Chapter 3: Identification of Units of Comparison
Sale B is a half-acre commercial lot with a 1,400 square foot building located on a side street, which sold for $110,000. Sale C is a half-acre commercial lot with a 1,500 square foot building located on a side street, which sold for $120,000. Based on this information, what is the adjustment for a difference of 100 square feet of building size?
$10,000
A comparable property sold for $800,000. In the sales comparison grid, it is adjusted downward 5% for property rights, downward 10% for financing terms, and upward 15% for market conditions. What is the dollar adjustment for market conditions?
$102,600
Based on the following information, what is the adjustment for a corner location versus a side street? Sale A Sale B Sale C Sale Price $135,000 $110,000 $120,000 Bldg Size 1,500 SF 1,400 SF 1,500 SF Location Corner Side street Side street Lot 0.5 acre 0.5 acre 0.5 acre
$15,000
Sale A is a half-acre commercial lot with a 1,500 square foot building, located on a corner, which sold for $135,000. Sale C is a half-acre commercial lot with a 1,500 square foot building located on a side street, which sold for $120,000. Based on this information, what is the adjustment for a corner location versus a side street?
$15,000
Sale B is a half-acre commercial lot with a 1,400 square foot building located on a side street, which sold for $110,000. Sale C is a half-acre commercial lot with a 1,500 square foot building located on a side street, which sold for $120,000. Based on the information that can be extracted from these sales, what would be the dollar adjustment for a 150 square foot difference in building size?
$15,000
A comparable property sold for $400,000. In the sales comparison grid, it is adjusted downward 5% for financing terms, and upward 10% for conditions of sale. What is the dollar adjustment for financing terms?
$20,000
A comparable property sold for $400,000. In the sales comparison grid, it is adjusted downward 5% for financing terms, and upward 10% for conditions of sale. What is the dollar adjustment for conditions of sale?
$38,000
An appraiser is analyzing sales of office buildings, and finds a 20,000 square foot office building which sold for $60 per square foot. Considering the economies of scale principle, which of these would be the MOST likely sale price for a 35,000 square foot office building?
$40 per square foot
A comparable property sold for $800,000. In the sales comparison grid, it is adjusted downward 5% for property rights, downward 10% for financing terms, and upward 15% for market conditions. What is the dollar adjustment for property rights conveyed?
$40,000
An appraiser is valuing an apartment building with a common recreation room. This room adds an additional $3,200 to net operating income annually. The capitalization rate is 8%. What would be an appropriate adjustment for the recreation room?
$40,000
An appraiser is valuing an office building, which has no elevator. Comparable Sale 1 recently had an elevator installed in the building, at a cost of $50,000. As a result, the owner is able to rent the building for an additional $3,000 per year. The gross income multiplier is 20. What would be an appropriate adjustment for the elevator?
$60,000
An appraiser concludes that an industrial building with an inadequate loading dock has an annual rent of $0.25 less per square foot than a property with an adequate loading dock. If the gross income multiplier is 6, what would be the dollar adjustment on a 40,000 square foot warehouse with an inadequate loading dock?
$60,000 (40,000 square feet multiplied by $0.25 per square foot is a rent loss of $10,000 annually. Multiplied by a GIM of 6, this equals a loss of value due to inadequate loading dock facilities of $60,000. A $60,000 adjustment would be applied to this property in the sales comparison approach. (Chapter 3, Rent Analysis)
A comparable property sold for $80,000. In the sales comparison grid, two downward adjustments were made: 10% for financing terms and 10% for market conditions. What is the net adjusted sale price?
$64,800
A comparable property sold for $800,000. In the sales comparison grid, it is adjusted downward 5% for property rights, downward 10% for financing terms, and upward 15% for market conditions. What is the dollar adjustment for financing terms?
$76,000
A comparable property sold for $800,000. In the sales comparison grid, it is adjusted downward 5% for property rights, downward 10% for financing terms, and upward 15% for market conditions. What is the net adjusted sale price?
