Sales Comparison Approach - Final Exam

A comparable sale property sold for $1,100,000. It required a positive $100,000 adjustment for location, a negative $80,000 adjustment for site, and a negative $60,000 adjustment for square footage. What is the net adjustment to this comparable sale?

$-40,000

Sale X is a half-acre commercial lot with a 1,400 square foot building located on a side street. It recently sold for $210,000. Sale Y is a half-acre commercial lot with a 1,500 square foot building located on a side street. It recently sold for $220,000. Based on this information, what is the adjustment for a difference of 100 square feet of building size?

$10,000

Property A sold for $305,000. It is a four-unit apartment building with a four-car garage. Property B sold for $294,000. It is a similar four-unit apartment building with no garage. What is the indicated adjustment for a four-car garage?

$11,000

A comparable property sold for $160,000. In the sales comparison grid, it is adjusted downward 10% for financing terms, and 10% for market conditions. What is the dollar adjustment for market conditions?

$14,400

Sale C is a half-acre commercial lot with a 1,500 square foot building, located on a corner. It recently sold for $335,000. Sale D is a half-acre commercial lot with a 1,500 square foot building located on a side street. It recently sold for $320,000. Based on this information, what is the adjustment for a corner location versus a side street?

$15,000

Property J is a small retail building with a flat roof and a good highway location; it recently sold for $385,000. Property K has a peaked gable roof, but an inferior location on a side street; it recently sold for $375,000. Analysis of other paired sales indicates that retail properties along highways sell for $30,000 more than properties on side streets. What is the indicated adjustment for a flat roof?

$20,000

A comparable property sold for $400,000. 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?

$393,300

If a property's gross annual income is $28,000 and its sale price is $840,000, what is its indicated GIM?

30

Calculate the mean of this set of gross rent multipliers: 87, 88, 72, 69, 67, 85.

78

You are trying to extract an adjustment for energy-efficient windows in an apartment building. You find two similar sales which differ from each other in two respects. Property A is a building with an energy-efficient windows and a good location, and it sold for $375,000. Property B has standard windows and an inferior location, and it sold for $335,000. Analysis of other paired sales indicates that apartment properties in good locations sell for $30,000 more than properties in lesser locations. Using this data, what is the indicated adjustment for the energy-efficient windows which are present in your subject property but are absent on a sales comparable?

A positive $10,000 adjustment

Which of the following is considered the foundation of statistical analysis?

Accurate data

Which of these terms refers to a type of sampling technique?

All of these are sampling techniques

Which of the following is an example of secondary data that might be used by an appraiser?

All of these are secondary data

In what way(s) does sales verification assist in reconciliation within the Sales Comparison Approach?

All of these: It helps determine the quality of the data, it can help the appraiser determine which sales are arm's-length

The gross income multiplier (GIM) reflects:

All the factors that market participants consider when pricing properties

Benefits or features of a property, both tangible and intangible, which increase its value would be considered ___________.

Amenities

There are four steps in the scientific method, which an appraiser might use as a systematic approach to solving problems. What is the final step this method?

Analysis

When using gross income multiplier (GIM) to appraise income-producing non-residential properties, what type of rental rate is used?

Annual

When reconciling to an indicated value for the subject, an appraiser may use:

Any of these: A single-point value, A relationship to a numerical benchmark, a value range

In the Sales Comparison Approach on a non-residential property, an appraiser may use ________ sales data.

Any or all of these types of: Local, Regional, National

An appraiser has reconciled to a final value opinion. How might this value opinion be stated in an appraisal report?

As any of these

A computer-generated model that provides value estimates for properties based on information gathered from agents, brokers, appraisers, public records, and other sources is an:

Automated valuation model

An appraiser is valuing a four-acre vacant parcel of land in an area where there is no zoning. As a residential home site, the property is worth $185,000. For commercial purposes, it is worth $1.20 per square foot. For industrial purposes, it is worth $50,000 per acre. What is the highest and best use of the property?

Commercial

What should an appraiser do when reconciling the indicated values in the Sales Comparison Approach?

Consider the quality and quantity of data

A building owner installs a new high-efficiency roof on a building at a cost of $200,000. However, the value of the building only increases by $150,000 as a result of the new roof. This demonstrates which economic principle?

Contribution

An appraisal organization performed a study which concluded that that spending more hours working on an appraisal assignment results in higher client satisfaction. In this situation, client satisfaction is the _________ variable.

