Valuation Methodologies Flashcards
7 cards from real CAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Valuation Methodologies flashcards as text
Which valuation approach estimates a vehicle's value by analyzing recent sales of similar vehicles and adjusting for differences?
Answer: Sales comparison approach
The sales comparison approach derives value from comparable sales adjusted for differences in features, condition, and mileage.
An appraiser finds a comparable that sold for $42,000 but has 15,000 fewer miles than the subject, valued at $0.10 per mile. What is the adjusted comparable price?
Answer: $40,500
The comparable is superior in mileage, so its price is adjusted downward by $1,500 to $40,500.
Under IRS guidance, fair market value is best described as the price at which property changes hands between whom?
Answer: A willing buyer and willing seller, neither compelled, both with reasonable knowledge
Treasury Regulation 20.2031-1(b) defines FMV as the price between a willing buyer and willing seller with reasonable knowledge and no compulsion.
When valuing a one-off custom-built hot rod with no true comparables, which approach is often given the most weight?
Answer: Cost approach
With no comparable sales, the cost to build or replace the vehicle, less depreciation, is often the most supportable indicator.
In the final step of an appraisal where multiple approaches yield different indications, what process does the appraiser use to arrive at a single value?
Answer: Reconciliation
Reconciliation weighs the reliability and relevance of each approach rather than simply averaging them.
A vehicle insured under an 'agreed value' policy is totaled. What amount is typically paid?
Answer: The value agreed upon by insurer and owner when the policy was written
Agreed value policies pay the pre-agreed amount without depreciation, which is common for collector vehicles.
Which valuation approach is most applicable to a limousine or rental vehicle valued based on its revenue-generating ability?
Answer: Income approach
The income approach capitalizes or discounts expected net income, making it suitable for commercial revenue-producing vehicles.