Property Valuation & Appraisal Methods Flashcards
7 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Valuation & Appraisal Methods flashcards as text
Which technique directly capitalizes a single year's stabilized NOI into a value estimate without projecting multi-year cash flows?
Answer: Direct Capitalization
Direct capitalization converts a single period's income estimate into value using a market-derived overall cap rate.
In a paired sales analysis, an appraiser isolates the value contribution of a single feature by:
Answer: Comparing two sales that are identical except for the feature being studied
Paired sales analysis matches two comparable properties differing only in the feature being measured to isolate that feature's market value contribution.
A property's 'market value' as defined under standard appraisal practice assumes all of the following EXCEPT:
Answer: The transaction is between related parties with no arm's-length conditions
Market value requires an arm's-length transaction between unrelated, knowledgeable parties—related-party dealings violate this fundamental assumption.
The 'equity dividend rate' (cash-on-cash return) is calculated as:
Answer: Before-Tax Cash Flow ÷ Equity Investment
The equity dividend rate measures the annual pre-tax cash return relative to the equity invested, not total property value.
Which zoning concept allows a non-conforming use to continue legally even though it violates current zoning regulations because it predates them?
Answer: Legal nonconforming use (grandfathered use)
A legal nonconforming use is permitted to continue because it existed lawfully before new zoning restrictions were enacted.
An appraiser finding a subject property's highest and best use requires the use to meet which four criteria?
Answer: Legal, physical, financial, and maximally productive
Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.
When an appraiser uses the 'income residual' technique for land valuation, what is being treated as the known quantity?
Answer: The income attributable to the improvements
In the land residual technique, the return required by improvements is deducted first, and the remaining (residual) income is capitalized to derive land value.