CMA Property Valuation and Appraisal 2 — Questions and Answers
Question 1: What is an Automated Valuation Model (AVM)?
- A manual appraisal process using spreadsheets
- A software-based property value estimate using statistical modeling and public data (Correct answer)
- A government-issued property assessment
- An appraisal performed by a licensed AI appraiser
Correct answer: A software-based property value estimate using statistical modeling and public data
AVMs use algorithms, comparable sales, and public records to generate a property value estimate without a physical inspection.
Question 2: Which appraisal approach is most commonly used for income-producing properties such as apartment buildings?
- Sales comparison approach
- Cost approach
- Income capitalization approach (Correct answer)
- Assessed value approach
Correct answer: Income capitalization approach
The income capitalization approach values a property based on the net operating income it generates, making it ideal for investment properties.
Question 3: What term describes an appraisal that comes in lower than the agreed purchase price?
- Short appraisal
- Low appraisal
- Appraisal gap (Correct answer)
- Value shortfall
Correct answer: Appraisal gap
An appraisal gap occurs when the appraised value is less than the purchase price, potentially requiring renegotiation or additional borrower funds.
Question 4: What is 'adjusting for comparables' in the sales comparison approach?
- Averaging all comparable sale prices
- Adding or subtracting dollar amounts to account for differences between the subject property and comparable sales (Correct answer)
- Applying a cap rate to net income
- Estimating depreciation on the structure
Correct answer: Adding or subtracting dollar amounts to account for differences between the subject property and comparable sales
Appraisers adjust comparable sale prices upward or downward to account for differences in features like size, condition, or amenities.
Question 5: Which form is the standard Fannie Mae appraisal report for single-family residential properties?
- Form 1003
- Form 1004 (Correct answer)
- Form 1008
- Form 1005
Correct answer: Form 1004
Fannie Mae Form 1004 (Uniform Residential Appraisal Report) is the standard form used for appraisals of single-family properties.
Question 6: What does 'functional obsolescence' mean in property appraisal?
- Physical deterioration due to age and wear
- Loss of value due to features that are outdated or no longer desirable (Correct answer)
- External factors reducing property value
- The remaining useful life of improvements
Correct answer: Loss of value due to features that are outdated or no longer desirable
Functional obsolescence refers to a loss of value caused by outdated design, layout, or features that no longer meet current market standards.
CMA Property Valuation and Appraisal 2
What is an Automated Valuation Model (AVM)?