CCS Property Valuation & Appraisal 2 — Questions and Answers
Question 1: Which appraisal approach is most commonly used as the primary method for valuing condominium units?
- Cost approach
- Sales comparison approach (Correct answer)
- Income capitalization approach
- Gross rent multiplier method
Correct answer: Sales comparison approach
The sales comparison approach is primary for condominiums because comparable unit sales provide the most reliable market evidence.
Question 2: When appraising a condominium, what does the term 'fee simple' ownership refer to?
- Ownership of a unit plus an undivided interest in common elements (Correct answer)
- Absolute ownership of real property without limitation
- Leasehold interest in the underlying land
- Fractional ownership shared among multiple buyers
Correct answer: Ownership of a unit plus an undivided interest in common elements
In condominium ownership, fee simple typically includes the unit plus an undivided interest in common areas, not absolute freehold of all land.
Question 3: A condominium unit sells for $320,000. The comparable unit next door sold for $300,000 but lacked an assigned covered parking space valued at $15,000. What is the adjusted sale price of the comparable?
- $285,000
- $300,000
- $315,000 (Correct answer)
- $335,000
Correct answer: $315,000
Since the comparable lacks the parking space, you add its value to the comp: $300,000 + $15,000 = $315,000.
Question 4: Which factor most significantly affects the value of a high-rise condominium unit compared to identical lower-floor units?
- Proximity to elevator shafts
- Floor level and view (Correct answer)
- Distance from stairwells
- Unit number designation
Correct answer: Floor level and view
Floor level and the associated views are primary value drivers in high-rise condominiums, commanding significant premiums.
Question 5: What is the purpose of a 'retrospective appraisal' in condominium transactions?
- To estimate future market value after planned renovations
- To determine value as of a past effective date (Correct answer)
- To compare current value against replacement cost
- To assess value after a foreclosure sale
Correct answer: To determine value as of a past effective date
A retrospective appraisal establishes value as of a historical date, often needed for estate settlements, litigation, or tax purposes.
Question 6: In condominium appraisal, 'market rent' is best defined as:
- The rent currently being charged to existing tenants
- The most probable rent a unit would command in an open market (Correct answer)
- The maximum rent allowed under local rent control laws
- The average rent in the building over the past 12 months
Correct answer: The most probable rent a unit would command in an open market
Market rent is the rent a knowledgeable landlord and tenant would agree upon in an arm's-length transaction in an open competitive market.
Question 7: What is 'assemblage' in the context of condominium property valuation?
- The process of combining adjacent properties to create greater value (Correct answer)
- The method of adding adjustment values in the sales comparison grid
- The assembly of comparable sales data for the appraisal report
- The combination of cost approach and income approach results
Correct answer: The process of combining adjacent properties to create greater value
Assemblage refers to combining two or more contiguous parcels under one ownership, often creating a 'plottage' value increment.
CCS Property Valuation & Appraisal 2
Which appraisal approach is most commonly used as the primary method for valuing condominium units?