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
A property's estimated reproduction cost new is $320,000 and total accrued depreciation is $64,000. The site value is $45,000. What is the indicated value via the cost approach?
Answer: $301,000
Cost approach value = (Reproduction cost new − Accrued depreciation) + Site value = ($320,000 − $64,000) + $45,000 = $301,000.
External obsolescence caused by proximity to a busy highway is best described as:
Answer: Locational obsolescence — incurable
Proximity to a negative external influence such as a highway is locational (external) obsolescence and is virtually always incurable because the appraiser cannot move the property.
Which adjustment in the sales comparison approach accounts for the fact that a comparable sale occurred 18 months ago in a rising market?
Answer: Market conditions (time) adjustment
A market conditions (time) adjustment is applied to account for price changes between the date of a comparable sale and the effective date of the appraisal.
The gross rent multiplier for a property is calculated as:
Answer: Sale price ÷ monthly gross rent
GRM = Sale price ÷ Monthly gross rent; it expresses how many months of gross rent equal the property's sale price.
Under the income approach, if a property generates an annual NOI of $18,000 and the market capitalization rate is 6%, what is the indicated value?
Answer: $300,000
Value = NOI ÷ Cap rate = $18,000 ÷ 0.06 = $300,000.
When selecting comparable sales for an FHA appraisal, the MOST important criterion is that the comparables reflect:
Answer: Arm's-length transactions in the subject's competitive market
Comparables must be arm's-length transactions (not distressed, related-party, or forced sales) within the same competitive market area as the subject.
Which term describes the loss in value due to an oversized floor plan that does not meet current market preferences?
Answer: Functional obsolescence — superadequacy
A superadequacy is a feature that exceeds what the market demands, such as an oversized floor plan, and results in functional obsolescence because the excess cost is not recovered in market value.