Appraisal Methodology & Techniques Flashcards
7 cards from real IACP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Appraisal Methodology & Techniques flashcards as text
When a property's highest and best use 'as improved' differs from its highest and best use 'as vacant,' the appraiser should:
Answer: Consider whether the existing improvement contributes value or represents a demolition cost
When as-improved and as-vacant HBU differ, the appraiser must determine whether the improvement adds value or whether demolition and redevelopment would yield a higher value.
Which approach to value is generally given the most weight when appraising a special-purpose property with no comparable sales?
Answer: Cost approach
For special-purpose properties such as churches or schools, where sales and income data are scarce, the cost approach typically receives the greatest weight.
What does the term 'excess land' mean in appraisal?
Answer: Land beyond what is needed to support the property's highest and best use that can be sold separately
Excess land is the portion of a site beyond what is needed for the existing or planned improvement and may have potential for separate sale or development.
In discounted cash flow (DCF) analysis, the 'terminal value' (reversion) is typically estimated by:
Answer: Capitalizing the projected NOI at the end of the holding period using a terminal cap rate
The reversion (terminal value) in DCF analysis is most commonly estimated by capitalizing the projected NOI in the year following the holding period using a terminal (going-out) capitalization rate.
The principle of substitution states that:
Answer: A buyer will pay no more for a property than the cost of acquiring an equally desirable substitute
The principle of substitution holds that a rational buyer will not pay more for a property than the cost of obtaining a comparable substitute, forming the theoretical basis for all three valuation approaches.
When selecting comparable sales, which factor is considered MOST critical by appraisers following USPAP standards?
Answer: Sales that reflect the same property rights being appraised
Comparable sales must convey the same property rights (e.g., fee simple vs. leased fee) as those being appraised to ensure a valid comparison.
What is 'functional obsolescence caused by a superadequacy'?
Answer: An over-improvement whose cost exceeds its contribution to market value
A superadequacy occurs when a feature is excessive relative to market demand (e.g., a gold-plated faucet in a modest home), causing a loss in value because its cost exceeds its market contribution.