Chapter 2: Market Analysis - Highest and Best Use and Feasibility Flashcards
Which of the following statements is NOT directly addressed in the First Principles of Value?
1.) Without knowledge of a property’s physical possibilities, legal permissions and limitations, and its financials capabilities, the professional will be unable to provide a credible value conclusion
2.) Valuation and consulting assignments are typically a mixture of fact and opinion. Opinions have no foundation unless they are supported by appropriate facts
3.) In all circumstances, there is a minimum expectation for the reasonable amount of research necessary such that the valuation professional can rely reasonably on such data. This due diligence ultimately forms the basis for credible work as a valuation professional
4.) In performing a consulting assignment involving real estate or real property services, a member must identify and analyze alternative courses of action to achieve the client’s lawful objective, and analyze their implications
4.) In performing a consulting assignment involving real estate or real property services, a member must identify and analyze alternative courses of action to achieve the client’s lawful objective, and analyze their implications
You and an appraiser colleague are discussing the value of a duplex located in an area that is experiencing rising demand for condominiums. You argue that the property’s value should be based on the value of the condominiums, which could sell for well over $350,000 per unit. Your friend argues that the value of the property should be based on the sale price for duplexes, currently approximately $300,000. What type of analysis would BEST support your argument?
1.) Feasibility
2.) Investment
3.) Highest and best use
4.) Marketability
3.) Highest and best use
Which of the following statements regarding market studies is FALSE?
1.) Marketability studies rely on historic absorption rates to predict future absorption at a specific site
2.) A market analysis involves comparing the “as is” condition with anticipated future stages of supply and demand
3.) In the appraisal process, the market analysis facilitates the calculation of adjustments and income stream projections
4.) A marketability study involves a “use in search of a site”, whereas a market study is a “site in search of a use.”
4.) FALSE - A marketability study involves a “use in search of a site”, whereas a market study is a “site in search of a use.”
Brett owns an older home with an attached garage that he uses as his work studio. Under current zoning bylaws, newer homes in the area that are being developed are only permitted detached garages. Brett’s attached garage represents which of the following?
1.) Non-contributing improvement
2.) Legal non-conforming use
3.) Interim use
4.) Illegal non-conforming use
2.) Legal non-conforming use
To determine whether a use is physically possible, an appraiser should look at which of the following?
1.) Land use regulations
2.) Site topography and soil
3.) Zoning bylaws
4.) Competitive location rating
2.) Site topography and soil
Which of the following statements regarding an inferred analysis is TRUE?
1.) Forecasts subject-specific supply, demand, absorption period, and capture rates
2.) Studies a specific development to assess its competitive position
3.) Estimates future changes in value by investigating past market behaviour
4.)Evaluates whether a specific property meets investor specific criteria
3.) Estimates future changes in value by investigating past market behaviour
Which if the following is NOT a test of highest and best use analysis for improved properties?
1.) Test demolition of existing use and redevelopment
2.) Test physical possibility of current use
3.) Test modification of current use
4.) Test continuation of existing use
2.) Test physical possibility of current use
A piece of land in Mississauga is improved with a single-family dwelling built in the 1950s. Recent sales in the neighbourhood show market values to be $425,000 for these improved properties. You are aware that amendments to the zoning bylaws have allowed for the development of multi-family in the neighbourhood. Your discussions with contractors have determined that demolition costs for the improvements would be $20,000. Vacant sites in the neighbourhood have been selling for $530,000. Based on this information, what is the highest and best use for this property?
1.) The existing improvements developed as is, represent the site’s highest and best use
2.) The highest and best use involves demolishing the existing improvements and redeveloping the site to multi-family
3.) The existing improvements represent an under-improvement of the site but generate sufficient benefits to the property that their immediate demolition is not warranted
4.) None of the above
2.) The highest and best use involves demolishing the existing improvements and redeveloping the site to multi-family
Which of the following statements regarding a feasibility analysis s/are TRUE?
1.) Profitability is the most common performance measure for differentiating between alternatives
2.) A feasibility analysis is an evaluation of whether a specific project is likely to be carried out successfully
3.) A risk assessment is often included in a feasibility analysis
4.) All of the above
4.) All of the above
Forecasting demand based on segmentation of broad demographic and economic data to reflect the subject’s specific submarket is called which of the following?
1.) Comparative market analysis
2.) Trend analysis
3.) Investment analysis
4.) Fundamental analysis
2.) Trend analysis
Which of the following is a key determinant of use in a property productivity analysis?
1.) Supply and demand analysis
2.) Legal and regulatory attributes
3.) Capture rate and absorption period
4.) Analysis of timing and market participants
2.) Legal and regulatory attributes
Which of the following assignments are likely to be subject to CUSPAP’s Consulting Standard Section 13?
A. Evaluation the probability of success for a real estate development project
B. Providing advice to an owner on pricing her heritage home in a sale negotiation
C. Evaluation a specific property to determine if it meets a client’s investment criteria
D. Establishing the market value of a four-unit rental project upon completion, for insurance purposes
1.) A and C only
2.) B and D only
3.) C only
4.) D only
1.) A and C only
Shannon purchases a home in a residential neighbourhood. The site is zoned for a single family dwelling, but the basement suite is rented out with a lease in place. Shannon is well aware that is represents a/an _____. With the current trend of densification and the growing number of secondary suites in the city, she anticipates that the zoning bylaws will be amended and that the suite will likely become a/an _____.
1.) illegal use, legal use
2.) legal non-conforming use, interim use
3.) interim use, holding use
4.) illegal use, legal non-conforming use
1.) illegal use, legal use
