the date of valuation between a willing buyer and willing seller in an arm’slength transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion.”

Question 4

Market value assessment is widely considered the fairest and most objective system for
distributing the _____________. In any taxing jurisdiction, properties of equal value
contribute the same tax while higher-value properties contribute more than those with
lower values do. By using market value, assessors and taxpayers can readily check
assessments by comparing recent sales and assessments of similar properties in the
neighborhood.

Answer 4

property tax burden

Question 5

BCA includes Goods and Services tax (GST) in the sale price of new construction and
vacant lots. This is subsequently also included in the _______________ of these properties.

Answer 5

assessment

Question 6

Both fee appraisers in the private sector and the professional appraisal staff at BCA
employ market data and analysis to determine a property’s value. BCA does this by
utilizing _________________to value a large group of properties for property tax
purposes on July 1st;

appraisers in private practice, prepare an appraisal report on a
________________ property, for a particular purpose (i.e. mortgage financing) on a specific date.

The work done by BCA appraisers and private appraisers is most similar when we are working
on preparing an appraisal report for PAAB (Property Assessment Appeal Board).

Answer 6

mass appraisal models
specific

Question 7

While BCA uses computer assisted models in developing its market values, it is important
to remember that no matter what number the computer produces, it is incumbent upon
the appraiser to ensure that the results are reasonable, especially when talking to a
property owner.

We use _______________ to develop the values; we use market evidence,
appraisal analysis and professional judgement in support of our values before the Property
Assessment Review Panel (PARP) and PAAB tribunals.

Answer 7

computer models

Question 8

Highest and best use (HBU) is defined as, “The reasonably probable and legal use of vacant
land or an improved property, that is _____________, _______________, and
________________, and that results in the highest value.”

Answer 8

physically possible
appropriately supported
financially feasible

Question 9

BCA appraisers must consider the following four criteria when determining the highest
and best use of a property:

Answer 9

Legal permissibility
 Physical Possibility

 Financial feasibility
 Maximum profitability

Question 10

Legal Permissibity

Answer 10

Addresses the issue of whether the development and/or use of
the property conforms to existing legal requirements (e.g. Official Community Plan
(OCP), Zoning Bylaw, Subdivision Bylaw, Development Permit Area, Health
Authority, Department of Fisheries and Oceans, Streamside Regulation, Riparian
Area Regulation, and Land Use Contract).

Question 11

Physical possibility

Answer 11

refers to the physical characteristics or attributes of the site that
may affect its use (e.g. size, shape, topography, and riparian areas).

Question 12

Financially feasible

Answer 12

is the use that results in a positive return on the investment.

Question 13

Maximum profitability

Answer 13

is the use that satisfies all of the above criteria and generates
the most value.

Question 14

Through highest and best use analysis, the appraiser interprets the __________ that
affect the subject property and identifies the uses on which the final opinion of value is
based.

Answer 14

market forces

Question 15

Estimating the HBU is a necessary part of deriving an opinion of both land and improved
values because it is essential in

Answer 15

identifying comparable properties.

Question 16

highest and best use involves a number of possibilities:

Answer 16

 retain all or a portion of the property as is,
 demolish all or a component of the improvements,
 construct an addition,
 subdivide and sell excess land areas,
 assemble the subject site with adjacent sites; or
 convert the use of the existing structure

Question 17

Analyzing the HBU of a property is a two-part test:

Answer 17

1. determining the highest and best use as vacant and,
2. determining the highest and best use as improved.

Question 18

The highest and best use of land as though vacant and the highest and best use of the
property as improved are connected but distinctly different concepts. To clarify the
distinction, consider a single-unit residential property located in an area zoned for
commercial use.

If there is a market for a commercial use, the maximum productivity of
the land as though vacant will most likely be for a commercial use. In this case, the
residential improvements may contribute little, if any, to the value of the property as a
whole except as an interim use during the transition between land uses.

