Ch 15: Preparing a CMA

Question 1

What appraisal method is generally most appropriate to use in appraising residential properties?

Answer 1

Sales comparison approach

Question 2

What five factors determine the value of a home?

Answer 2

Location
Property condition
Improvements
Supply and demand
Financing trends

Question 3

What are the four steps in the CMA process?

Answer 3

Collect and analyze information about the seller’s property.
Choose comparable properties in the area.
Compare the seller’s property to the comparables and do some adjusting to the value of the comparables.
Estimate a reasonable and realistic range for the selling price for the seller’s property.

Question 4

List five neighborhood factors that a licensee should look at when collecting information about a seller’s property? (See pages 6, 7, and 8 for other correct answers.)

Answer 4

Ownership makeup
Vacancies
Land contour
Utilities
Schools

Question 5

Why is collecting information about the property’s frontage measurement important?

Answer 5

This measurement is the length of the front boundary of the property, either along the street or along a lake, river or other body of water. If the frontage is significant, it can raise the value of the property, especially if it grants access to a desirable feature.

Question 6

What is not included when determining the square footage of a home?

Answer 6

The square footage of the home’s living area does not include attached garages, unfinished basements, or porches. Most often, living area must be “under heat and air-conditioning.”

Question 7

What are five design features that could be particularly appealing to a buyer?

Answer 7

Number of bedrooms
Number of bathrooms
Amount of closet space
Kitchen work space
Amount of natural light
Overall size of the home
Separate family room or other recreational room
Number and size of windows
Separate laundry room
Storage for cleaning supplies
Storage for gardening supplies and tools

Question 8

List three features that could be considered design flaws by some buyers.

Answer 8

There is no coat closet at the front of the house.
The kitchen is too small for an eat-in area.
There is no linen closet in or near the bathroom.
Guests must walk into or through a bedroom to access a bathroom.
The bathrooms are only on the second floor.
The stairway to the basement or to the second floor is very narrow or steep.
The basement has no outside access.
The laundry hook-ups are located in the garage.

Question 9

What important information can a licensee glean from sales price, original price and number of days on the market when looking at sold properties?

Answer 9

This date gives information about how competitive the home was in the marketplace at the time.

Question 10

Of what value are expired listings to a CMA?

Answer 10

Expired data may show the seller that the asking prices of these homes were significantly higher than the selling prices of the homes on the recently-sold list.

Question 11

What are the two most important areas for a licensee to focus on when choosing comparables for every category -active, sold, pending and expired listings?

Answer 11

Location and physical characteristics

Question 12

For recently sold properties, the licensee should be concerned with what three pieces of information?

Answer 12

Date of the sale
Financing Terms
Sale Conditions

Question 13

Once you have chosen comparable properties, you will compare them to the subject property based on what factors?

Answer 13

Location, physical characteristics, sale date, and financing terms

Question 14

How do you account for the sale conditions when choosing comparables?

Answer 14

By eliminating any non-arm’s length transactions from consideration

Question 15

How do you make adjustments for features that a comparable property either has (and the seller’s property doesn’t have) or lacks?

Answer 15

If a comparable has a feature that the seller’s property does not have, subtract the value of that feature from the price of the comparable.

If a comparable lacks a feature that the seller’s property has, add the value of the feature to the price of the comparable.

Question 16

How would you arrive at an estimate of the value of the seller’s property?

Answer 16

Use the adjusted market value of each of the comparables after all the adjustments were made, evaluate the soundness of each comparable, and then come up with a listing range to present to the seller.

Question 17

How would you go about collecting information on a seller’s property in preparation for doing a CMA?

Answer 17

Tour the home, taking notes about the home’s features and faults. After getting answers to all questions, leave the home and drive through the local neighborhood, sizing up the features and benefits as well as any noticeable shortcomings. While driving through the neighborhood, look for homes that are currently for sale or have sold signs in the yard.

Question 18

Where will you find homes that are comparable to the seller’s home you’re wanting to list?

Answer 18

You will find homes in the same neighborhood by looking through your own files, checking with fellow agents and checking out the listings on your local MLS database.

Question 19

After collecting and organizing all the information on the seller’s property and some number of comparable properties, what will be your next steps to complete the CMA?

Answer 19

Decide on values for the differential features.
Adjust the comparables.
Estimate a price range.
Present the data to the seller.

Question 20

What suggestions can an agent make to a buyer or a seller if the appraisal comes in lower than the agreed-upon purchase price?

Answer 20

The buyer can make up the difference in cash.
The seller can lower the price.
The seller can offer to carry a second mortgage for the difference.
The buyer can apply to another lender and get another appraisal.
The real estate agents can supply a list of comparable sales.
The agents can call the listing agents of pending sales to try to find out the actual sales price of those properties.
The sellers can compromise on the value.
The seller can pay for an independent appraisal.
The buyer can cancel the transaction.

Question 21

Data collected to determine the total square footage of a lot is called:

Answer 21

area

Question 22

When collecting neighborhood data, what determines if the neighborhood is considered to be prominent compared to other nearby communities?

Answer 22

Community status

Question 23

The measurement of the distance from the front boundary to the boundary at the back of the site describes:

Answer 23

depth.

Question 24

According to what principle will a buyer not pay more for a home than what he or she would pay for another home that is equally attractive and available?

Answer 24

Substitution

Question 25

What describes the most probable price a property should bring in an open and competitive market?

Answer 25

Fair market value

Question 26

The two most important considerations for all property types are location and:

Answer 26

physical characteristics.

Question 27

The typical value of the homes in the Greenwood neighborhood is $150,000. Comp 2 has an extra bedroom and sold for $153,500. What is the value of the extra bedroom?

Answer 27

$3,500

Question 28

When collecting data on a property, to be considered a living area the space must generally:

Answer 28

have heat and air-conditioning.

Question 29

The value of the “smallest” or “least desirable” house on the block can be boosted by:

Answer 29

a good neighborhood.

Question 30

The first step an agent will take when doing a CMA is:

Answer 30

collecting and analyzing information.

Question 31

What factor deals with the motivations the buyer and seller may have had when completing the transaction?

Answer 31

Sale conditions

Question 32

If a loan is an FHA loan, who can the buyer ask for a list of approved appraisers?

Answer 32

The lender

Question 33

When assessing a dining room, an agent should see how large it is and its:

Answer 33

proximity to the kitchen.

Question 34

When preparing a CMA, a licensee should have at least how many comparable homes?

Answer 34

3

Question 35

What type of listing gives an indication of how each of the homes currently on the market stacks up against others?

Answer 35

Active listings

Question 36

An agent will make comparisons based on location, physical characteristics, sale date, and:

Answer 36

financing terms.

Question 37

The sales comparison approach is based on the principle of:

Answer 37

substitution.

Question 38

The two common methods that can help determine a reasonable asking price for a property are an appraisal and:

Answer 38

a CMA.