SAEE Market Approach Application 2

Question 1

When applying the market approach, what is the primary basis for estimating a subject property's value?

Accepted Answer

Recent sale prices of comparable properties

Answer

The owner's original purchase price

Answer

The cost to rebuild the structure new

Answer

The property's annual tax assessment

Question 2

An adjustment to a comparable sale is made because the comparable has a feature the subject lacks. The adjustment should be:

Accepted Answer

Subtracted from the comparable's sale price

Answer

Added to the comparable's sale price

Answer

Added to the subject's value

Answer

Ignored as immaterial

Question 3

Which sale would generally NOT qualify as an arm's-length transaction for use as a comparable?

Accepted Answer

A sale between two family members at a discount

Answer

A sale between unrelated buyer and seller

Answer

A sale exposed openly on the market

Answer

A sale at the prevailing market price

Question 4

The principle of substitution underlies the market approach because it holds that:

Accepted Answer

A buyer will pay no more than the cost of an equally desirable substitute

Answer

Value always equals replacement cost

Answer

Older properties are worth less than new ones

Answer

Location has no effect on value

Question 5

When selecting comparable sales, which factor is most important to match closely with the subject?

Accepted Answer

Property type, location, and date of sale

Answer

The listing agent's brokerage

Answer

The lender used by the buyer

Answer

The color of the exterior paint

Question 6

A comparable sold six months ago in a rising market. To account for time, the appraiser applies a:

Accepted Answer

Market conditions (time) adjustment

Answer

Physical depreciation adjustment

Answer

Functional obsolescence adjustment

Answer

Capitalization rate

Question 7

After adjusting several comparables, the appraiser arrives at differing indicated values. The final step is to:

Accepted Answer

Reconcile the indications into a single value opinion

Answer

Average all values automatically

Answer

Choose only the highest value

Answer

Discard all but the lowest comparable