CRPA Relocation Appraisal Methodology & Terminology 3 — Questions and Answers
Question 1: In relocation appraisal terminology, 'cash equivalency' means:
- The property must be purchased with all-cash financing
- Adjusting comparable sales to reflect what the price would have been with typical market financing (Correct answer)
- Valuing only the liquid assets of the transferred employee
- Converting the appraised value to foreign currency for international transfers
Correct answer: Adjusting comparable sales to reflect what the price would have been with typical market financing
Cash equivalency converts sale prices with atypical financing (e.g., seller buy-downs) to equivalent cash prices reflecting normal market terms.
Question 2: Which of the following statements about the 'anticipated selling price' in a relocation appraisal is correct?
- It equals the assessed value set by the county
- It is the price the appraiser forecasts the property will sell for within normal marketing time (Correct answer)
- It is determined solely by the employer's relocation policy
- It must match the lowest comparable sale in the report
Correct answer: It is the price the appraiser forecasts the property will sell for within normal marketing time
The anticipated selling price is the appraiser's forecast of the most probable selling price achievable within the estimated normal marketing time.
Question 3: When analyzing market conditions in a relocation appraisal, an appraiser should examine all of the following EXCEPT:
- Supply and demand trends
- Absorption rates for similar properties
- The transferee's personal credit score (Correct answer)
- Days on market for comparable sales
Correct answer: The transferee's personal credit score
The transferee's personal credit score is irrelevant to market condition analysis; appraisers focus on property market dynamics.
Question 4: A 'gross adjustment' in a sales comparison approach is best described as:
- The net dollar amount after all upward and downward adjustments are summed
- The total of all individual adjustment amounts without regard to sign (positive or negative) (Correct answer)
- Only the upward adjustments made to comparables
- The adjustment applied to the subject property's list price
Correct answer: The total of all individual adjustment amounts without regard to sign (positive or negative)
Gross adjustment is the sum of the absolute values of all adjustments, indicating total adjustment magnitude regardless of direction.
Question 5: Under ERC guidelines, which situation would most likely require the appraiser to obtain a second independent appraisal?
- The subject property has a pool in a warm-weather market
- The two required appraisals differ by more than 5% in value conclusion (Correct answer)
- The property has been recently renovated
- The transferee disagrees with the first appraisal
Correct answer: The two required appraisals differ by more than 5% in value conclusion
When two appraisals differ by more than 5%, ERC guidelines typically call for a third independent appraisal or review to resolve the discrepancy.
Question 6: The term 'functional obsolescence' in a relocation appraisal context refers to:
- Physical deterioration of the roof or foundation
- A loss in value due to deficiencies or superadequacies in the property's design or features (Correct answer)
- Depreciation caused by nearby land uses like highways or industrial sites
- Declining values due to overall neighborhood deterioration
Correct answer: A loss in value due to deficiencies or superadequacies in the property's design or features
Functional obsolescence results from outmoded or inadequate features (deficiencies) or over-improvements (superadequacies) relative to market standards.
Question 7: Which factor is most critical when selecting comparable sales for a relocation appraisal in a rural or low-density market?
- Sales must be within 0.25 miles of the subject
- Sales must have occurred within the last 30 days
- A wider geographic radius and longer time frame may be necessary due to limited data (Correct answer)
- Only new construction sales should be used
Correct answer: A wider geographic radius and longer time frame may be necessary due to limited data
In rural markets with limited sales activity, appraisers may expand the search area and time frame while explaining why broader parameters were necessary.
CRPA Relocation Appraisal Methodology & Terminology 3
In relocation appraisal terminology, 'cash equivalency' means: