CAR Advanced Techniques & Methods 3

Question 1

In a discounted cash flow analysis review, which error would cause the present value of cash flows to be overstated while leaving the reversion value unaffected?

Accepted Answer

Using a discount rate that is too low

Answer

A discount rate that is too low increases the present value factor applied to each periodic cash flow, inflating the PV of NOI without directly affecting the projected reversion.

Question 2

When reviewing an appraisal using the extraction method to develop a land-to-value ratio, the reviewer should be most concerned if:

Accepted Answer

The ratio varies significantly across the comparable improved sales used

Answer

Significant variation in the land-to-value ratios extracted from improved sales suggests the comparable properties are not sufficiently similar to produce a reliable ratio for the subject.

Question 3

A reviewer assesses an appraisal of a special-purpose property (e.g., a church). Which limitation is most important to flag if only the cost approach was used?

Accepted Answer

The cost approach may not capture economic obsolescence from limited alternative uses

Answer

Special-purpose properties often suffer from external obsolescence due to limited demand and few alternative uses, which cost approach depreciation schedules may fail to fully capture.

Question 4

Under USPAP's jurisdictional exception rule, an appraiser omits a specific required disclosure. In reviewing the report, the reviewer must:

Accepted Answer

Accept the omission if the appraiser cited a valid law or regulation overriding USPAP

Answer

USPAP's jurisdictional exception allows non-compliance with a specific requirement when law or regulation precludes it, provided the appraiser clearly identifies the law or regulation.

Question 5

A reviewer finds that an appraiser supported time adjustments using list price trends rather than closed sale trends. The primary concern is:

Accepted Answer

List prices reflect seller aspirations, not confirmed market transactions

Answer

List prices represent asking prices and may not reflect actual transaction prices; time adjustments should be grounded in closed sale data to capture real market movement.

(CAR) Certified Appraisal Reviewer Practice Test

(CAR) Certified Appraisal Reviewer Practice Test

CAR Advanced Techniques & Methods 3