Market Analysis & Valuation Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Market Analysis & Valuation flashcards as text
In a discounted cash flow (DCF) analysis, the 'reversion' represents:
Answer: The net proceeds from the property sale at the end of the holding period
The reversion is the lump-sum proceeds received when the property is sold at the end of the projected holding period, discounted back to present value.
Which of the following best describes external (economic) obsolescence in an appraisal context?
Answer: Loss of value from a nearby highway widening that increased traffic noise
External obsolescence arises from factors outside the property boundaries — such as neighborhood decline, nearby nuisances, or adverse economic conditions — and is always incurable.
When comparing two otherwise identical commercial properties, Property A has a lower cap rate than Property B. This indicates that Property A:
Answer: Has a lower perceived risk and commands a higher value
A lower cap rate reflects lower perceived risk and investor willingness to pay more per dollar of income, resulting in a higher property value relative to its NOI.
The gross rent multiplier (GRM) for a residential property is calculated as:
Answer: Sale price divided by gross monthly rental income
The GRM equals the sale price divided by gross monthly rent, providing a quick ratio used to compare residential income properties in a market.
A CGA appraiser identifies a comparable sale that occurred 14 months ago in a market that has appreciated 0.5% per month. What total market conditions adjustment is appropriate?
Answer: 7.0%
0.5% per month × 14 months = 7.0% total market conditions (time) adjustment to bring the older sale to current market levels.
The primary purpose of a feasibility analysis in real estate is to determine whether:
Answer: A proposed development will generate sufficient returns to justify the investment
Feasibility analysis evaluates whether a proposed project's projected returns exceed the required return threshold, justifying the capital investment and associated risk.
In the sales comparison approach, the 'net adjustment' for a comparable is best described as:
Answer: The algebraic sum of all positive and negative adjustments applied to the comparable
The net adjustment is the algebraic (signed) sum of all individual adjustments, reflecting the overall dollar difference after positive and negative adjustments offset each other.