IACP Appraisal Methodology & Techniques 3

Question 1

When a property's highest and best use 'as improved' differs from its highest and best use 'as vacant,' the appraiser should:

Accepted Answer

Consider whether the existing improvement contributes value or represents a demolition cost

Answer

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.

Question 2

Which approach to value is generally given the most weight when appraising a special-purpose property with no comparable sales?

Accepted Answer

Cost approach

Answer

For special-purpose properties such as churches or schools, where sales and income data are scarce, the cost approach typically receives the greatest weight.

Question 3

What does the term 'excess land' mean in appraisal?

Accepted Answer

Land beyond what is needed to support the property's highest and best use that can be sold separately

Answer

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.

Question 4

In discounted cash flow (DCF) analysis, the 'terminal value' (reversion) is typically estimated by:

Accepted Answer

Capitalizing the projected NOI at the end of the holding period using a terminal cap rate

Answer

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.

Question 5

The principle of substitution states that:

Accepted Answer

A buyer will pay no more for a property than the cost of acquiring an equally desirable substitute

Answer

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.

(IACP) Independent Appraisers Certification Program Practice Test

(IACP) Independent Appraisers Certification Program Practice Test

IACP Appraisal Methodology & Techniques 3