CFE CFE Market Analysis & Valuation Methods 2

Question 1

When conducting a market analysis for mass appraisal in Florida, which statistical measure is used to assess the uniformity of assessments across properties?

Accepted Answer

Coefficient of Dispersion (COD)

Answer

The Coefficient of Dispersion (COD) measures the average percentage deviation of individual assessment ratios from the median ratio, indicating assessment uniformity.

Question 2

What is a 'price-related differential' (PRD) used to detect in assessment ratio studies?

Accepted Answer

Regressivity or progressivity in assessments across different value ranges

Answer

The PRD indicates whether assessments are regressive (lower-value properties over-assessed relative to higher-value ones) or progressive — a PRD above 1.03 suggests regressivity.

Question 3

In Florida mass appraisal, what does the term 'sales ratio' represent?

Accepted Answer

The ratio of assessed value to the verified sale price of a property

Answer

The sales ratio (assessment ratio) is calculated by dividing the assessed value by the verified arm's-length sale price, used to evaluate appraisal accuracy and level.

Question 4

Which income approach formula is used to convert a single year's income into a value estimate?

Accepted Answer

Value = NOI ÷ Cap Rate

Answer

Direct capitalization divides net operating income by the appropriate capitalization rate (Value = NOI ÷ Cap Rate) to estimate the property's market value.

Question 5

What is 'highest and best use' and why is it critical to the valuation process?

Accepted Answer

The legally permissible, physically possible, financially feasible, and maximally productive use that produces the highest value

Answer

Highest and best use is the foundational concept in appraisal — it defines the use that maximizes property value while meeting all four criteria: legal, physical, financial, and maximum productivity.

CFE - Certified Florida Evaluator Practice Test

CFE - Certified Florida Evaluator Practice Test

CFE CFE Market Analysis & Valuation Methods 2