Property Valuation Flashcards

A 2,000 sq ft home sold for $340,000. Using that price per square foot, what is the indicated value of a similar 2,300 sq ft home?

Answer: $391,000

$340,000 ÷ 2,000 = $170/sq ft; $170 × 2,300 = $391,000.

The principle of highest and best use states a property's value is based on its:

Answer: Legally permissible, physically possible, financially feasible, and most productive use

Highest and best use must meet all four tests: legal, physical, financial, and maximally productive.

A seller spent $60,000 on a luxury kitchen in a starter-home neighborhood. The CMA shows little value added. Which principle explains this?

Answer: Contribution

The principle of contribution says an improvement is worth only what it adds to market value, not its cost.

Why might a seller's agent recommend pricing slightly below a round number, such as $499,000 instead of $505,000?

Answer: To capture buyers searching with a $500,000 price cap

Pricing just under a search threshold exposes the listing to more online buyers.

A buyer is willing to pay no more than the cost of an equally desirable substitute property. This is the principle of:

Answer: Substitution

Substitution is the foundation of the sales comparison approach.

A listing has had heavy showings but no offers after three weeks. What does this usually signal?

Answer: Buyers see the home but find the price unjustified for its condition or features

Strong traffic without offers suggests exposure is fine but price or condition is the obstacle.

Comparable A sold for $300,000 and has a two-car garage valued at $12,000; the subject has no garage. Comparable A is also 200 sq ft smaller than the subject at $100/sq ft. What is A's adjusted price?

Answer: $308,000

Subtract $12,000 for the superior garage and add $20,000 for the smaller size: $300,000 − $12,000 + $20,000 = $308,000.