Residential Sales Comparison and Income Approaches
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475 Terms
When choosing comparables, the appraiser analyzes:
Location, amenities, market conditions
Sales or financing concessions
Motivations of sellers and buyers, property rights
All of the above
All of the above
The sales comparison approach was previously known as the:
Market Approach
Market Data Approach
Direct Sales Comparison Approach
All of the above
All of the above
“The result of the cause and effect relationship among the forces that influence real property value” is the definition of the principle of
Anticipation
Supply and Demand
Change
Balance
Change
“The perception that value is created by the expectation of benefits to be derived in the future” is the definition of the principle of
Anticipation
Supply and Demand
Change
Balance
Anticipation
Of the three appraisal approaches, the sales comparison approach relies most heavily on the economic principle of:
Contribution
Substitution
Equalization
Anticipation
Substitution
“The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium” is the definition of the principle of
Anticipation
Supply and Demand
Change
Balance
Balance
"In appraisal, off-site conditions that affect a property’s value" is part of the definition of the principle of
Externalities
Balance
Regression
Progression
Externalities
"The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties" is the definition of the principle of
Competition
Balance
Conformity
Progression
Progression
Adjustments made in the sales comparison process always start with:
The subject
The comparable
Either subject or comparable
Neither the subject nor comparable
The comparable
The first step in the sales comparison approach procedure is
Verify the information
Select relevant units of comparison
Define the scope of work
Research the market
Research the market
Which of the following is the sales comparison formula?
Price of comparable ± adjustments = value of subject
Price of comparable – adjustments = price of subject
Price of subject ± adjustments = value of comparable
Price of subject + adjustments = value of comparable
Price of comparable ± adjustments = value of subject
The principle that means that good things or bad things can happen to your property according to what is located around it is the principle of
Balance
Conformity
Externalities
Location
Externalities
The principles of progression and regression are illustrations of what happens when the principle of ______________ is violated.
Conformity
Balance
Change
Substitution
Balance
"The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium” is the definition of the principle of
Anticipation
Supply and Demand
Change
Balance
Balance
In the sales comparison formula presented, we always start with
The subject
The comparable
Either subject or comparable
Neither the subject nor comparable
The comparable
The final step in the sales comparison approach procedure is
Verify the information
Select relevant units of comparison
Reconcile the value indications
Research the market
Reconcile the value indications
The appraisal principle that states "real property value is created and sustained when the characteristics of a property conform to the demands of its market” is the principle of
Conformity
Balance
Equilibrium
Supply and Demand
Conformity
A transaction could be verified with all of the following parties EXCEPT
Buyer
Another appraiser
Seller
Listing broker
Another appraiser
How many comparables are typically used by appraisers in the sales comparison approach?
No less than three
No more than four
At least six
Two
No less than three
We NEVER adjust the
Best comparable
Comparable properties
Subject property
Variables
Subject property
Which of the following is NOT a common unit of comparison when appraising 2-4 unit properties?
Price per SF of GLA
Price per room
Price per SF of GBA
Price per bedroom
Price per SF of GLA
The principle of competition can be between
Purchasers only
Tenants only
Purchasers and tenants
Purchasers and tenants as well as between sellers and landlords
Purchasers and tenants as well as between sellers and landlords
In residential properties, anticipated future benefits are amenities. They may include all of the following EXCEPT
The security of having a roof over your head
The prestige of owning a nice home in a good neighborhood
Tax benefits
The privacy entailed in owning a home of your own
Tax benefits
In researching the market, an appraiser researches
Closed sales only
Prior sales and closed sales only
Options to purchase and contracts only
All of the above
All of the above
The principle of supply and demand states that price and demand move in a(an) ________ relationship.
Inverse
Direct but not proportional
Proportionate
Disproportionate
Direct but not proportional
When is the sales comparison approach NOT the best way to estimate value?
When there are many similar properties nearby
When the market is very strong
When the property is highly unusual
When the property is in a subdivision
When the property is highly unusual
“Data that relates to the four forces that affect real property values—social, economic, governmental, and environmental forces" is the definition of
Specific data
Demographics
General data
Criteria
General data
"The geographic region from which a majority of demand comes and in which the majority of competition is located" is the definition of
District
Neighborhood
Market area
Suburb
Market area
Median wages and interest rates would be categorized as ___________ factors.
