BC Real Estate Trading Services Course Real Estate Appraisal Questions and Answers

Question 1

A real estate licensee is preparing a Comparative Market Analysis (CMA) for a seller of a standard-built, 15-year-old detached home in a large Surrey subdivision.
A professional appraiser has also been hired by a potential buyer's lender.
Which of the following statements most accurately distinguishes the licensee's CMA from the professional appraisal?

Accepted Answer

The licensee's CMA is primarily used to establish a competitive listing price, while the appraisal is a formal valuation required for mortgage financing purposes.

Answer

The CMA is a formal, legally binding document, whereas the appraisal is an informal estimate of value.

Answer

The appraiser will exclusively use the Cost Approach, while the licensee will only use the Direct Comparison Approach.

Answer

The CMA is regulated by the Appraisal Institute of Canada (AIC) under CUSPAP, while the appraisal is not.

Question 2

An appraiser is determining the value of a newly constructed, custom-designed community church in Prince George, BC. Due to the unique nature of the property, there are no recent sales of similar buildings in the area. Which approach to value would be the most reliable and heavily weighted in this appraisal?

Accepted Answer

Cost Approach

Answer

Direct Comparison Approach

Answer

Income Approach

Answer

Residual Approach

Question 3

A homeowner in a well-established Vancouver neighbourhood spends $100,000 to add an elaborate indoor swimming pool to their home. An appraiser determines that the addition only increases the property's market value by $40,000. This difference between cost and value illustrates which fundamental principle of appraisal?

Accepted Answer

Contribution

Answer

Highest and Best Use

Answer

Substitution

Answer

Anticipation

Question 4

The concept of 'Highest and Best Use' is a critical component of real estate appraisal in Canada. For a use to be considered the highest and best, it must meet four specific criteria. Which of the following is NOT one of those four criteria?

Accepted Answer

Conformity to Neighbourhood

Answer

Legally Permissible

Answer

Physically Possible

Answer

Maximum Profitability

Question 5

In Canada, professional appraisers who are members of the Appraisal Institute of Canada (AIC) are required to adhere to a specific set of standards in their practice. What is the name of this mandatory code of standards?

Accepted Answer

Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP)

Answer

Generally Accepted Appraisal Principles (GAAP)

Answer

National Code of Real Estate Valuation (NCREV)

Answer

Real Estate Services and Appraisal Rules (RESAR)

Question 6

When using the Cost Approach to appraisal, an appraiser calculates the replacement cost of the improvements and then subtracts a figure for depreciation. Which of the following best describes 'functional obsolescence'?

Accepted Answer

A loss in value resulting from a poor or outdated design, such as a home with four bedrooms but only one bathroom.

Answer

Wear and tear on the building's physical components, such as a worn-out roof.

Answer

A loss in value due to factors outside the property's boundaries, such as a new nearby landfill.

Answer

The decrease in value due to the natural aging process of the structure.