CH 13 -

n a CMA, a broker should consider all homes listed in the past six months, have sales pending, or are expired. What should not be included?

The sales price of your home when you bought it 5 years before.

Can a residential appraiser ever evaluate a property with five units or more?

Yes, as long as the transaction value is less than $250,000.

How do appraisers typically offer their services?

Appraisers have the option of either freelancing or working for a firm/financing institution.

Who can perform the income approach for an official appraisal?

Appraisers only

Which of the following yields a fair listing price for a property?

CMA

Principle of Anticipation

Affirms that value is created by anticipated benefits to be derived in the future.

Which of the following is true of a listing contract signed by the agent and seller?

It is legally binding

What is the last stage in the appraisal process?

Reconciliation

When might an agent without additional education or training refuse a BPO for a property with two units?

if the income revenue of the property is above a certain threshold

What is the standard number of properties used in a sales comparison approach for a BPO or a CMA?

3

Principle of Contribution

A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.

Sales Comparison Approach

A valuation method which compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions.

Your client added a pool, central air, and skylights that can increase the value of the property. This is an improvement in which category of a CMA analysis?

Additions and upgrades

Principle of Substitution

Affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution

When conducting a CMA, which of the following features will require adjustments to the value of the target property? A) Number of bedrooms B) Size of the property C) Condition of the property D) All of the answer choices provided are correct

All of the answer choices provided are correct

What value is used during the reconciliation process?

All three values

Highest and best use

An appraisal phrase meaning that use which at the time of an appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time; that use which will produce the greatest amount of profit. This is the starting point for an appraisal

What is the reproduction method?

An evalulation of the cost of replicating the property as-is.

Which of the following parties would be most likely to order a cost approach appraisal?

An insurance auditor

Which estimates are brokers allowed to perform?

BPOs and CMAs

How are most no-fee BPOs/CMAs usually performed?

BPOs/CMAs are usually included in a standard broker contract.

Which of the following statements is true regarding cost approaches?

Cost appraisals are generally not as reliable as sales comparison or income appraisals.

What is the basic equation for the cost approach method?

Cost of construction plus the cost of the land, minus the depreciation.

Which of the following is an example of a long-lived item?

Crown molding

What does the acronym DUST stand for?

Demand, utility, scarcity, transferability

How should an estimator reconcile data if they find the price of a benchmark property was heavily inflated?

Either by substituting a different property or adjusting the price of the property to a truer value.

A CMA is commonly used to do which of the following?

Establish the listing price for a property

The seller is ultimately responsible for which of the following?

Establishing the listing price for the property

What should estimators consider when calculating the monthly or yearly income revenue of a property?

Estimators must factor in the likelihood of the tenants' ability to pay the monthly required rent.

Principle of Change

Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely the result of cause and effect

Principle of Conformity

Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvements is present. Use conformity is desirable, creating and maintaining higher values

If Home Buyer is the cousin of Home Seller, what usually happens with the sale price?

Home Seller usually pays less for the property.

If a broker includes a comparable property in their analysis that was sold more than six months ago, what should they do?

Justify their decision for including that property in writing.

What is set in the listing contract, and is the price at which the seller agrees to accept an offer from a willing and able buyer?

Listing price

Which method deducts operating expenses?

Neither GRM nor GIM.

A playground is being built in a neighborhood with primarily senior housing. Is this good for property values?

No, because it lacks utility.

A Victorian home is built in a neighborhood that is almost all split level ranches. Is the Victorian more valuable?

No, the property does not conform and therefore will be worth less than it might otherwise be.

Are property improvements always a good idea?

No, there is the possibility of diminishing returns.

When is the gross rent multiplier approach generally used?

On properties up to 4 units

Include homes with similar amenities in the CMA. For example, your home has an in-ground pool. So, you should include...?

Other listings with in-ground pools

If the subject property is superior in one component relative to the comparable property, a .........adjustment should be made.

Positive

How does an appraiser identify properties when using the Sales Comparison Approach?

Public records such as the clerk in the county and MLS services.

Which valuation method is commonly used to value residential properties?

Sales Comparison Approach

What is the Sales Comparison Approach?

Sales comparison approach means comparing one property against recent sales of properties in a neighborhood

What is a BPO/CMA likely to be used for?

Setting the listing price of a home

How can the estimate of the property be displayed in a BPO or CMA?

Single figure or price range

What is the key difference between an appraisal and a BPO/CMA?

The BPO/CMA predicts the sale price of the property, while the appraisal estimates the inherent worth of a property.

What is the principle of substitution?

The ability to acquire another property that is both desirable and similar in a short period of time.

What is the effective age of a building?

The age of the building based on the upkeep and maintenance it has received.

If all the homes sold recently have finished basements and the appraised property has an unfinished basement, what happens?

The appraiser takes the cost of finishing and deducts from the value.

Which of the following parties typically performs a CMA?

The listing broker

What is the principle of conformity?

The more unique new homes are, the lower the value.

There are 12 buyers looking for homes in the same neighborhood. There are only 8 homes in the neighborhood. What happens to the property value?

The value of the properties are higher because of demand.

How should an estimator treat a capital expenditure according to the income approach?

They should not factor in capital expenditures because they are not considered necessary to the building.

Be aware of how the local building code defines a bedroom. In some cases, living rooms, dining rooms and sun rooms can be considered officially as a "bedroom." This statement is:

True

Unless you live in a historical home that has a heritage that will increase the property value, older homes are going to be worth less than newer ones. This statement is...?

True

Can all property be valued using the sales comparison approach?

Typically, this approach is used for residential property.

Do higher property taxes impact home values?

Yes, the properties will be less valuable.

Which of the following is an example of an incurable repair?

A crumbling foundation that is expected to last 20 more years.

What event might trigger a bank to order a BPO?

A foreclosure

Principle of Progression

The worth of a lesser valued residence tends to be enhanced by association with higher valued residences in the same area

When should an estimator rely on market data from properties that are still in use?

When there are no comparable sales data available.

Can a broker complete a BPO if they have personally put in an offer for the property in the past 5 years?

Yes, but they have to disclose this conflict of interest before completing the BPO.

What is the point of a cost appraisal?

Buyers should not have to pay more for a property than the cost to replace the property on the same patch of land.

What is an analysis of the competition in the marketplace that a property will face upon sale attempts?

Comparative Market Analysis

When conducting a comparative market analysis, how will the age of a comparable property affect its value relative to the subject property?

Older properties will typically be worth less

What is the principle of anticipation?

The benefits the property may offer buyer.

Can a lender ever use a BPO/CMA to determine how much money to give to a buyer?

Yes. As long as they use it in conjunction with an appraisal.