Social
Economic
Governmental
Environmental
Economic
When collecting comparable sales information, you can collect data concerning all of the following EXCEPT:
Recent sales
The purchaser's ethnic background
Listing of comparables
Options to purchase
The purchaser's ethnic background
There are ______ basic elements of comparison in the sales comparison approach.
4
6
8
10
10
MLS information is compiled for the convenience and use of
Appraisers
Buyers
Sellers
Sales agents
Sales agents
The “normal course of business” in an area is determined by:
The actions of an appraiser’s peers only
Expectations of parties who are regularly intended users for similar assignments only
Both actions of appraiser's peers and expectations of intended users
Fannie Mae and Freddie Mac
Both actions of appraiser's peers and expectations of intended users
Which is typically the largest?
Neighborhood
District
Central Business District
Market area
Market area
Zoning and public transportation would be categorized as ___________ factors.
Social
Economic
Environmental
Governmental
Governmental
"Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics” is the definition of
Specific data
General data
Demographics
Sales data
Specific data
Age of residents and average family size would be categorized as ___________ factors.
Social
Economic
Governmental
Environmental
Social
Specific data must be gathered concerning
The property being appraised only
Comparable sale properties only
Both the property being appraised and the comparable sale properties
Neither the subject property nor the comparable sale properties
Both the property being appraised and the comparable sale properties
Climate and convenience to shopping would be categorized as ___________ factors.
Social
Economic
Governmental
Environmental
Environmental
Fannie Mae says when comparable sales data is provided by a party that has a financial interest in either the sale or financing of the subject property, the appraiser must
Call the lender and reject the sale
Reverify the data with a party that does not have a financial interest
Use another sale
Make an adjustment
Reverify the data with a party that does not have a financial interest
Which of the following would NOT typically be a source of specific data?
Homeowner
Deed
Chamber of commerce
Lease
Chamber of commerce
Which of these data sources primarily provides information on residential properties?
Crexi
Attorneys may need appraisals for all the following reasons EXCEPT
Mortgage loans
Divorces
Estate settlements
Eminent domain proceedings
Mortgage loans
When collecting comparable sales information, you would likely collect data concerning all of the following EXCEPT
Recent sales
Copies of home inspection reports
Listings of comparables
Options to purchase
Copies of home inspection reports
“The geographic region from which a majority of demand comes and in which the majority of competition is located. Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market area” is the definition of:
District
Neighborhood
Market area
Suburb
Market area
Examination of a title report might reveal all of the following EXCEPT
Easements
Rights of way
Chain of title
Interest rates
Interest rates
One drawback of multiple listing services is that typically their concentration is on ____________ .
Vacant land
Single family residences
Commercial properties
2-4 unit properties
Single family residences
"A type of market area characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural” is the definition of
District
Census tract
Central Business District
Economic area
District
Comparable sales are those that would be comparable or competitive in the minds of ____________________.
A typical seller
The marketplace
A typical purchaser
An astute appraiser
A typical purchaser
Which of the following is an element of comparison in the sales comparison approach?
Real property rights
Use
Conditions of sale
All of the above
All of the above
When discussing verification, HUD says that __________ by itself, is not considered a verification source.
MLS records
Public records
The buyer
The seller
MLS records
Which of these is LEAST LIKELY to be considered an atypical motivation to buy or sell?
Divorce
Job transfer
Want to move up to a larger home
Untimely death of a spouse
Want to move up to a larger home
You may exchange __________ information with other appraisers.
Confidential
Non-confidential
All
No
Non-confidential
Which of the following would likely NOT be a source of comparable sales?