Dependent

Which appraisal term refers to the the motivation of an individual, group of persons, or business entity involving the purchase of an item?

Desire

Which characteristic of value implies the presence of a need or demand?

Desire

When using a sale that was the result of the execution of a contract for deed, what is usually the most significant problem for an appraiser?

Determining the date when the actual meeting of the minds took place between the buyer and seller

Which of the following statement about the appraisal development process is TRUE?

Development and reporting are two separate and distinct functions.

An appraiser locates a comparable sale in the local MLS. During the verification process, the appraiser discovers that the buyer of the property was the granddaughter of the seller, although the parties have different last names. What should the appraiser do with this sale?

Disregard it or set it aside

A vacant land property sold for $408,000. Nine months later, it re-sold for $371,000. No changes or improvements were made to the property during this time. What is the monthly adjustment for market conditions indicated by this sale and re-sale?

Downward 1%

What is the principle that states that larger buildings tend to sell for less per square foot than smaller buildings?

Economies of scale

Factors that have an effect on the sale prices or value of comparable properties, for which adjustments are made in the Sales Comparison Approach, are known as _________.

Elements of comparison

In the Sales Comparison Approach, an appraiser uses ________ to adjust the sales prices of the comparable sales based on specific differences.

Elements of comparison

The Sales Comparison Approach is best described as an ________ investigation.

Empirical

What is name of the principle which state that in a normal bell-shaped curve, 68% of the observations will fall within one standard deviation of the mean?

Empirical rule

Which of the following is not a test criterion for highest and best use?

Environmentally friendly

Sometimes errors can occur when extracting adjustments using the paired sales technique. What is the best way for an appraiser to avoid such errors?

Examine several pairs of sales

When applying the Sales Comparison Approach to a particular property, an appraiser is making adjustments for conditions of sale, financing terms, and market conditions. What is the proper order of these adjustments?

Financing terms, conditions of sale, market conditions

In an appraisal, an appraiser is making adjustments for location, financing terms, and market conditions. What is the proper sequence of these adjustments?

Financing terms, market conditions, location

An apartment building is worth less than other buildings in its market because it has fewer bathrooms than what is expected by market participants. This is an example of ___________.

Functional obsolescence

If an appraiser is using the Sales Comparison Approach to value an identified parcel of real property, whose actions is he or she LEAST likely to consider?

Government agencies

A buyer of a property is unable to obtain typical market financing, so the seller agrees to carry the financing for the buyer at below-market terms. It is likely that the sale price of this property is going to be _________ than it would have been if typical market financing had been utilized.

Higher

When making an adjustment for condition in the Sales Comparison Approach, what "question" is the adjustment intended to answer?

If this comparable sale property were similar to the subject in condition, what would it have sold for?

The real estate market is best described as:

Inefficient

Which statement about the Concentric Zone Model is FALSE?

It focuses primarily on weather patterns that affect values in a region. WRONG ANSWERS: It has been criticized by some for its inability to fully explain contemporary city growth, It is considered somewhat simplistic but still can be useful to appraisers, Its theory assists appraisers with a method for analyzing growth patterns surrounding a city.

Which of these items would be a tangible difference between the subject and a comparable sale that might require adjustment in the Sales Comparison Approach?

Location

Supply and demand analysis along with the collection of market data, analyses, and recommendations would be found in a __________.

Market analysis

Which of these would NOT be a tangible difference between the subject and comparable sales that might require an adjustment in the Sales Comparison Approach?

Market conditions

Within the Income Approach, what might an appraiser need to reconcile?

Market rent

What term is defined as the most probable price that a property should sell for, under a fair sale, with each party acting prudently and knowledgeably?

Market value

An appraiser is applying statistical analysis in the study of vacant land values. What might the appraiser use to explain the extent to which individual data values have departed from the mean?

Measures of dispersion

According to the Concentric Zone Model, Zone 1 is the CBD, which contains:

Most of the tertiary employment

A capitalization rate indicates the relationship between a property's ________ income and its sales price.

Net operating

There are four steps in the scientific method which an appraiser might employ to solve problems. Which of these is the first step?

Observation

Which of the following is the MOST most common method of extracting and supporting adjustments in the Sales Comparison Approach?

Paired sales technique

While researching a potential comparable sale, an appraiser realizes that he had previously appraised the property. He goes into his prior workfile and is able to retrieve the measurements and field notes from his property inspection three years prior. This is an example of what type of data?

