SAEE Mass Appraisal Techniques 4 — Questions and Answers
Question 1: Which statistical measure is used in mass appraisal to indicate the uniformity of appraisal ratios within a property class?
- Coefficient of Dispersion (COD) (Correct answer)
- Standard Deviation of Sale Prices
- Price-Related Differential (PRD)
- Mean Absolute Error (MAE)
Correct answer: Coefficient of Dispersion (COD)
The Coefficient of Dispersion (COD) measures the average deviation of appraisal ratios from the median ratio, indicating uniformity.
Question 2: In mass appraisal, a Price-Related Differential (PRD) greater than 1.03 generally indicates:
- Excellent appraisal uniformity
- Regressivity, where higher-value properties are under-appraised relative to lower-value properties (Correct answer)
- Progressivity, where higher-value properties are over-appraised
- The assessment ratio is above 100%
Correct answer: Regressivity, where higher-value properties are under-appraised relative to lower-value properties
A PRD above 1.03 indicates regressivity, meaning higher-value properties tend to have lower assessment ratios than lower-value properties.
Question 3: Which type of multiple regression analysis is most commonly used when the relationship between property value and its characteristics is multiplicative rather than additive?
- Ordinary Least Squares (OLS) regression
- Log-linear (semi-log) regression (Correct answer)
- Nonlinear regression with interaction terms
- Weighted least squares regression
Correct answer: Log-linear (semi-log) regression
Log-linear regression is used when variables have a multiplicative relationship, as taking the logarithm transforms this into an additive (linear) model.
Question 4: In a Computer-Assisted Mass Appraisal (CAMA) system, what is the primary function of a 'neighborhood delineation'?
- Setting uniform tax rates across all properties
- Grouping properties that share similar market influences to improve model accuracy (Correct answer)
- Identifying properties exempt from taxation
- Calculating depreciation schedules for commercial buildings
Correct answer: Grouping properties that share similar market influences to improve model accuracy
Neighborhood delineation groups properties with similar locational and market influences so appraisal models can reflect those shared characteristics accurately.
Question 5: An assessor is comparing two mass appraisal models. Model A has a COD of 12 and Model B has a COD of 18. Which model demonstrates better appraisal uniformity?
- Model B, because higher COD reflects more data variation captured
- Model A, because a lower COD indicates tighter clustering of ratios around the median (Correct answer)
- Both are equally acceptable under IAAO standards
- Neither model is acceptable; COD must be below 10 for all property types
Correct answer: Model A, because a lower COD indicates tighter clustering of ratios around the median
A lower COD indicates less variation in appraisal ratios, meaning Model A produces more uniform assessments.
Question 6: Which mass appraisal approach relies on the principle that a buyer will pay no more for a property than the cost to acquire a similar site and construct a comparable building?
- Sales Comparison Approach
- Income Capitalization Approach
- Cost Approach (Correct answer)
- Regression Analysis Approach
Correct answer: Cost Approach
The Cost Approach is based on the principle of substitution — a buyer will not pay more than the cost to reproduce or replace the improvements plus land value.
Question 7: When using the income approach in mass appraisal for a commercial property, which step directly converts the net operating income (NOI) into an estimate of value?
- Dividing NOI by the effective gross income multiplier
- Multiplying NOI by the gross rent multiplier
- Dividing NOI by the capitalization rate (Correct answer)
- Subtracting vacancy and collection losses from potential gross income
Correct answer: Dividing NOI by the capitalization rate
Value is estimated by dividing NOI by the capitalization rate (V = NOI / Cap Rate), converting the income stream into a present value.
SAEE Mass Appraisal Techniques 4
Which statistical measure is used in mass appraisal to indicate the uniformity of appraisal ratios within a property class?