Exam 7: Valuation Using the Sales Comparison and Cost Approaches

Real estate appraisal is often considered "more art than science," since identifying truly comparable properties is a subjective process.Therefore,it is essential that a comparable property transaction at least meets the requirement that it was fairly negotiated under typical market conditions.Which of the following types of transactions would be most appropriate for use in the sales comparison approach to valuation?

A comparable property sold 15 months ago for $105,000.If the appropriate adjustment for market conditions is 0.25% per month (without compounding),what would be the adjusted price of the comparable property?

Favorable mortgage financing may have a significant impact on the transaction price of the particular property.If the comparable property was known to have had favorable financing terms negotiated into the transaction price,which of the following adjustments should take place? (Note: Assume that the comparable property cannot be dropped from the analysis as there are already limited comparable sales transactions)

When employing the sales comparison approach,appraisers must consider numerous adjustments to convert each comparable sale transaction into an approximation of the subject property.Adjustments are divided into two groups: transactional adjustments and property adjustments.All of the following are transactional adjustments EXCEPT:

At the conclusion of the traditional sales comparison approach to valuation,the appraiser evaluates and reconciles the final adjusted sale prices into a single value for the subject property.This single value is commonly referred to as:

The sequence of adjustments to the transaction price of a comparable property would make no difference if all adjustments were dollar adjustments.However,if percentage adjustments are involved then the sequence does matter.In making adjustments to a comparable property to arrive at a final adjusted sales price,the proper sequence for the following adjustments would be:

While there are several conventional approaches used to estimate the market value of real estate,which of the following is typically considered the most reliable approach?

Several techniques can be used to obtain an indication of land value.The cost approach to valuation would most likely be used for which of the following properties?

Which of the following would be categorized as a cause of external obsolescence?

Estimating the market value of real estate is complicated by the unique characteristics of real estate markets.In contrast to stock markets,real estate markets are characterized by all of the following EXCEPT:

It may be appropriate for a real estate professional to utilize different approaches for estimating the market value of a property depending upon the particular property type and use.Which of the following approaches would be most applicable when considering the valuation of retail office space (i.e. ,which approach would receive the most weight in the valuation process)?

Suppose that an appraiser has come to the following conclusions in evaluating the subject property.Due to the dramatic shift in the perceived safety of the neighborhood,values of any residential properties in the area of the subject property have fallen by $10,000,on average.Due to the subject property's age,physical deterioration to the building accounts for an estimate of $50,000 in lost value.An evaluation of the floor plan reveals that it is quite obsolete relative to current homebuyer preferences.This has a detrimental effect on the value of the property that is estimated to be approximately $15,000.Based on your understanding of adjustments related to accrued depreciation,which of the following pertains to the adjustment for external obsolescence?

Given the following information,determine the value of having an additional bedroom.Assume that the comparable properties are similar in all other attributes besides those listed in the table below.

While it is often sufficient to rely on informal methods of estimating the market value of real estate assets,the complexity and large dollar value of many real estate decisions dictate that formal estimates based on methodical collection and analysis of relevant market data should be utilized.The unbiased written estimate of the market value of a property is Commonly referred to as a(n):

Adjustments for physical characteristics are intended to capture the dimensions in which a comparable property differs physically from the subject property.If the only physical difference between the subject property and the comparable is that the comparable does not have a fireplace,which of the following adjustments should take place?

Suppose that we observe two comparable properties that have each sold twice within the past two years.Property A sold 24 months ago for $350,000 and Property B sold 18 months ago for $325,000.If the two properties were sold today at $375,000 and $340,000,respectively,estimate the change in market conditions (percentage change in price)per month,assuming we equally weight the two properties in our analysis?

If all appraisal methods are appropriate for use in valuing a particular property,there is a clear order of preference that real estate professionals adhere to.Which of the following depicts the preferred order,with the most preferable approach being listed first and the least preferable listed last?

Real estate appraisers generally distinguish among the concepts of market value,investment value,and transaction value.Which of the following statements best describes the concept of market value?

Real estate professionals have long supported strict standards of ethics and practice.Followed by all states and federal regulatory agencies,which of the following imposes ethical obligations and minimum standards that must be followed by all real estate professionals providing formal estimates of market value?

As part of the data analysis step in the appraisal process,it is necessary to consider the highest and best use of the property in question.In regards to determining highest and best use,all of the following statements are true EXCEPT: