Property Appraisal and Valuation Flashcards
7 cards from real CMC 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 Appraisal and Valuation flashcards as text
The sales comparison approach to value is MOST appropriate for which type of property?
Answer: Single-family residential properties in active markets with sufficient comparable sales
The sales comparison approach is most reliable for single-family homes in active markets where sufficient recent, comparable sales data is readily available to support the analysis.
In the cost approach to appraisal, which of the following correctly describes 'depreciation'?
Answer: The total loss in value from any cause, including physical deterioration, functional obsolescence, and external obsolescence
In the cost approach, depreciation represents the total loss in value from all causes: physical deterioration (wear and tear), functional obsolescence (outdated features), and external obsolescence (outside factors beyond the owner's control).
What is 'functional obsolescence' in property appraisal?
Answer: Loss in value due to outdated, inadequate, or superadequate features within the property itself
Functional obsolescence is a loss in value resulting from deficiencies or superadequacies within the property, such as outdated floor plans, inadequate electrical capacity, or features no longer desired by the current market.
In the income approach to property valuation, what is the capitalization rate (cap rate) used to determine?
Answer: The ratio of net operating income to property value, used to convert income into a value estimate
The capitalization rate is the ratio of a property's net operating income to its value, and is used in the income approach to directly convert a property's stabilized income stream into an estimate of present value.
What is a 'comparable sale' (comp) in the sales comparison approach?
Answer: A recently sold property with characteristics similar to the subject that is used as a value benchmark
Comparable sales are recently sold properties with similar characteristics to the subject property; appraisers adjust for differences between each comp and the subject to support a credible value conclusion.
When applying adjustments in the sales comparison approach, which situation requires a POSITIVE (upward) adjustment to the comparable's sale price?
Answer: When the comparable is inferior to the subject property in a given feature
A positive adjustment is applied to a comparable's price when the comparable is inferior to the subject in a feature, reflecting what the comp would have sold for had it possessed that feature like the subject does.
What is 'external obsolescence' in the cost approach to appraisal?
Answer: Loss in value caused by factors outside the property's boundaries, such as neighborhood decline or nearby nuisances
External obsolescence is a loss in value caused by factors outside the property's boundaries, such as proximity to a landfill, airport noise, economic decline in the area, or other adverse conditions the owner cannot control or cure.