ARA Rural Property Valuation & Methodologies 2

Question 1

When appraising a farm with both irrigated and dryland acres, which approach BEST captures the value differential between the two land types?

Accepted Answer

Segregate irrigated and dryland acres and apply separate comparable-derived per-acre rates

Answer

Irrigated and dryland acres command different market rates, so segregating them and applying class-specific rates from comparables produces the most defensible value.

Question 2

In rural appraisal, what does the term 'highest and best use as improved' specifically test?

Accepted Answer

Whether the existing improvements contribute value or should be demolished

Answer

Highest and best use as improved tests whether existing structures contribute positively to value or whether demolition and redevelopment would yield a higher value.

Question 3

A rural appraiser is valuing a property with a permanent conservation easement. How does this typically affect market value?

Accepted Answer

It typically reduces value by limiting the owner's bundle of rights

Answer

A permanent conservation easement restricts development rights, reducing the bundle of rights and typically lowering market value relative to unencumbered comparable sales.

Question 4

Which capitalization method is MOST appropriate when a rural income property has a finite productive life with a depletable resource?

Accepted Answer

Yield capitalization with a sinking fund provision for capital recovery

Answer

When income is derived from a wasting asset (e.g., timber, mineral extraction), yield capitalization with a sinking fund factor accounts for the return of capital over the resource's finite life.

Question 5

What is the primary purpose of a paired-sales analysis in rural appraisal?

Accepted Answer

To isolate and quantify the contributory value of a single property characteristic

Answer

Paired-sales analysis compares two sales that differ in only one attribute, allowing the appraiser to isolate and measure that attribute's market-derived value adjustment.

(ARA) Accredited Rural Appraiser Practice Test

(ARA) Accredited Rural Appraiser Practice Test

ARA Rural Property Valuation & Methodologies 2