Chapter 9 - Market Data Approach
How can a market adjustment for the differences between a subject property and comparable sales be expressed.
(1) As a dollar amount (2) As a percentage
Regarding data collection, name three places this data is collected
(1) Comparable property sales (2) listings and offerings (3) appraisers' files.
Appraisers commonly use two analytical tools:
(1) Elements of comparison: includes the property's location, one or more physical characteristics, sale conditions and sale date, must each be considered (2) Units of comparison: gives the appraiser the means to make the consideration for necessary adjustments
When comparing properties, appraisers must take into consideration the following adjustments:
(1) If the comparable sale is superior to the subject property, a minus (-) adjustment is made to the comparable sale. (2) If the comparable sale is inferior to the subject property, a plus (+) adjustment is made to the comparable sale.
What is the sequence of adjustments recommended by the Appraisal Institute
(1) Property rights conveyed (2) Financing terms (3) Condition of sales (4) Market condition (time) (5) Location
The five steps of the sales comparison approach are:
(1) Study the market. (2) Collect and verify data. (3) Analyze and compare properties. (4) Adjust the prices of the comparables. (5) Reconcile the newly adjusted prices.
Dollar adjustments are needed to complete which documents
(1) The Uniform Residential Appraisal Report (URAR) form (2) The Small Income Property Report form (3) The Condominium-PUD Appraisal Report form
Percentage adjustments are generally used to express what kinds of differences between the subject property and the comparables:
(1) Time adjustments (2) Location (3) Special conditions
How does the principle of substitution apply to a single-family residence.
A home's value is basically set at whatever it would cost to purchase an equally desirable "substitute" home.
what is regression analysis
A technique that is used when more than one set of matched pairs is used to extract adjustment factors.
What is the purpose of math equations, computer programs, and other calculations in the course of an appraisal? A.) To narrow a range of possible numbers B.) To provide the exact numbers in an appraisal C.) To determine the appraised property's adjustments D.) To determine the appraised property's final value
A.) To narrow a range of possible numbers
What are the two primary factors where calculations would rarely work in a matched pairs technique? A.) Cost and comparison factors B.) The adjustment for one item of difference may already include a partial adjustment for another item of difference and that there can be a range of prices considered reasonable for the applicable market because buyers and sellers have different opinions of the value of each comparable item C.) Abstractions for lot size and floor plan D.) Similar homes with the same floor plan where home 1 has a 1 car attached garage and home 2 has a 2 car attached garage
B.) The adjustment for one item of difference may already include a partial adjustment for another item of difference and that there can be a range of prices considered reasonable for the applicable market because buyers and sellers have different opinions of the value of each comparable item
What principle states that when several commodities, products, or services offer or provide the same basic uses, then the one priced the lowest will be in the most demand, and consequently, receive the widest distribution? A.) The principle of demand B.) The principle of substitution C.) The principle of supply D.) The principle of replacement
B.) The principle of substitution
Substitution is based on what assumption
Based on the assumption that there will not be any costly delay in making the substitution (in other words, it will not have to be built from the ground up, or other significant -- and expensive -- delay).
Which question is not a motivation-specific element in a home sale? A.) Were both parties knowledgeable about the property and the market in which the sale took place? B.) Did each party act without financial pressure? C.) Is the home subject to HOA dues? D.) Was the sale an "arms-length" transaction?
C.) Is the home subject to HOA dues?
In which of the following is the sequence of adjustments most important? A.) Estimates B.) Replacement costs C.) Percentage adjustments D.) Dollar adjustments
C.) Percentage adjustments
The technique that is used when more than one set of matched pairs is used to extract adjustment factors is known as what? A.) Reconciliation B.) Matched pair adjustment C.) Regression analysis D.) The extraction method
C.) Regression analysis
If an appraiser is using the technique of matched pairs, one sale must contain the item for which the adjustment is being sought and the other sale A.) must have the same item. B.) must have a similar item. C.) must not contain that adjustment item. D.) must have a similar floor plan.
