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 market approach derives value from the recent sale prices of similar, competing properties.

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

If the comparable is superior, its price is adjusted downward to reflect the subject.

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

Sales between related parties are not arm's-length and may not reflect true market value.

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

Substitution states a buyer pays no more than an equally desirable alternative would cost.

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

Comparables should be similar in type, location, and recency to be reliable.

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