CAE Assessment and Evaluation 3

Question 1

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

Accepted Answer

120

Answer

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

Question 2

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?

Accepted Answer

$1,000,000

Answer

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

Question 3

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

Accepted Answer

The comparable sales, to make them resemble the subject

Answer

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

Question 4

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

Accepted Answer

A sale between family members at a reduced price

Answer

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

Question 5

What is 'sales chasing' in an assessment office?

Accepted Answer

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

Answer

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

CAE - Certified Assessment Evaluator Practice Test

CAE - Certified Assessment Evaluator Practice Test

CAE Assessment and Evaluation 3