Commercial Property Appraisal Standards Flashcards

What does 'highest and best use' analysis require when applied to commercial real estate under USPAP?

Answer: Analysis as if vacant and as improved, identifying the use that is legally permissible, physically possible, financially feasible, and maximally productive

USPAP requires highest and best use analysis to consider both the site as vacant and as improved, evaluating legal, physical, financial, and productivity criteria.

Under STANDARD 1, an appraiser developing a commercial appraisal must analyze all three approaches to value unless:

Answer: An approach is not applicable or cannot be developed

STANDARD 1 requires all applicable approaches to be analyzed, but an approach need not be developed if it is not applicable or data is unavailable.

Which of the following best describes 'going concern value' in commercial appraisal?

Answer: The value of an established operating business, including real property, personal property, and intangible assets

Going concern value includes real property, personal property, and intangible business assets as a total operating entity.

When a commercial appraisal involves a complex property, USPAP requires the appraiser to:

Answer: Invoke the Competency Rule if lacking knowledge or experience

For complex properties, the appraiser must ensure competency under the Competency Rule, disclosing any deficiency and taking steps to address it.

In commercial appraisal, the 'band of investment' method is used to derive which component?

Answer: Overall capitalization rate

The band of investment method derives an overall capitalization rate by weighting the mortgage and equity components of a typical investment.

Which of the following is an example of an extraordinary assumption in a commercial appraisal?

Answer: Assuming a proposed development will be completed as planned

Assuming a proposed development will be completed as planned is an extraordinary assumption because it treats an uncertain future condition as certain for appraisal purposes.