Chapter 7

Question 1

The process of deriving a value indication for the subject property by comparing sales of similar properties to the property being appraised, identifying appropriate units of comparison, and making 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.

Answer 1

Sales Comparison Approach

Question 2

The most commonly used approach for appraising residential property.

Answer 2

Sales Comparison Approach

Question 3

The more sales ______ you collect, the more supportable and defensible your appraisal will be. The traditional minimum number of comparable sales has been ____

Answer 3

data; three

Question 4

This approach generally does not consider the income that is being produced or can be produced by the property.

Answer 4

Sales Comparison Approach

Question 5

Income-producing properties are generally appraised with which approach?

Answer 5

Income Capitalization Approach

Question 6

The 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

Answer 6

Principle of Substitution

Question 7

Of the three appraisal approaches, the sales comparison approach relies most heavily on which principle?

Answer 7

Principle of Substitution

Question 8

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.

Answer 8

Principle of Contribution

Question 9

sale price of comparable plus or minus the adjustment to price = indicated value of subject

Answer 9

Sales Comparison formula

Question 10

The sales comparison formula always starts with the __________. We never adjust the ______ property.

Answer 10

comparable

Question 11

The first step of this procedure is to research the market in which the subject is competing for indications of value.

Answer 11

Sales Comparison Procedure

Question 12

_____ ____ ______ is the second step of the sales comparison procedure.

Answer 12

Verifying the information

Question 13

The Sales Comparison Procedure (5 steps)

Answer 13

Research the market
Verify the information
Select relevant units of comparison
Identify differences and make adjustments
Reconcile the value indications

Question 14

An appraiser uses five comparable sales, and gets a differing indication of value from each one. What step of the sales comparison process involves considering these indications and arriving at an indication of value for the subject?

select relevant units of comparison
reconcile the value indications
verify the information
none of the above

Answer 14

reconcile the value indication

Question 15

What is the first step in the sales comparison approach process?

select relevant units of comparison
reconcile the value indications
research the market
verify the information

Answer 15

research the market

Question 16

The subject property has 1,200 square feet of GLA, and a comparable sale has 1,400 square feet. What type of adjustment are you likely to make in the sales comparison approach for GLA?

a downward adjustment to the comparable
an upward adjustment to the comparable
a downward adjustment to the subject
an upward adjustment to the subject

Answer 16

a downwards adjustment to the comparable

Question 17

In the sales comparison approach, we adjust

the subject
the comparable
either the subject property or the comparable, depending on the appraiser’s discretion
comparable listings but not comparable sales

Answer 17

the comparable

Question 18

True or False: In an arms-length transaction, the seller is under no duress to sell, but the buyer may be under duress.

Answer 18

False

Question 19

A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises

Answer 19

neighborhood

Question 20

A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural.

Answer 20

district

Question 21

The geographic region from which a majority of demand comes and in which the majority of competition is located. Depending on the market, a market area may be further subdivided into components such as primary, secondary, and tertiary market areas, or the competitive market area may be distinguished from the general market area

Answer 21

Market Area

Question 22

Before completing the sales comparison approach we need to collect:

Answer 22

General data about trends affecting the neighborhood, city, region and nation
Specific data about the subject and its improvements
Comparables to be used for valuation

Question 23

Data that relates to the four forces that affect real property values—social, economic, governmental, and environmental forces. This type of data is usually not specific to any particular property but is applicable in many assignments of similar types of properties. Also known as macro-level data

Answer 23

General Data

Question 24

Details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics

Answer 24

Specific Data

Question 25

Places where you might find specific data:

Answer 25

``` Personal inspection Homeowner Deed Lease(s) Assessment record Tax bill Survey Site plan Title document Homeowners Association declaration and bylaws ```

Question 26

When collecting data, the appraiser looks for information on:

Answer 26

Recent sales Listings of comparables Contracted or pending sales Offers / refusals / options

Question 27

Where can we obtain information on property sales?

Answer 27

