CFE CFE Market Analysis & Valuation Methods

Question 1

In the sales comparison approach to property valuation, what is a 'paired sales analysis' used to determine?

Accepted Answer

The dollar or percentage adjustment for a specific property characteristic

Answer

Paired sales analysis involves comparing two similar sales that differ in only one characteristic to isolate and quantify the value contribution of that feature.

Question 2

Which valuation approach is most commonly emphasized when assessing residential properties for Florida ad valorem tax purposes?

Accepted Answer

Sales comparison approach

Answer

The sales comparison approach is most heavily relied upon for residential property assessment because abundant sales data allows direct market comparisons.

Question 3

Under the income approach to valuation, what does the term 'capitalization rate' (cap rate) represent?

Accepted Answer

The ratio of net operating income to property value

Answer

The capitalization rate is the ratio of a property's net operating income (NOI) to its market value, reflecting the return rate investors expect for that property type.

Question 4

In the cost approach, 'effective age' differs from 'actual age' in that it reflects:

Accepted Answer

The age indicated by the property's condition and utility relative to new construction

Answer

Effective age represents how old a structure appears based on its actual physical condition and utility, which may be less than or greater than its chronological age depending on maintenance.

Question 5

What is 'economic obsolescence' in the context of property valuation?

Accepted Answer

Loss in value caused by external factors outside the property itself

Answer

Economic obsolescence is a loss in value resulting from external forces such as neighborhood decline, adverse zoning changes, or poor economic conditions — factors outside the property boundaries.

CFE - Certified Florida Evaluator Practice Test

CFE - Certified Florida Evaluator Practice Test

CFE CFE Market Analysis & Valuation Methods