Title report
Multiple Listing Service
Sales agent
Assessor records
Title report
Lenders might be sources of information in all of the following areas EXCEPT
Commercial transactions
Lease terms
Interest rates
Industrial transactions
Lease terms
Contractors may be sources of data for all of the following EXCEPT
Land values
Construction costs
Interest rates
New construction sales
Interest rates
American Housing Survey can be found on the website of
The Census Bureau
The National Chamber of Commerce
The National Association of REALTORS®
The Census Bureau
In the course of performing an appraisal, the appraiser needs to gather
General data only
Specific data only
Both general and specific data
Neither general nor specific data
Both general and specific data
The process by which a value indication is derived in the sales comparison approach is called
Comparative analysis
Quantitative analysis
Qualitative analysis
Highest and best use analysis
Comparative analysis
Qualitative analysis is used for elements that
Defy description
Are too far apart
Can’t be ranked
Cannot be given a numerical value
Cannot be given a numerical value
Comparative analysis may employ quantitative analysis and qualitative analysis
Separately only
Together only
Separately or together
Only in the appraisal of non-residential properties
Separately or together
A property sold for $250,000 and then sold later in the same year for $237,000. What was its percentage of decline?
4.2%
5.0%
5.2%
6.7%
5.2%
237,000 / 250,000 = .948 or 94.8% 1.00 - .948 = 0.52 or 5.2 %
An analysis technique in which nearly identical properties are analyzed to isolate a single characteristic's effect on value or rent is called
Economic base analysis
Paired data analysis
Ranking analysis
Trend analysis
Paired data analysis
"A quantitative technique used to identify and measure trends in the sale prices of comparable properties; useful when sales data on highly comparable properties is lacking, but a broad database on properties with less similar characteristics is available. Market sensitivity is investigated by testing various factors that influence sale prices" is the definition of ___________ analysis.
Ranking
Cost
Graphic
Trend
Trend
The procedure in which we employ just plusses and minuses in sales comparison is called ______________ analysis.
Gross rent multiplier
Graphic
Relative comparison
Paired data
Relative comparison
Which of the following is NOT a form of qualitative analysis?
Ranking analysis
Graphic analysis
Relative comparison analysis
Interviews
Graphic analysis
"The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative analysis" is the definition of ____________ techniques.
Economic
Relative comparison
Graphic
Qualitative
Qualitative
Comparable A sells for $240,000 and contains 2,300 SF. Comparable B is similar in all aspects, except it contains 2,100 SF, and it sells for $232,000. If our subject property contains 2,200 square feet and Comparable A has 2,300 square feet; it would warrant an adjustment of how much to Comparable A?
-$3,000
-$4,000
$6,000
No adjustment
-$4,000
$240,000 - $232,000 = $8,000. 2,300 - 2,100 = 200 SF. $8,000 ÷ 200 SF = $40 per SF. Subject 2,200 SF - 2,300 SF = -100 SF. -100 SF X $40 - $4,000.
What is the name of the process by which a value indication is derived in the sales comparison approach?
Comparative analysis
Market analysis
Economic base analysis
Graphic analysis
Comparative analysis
"A numerical (dollar or percentage) adjustment to the indicated value of a comparable property to account for the effect of a difference between two properties on value” is the definition of
Quantitative adjustments
Qualitative adjustments
Intermediation
Comparative analysis
Quantitative adjustments
Which of the following is FALSE, concerning quantitative analysis?
It is based on numbers.
It analyzes features that cannot be given a numerical value.
It may result in a dollar amount.
It may result in a percentage amount.
It analyzes features that cannot be given a numerical value.
Which is NOT a form of quantitative analysis?
Paired data analysis
Graphic analysis
Ranking analysis
Cost analysis
Ranking analysis
A property sold for $225,000 and then sold 6 months later for $245,000. What was its average percentage of increase per month?
1.0%
1.5%
1.8%
8.9%
1.5%
The procedure in the sales comparison approach in which we employ just pluses and minuses is called ______________ analysis.
Ranking
Graphic
Relative comparison
Paired data
Relative comparison
A property sold for $225,000 and then sold later in the same year for $207,000. What was its percentage of decline?
4.2%
6.0%
8%
1%
8%
$225,000 ÷ $207,000 = 1.08 or 8%
"A qualitative technique for analyzing comparable sales; used to determine whether the characteristics of a comparable property are inferior, superior, or equal to those of the subject property” is the definition of _____________ analysis.
