BC Real Estate Trading Services Course Property Valuation

Question 1

What are the three traditional approaches to property valuation used in BC?

Accepted Answer

Market approach, income approach, and cost approach

Answer

Assessed value approach, insurance value approach, and listing price approach

Answer

Comparable sales approach, rental approach, and demolition approach

Answer

Tax assessment approach, mortgage value approach, and appraisal approach

Question 2

In the market comparison approach, what is an 'adjustment' and why is it necessary?

Accepted Answer

It is a modification to the sale price of a comparable property to account for differences between it and the subject property

Answer

It is a change to the listing price to attract buyers

Answer

It is a discount given by the seller during negotiations

Answer

It is a fee charged by the appraiser

Question 3

What is the 'capitalization rate' (cap rate) used in the income approach to valuation?

Accepted Answer

The rate of return an investor expects on the property, used to convert net operating income into an estimate of value

Answer

The interest rate on the property's mortgage

Answer

The rate at which the property depreciates

Answer

The rate of property tax applied by the municipality

Question 4

What is 'highest and best use' in property valuation?

Accepted Answer

The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive

Answer

The most expensive improvement that could be made to the property

Answer

The use preferred by the current owner

Answer

The use that generates the most rental income in the short term

Question 5

What is the difference between 'market value' and 'assessed value' in BC?

Accepted Answer

Market value is the estimated price in an open market transaction, while assessed value is determined by BC Assessment for property tax purposes and may differ from market value

Answer

They are always the same amount

Answer

Assessed value is always higher than market value

Answer

Market value is set by the government and assessed value is set by appraisers

Question 6

What factors can cause 'depreciation' in the cost approach to valuation?

Accepted Answer

Physical deterioration, functional obsolescence, and external (economic) obsolescence

Answer

Only the age of the building

Answer

Increases in interest rates only

Answer

Changes in the owner's financial situation