If, however, the market value for residential use is greater than the market value for the permitted
commercial use less costs to demolish the residential improvements, then the highest and
best use of the property as improved will be for___________________ . 3

Answer 18

continued residential use

Question 19

The valuation process is applied to develop a well-supported opinion of market value as
of, in the case of BCA, July 1st. Appraisers develop an opinion of property value with
specific appraisal procedures that reflect three distinct methods of data analysis:

Answer 19

Cost Approach
* Direct Comparison Approach (DCA)
* Income Approach

Question 20

One or more of these approaches are used in all estimations of value. At BC Assessment,
the approaches employed depend on the type of property and the quality and quantity of
___________________.

All three approaches are applicable to many appraisal problems, but one or more of the
approaches may have greater significance in a given assignment.4

The approach relied upon will generally depend on how a ____________________________.
At BCA, the valuation of some properties are legislated and the use of approved manuals
are set out in the Assessment Act or other legislation.

Each approach to value will be explained in terms of the _______________ of the valuation
approach. I.e.: What data is needed to provide a reliable valuation indication and when it is
generally used to provide primary support for the valuation. That will be followed with an
example to demonstrate its use.

Answer 20

data available,
property trades in your market
basic premise

Question 21

This approach to value is based upon the idea that the market value of a property is
________________to the sale of similar properties. While not primarily relied upon in the
valuation of income producing properties, it is the most ______________________and simple way to
explain and support a valuation opinion
.
This approach is applicable to all types of real property interests when there are sufficient,
recent, reliable _______________to indicate value patterns or trends in the market. Especially
for properties that are highly similar in property characteristics and with abundant market
transaction data

Answer 21

directly related

straightforward

transactions

Question 22

Procedure

1. Gather data on actual sales as well as listings, offers and options based upon
   highest and best use. Consider the characteristics that influence value with the goal
   of selecting the most comparable properties.
2. Verify the sales transactions to ensure that the data is factually accurate and that
   the transactions reflect_______________market consideration.
3. Define and identify the appropriate units of comparison that explains market
   behavior.
4. Adjust the price of each sale property to reflect how it differs from the subject
   property based on market evidence.
5. Reconcile multiple value indication into a single value or range of values, placing
   greater weight on what are considered the strongest comparable.

Answer 22

an arms length

Question 23

In property appraisal, the cost approach is one of three basic valuation methods. It is
based upon the premise that a purchaser would not pay any more to purchase a property
than it would ____________________________________________ on it with
similar utility.

In order to effectively use the Cost Approach, there needs to be ________________, reliable cost
data and the ability to “prove” adjustments for all forms of depreciation.

The Cost Approach is most reliable when the property in question is new and is at its
highest and best use. The cost approach is required and sometimes the only way to
determine the value of special-use properties, such as libraries, schools or churches. These
resources generate little income and are not often marketed, which invalidates the use of
the income and direct comparison approaches. Cost is the required methodology for
legislated properties such as Major Industrial Properties (MIPS)

Answer 23

cost to buy a similar lot (or site) and construct an improvement

land sales

Question 24

There are two primary cost basis: ___________ cost or_____________. BCA uses
replacement cost. BCA uses a Marshall-Swift based cost model to develop the costs for
most properties; for legislated properties, there are specific BCA cost manuals.

Answer 24

reproduction
replacement cost

Question 25

There are three types of depreciation:

Answer 25

Physical Deterioration –
 Functional Obsolescence –
 External Obsolescence -

Question 26

Physical Deterioration –

Answer 26

wear and tear from regular use and the impact of the
elements.

Question 27

Functional Obsolescence –

Answer 27

a flaw in the structure, materials, or design that
diminishes the function, utility and value of the improvement.

Question 28

External Obsolescence -

Answer 28

a temporary or permanent impairment of the utility or
stability of an improvement or property due to negative influences outside the
property (e.g., adverse market conditions).