Valuation & Appraisal Flashcards
6 cards from real Real Estate practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Valuation & Appraisal flashcards as text
The three standard approaches to value used by appraisers are:
Answer: Sales comparison, cost, and income
Appraisers use the sales comparison approach, cost approach, and income approach, weighting each based on the property type and available data.
The sales comparison approach estimates value primarily by:
Answer: Comparing the subject property to recently sold similar properties
The sales comparison approach adjusts the sale prices of comparable properties for differences to arrive at an indicated value for the subject property.
Market value is defined as the most probable price a property would sell for:
Answer: In an arm's-length transaction between informed and willing parties
Market value assumes an arm's-length transaction with a willing buyer and seller, adequate time on the market, and no undue pressure on either party.
In the sales comparison approach, if a comparable sold for more than the subject because it has a pool, the appraiser would make a:
Answer: Negative adjustment to the comparable
When the comparable is superior to the subject (has a feature the subject lacks), a downward (negative) adjustment is made to the comparable's sale price.
The principle of substitution states that a buyer will pay no more for a property than the cost of:
Answer: An equally desirable substitute property
The principle of substitution holds that value is set by the price of acquiring an equally desirable alternative, forming the basis of the sales comparison approach.
Which type of depreciation in real estate refers to a loss in value from external factors outside the property?
Answer: Economic (external) obsolescence
Economic obsolescence (external obsolescence) results from factors outside the property such as a nearby factory, declining neighborhood, or zoning changes.