``` Multiple Listing Services Data Subscription services Real Estate agents Other appraisers Appraisal organizations Your own files Courthouse records Assessor records Newspaper articles Newspaper advertisements ```

Question 28

The process by which a value indication is derived in the sales comparison approach. Comparative analysis may employ quantitative or qualitative techniques, either separately or in combination

Answer 28

Comparative Analysis

Question 29

In applying comparative analysis, an appraiser may employ qualitative techniques only quantitative techniques only quantitative or qualitative techniques, either separately or in combination quantitative or qualitative techniques separately, but not together

Answer 29

quantitative or qualitative techniques, either separately or in combination

Question 30

True or False: A market area could encompass an entire state, or several states.

Answer 30

True

Question 31

"The geographic region from which a majority of demand comes and in which the majority of competition is located" is the definition of neighborhood market area district municipality

Answer 31

market area

Question 32

This type of analysis is based on numbers, and results in either dollar or percentage amounts.

Answer 32

Quantitative

Question 33

This type of analysis is used for elements that cannot be given a numerical value.

Answer 33

Qualitative

Question 34

Quantitative analysis usually forms the basis of your

Answer 34

opinion

Question 35

A numerical (dollar or percentage) adjustment to the indicated value of a comparable property to account for the effect of a difference between two properties on value

Answer 35

Quantitative Adjustment

Question 36

This is a technique that is often used in extracting adjustments - is a common type of quantitative analysis

Answer 36

Paired data analysis

Question 37

A quantitative technique used to identify and measure adjustments to the sale prices or rents of comparable properties; to apply this technique, sales or rental data on nearly identical properties are analyzed to isolate a single characteristic's effect on value or rent. Often referred to as paired sales analysis.

Answer 37

Paired data analysis

Question 38

Comparable 1 sells for $185,000 and has a fireplace. Comparable 2 was built by the same builder, is right across the street, and is similar in all aspects except that it has no fireplace. It sells for $180,000. What's the value of the fireplace?

Answer 38

$5,000 $185,000 - $180,000 = $5,000

Question 39

Comparable 1 sells for $208,000 and contains 2,100 SF. Comparable 2 is similar in all aspects, except it contains 1,950 SF, and it sells for $203,500. We can subtract the square footages of the two homes (2,100 -1,950 = 150 SF) to obtain the difference in size between the two homes. Then we can subtract the sale prices of the two homes ($208,000 - $203,500 = $4,500) to obtain the difference in sale price between the two homes.

Answer 39

Because the two homes are otherwise the same, we can conclude that the $4,500 difference in the sale price between the two homes is based on the 150 square foot difference in size. We can even take these two numbers and divide them, to get an indication of how much each additional square foot adds to the value of the home. $4,500 / 150 = $30 per SF

Question 40

A home sells in January for $180,000 and sells again in November for $198,000. When the home resold, it had not been improved at all from the date it was originally purchased. The only change was the time. What is the indicated adjustment for time or change in market conditions?

Answer 40

$198,000 / $180,000 = 1.10 10% over 10 months

Question 41

The HP 12C employs five financial function keys. They are arrayed across the top of the calculator and include:

Answer 41

n = number of periods i = periodic interest rate PV = present value PMT = periodic payment FV = future value

Question 42

Sale A, which is a 1,600 square-foot home with a double garage, sold for $190,000 in February. Sale B, which is very similar except it had 1,700 square feet of living area and only a single garage, sold for $204,900 in October. It has been determined that the indicated adjustment for square feet of living area is $38.00 per square foot and the adjustment for the difference in garages is $4,000.00. What is the market conditions (time) adjustment?

Answer 42

Sale B price: $204,900 Adjustment for size - 3,800 Adjustment for garage + 4,000 Sale B adjusted price $205,100 Earlier sale (Sale A) $190,000 Difference (time of sale) $ 15,100 $15,100 / $190,000 = .0795 or 7.95% increase over 8 months. 7.9 / 8 = 0.993% per month.

