CGA Market Analysis & Valuation 2

Question 1

In a market analysis, which condition must be present for a sale to qualify as an arm's-length transaction?

Accepted Answer

Both parties act in their own best interests without undue pressure

Answer

An arm's-length transaction requires both parties to be independent, knowledgeable, and acting in their own best interests without compulsion.

Question 2

Which adjustment in the sales comparison approach compensates for a comparable property having a superior feature compared to the subject?

Accepted Answer

A negative adjustment to the comparable

Answer

When a comparable is superior to the subject, a negative adjustment is made to the comparable's sale price to reflect what it would have sold for without that superior feature.

Question 3

The principle of substitution states that a rational buyer will pay no more for a property than:

Accepted Answer

The cost to acquire an equally desirable substitute

Answer

The substitution principle holds that a buyer will not pay more for a property than the cost of acquiring an equally desirable alternative in the marketplace.

Question 4

When analyzing market conditions over time, a paired sales analysis is BEST used to isolate:

Accepted Answer

Time adjustments reflecting market appreciation or depreciation

Answer

Paired sales analysis compares sales of the same or very similar properties at different points in time to isolate and quantify market condition (time) adjustments.

Question 5

In a residential market analysis, 'effective demand' differs from 'potential demand' in that effective demand requires:

Accepted Answer

Both the desire and the financial ability to purchase

Answer

Effective demand combines purchasing desire with financial ability, distinguishing actual market participants from those who merely want but cannot afford the property.

(CGA) Certified General Appraiser Practice Test

(CGA) Certified General Appraiser Practice Test

CGA Market Analysis & Valuation 2