Sales Comparison Approach 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 Sales Comparison Approach flashcards as text
An 'absolute adjustment' in the sales comparison approach differs from a 'percentage adjustment' in that it:
Answer: Is a fixed dollar amount regardless of the comparable's sale price
An absolute (dollar) adjustment is a fixed amount applied to each comparable, while a percentage adjustment scales with the comparable's price.
When using the sales comparison approach for income-producing properties, an appraiser may supplement price-per-SF analysis with:
Answer: Price per unit or effective gross income multiplier comparisons
For income properties, units-of-comparison such as price per unit and GIM/GRM relate sale prices to income-producing capacity, providing additional market support.
A deed restriction limiting the subject property to residential use only, while most comparables have no such restriction, would call for a:
Answer: Negative (downward) adjustment to the comparables
An encumbrance limiting the subject's utility makes it less valuable than unrestricted comparables, requiring a downward adjustment to the comparables.
The principle of substitution, which underlies the sales comparison approach, states that:
Answer: A buyer will pay no more for a property than the cost of acquiring an equally desirable substitute
Substitution holds that a rational buyer will pay no more for a property than the cost of an equally desirable alternative, setting an upper limit on value.
A sale between a corporation and its wholly-owned subsidiary would be classified as:
Answer: A non-arm's-length transaction requiring exclusion or adjustment
Related-party transactions lack the independence required for arm's-length status and may not reflect market value, disqualifying them as direct comparables.
What does 'cash equivalency' adjustment accomplish in the sales comparison approach?
Answer: Removes the value effect of non-market financing to reflect what the property would sell for with cash or market-rate financing
Cash equivalency adjustment strips out the price premium caused by below-market financing, yielding a price as if the transaction were all-cash.
Which data source is generally considered MOST reliable for verifying a comparable sale?
Answer: Direct conversation with the buyer, seller, or their agents
First-hand verification from a party to the transaction — buyer, seller, broker, or closing agent — provides the most accurate information about conditions and concessions.