SAEE SAEE - Core Valuation Principles Questions and Answers 2

Question 1

Which valuation approach relies on comparing the subject property to similar properties that have recently sold in the same market area?

Accepted Answer

Sales comparison approach

Answer

The sales comparison approach estimates value by analyzing prices of comparable properties that have recently transacted in the market.

Question 2

In the cost approach to valuation, what does 'external obsolescence' refer to?

Accepted Answer

Loss in value due to factors outside the property boundaries

Answer

External obsolescence is a loss in value caused by factors outside the property itself, such as environmental hazards or adverse economic conditions in the area.

Question 3

What is the primary purpose of the principle of substitution in real estate appraisal?

Accepted Answer

To establish that a buyer will not pay more for a property than the cost of an equally desirable alternative

Answer

The principle of substitution holds that a prudent buyer would pay no more for a property than the cost of acquiring an equally desirable substitute property.

Question 4

When applying the income capitalization approach, which formula correctly represents the relationship between value, net operating income, and capitalization rate?

Accepted Answer

Value = NOI / Cap Rate

Answer

The direct capitalization formula divides net operating income by the capitalization rate to arrive at an estimate of property value.

Question 5

Which principle of value states that the maximum value of a property is influenced by the degree of homogeneity present in the surrounding neighborhood?

Accepted Answer

Principle of conformity

Answer

The principle of conformity holds that property values are maximized when land uses in an area are compatible and buildings are similar in design, construction, and age.

SAEE Test Practice Test

SAEE Test Practice Test

SAEE SAEE - Core Valuation Principles Questions and Answers 2