Property Valuation Methods & Techniques Flashcards
7 cards from real FHA 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 Valuation Methods & Techniques flashcards as text
When using the income capitalization approach for a single-family residence, what is the most common method FHA appraisers use to estimate market rent?
Answer: Gross rent multiplier analysis
The gross rent multiplier (GRM) is the standard method for single-family residences because it is simple, market-derived, and appropriate for properties where investors typically think in terms of rent multiples rather than cap rates.
In the sales comparison approach, a comparable sale requires a negative dollar adjustment for a feature it has that the subject property lacks. This means the comparable is:
Answer: Superior to the subject in that feature
When a comparable is superior to the subject, it sold for more because of that feature, so you subtract value from the comparable to make it equal to the subject.
Under FHA guidelines, which cost approach method typically yields the most reliable replacement cost estimate for a standard residential property?
Answer: Comparative unit method (square-foot method)
The comparative unit (square-foot) method is most commonly used for residential appraisals because it is practical, market-derived, and supported by published cost services such as Marshall & Swift.
An appraiser estimates accrued depreciation using the age-life method. The effective age is 10 years and the total economic life is 50 years. What percentage of depreciation has accrued?
Answer: 20%
Accrued depreciation under the age-life method = effective age ÷ total economic life = 10 ÷ 50 = 20%.
Which type of depreciation is considered incurable when the cost to cure exceeds the value added by curing the item?
Answer: Physical deterioration — incurable long-lived
Incurable physical deterioration refers to long-lived structural components where the cost to cure exceeds the contributory value gained, making repair economically unsound.
In paired sales analysis, an appraiser isolates the value contribution of a garage by comparing two otherwise identical sales. Sale A (no garage) sold for $280,000 and Sale B (one-car garage) sold for $295,000. What is the indicated garage adjustment?
Answer: +$15,000
The indicated value contribution of the garage is the difference between the two paired sales: $295,000 − $280,000 = $15,000.
When reconciling value indications in an FHA appraisal, which approach typically receives the greatest weight for owner-occupied single-family properties?
Answer: Sales comparison approach
The sales comparison approach receives the greatest weight for owner-occupied residences because buyers and sellers in that market segment primarily rely on comparable sale prices.