Property Valuation & Appraisal Flashcards

How does Basic Allowance for Housing (BAH) relate to property valuation in military relocation markets?

Answer: BAH rates reflect the median rental cost of the area and can indicate local housing demand and affordability

BAH rates are based on local median rental costs and housing data, making them a useful indicator of housing demand and affordability in military markets.

What does 'highest and best use' mean in property appraisal?

Answer: The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive

Highest and best use is the use that produces the greatest value for a property while meeting the four tests: legally permissible, physically possible, financially feasible, and maximally productive.

What is 'external obsolescence' in real estate appraisal, and how might it affect properties near military bases?

Answer: Loss in value caused by negative factors outside the property boundaries, such as base closure announcements

External obsolescence is a loss in value caused by factors outside the property, and base closure announcements or neighborhood decline can cause it in military markets.

A VA appraiser finds a property with a non-working HVAC system. Under VA Minimum Property Requirements, what is the most likely outcome?

Answer: The appraiser will require the HVAC system to be repaired or replaced as a condition of value

VA MPRs require that all mechanical systems including HVAC be in proper working order, so the appraiser will condition the NOV on repair or replacement.

When using the income approach for a single-family home, what is the Gross Rent Multiplier (GRM) calculated from?

Answer: The sale price of comparable properties divided by their monthly or annual gross rent

The GRM is derived by dividing the sale prices of comparable rental properties by their gross monthly or annual rent, then applying that multiplier to the subject's rent to estimate value.

In a military relocation context, why might an appraiser encounter difficulty finding truly comparable sales?

Answer: Rapid military-driven market turnover can create thin inventory with few truly similar recent sales

Military markets can have concentrated buying and selling seasons driven by PCS cycles, leading to limited inventory and fewer recent comparable sales in some periods.

What happens if a veteran disagrees with a VA appraisal value and believes it is too low?

Answer: The veteran or lender can request a Reconsideration of Value (ROV) with supporting data

A Reconsideration of Value (ROV) can be requested by submitting additional comparable sales data or evidence of errors to the VA for review.