Property Valuation & Market Analysis Flashcards
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Read the first 7 Property Valuation & Market Analysis flashcards as text
Which principle states that value is created when a property is in its best possible use that is legally permissible, physically possible, financially feasible, and maximally productive?
Answer: Principle of highest and best use
Highest and best use is the use that meets all four criteria and produces the greatest net return, forming the foundation of every appraisal.
When an appraiser reconciles multiple value indicators, which approach is typically given the most weight for a single-family residence?
Answer: Sales comparison approach
The sales comparison approach is typically weighted most heavily for residential properties because it directly reflects actual buyer and seller behavior in the market.
A property's list price is $350,000 and it ultimately sells for $336,000. What is the sale-to-list ratio?
Answer: 96%
$336,000 ÷ $350,000 = 0.96 or 96%, indicating the buyer negotiated a 4% discount from list price.
External obsolescence differs from functional obsolescence primarily because external obsolescence:
Answer: Originates from factors outside the property boundaries
External obsolescence stems from neighborhood, economic, or environmental factors beyond the property's boundaries and is almost always incurable by the property owner.
In a declining market, what adjustment should comparable sales from six months ago typically receive?
Answer: A negative time adjustment to reflect today's lower values
In a declining market, older comparable sales need a negative time adjustment because values have decreased since those sales occurred.
Which factor would most likely cause a property to be under-improved relative to its site?
Answer: A modest starter home on a large commercial-zoned parcel
An under-improvement exists when the land's potential value (especially if commercially zoned) far exceeds the contribution of the existing modest structure.
A square foot price of $185 is derived from sales of comparable office buildings. An appraiser values a 4,000 sq ft subject building using this metric. What is the indicated value?
Answer: $740,000
$185 × 4,000 sq ft = $740,000 as the indicated value using price per square foot analysis.
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