C.) must not contain that adjustment item.
Those comparable sales upon which the most weight is placed in the final reconciliation is based upon what
Comparable sales whose value estimates required the least amount of adjustments.
When an analysis of residential properties is made, what can one use to come up with a dollar adjustment for location of properties of similar value? A.) Revision B.) Conversion C.) Exchange D.) Discounting
D.) Discounting
When sequence adjustments are made to the appraisal, what type of adjustment translates the comparables' transaction price into its cash equivalent? A.) Conditions of sales B.) Property rights conveyed C.) Market conditions D.) Financing terms
D.) Financing terms
Buyers often base their value conclusions primarily on which of these? A.) Closed listings B.) Closed sales C.) Expired listings D.) Properties that are currently being offered for sale
D.) Properties that are currently being offered for sale
An appraiser must always personally inspect comparable information and confirm that information with the buyer, seller or A.) lender. B.) builder. C.) HOA. D.) broker.
D.) broker.
the technique to extract the amount of the adjustment from the market is called A.) elements of similarity. B.) comparable sales. C.) exact comparables. D.) matched pairs.
D.) matched pairs.
When an appraiser analyzes residential properties, what can be used to come up with a dollar adjustment for location of properties of similar value
Discounting.
Percentage adjustments can be converted to what other type of adjustment, if needed
Dollar adjustments.
Define reconciliation
Final resolution.
When is the "matched pairs" technique the most reliable
If there is only one difference present between the matched pairs.
Explain substitution
Important factor in the market data approach to valuation. States that when several commodities, products or services that offer or provide the same basic uses, then the one priced the lowest will be in the most demand, and consequently, receive the widest distribution.
How does substitution apply to the theory of market data approach
In single-family residential markets, when a residence is considered "replaceable" in the market, that home's value is basically set at whatever it would cost to purchase an equally desirable "substitute" home. The significant aspects of the home -- such as the design, square footage, perhaps the number of bedrooms and bathrooms, and other factors -- are similar enough that they could almost be considered interchangeable.
What does the sales comparison approach require an appraiser to do
It requires an appraiser to make direct comparisons between the subject property (the one being appraised) and other sold or listed (for sale) properties.
Which approach has the best indication of market value
Sales comparison approach.
In an actual sales analysis, why do adjustment calculations rarely work out precisely
The adjustment for one item of difference may already include a partial adjustment for another item of difference. For each property, there can be a range of prices (to apply to adjustments) that are considered reasonable for the applicable market.
What are the criteria for using the "matched pairs" technique
The appraiser must choose two sales in the market. One sale must contain the item for which the adjustment is being sought. The other must not contain that adjustment item.
The sales comparison approach is also known as:
The market data approach.
Someone who wishes to purchase an investment property generally compares what elements when looking at one particular property:
The potential return on his investment. Tax shelter possibilities. The burden of management. Numerous additional factors.
A clear difference between the expression of adjustments in dollar figures versus percentages is seen when
The sequence adjustments are made to the appraisal
If a subject property and a comparable property are equal, what type of adjustment is necessary
There is no adjustment required.
To arrive at the most accurate appraisal, the appraiser should do what
Try to make the fewest adjustments possible to the estimate.
What impact does a special assessment have on an appraisal
When a property is sold subject to a special assessment, an adjustment must be made if comparable properties are not subject to the same special assessment.
Can appraisers apply the sales comparison approach to income properties
Yes.
what is data collection
a key component of using the sales comparison approach to value.
what is market study
conducted to find the sales/listing data of comparable properties, and because appraisal values are time-sensitive, the more current the comparable information is, the more relevant it is.
Define special assessments
taxes that are levied by a specific taxing authority. They apply only for a specific period of time as a way to pay for specific improvements, including sidewalk construction, sewers, street paving, etc.
Percentage adjustments are generally used to express
the differences between a subject property and a comparable sale
In general, what is a special assessment based on
the specific benefits that improvement adds to the property.
