Assessment and Evaluation Flashcards

A rental house sells for $300,000 and earns $2,500 per month in gross rent. What is its monthly gross rent multiplier (GRM)?

Answer: 120

GRM = sale price ÷ monthly gross rent = $300,000 ÷ $2,500 = 120.

A commercial property has net operating income of $80,000 and the market capitalization rate is 8%. What is its indicated value under direct capitalization?

Answer: $1,000,000

Value = NOI ÷ cap rate = $80,000 ÷ 0.08 = $1,000,000.

In the sales comparison approach, which properties are adjustments applied to?

Answer: The comparable sales, to make them resemble the subject

Adjustments are made to the comparables' sale prices to estimate what they would have sold for if they were like the subject.

Which sale should usually be excluded from a ratio study as non-arm's-length?

Answer: A sale between family members at a reduced price

Sales between related parties may not reflect market value, so they are usually screened out.

What is 'sales chasing' in an assessment office?

Answer: Changing the values of only the parcels that sold to match their sale prices

Sales chasing makes ratio statistics look better than the real uniformity of the whole population.

What most clearly separates mass appraisal from single-property appraisal?

Answer: It values groups of properties as of a given date using standardized methods and statistical testing

Mass appraisal applies common data, models, and statistical quality checks to many properties at once.

Which of these is NOT one of the four tests of highest and best use?

Answer: Most aesthetically pleasing

The four tests are legally permissible, physically possible, financially feasible, and maximally productive.