chapter 1valuation principles and procedures Flashcards
The process of deriving a value indication for the subject property by comparing market information for similar properties with the property being appraised, identifying appropriate units of comparison, and making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available
sales comparison approach
When choosing comparables, the appraiser looks for properties that are as similar as possible to the subject in all aspects. This includes analyzing diverse factors such as:
Sales or financing concessions Market conditions when sale occurred Location Property rights appraised Site characteristics Physical characteristics of structures Quality Functional attributes Amenities Motivations of sellers and buyers
When choosing comparables, the appraiser analyzes:
Location, amenities, market conditions
Sales or financing concessions
Motivations of sellers and buyers, property rights
All of the above
all of the above
How many comparables are typically used by appraisers in the Sales Comparison Approach? No less than three No more than four At least six Two
no less than three
The Sales Comparison Approach was previously known as the: Market Approach Market Data Approach Direct Sales Comparison Approach All of the above
all of the above
The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based
principle of substitution
The amount a component of a property adds to the total value of the property. Contribution may or may not be equivalent to the cost to add the component.
principle of contribution
The result of the cause and effect relationship among the forces that influence real property value.
principle of change
Of the three appraisal approaches, the Sales Comparison Approach relies most heavily on the economic principle of: Contribution Substitution Equalization Anticipation
substitution
“The result of the cause and effect relationship among the forces that influence real property value” is the definition of the principle of Anticipation Supply and Demand Change Balance
change
“The perception that value is created by the expectation of benefits to be derived in the future” is the definition of the principle of Anticipation Supply and Demand Change Balance
anticipation
"The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties" is the definition of the principle of Competition Balance Conformity Progression
progression
"In appraisal, off-site conditions that affect a property’s value" is part of the definition of the principle of Externalities Balance Regression Progression
externalities
“The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium” is the definition of the principle of Anticipation Supply and Demand Change Balance
balance
In applying the Sales Comparison Approach, the appraiser should employ a systematic approach:
Research the market Verify the information Select relevant units of comparison Identify differences and make adjustments Reconcile the value indications
Type of information you look for when researching the market:
Listings Offers to purchase Refusals Options to purchase Contracts on properties that have yet to close
The first step in the Sales Comparison Approach procedure is Verify the information Select relevant units of comparison Define the scope of work Research the market
research the market
Which of the following is the sales comparison formula?
Price of comparable ± adjustments = value of subject
Price of comparable – adjustments = price of subject
Price of subject ± adjustments = value of comparable
Price of subject + adjustments = value of comparable
Price of comparable ± adjustments = value of subject
Adjustments made in the sales comparison process always start with: The subject The comparable Either subject or comparable Neither the subject nor comparable
the comparable
We NEVER adjust the Best comparable Comparable properties Subject property Variables
subject property
The principle of competition can be between
Purchasers only
Tenants only
Purchasers and tenants
Purchasers and tenants as well as between sellers and landlords
Purchasers and tenants as well as between sellers and landlords
Which of the following is NOT a common unit of comparison when appraising vacant land? Price per SF Price per Front Foot Price per SF of GLA Price per Buildable Unit
Price per SF of GLA