Cost
Ranking
Quantitative
Relative comparison
Relative comparison
"In the sales comparison approach, a quantitative adjustment technique in which adjustments are based on cost indicators, such as depreciated building cost, cost to cure, or permit fees” is the definition of
Cost analysis
Construction analysis
Cost to cure analysis
Cost matrix
Cost analysis
A rent loss can be capitalized by
Dividing by a rate only
Multiplying by a multiplier only
Either dividing by a rate or multiplying by a multiplier
Dividing by a multiplier only
Either dividing by a rate or multiplying by a multiplier
A 1,900 square-foot home with a double garage sold for $210,000. A home very similar except it had 2,000 square feet of living area and only a single garage, recently sold for $208,000. It has been determined that the indicated adjustment for square feet of living area is $30.00 per square foot. Which is the indicated adjustment for the difference in garages?
$5,000
$8,000
$10,000
$13,000
$5,000
An appraiser identifies a value-related difference between the subject property and a comparable property in terms of remodeling, however the appraiser is unable to extract a specific dollar adjustment. What is the BEST course of action for the appraiser?
Ignore the difference because it doesn't matter if it can't be quantified
Base the adjustment on the amount that a contractor would charge for the remodeling
Use an adjustment amount that the appraiser would pay for the remodeling
Handle the difference through qualitative analysis
Handle the difference through qualitative analysis
In ranking analysis, the data is ranked in ____________ order.
Chronological
Alphabetical
Ascending or descending
Random
Ascending or descending
"In the sales comparison approach, the process of accounting for differences between comparables that are not quantified” is the definition of _________ analysis.
Quantitative
Cost
Qualitative
Market
Qualitative
"Quantitative techniques used to identify and measure adjustments to the sale prices of comparable properties; a variant of statistical analysis in which an appraiser interprets graphically displayed data visually or through curve fit analysis” is the definition of
Qualitative analysis
Curvilinear analysis
Graphic analysis
Quantitative analysis
Graphic analysis
"A quantitative technique used to identify and measure adjustments to the sale prices of comparable properties; useful when sales data on highly comparable properties are lacking, but a broad database on properties with less similar characteristics is available" is the definition of ___________ analysis.
Ranking
Cost
Graphic
Trend
Trend
In traditional appraisal theory, the first step in the adjustment sequence is an adjustment for
Market conditions
Real property rights appraised
Sales or financing concessions
Physical characteristics
Real property rights appraised
“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat” is the definition of
Leased fee
Partial interest
An estate
Fee simple estate
Fee simple estate
“Divided or undivided rights in real estate that represent less than the whole, i.e., a fractional interest such as a tenancy in common, easement, or life interest” is the definition of
Condominium
Partial interest
Divided interest
Limited partnership
Partial interest
"The right to perform a specific act on a property owned by another" is the definition of
License
Negative easement
Encroachment
Affirmative easement
Affirmative easement
A leasehold interest may have value when
The contract rent is less than market rent
The contract rent is more than market rent
There is a positive cash flow
The capitalization rate is more than the discount rate
The contract rent is less than market rent
When appraising a 4-unit property and at least one unit is leased, the property rights would be
Fee simple absolute
Leasehold estate
Leased fee estate
Life estate
Leased fee estate
“An easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and not a particular tract of land; an easement having a servient estate but no dominant estate” is the definition of a(an)
Easement appurtenant
Easement in gross
License
Negative easement
Easement in gross
The most desirable form of timesharing is called ___________ timesharing.
Nonfee
Fee
Title
Warranty
Fee
“A multiunit structure, or a unit within such a structure, with a condominium form of ownership” is the definition of a
Condominium
Cooperative
Life estate
REIT
Condominium
“Trespassing on the domain of another” is the definition of
Adverse possession
Easement
Encroachment
Conservation easement
Encroachment
Which statement is TRUE about syndications?
They are private partnerships only.
They are public partnerships only.
They can be either a private or public partnership.
They must be corporations.
They can be either a private or public partnership.
A limited partnership has
Limited partners only
General partners only
Both general and limited partners
Only one general partner
Both general and limited partners
An estate in severalty involves ____________ owner(s).
Only one
More than one
At least two
Corporate
Only one
Which ownerships include a right of survivorship?
Joint tenancy only
Tenancy in common only
Tenancy in common and joint tenancy
Joint tenancy and tenancy by the entirety
Joint tenancy and tenancy by the entirety
The sequence of adjustments is determined by the _______ and through analysis of the _______.
Lender, data
Appraiser, problem
Market, data
Market, situation
Market, data