Property Evaluation & Analysis 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 Property Evaluation & Analysis flashcards as text
Which highest and best use test requires that a proposed use must be legally permissible, physically possible, financially feasible, and:
Answer: Maximally productive
The four tests of highest and best use are: legally permissible, physically possible, financially feasible, and maximally productive.
When appraising a property with an existing lease below market rent, the income approach typically recognizes:
Answer: Leased fee value, which reflects the contract rent and the reversion
A below-market lease creates a leased fee interest, valued by discounting contract rent over the lease term plus the reversionary value at lease expiration.
Which of the following is an example of external (economic) obsolescence?
Answer: A decline in property values caused by a new freeway built adjacent to a residential neighborhood
External obsolescence arises from factors outside the property, such as nearby nuisances, zoning changes, or economic conditions, and is generally incurable by the property owner.
The discounted cash flow (DCF) analysis is most useful when:
Answer: Income or expenses are expected to change significantly over the holding period
DCF is preferred when cash flows are irregular or expected to change over time, as it explicitly models each period's income and the terminal value.
In site valuation using the land residual method, land value is found by:
Answer: Capitalizing the income attributable to the land after deducting the return on and of improvements
The land residual method attributes income to the building first (return on and of building value), then capitalizes the residual income as land value.
An appraisal performed for a federally related transaction must comply with:
Answer: USPAP and the federal financial institution regulatory agencies' appraisal regulations
Federally related transactions require compliance with USPAP and the appraisal regulations issued by federal financial institution regulatory agencies such as the OCC, FDIC, and Federal Reserve.
The concept of 'regression' in real estate appraisal theory suggests that:
Answer: A higher-valued property is negatively affected by association with lower-valued properties
The principle of regression holds that an above-average property placed among inferior properties will tend to decline in value toward the level of the lesser properties.