Primary data

An appraiser is analyzing a small apartment building, and notes that it is located in a busy suburban location, very close to a commuter rail line. This is an example of _______ data.

Qualitative

When developing the Sales Comparison Approach on an industrial property, an appraiser makes specific dollar adjustments to the sales prices of comparable properties. What type of analysis is the appraiser employing?

Quantitative

An appraiser is reviewing his data before drawing a conclusion. When reviewing, he finds an outlier. What should she do?

Re-examine the population of data

Which term is defined as the land, and everything permanently attached thereto?

Real estate

An appraiser is performing a highest and best use analysis. When considering legal permissibility and current land use regulations, what must the appraiser also consider?

Reasonably probable modifications of land use regulations

Prior to an appraiser reconciling the indications of the three approaches to reach a final value conclusion, he or she must first:

Reconcile within the approaches

Communication of the results of a real property appraisal assignment is governed by which part of USPAP?

STANDARD 2

An appraiser is valuing a residential property situated along a river. The river frontage is a major factor in the value of this property, accounting for approximately 50% of its value. The appraiser is only able to find one other sale of a riverfront property, Sale A, which occurred three years ago. Sale B is located several miles away, and it sold within the last month. Sale C is located only one-quarter mile from the subject, but it has no river frontage. Which sale is likely to provide the best indication of value for the subject property?

Sale A

An appraiser is valuing a new one-unit retail building, which is under construction. The appraiser has ample market-derived evidence that owner-occupied buildings of this type typically sell for significantly more than their cost to construct. Which approach is likely to be given greater weight in final reconciliation?

Sales Comparison Approach

The test criteria used in highest and best use analysis include all of the following EXCEPT:

Socially acceptable WRONG ANSWERS: Financially feasible, legally permissible, maximally productive

Upon which valuation principle is the Sales Comparison Approach primarily based?

Substitution

When reconciling, which of these is NOT an important consideration for the appraiser?

The amount of time the appraiser was given to complete the appraisal

When reconciling to an indicated value in the Sales Comparison Approach, who is responsible for determining which sales provide the best indication of value for the subject property?

The appraiser

Upon which of the following is reconciliation primarily based?

The appraiser's judgment

Which statement regarding the Sales Comparison Approach is FALSE?

The approach is localized, i.e., regional and national data is not used.

The subject property is an industrial warehouse building with low ceilings. This factor limits the building's functional utility. One of the comparable sales has much higher ceilings, and therefore is more useable. What type of adjustment should be made in the Sales Comparison Approach?

The comparable should be adjusted down to the subject

An appraiser uses only one valuation approach in developing an appraisal. Which statement is TRUE regarding this situation?

The conclusion of that approach becomes the final value by default.

When reconciling multiple approaches into a single opinion of value, the importance of each approach will vary based on the type of property and:

The intended use of the appraisal

As it relates to appraisal, how is the term "reconciliation" defined?

The process in which the appraiser considers various indications of value

There are four characteristics of value - utility, scarcity, desire, and purchasing power. What happens when one or more of these value characteristics changes in relation to a specific property?

The property's value changes

The Cost Approach is sometimes referred to by another name. What is it?

The summation approach

In a real property appraisal, an appraiser's point of focus should be:

The value of ownership rights

In an appraisal in which three approaches to value are developed, and multiple comparable sales are used:

There will typical be multiple indications of value

An appraiser is valuing a property as of a date in the past. Which statement is TRUE regarding this situation?

This is a retrospective value opinion

What are property rights conveyed, financing, conditions of sale, and market conditions?

Transactional differences considered in the sales comparison approach

Which statement is TRUE regarding USPAP and the definition of market value?

USPAP cautions appraisers to identify the exact definition of value used in every market value appraisal.

An appraiser is valuing an agricultural property and decides to appraise it based on value per acre. This is an example of ____________.

Units of comparison

Another term for a variable is:

Variate

You are appraising in a non-disclosure state. What is the best way for you to determine the actual sale price of a comparable property?

Verify the sale with a party or parties to the transaction

Which of these answers reflects a difficulty associated with the paired sales technique?

When applying this technique, it is difficult to account for every single difference between properties

It is likely that in the Sales Comparison Approach, each comparable sale used ___________.

Will produce its own indicated value

Is reconciliation necessary within the Income Approach?

Yes, items such as market rent and capitalization rate need to be reconciled