Module Introduction

Question 1

Market study

Answer 1

An analysis of the market conditions of supply, demand, and pricing for a specific property type in a specific area.

Question 2

Marketability analysis

Answer 2

The study of how a specific property is expected to perform in a specific market. A marketability analysis expands on a market analysis by addressing a specific property.

Question 3

A marketability analysis is necessary in all market value appraisals

Answer 3

to enable the appraiser to decide if there is functional or external obsolescence, and what are the best comparable sales.

Question 4

Where does market analysis fit in the valuation process?

Answer 4

Market analysis is part of the fourth step: data analysis.

Question 5

From the perspective of a broad market (general data), a market analysis and a market study essentially are the same.

Question 6

According to appraisal standards, appraisers have a responsibility to address market analysis.

Answer 6

1. Identify and analyze the highest and best use for continuation of a property’s existing use or a different use with regard to legal permissibility, physical possibility, financial feasibility, and maximum productivity.
2. Develop and support an opinion of the highest and best use.

Question 7

Market area

Answer 7

The geographic region from which a majority of demand comes and in which the majority of competition is located. Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market area.

Question 8

Inferred demand analysis

Answer 8

which is sometimes called trend analysis, is descriptive and relies on historical data and inferential statistics to support future projections. The focus of the analysis can be general, with selected comparable properties representing the larger market, or more specific and include area-wide market data and subject-specific conclusions. Inferred analysis is usually sufficient for one- to four-unit residential properties.

Question 9

Neighborhood

Answer 9

A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.

Question 10

District

Answer 10

A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural.

Question 11

Marketability analysis

Answer 11

The study of how a specific property is expected to perform in a specific market. A marketability analysis expands on a market analysis by addressing a specific property. All appraisal assignments to develop an opinion of market value include marketability studies.

Question 12

Because of the importance of demand analysis in all marketability studies, appraisers have recognized two ways to measure it. The two methods for measuring demand are

Answer 12

inferred demand analysis and fundamental demand analysis.

Question 13

Projection

Answer 13

A prediction of the future that is an extension of current and historical trends.

Question 14

Inferred analysis.

Answer 14

A prediction of future market conditions based on inferences drawn from general market information, published data, and historical trends in rents and absorption rates and occupancy for similar property types.

Question 15

Here are some of the things you would use to draw inferences about the market:

Answer 15

1. Number of days on the market for closed sales
2. Listing period for active listings
3. Multiple listing services (MLS) statistics for supply and demand data
4. For sale by owner (FSBO) data
5. Auctions

Question 16

Forecast.

Answer 16

In market analysis, a prediction of the future based on the fundamental forces of demand.

Question 17

Fundamental demand analysis is different than inferred demand analysis because

Answer 17

this looks at the causes of demand to calculate what the current demand is and what the future demand will be. Inferred demand analysis is focused on reading the signs of change and drawing conclusions from the various signs and based on that, developing an opinion of what the market is and what it will do. The fundamental demand analysis looks at why change is occurring.

Question 18

First premise.

Answer 18

Real estate exists to house economic activities, supply services, and provide amenities to meet human needs.

Question 19

These demographic and economic forces are known as the fundamental forces of demand and they primarily fall into three broad categories:

Answer 19

1. Employment
2. Population
3. Income

Question 20

Second premise.

Answer 20

The relationships among these forces of demand are important no matter which type of market analysis is done.

Question 21

Third premise.

Answer 21

There is a hierarchy to the fundamental forces of demand.