Property Valuation & Market Analysis Flashcards
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Read the first 7 Property Valuation & Market Analysis flashcards as text
Which adjustment is made in the sales comparison approach when a comparable property has a feature that the subject property lacks?
Answer: A negative adjustment to the comparable
When a comparable has a superior feature the subject lacks, a negative adjustment is applied to the comparable's sale price to account for the difference.
What does a capitalization rate (cap rate) primarily measure in income-producing property analysis?
Answer: The ratio of net operating income to property value
The cap rate equals Net Operating Income divided by property value, expressing the rate of return an investor expects from an income-producing property.
A neighborhood that is transitioning from residential to commercial use is said to be in which stage of its life cycle?
Answer: Decline
A neighborhood undergoing transition from residential to commercial use typically reflects the decline stage, where original land uses are being replaced.
In an appraisal, 'effective age' differs from 'actual age' because it reflects:
Answer: The condition and utility of the structure relative to its peers
Effective age reflects how old a property appears based on its condition and maintenance, which may be more or less than its chronological actual age.
Which type of depreciation is considered incurable when the cost to cure exceeds the value added?
Answer: Physical deterioration — long-lived
Long-lived physical deterioration affecting the entire structure is typically incurable because the cost to correct it would exceed the value gain.
When performing a competitive market analysis (CMA), which property type should be weighted most heavily?
Answer: Recently closed sales of similar properties
Recently closed sales provide actual transacted market evidence and are the most reliable indicator of current market value in a CMA.
Regression and progression are principles that describe how:
Answer: A property's value is influenced by surrounding properties of different values
Regression holds that a superior property surrounded by inferior ones loses value, while progression holds that an inferior property surrounded by superior ones gains value.
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