$786,600
Property A sold for $175,000 and has 3,000 square feet of building area. Property B sold for $202,000 and has 3,300 square feet of building area. What is the indicated adjustment per square foot of building area?
$90
An appraiser makes the following adjustments to Comparable Sale 1: +28,000, +35,000, -12,000, +8,000, -15,500. What is the gross adjustment?
$98,500
What would provide a more reliable analysis in the paired sales technique?
A larger set of data where the appraiser can support each adjustment with more than one pair of comparable sales
Property C is a small retail building with an energy-efficient HVAC system and a good highway location, which sold for $375,000. Property D has a standard HVAC system and an inferior location on a side street, which sold for $335,000. Analysis of other paired sales indicates that retail properties along highways sell for $30,000 more than properties on side streets. Assuming the subject has a good highway location and an energy-efficient HVAC system, what is the indicated HVAC adjustment to Property D?
A positive $10,000 adjustment
The presence of a physical feature does not necessarily enhance value because:
A potential purchaser may be unwilling to pay for the feature
A property sold for $400,000, with the seller agreeing to carry the financing for the buyer, at below-market terms. An appraiser is considering the use of this property as a comparable sale. There are very few other sales in this market. What should the appraiser do?
Adjust the sale price downward to cash equivalency
Adjustments for tangible property differences may include:
All of these
Appraiser A and Appraiser B are appraising the same property, and they use the same comparable sales, but make different adjustments. Which statement is true regarding this situation?
Both appraisers may be right, if they have support for their adjustments
When estimating adjustments based on the cost of a feature or item:
Careful analysis of the relationship between cost and value is necessar
In the sales comparison approach, if an appraiser's initial observations are inadequate or untrustworthy, the appraiser should:
Collect and analyze additional data
In many cases, _________ remains at a relatively stable level, while at the same time, _________ fluctuates according to the dictates of the market.
Cost, value
Generally, commercial properties are worth less if the roadway is:
Divided by a median
Bert is appraising a new apartment building. One of his comparable sales is an apartment building that is 15 years old. He makes an age adjustment to this comparable sale, and also a condition adjustment. In this situation, Bert needs to watch out for:
Double-adjusting
A parcel of vacant land sold for $408,000. Nine months later, it sold again for $371,000. No physical changes were made to the property over this time. What is the monthly adjustment for market conditions indicated by this sale?
Downward 1%
Factors that have an effect on the sale prices or value of comparable properties are known as _________.
Elements of comparison
What is the mission of the U.S. Department of Transportation?
Ensure a fast, safe, efficient, and accessible transportation system
Which of these is an intangible (transactional) adjustment?
Expenditures made immediately after purchase
A buyer of a comparable sale is unable to obtain typical market financing, and the seller agrees to carry the financing for the buyer, at below-market terms. What type of adjustment is this comparable sale likely to require?
Financing terms
A low-cost apartment building has been remodeled with very expensive high-end plumbing fixtures, which are considered a super-adequacy for the structure. This would be an example of ____________.
Functional obsolescence
A buyer is unable to obtain typical market financing. The seller agrees to carry the financing for the buyer, at below-market terms. The sale price of this property is likely to be ________ than it would have been if typical market financing had been utilized.
Higher
Why is it generally a good idea to report the median along with the mean?
If an analyst reports only the mean, the higher numbers may skew the data, making it unreliable
Kate is appraising in an economically depressed market where the majority of sales are short sales or foreclosure sales. She is considering using two short sale properties as comparable sales in an appraisal. Which statement is true regarding this situation?
If these short sales are indicative of typical seller motivation, they can be used without adjustments for conditions of sale.
Which statement is FALSE about the market survey technique (contingent valuation method) of estimating adjustments?
It is highly scientific
One of the benefits of using sale price per square foot as a unit of comparison is:
It may eliminate the need for size adjustments
Which of these is not an intangible (transactional) adjustment?
