Property Valuation & Appraisal Flashcards
6 cards from real BC Real Estate Trading Services Course practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Property Valuation & Appraisal flashcards as text
In a BC residential CMA, 'pending sales' (properties with accepted offers but not yet completed) are useful because:
Answer: They indicate current buyer activity and emerging price trends, though they are not yet confirmed
Pending sales show where the market is heading and provide insight into current buyer behavior, but since the sale is not yet completed, the final price is unknown and they are less reliable than closed sales.
In BC, which type of depreciation CANNOT be cured (corrected) by the property owner?
Answer: External obsolescence caused by a new highway built adjacent to the property
External obsolescence comes from factors outside the property (highways, industrial uses nearby, economic decline) and cannot be cured by the owner — the owner has no control over these external factors.
In BC real estate, the principle of 'substitution' states that:
Answer: No informed buyer will pay more for a property than the cost of acquiring an equally desirable substitute
The principle of substitution is the foundation of all three valuation approaches: no buyer will pay more for a property than the cost of getting an equally desirable substitute. This principle drives competitive pricing.
In BC, a 'drive-by appraisal' or 'desk review' differs from a full appraisal in that:
Answer: It does not involve a full interior inspection and relies more on existing data
A desk review or drive-by appraisal provides a value estimate with limited inspection (exterior only or no inspection), relying on public records and MLS data. It is less comprehensive than a full appraisal.
In BC, the principle of 'conformity' in real estate valuation suggests that value is maximized when:
Answer: Properties in an area are reasonably similar in use, style, and quality
The principle of conformity states that maximum value is achieved when a property is in harmony with surrounding properties. A commercial property in a residential area, for instance, may suffer from non-conformity.
In BC, if a property has potential gross income of $120,000, vacancy loss of $6,000, and operating expenses of $50,000, what is the Net Operating Income (NOI)?
Answer: $64,000
NOI = Potential Gross Income - Vacancy - Operating Expenses = $120,000 - $6,000 - $50,000 = $64,000. Note: debt service (mortgage) is excluded from operating expenses in the NOI calculation.