Chapter 6 True/False

Question 1

The market data approach is the most reliable method for analyzing the value of a single-family home.

True
False

Answer 1

True: The market data approach estimates value by comparing the subject property to recently sold comparable properties.

Question 2

An example of contribution would be a homeowner adding a deck and increasing the property’s value.

True
False

Answer 2

True: Contribution is a principle of value used when trying to estimate a property’s value. When evaluating contribution, any improvements made to a property are worth only what the improvements add to a property’s market value.

Question 3

There is a difference between market value and market price.

True
False

Answer 3

True: Market price is what a ready, willing and able person pays for the property. Market value is an opinion of value for which a property would likely sell to an informed buyer acting freely.

Question 4

A seller hires a real estate licensee to provide an appraisal for a buyer who is applying for financing.

True
False

Answer 4

False: A real estate licensee will conduct a market analysis but does not conduct appraisals.

Question 5

When conducting a comparative market analysis, licensees most frequently use the principle of increasing and decreasing returns.

True
False

Answer 5

False: A comparative market analysis relies most heavily on the value of substitution.