Location
When the national real estate market began to decline in 2006-2007:
Many appraisers continued to make positive time adjustments out of habit
Why is it not a good idea that appraisers use standard pre-printed residential sales comparison grids in their commercial appraisal reports?
Many of the elements of comparison on residential grids are not typical value-related elements of comparison for commercial properties
A comparable sale that requires a location adjustment:
May be a meaningful indicator of value for the subject
Adjustments for market conditions _________ .
May not be necessary in all appraisals
After Hurricane Katrina, why were prices of warehouse buildings in New Orleans related much more strongly to the size of the lot rather than the size of the building?
Most buildings were flooded and of little or no use.
The subject property has expensive, energy-efficient windows, but Comparable Sale 1 does not. Which statement is true regarding this situation?
No adjustment may be necessary, if the market does not recognize a difference in value based on the efficient windows.
When verifying the sale of an apartment building, an appraiser discovers that the seller was the purchaser's grandmother. The appraiser should:
Not use the sale
How many independent variables are used in simple linear regression?
One
Which of these is NOT another name for paired sales technique?
Paired regression analysis
Which of these lists is made up entirely of intangible (transactional) adjustments?
Property rights, financing terms, conditions of sale, market conditions
An appraiser is analyzing three comparable sales in the sales comparison approach. Sale 1 sold for $225,000 and is rated overall superior to the subject. Sale 2 sold for $208,000 and is rated overall inferior to the subject. Sale 3 sold for $215,000 and is rated overall inferior to the subject. The appraiser reconciles the indicated value of the subject at $220,000. This is an example of _________ analysis.
Qualitative
Using non-numeric techniques to reconcile comparable sales into an indication of value is considered _________ analysis.
Qualitative
Making numeric dollar adjustments to the sales prices of comparable properties would be considered _________ analysis.
Quantitative
What type of adjustments may be based on either percentages or specific dollar amounts?
Quantitative
After Hurricane Katrina, prices of warehouse buildings were most accurately valued by:
Regression analysis
Cash equivalency is determined through the eyes of the:
Seller
What is another name for the market survey method of extracting adjustments?
Stated preference method
What type of technique involves the appraiser surveying market participants and using this information to estimate adjustments?
Stated preference method
Adjustments in the sales comparison approach must be ___________.
Supported and defended
In the appraisal of an apartment building, an appraiser makes an adjustment for an elevator and central air conditioning. Because the subject building has these features, the owner is able to charge higher rents than are found in competing buildings. Why must the appraiser be careful in making an adjustment for higher rent (economic characteristics)?
The appraiser may be double-adjusting
In extreme cases where an appraiser cannot find sufficient similar sales data to estimate a reliable value by sales comparison approach:
The appraiser may omit this approach altogether
In the Supreme Judicial Court of Massachusetts court case, what happened after the expert assumed a selling price of 10% less than the asking price, and then adjusted for the differences in square footage to arrive at his opinion?
The board refused abatement and was upheld by an appellate board.
If a property that is worth $500,000 is listed for $699,900:
The listing is probably not a good indicator of value
An appraiser finds a sale and re-sale of a property which sold 18 months apart, indicating a 1.5% monthly decrease in value. What might be a problem with an appraiser using this 1.5% market conditions adjustment in the sales comparison approach?
This adjustment assumes a steady decline over the entire period, which may or may not be accurate
An appraiser is having difficulty obtaining comparable sales, and decides to use sales that are located outside the subject's market area. Which statement is true regarding this situation?
This is permissible only if the appraiser can extract and make adjustments for location, if appropriate.
If there is an oversupply of new homes in a market, __________ will decline.
Value
Adjustments for tangible property differences may include:
View
When verifying a sale of a property, an appraiser discovers that the seller was having severe financial difficulties and agreed to sell the property quickly at a below-market price. If the appraiser is able to extract and support an adjustment, can this sale be used as a comparable in an appraisal?
Yes, this adjustment would be for conditions of sale
Location adjustments are often necessary because of a comparable property's location and proximity to external factors ___________.
both positive and negative