FREE Real Estate Sales Property Valuation and Appraisal Questions and Answers Flashcards

An appraiser identifies outdated plumbing that reduces a home's value. What type of depreciation does this represent?

Answer: Functional obsolescence

Functional obsolescence occurs when a property feature is outdated or poorly designed, reducing the property's desirability and value.

Which appraisal report type provides the most detailed analysis and is typically required for complex or high-value properties?

Answer: Self-contained (narrative) appraisal report

A self-contained or narrative appraisal report includes the most comprehensive detail, analysis, and supporting documentation.

When using the income capitalization approach, which of the following would increase the estimated property value if all other factors remain the same?

Answer: A decrease in the capitalization rate

Since value equals NOI divided by the cap rate, a lower cap rate results in a higher estimated property value.

What is the primary purpose of a Comparative Market Analysis (CMA) prepared by a real estate agent?

Answer: To help sellers set a listing price or buyers make offers

A CMA uses recent comparable sales data to help sellers price their property or buyers determine a fair offer amount.

In an appraisal, what does the term 'highest and best use' refer to?

Answer: The legally permissible, physically possible, financially feasible, and maximally productive use

Highest and best use is defined as the reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive.

Which factor would most likely cause an appraiser to make a negative adjustment to a comparable property in the sales comparison approach?

Answer: The comparable has a swimming pool that the subject does not

When a comparable has a feature the subject lacks, the appraiser subtracts the value of that feature from the comparable's sale price.