MRP Property Valuation & Appraisal 3 — Questions and Answers
Question 1: In the sales comparison approach, what adjustment is made when a comparable property has a feature that the subject property LACKS?
- A positive adjustment is added to the comparable's sale price (Correct answer)
- A negative adjustment is subtracted from the comparable's sale price
- No adjustment is needed if the feature is minor
- The comparable is disqualified from use
Correct answer: A positive adjustment is added to the comparable's sale price
When a comparable has a superior feature that the subject lacks, a positive adjustment is added to the comparable to make it more like the inferior subject property.
Question 2: What is 'market conditions adjustment' (also called 'time adjustment') in the appraisal process?
- Adjusting for seasonal listing patterns in military markets
- Correcting comparable sale prices to reflect changes in market conditions between the sale date and the effective appraisal date (Correct answer)
- Averaging the appraised values from multiple appraisers
- Adjusting for interest rate differences between the comp sale date and today
Correct answer: Correcting comparable sale prices to reflect changes in market conditions between the sale date and the effective appraisal date
A market conditions adjustment corrects for the fact that property values may have changed between when a comparable sold and the current effective date of the appraisal.
Question 3: What is the primary reason VA appraisers are assigned by the VA rather than selected by the lender?
- VA appraisers work for free as a government benefit
- Independence ensures the appraiser is not pressured by parties with financial interest in the transaction (Correct answer)
- VA-assigned appraisers complete appraisals faster than private appraisers
- It reduces appraisal costs for the veteran buyer
Correct answer: Independence ensures the appraiser is not pressured by parties with financial interest in the transaction
VA appraisers are assigned by the VA to maintain independence and prevent lenders or real estate agents from pressuring the appraiser toward a predetermined value.
Question 4: In areas near military installations, what market factor may cause property values to fluctuate significantly?
- Changes in VA loan limits only
- BRAC (Base Realignment and Closure) announcements (Correct answer)
- Annual BAH rate adjustments
- Military uniform allowance changes
Correct answer: BRAC (Base Realignment and Closure) announcements
BRAC announcements can dramatically affect local real estate markets by signaling base closures (depressing values) or expansions (boosting values) near military installations.
Question 5: Which of the following best describes 'functional obsolescence' in property appraisal?
- Physical wear and tear on the roof and foundation
- A loss in value due to a deficiency or superadequacy in the property's design or layout (Correct answer)
- Declining property values caused by nearby industrial development
- The reduction in value as a property ages over time
Correct answer: A loss in value due to a deficiency or superadequacy in the property's design or layout
Functional obsolescence is a loss in value resulting from outmoded or unacceptable property features such as poor floor plans, outdated kitchens, or inadequate electrical systems.
Question 6: When appraising a property on or near a military installation, what unique consideration may an appraiser need to address?
- The property must be appraised by an active-duty military officer
- Deed restrictions, easements, or noise zones from military operations may affect value (Correct answer)
- Properties near bases are automatically valued 10% higher than comparable civilian areas
- VA appraisers are prohibited from using off-base comparables
Correct answer: Deed restrictions, easements, or noise zones from military operations may affect value
Properties near military installations may be subject to noise zones, accident potential zones, or deed restrictions that can affect marketability and value.
Question 7: What is the purpose of the 'reconciliation' step at the end of the appraisal process?
- To negotiate the final value between the appraiser and lender
- To weigh the results of the approaches used and arrive at a single final value opinion (Correct answer)
- To verify the property's title is clear of encumbrances
- To confirm the buyer's financial qualification for the loan amount
Correct answer: To weigh the results of the approaches used and arrive at a single final value opinion
Reconciliation is the final step where the appraiser weighs the reliability of each approach used and arrives at a single, supportable opinion of value.
MRP Property Valuation & Appraisal 3
In the sales comparison approach, what adjustment is made when a comparable property has a feature that the subject property LACKS?