SAEE - Market Approach Application Questions and Answers Flashcards
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Read the first 7 SAEE - Market Approach Application Questions and Answers flashcards as text
An appraiser calculates a gross adjustment of 28% and a net adjustment of 5% on a comparable. What does this indicate?
Answer: Large positive and negative adjustments are offsetting each other, reducing reliability
High gross adjustments relative to net adjustments signal that large positive and negative items are canceling out, which reduces the reliability of the comparable.
The Gross Rent Multiplier (GRM) is calculated as:
Answer: Sale Price ÷ Monthly Gross Rent
GRM = Sale Price ÷ Monthly Gross Rent; it is a quick market-derived ratio used as a check in the sales comparison approach for residential income properties.
When selecting comparables for a single-family residence, which factor has the HIGHEST priority?
Answer: Similarity of location and neighborhood
Location is paramount in real estate value; a geographically similar comp in the same neighborhood is more reliable than a time-similar comp in a different area.
A comparable sold for $350,000 and required $15,000 in deferred maintenance that a typical buyer would cure. The subject is in average condition. The appropriate adjustment to the comparable is:
Answer: +$15,000
The comparable is inferior due to deferred maintenance, so a positive $15,000 adjustment brings it up to the subject's average condition.
An appraiser is valuing a lakefront property. Which type of adjustment is MOST appropriate for the lake frontage feature?
Answer: A dollar adjustment derived from paired sales near the subject lake
Paired sales from the same lake most accurately capture local market reaction to that specific water frontage attribute.
Which of the following best describes an 'arm's length transaction' in the context of the sales comparison approach?
Answer: A sale between knowledgeable, unrelated parties acting in their own best interests without undue pressure
Arm's length transactions reflect open-market conditions and are suitable for use as comparables; non-arm's length sales require adjustment or exclusion.
A subject property has 2,000 sq ft. Comparable A has 1,800 sq ft and sold for $360,000. If the market indicates a value of $50/sq ft for size differences, what is the adjusted sale price of Comparable A?
Answer: $370,000
Comparable A is inferior by 200 sq ft; add 200 × $50 = $10,000, so $360,000 + $10,000 = $370,000.