CMC Property Appraisal and Valuation 2

Question 1

The sales comparison approach to value is MOST appropriate for which type of property?

Accepted Answer

Single-family residential properties in active markets with sufficient comparable sales

Answer

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.

Question 2

In the cost approach to appraisal, which of the following correctly describes 'depreciation'?

Accepted Answer

The total loss in value from any cause, including physical deterioration, functional obsolescence, and external obsolescence

Answer

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represents the total loss in value from all causes: physical deterioration (wear and tear), functional obsolescence (outdated features), and external obsolescence (outside factors beyond the owner's control).

Question 3

What is 'functional obsolescence' in property appraisal?

Accepted Answer

Loss in value due to outdated, inadequate, or superadequate features within the property itself

Answer

Functional obsolescence is a loss in value resulting from deficiencies or superadequacies within the property, such as outdated floor plans, inadequate electrical capacity, or features no longer desired by the current market.

Question 4

In the income approach to property valuation, what is the capitalization rate (cap rate) used to determine?

Accepted Answer

The ratio of net operating income to property value, used to convert income into a value estimate

Answer

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.

Question 5

What is a 'comparable sale' (comp) in the sales comparison approach?

Accepted Answer

A recently sold property with characteristics similar to the subject that is used as a value benchmark

Answer

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.

(CMC) Certified Mortgage Consultant Practice Test

(CMC) Certified Mortgage Consultant Practice Test

CMC Property Appraisal and Valuation 2