SAEE - Core Valuation Principles Questions and Answers Flashcards
6 cards from real SAEE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 SAEE - Core Valuation Principles Questions and Answers flashcards as text
Which valuation approach relies on comparing the subject property to similar properties that have recently sold in the same market area?
Answer: Sales comparison approach
The sales comparison approach estimates value by analyzing prices of comparable properties that have recently transacted in the market.
In the cost approach to valuation, what does 'external obsolescence' refer to?
Answer: Loss in value due to factors outside the property boundaries
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.
What is the primary purpose of the principle of substitution in real estate appraisal?
Answer: To establish that a buyer will not pay more for a property than the cost of an equally desirable alternative
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.
When applying the income capitalization approach, which formula correctly represents the relationship between value, net operating income, and capitalization rate?
Answer: Value = NOI / Cap Rate
The direct capitalization formula divides net operating income by the capitalization rate to arrive at an estimate of property value.
Which principle of value states that the maximum value of a property is influenced by the degree of homogeneity present in the surrounding neighborhood?
Answer: Principle of conformity
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.
What does the concept of 'highest and best use' require an appraiser to determine?
Answer: The most profitable, legally permissible, physically possible, and financially feasible use of the property
Highest and best use analysis identifies the use that is legally permissible, physically possible, financially feasible, and maximally productive.