section 20 - valuation process and pricing properties

Comparative market analysis is most effective when a licensee limits the data collection time frame for sold properties. A CMA should look at properties that sold within ______.

3-6 months

Appraisal

An appraisal is a detailed analysis of market conditions, the property itself, comparables within close proximity to the subject property, recent sales and listings, land value, construction costs—everything a lender wants to know to value the property as collateral for a loan. Here are additional details about appraisals: Prepared by a certified appraiser (with a few exceptions in some states). Prepared for a lender, buyer, or seller. Multiple methods are used to determine value, particularly sales comparison and cost. Appraisers also use the income approach for income-producing properties. The appraisal is very detailed. Price is a fixed number. The cost is $400 or more, depending on the size of the property.

Unbiased estimate of value of a specific property on a specific date

Appraisal

Which of the following statements is true about appraisals? "Appraisal" and "CMA" are interchangeable terms for a property valuation. Appraisals may only be performed by certified appraisers (with certain exceptions in some states). Either certified appraisers or managing brokers may perform appraisals. Real estate licensees may perform appraisals on foreclosed properties, but a certified appraiser must perform all other appraisals.

Appraisals may only be performed by certified appraisers (with certain exceptions in some states).

Article 11

Article 11 of the NAR Code of Ethics is all about competence. Standard of Practice 11-1 states: Identification of the subject property Date prepared Defined value or price Limiting conditions, including statements of purpose(s) and intended user(s) Any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants Basis for the opinion, including applicable market data If the opinion is not an appraisal, a statement to that effect Disclosure of whether or when a physical inspection of the property's exterior was conducted Disclosure of whether and when a physical inspection of the property's interior was conducted Disclosure of whether the REALTOR® has any conflicts of interest

In which form of price determination does the real estate professional often just drive by the property and take photos, then complete paperwork for the lender? Appraisal Broker's price opinion Comparative market analysis Competitive market analysis

BPO

BPO (broker price opinion)

BPOs are estimates of price in case the lender must take over and sell the property. The real estate professional providing the BPO will often just drive by the property and take photos, then complete paperwork for the lender in exchange for a small fee.

Which of the following features is most likely to be the cause of an adjustment to a comparable when preparing a CMA? Busy street Color Demographics Interest rates

Busy street

Clark works for Acme Bank and asks for your assistance. He wants you to look at a property that's about to go into foreclosure and provide him with a report on its current marketability and an approximate market value. What's Clark most likely asking you to provide? Appraisal BPO CMA Professional opinion

CMA

Estimates the cost to reproduce or replace any buildings on the property, plus the value of the land

Cost

Which of the following is defined as what it would take to recreate a property if it disappeared off the face of the earth today? Cost Insurance Price Value

Cost

4 Characteristics of Value (DUST)

Demand Utility Scarcity Transferability

Study of a property, potentially for land use or marketability. A study of a property that does not necessarily return a price or value

Evaluation

Which of the following is an accounting of the costs to develop, financing costs, taxes, and whether the community will accept this development in this location? Environmental impact statement Feasibility study Land use application ROI analysis

Feasible Study

Which of the following might involve old wiring or plumbing? Depreciation External obsolescence Functional obsolescence Physical deterioration

Functional obsolescence

Kobi, an appraiser, is appraising a single-family home used for a rental. If he wants to use the income approach, which of the following will come into play?

GRM

Highest and Best Use

Highest and best use is all about profit maximization. Legal permissibility Physical possibility Financial feasibility Maximum profitability

Sometimes called appraisal by calculation

Income

Which of the following approaches to value uses a capitalization rate? Cost approach Income approach Price approach Sales comparison approach

Income approach

The cost of replacing a building in case of a total loss

Insured Value s noc c nosc I nosc

Cost to replace or rebuild a property

Insured value

Value of importance to insurance companies

Insured value

Return on investment a property may provide

Investment value

The price at which a willing buyer and a willing seller would strike a deal given normal market conditions

Market Value

Of great importance to a lender

Mortgage Value

Price at which the property can be loaned on or bring at a foreclosure sale

Mortgage value

The price a lender believes the property will bring at a foreclosure sale

Mortgage value

Which of the following occurs when the property is damaged or just has normal wear and tear?

Physical depreciation

Primary approach to determine value, especially for residential properties

Sales Comparison

Uses similar, recently sold properties and adjusts their sales price based on differences from the subject property

Sales Comparison

For most residential properties, the highest and best use of the property is relatively obvious. What is it?

The current use

What's the primary purpose of a CMA?

To determine an appropriate listing price range

Process of forming an opinion of a property's value

Valuation

Which of the following can be defined as what a property is worth? Appraisal Cost Price Value

Value

Commonly used to appraise properties with few or no comparables

cost

A comparative market analysis (CMA)

is an opinion of price arrived at by evaluating the property, its location within the market, its condition, competing properties for sale, recent sales, and current buying tastes and trends. A CMA may also include a look at expired listings to find the "let's not go there" price point. Here are some additional details regarding CMAs: Prepared by a real estate agent. Prepared for the seller or buyer. Comparable property sales are used to determine value, including properties currently on the market, sold recently, and expired listings. The level of detail is basic to moderate. Price is an approximate range. The cost is free or minimal.