Residential Sales Comparison and Income Approaches 2022 QUESTIONS AND ANSWERS A GRADED

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Residential Sales Comparison and Income Approaches 2022 QUESTIONS AND ANSWERS A GRADED sales comparison approach Correct answer"The process of deriving a value indication for the subject property by ... comparing market information for similar properties with the property being appraised, identifying appropriate units of comparison, and making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant when an adequate supply of comparable sales is available." When choosing comparables, the appraiser looks for properties that are as similar as possible to the subject in all aspects. This includes analyzing diverse factors such as: Correct answerSales or financing concessions Market conditions when sale occurred Location Property rights appraised Site characteristics Physical characteristics of structures Quality Functional attributes Amenities Motivations of sellers and buyers elements of comparison Correct answerfactors selected for comps The sales comparison approach was previously known as the: Correct answerMarket Approach Market Data Approach Direct Sales Comparison Approach When choosing comparables, the appraiser analyzes: Correct answerLocation, amenities, market conditions Sales or financing concessions Motivations of sellers and buyers, property rights How many comparables are typically used by appraisers in the sales comparison approach? Correct answerNo less than three principle of substitution Correct answerThe appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based." principle of contribution Correct answer1. The amount a component of a property adds to the total value of the property. Contribution may or may not be equivalent to the cost to add the component. 2. The concept that the value of a particular component is measured in terms of the amount it adds to the value of the whole property or as the amount that its absence would detract from the value of the whole". Principle of Change Correct answerThe result of the cause and effect relationship among the forces that influence real property value." external market factors Correct answersocial, economic, governmental, and environmental. principle of anticipation Correct answer"The perception that value is created by the expectation of benefits to be derived in the future." In residential properties, the anticipated future benefits are amenities. They may include: Correct answerThe security of having a roof over your head The prestige of owning a nice home in a good neighborhood The anticipation of being able to put your feet up on your deck or cuddle up in front of the fireplace The benefits of owning versus renting The privacy entailed in owning a home of your own In income-producing properties, the anticipated benefits are primarily financial in nature. They may include: Correct answerIncome from rentals Build-up of equity Tax benefits Future resale at a profit "The result of the cause and effect relationship among the forces that influence real property value" is the definition of the principle of Correct answerChange Of the three appraisal approaches, the sales comparison approach relies most heavily on the economic principle of: Correct answerSubstitution "The perception that value is created by the expectation of benefits to be derived in the future" is the definition of the principle of Correct answerAnticipation principle of supply and demand Correct answer"In economic theory, the principle that states that the price of a commodity, good, or service varies directly, but not necessarily proportionately, with demand, and inversely, but not necessarily proportionately, with supply. In a real estate appraisal context, the principle of supply and demand states that the price of real property varies directly, but not necessarily proportionately, with demand and inversely, but not necessarily proportionately, with supply." Principle of Competition Correct answer"Between purchasers or tenants, the interactive efforts of two or more potential purchasers or tenants to make a sale or secure a lease. Between sellers or landlords, the interactive efforts of two or more potential sellers or landlords to complete a sale or lease. Among competitive properties, the level of productivity and amenities or benefits characteristic of each property considering the advantageous or disadvantageous position of the property relative to the competitors." Principle of Balance Correct answer"The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium. principle of conformity Correct answerThe appraisal principle that real property value is created and sustained when the characteristics of a property conform to the demands of its market." principle of progression Correct answer"The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties. principle of regression Correct answer"In appraisal, the concept that a higher-priced property will be worth less in a lower-priced neighborhood than it would in a neighborhood of comparable properties." principle of externalities Correct answer"1. The principle that economies outside a property have a positive effect on its value while diseconomies outside a property have a negative effect on its value. 2. In appraisal, off-site conditions that affect a property's value. Exposure to street noise or proximity to a blighted property may exemplify negative externalities, whereas proximity to attractive and well-maintained properties or easy access to mass transit may exemplify positive externalities." "The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are in a state of equilibrium" is the definition of the principle of Correct answerBalance "The concept that a lower-priced property will be worth more in a higher-priced neighborhood than it would in a neighborhood of comparable properties" is the definition of the principle of Correct answerProgression "In appraisal, off-site conditions that affect a property's value" is part of the definition of the principle of Correct answerExternalities The Sales Comparison Formula Correct answer-Sale price of comparable + or - adjustments to price = indicated value of subject -Process starts with the comparable not the subject -Never adjust the subject property, think of the subject property as a base, which does not move Notice that the process starts with the _______, not the _________ Correct answercomparable, subject The subject is a three-bedroom home that is 25 years old. It has a brand new kitchen. The comparable is a similar house, also 25 years old, in the same neighborhood, but it has its original kitchen. New kitchens have a contributory value of $15,000. The comparable sold for $200,000. What is the subject worth? Correct answer$200,000 + $15,000 = $215,000. In applying the sales comparison approach, the appraiser should employ a systematic approach: Correct answerResearch the market Verify the information Select relevant units of comparison Identify differences and make adjustments Reconcile the value indications Step 1, the COMPETENCY RULE of the Uniform Standards of Professional Appraisal Practice (USPAP) requires that you determine if you're qualified to do the job at hand. It says Correct answer"The appraiser must determine, prior to accepting an assignment, that he or she can perform the assignment competently. Competency requires: 1. the ability to properly identify the problem to be addressed; and 2. the knowledge and experience to complete the assignment competently; and 3. recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment." If the assignment cannot be completed competently, you must Correct answerdecline or withdraw from the assignment. Step 1 Correct answerResearch the Market We may also be able to gather information on other indications of value, which might include: Listings Offers to purchase Refusals Options to purchase Contracts on properties that have yet to close Step 2 Correct answerStep 2: Verify the information We need to verify information in order to assure its accuracy. STANDARD 1 of USPAP states, in part, [Show More]

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