IACP Market Analysis & Property Valuation 2 — Questions and Answers
Question 1: Which statistical measure best indicates the degree of price dispersion around the mean sale price in a market area?
- Median
- Standard deviation (Correct answer)
- Mode
- Range
Correct answer: Standard deviation
Standard deviation measures how widely individual sale prices are dispersed around the mean, making it the best indicator of price variability.
Question 2: In a declining market, an appraiser should give MOST weight to which comparable sales?
- Oldest sales closest to the subject
- Most recent sales regardless of location (Correct answer)
- Sales with the highest prices
- Sales from peak market conditions
Correct answer: Most recent sales regardless of location
In a declining market, the most recent sales best reflect current market conditions and should receive the greatest weight.
Question 3: The principle stating that value is created and maintained when land uses in an area are compatible with each other is known as:
- Progression
- Conformity (Correct answer)
- Contribution
- Substitution
Correct answer: Conformity
The principle of conformity holds that maximum value is achieved when land uses in an area are compatible and harmonious.
Question 4: A property sold for $350,000 and the gross rent multiplier in the area is 140. What is the estimated monthly rent?
- $2,000
- $2,500 (Correct answer)
- $3,500
- $4,900
Correct answer: $2,500
$350,000 ÷ 140 = $2,500 estimated monthly rent using the gross rent multiplier.
Question 5: When analyzing a market, which factor would MOST indicate an emerging buyer's market?
- Declining days on market
- Increasing absorption rates
- Rising listing-to-sale price ratios
- Increasing months of supply (Correct answer)
Correct answer: Increasing months of supply
Increasing months of supply means more inventory relative to demand, which signals a shift toward buyer's market conditions.
Question 6: Which valuation approach is MOST appropriate for a special-purpose property that rarely sells on the open market?
- Sales comparison approach
- Income capitalization approach
- Cost approach (Correct answer)
- Gross rent multiplier approach
Correct answer: Cost approach
The cost approach is most appropriate for special-purpose properties because comparable sales and income data are typically unavailable for these unique properties.
Question 7: The paired sales analysis technique is used primarily to:
- Estimate depreciation on improvements
- Extract market adjustments for specific property features (Correct answer)
- Calculate capitalization rates
- Determine land-to-building value ratios
Correct answer: Extract market adjustments for specific property features
Paired sales analysis isolates the effect of a single feature by comparing otherwise similar properties, allowing the appraiser to extract a market-supported adjustment.
IACP Market Analysis & Property Valuation 2
Which statistical measure best indicates the degree of price dispersion around the mean sale price in a market area?