Question 43

The process of accounting for differences (such as between comparable properties and the subject property) that are not quantified; may be combined with quantitative techniques.

Answer 43

Qualitative Analysis

Question 44

A qualitative technique for analyzing comparable sales; used to determine whether the characteristics of a comparable property are inferior, superior, or similar to those of the subject property. Relative comparison analysis is similar to paired data analysis, but quantitative adjustments are not derived.

Answer 44

Relative Comparison Analysis

Question 45

Comparable 1 sold for $400,000 and is greatly superior to the subject; Comparable 2 sold for $250,000 and is significantly inferior to the subject; Comparable 3 sold for $300,000 and is slightly inferior to the subject. Based on qualitative analysis, the indicated value for the subject would probably be in the range of $300,000 to $350,000.

Answer 45

Comparison Analysis Procedure

Question 46

A qualitative technique for analyzing comparable sales; a variant of relative comparison analysis in which comparable sales are ranked in descending or ascending order of desirability and each is analyzed to determine its position relative to the subject.

Answer 46

Ranking Analysis

Question 47

True or False: Qualitative analysis is used for elements that cannot be given a numerical value.

Answer 47

True

Question 48

``` What type of analysis is used for elements that cannot be given a numerical value? qualitative quantitative percentage units of comparison ```

Answer 48

Qualitative

Question 49

``` Comp A has three bedrooms and sold for $118,000. Comp B has four bedrooms and sold for $125,000. What is the indicated adjustment for a fourth bedroom, using these two paired sales? $1,000 $3,000 $7,000 $8,000 ```

Answer 49

$7000

Question 50

A property sold for $129,000. It was not improved or added onto, and it re­-sold 12 months later for $141,900. What is the annual change in market conditions indicated by this sale? a 10% increase an 8% increase a 10% decrease an 8% decrease

Answer 50

a 10% increase

Question 51

The only limitation of the sales comparison approach is that _____________. it only works for residential properties it only works for income producing properties it doesn’t work the way people think you need a sufficient number of reliable sales

Answer 51

You need a sufficient number of reliable sales

Question 52

``` Besides properties that have recently sold, other value indications might include all of the following EXCEPT listings offers to purchase option to purchase offers to lease ```

Answer 52

offers to lease

Question 53

``` Comparable 1 sells for $222,000 and contains 1,900 SF. Comparable 2 is similar in all aspects, except it contains 2,100 SF, and it sells for $234,000. How much should we adjust another comparable sale, per square foot? $30 $40 $50 $60 ```

Answer 53

$60

Question 54

``` Which of the following would NOT be considered a source of specific data? U.S. Census Bureau personal inspection deed tax bill ```

Answer 54

US Census Bureau

Question 55

``` The primary principle upon which the cost and sales comparison approaches are based is the principle of ________________. substitution change externalities supply and demand ```

Answer 55

Substitution

Question 56

The principle of _________________ is used when determining how much to adjust for differences between various components of a property. change contribution anticipation increasing and decreasing returns

Answer 56

Contribution

Question 57

``` ______________ is “the process by which a value indication is derived in the sales comparison approach”. Comparative analysis Bracketing Adjustment analysis Quantitative analysis ```

Answer 57

Comparative Analysis

Question 58

A market area boundary might be indicated by a change in all of the following EXCEPT age of structures type of use; single family, commercial, etc. topography income levels

Answer 58

Topography

Question 59

Price per square foot of gross living area is a common unit of comparison when appraising offices 2-4 unit properties vacant land one-unit residences

Answer 59

One unit residences

Question 60

``` A transaction could be verified through any of the following EXCEPT buyer seller home inspector listing agent ```

Answer 60

home inspector

Question 61

In the URAR, concerning verification, you are asked to provide the ____________ and the __________. data source, verification source verification source, date of data data source, date of data verification source, email address of source

Answer 61

data source, verification source

Question 62

``` Price per square foot of net leasable area is a common unit of comparison when appraising offices 2-4 unit properties vacant land one-unit residences ```

Answer 62

offices

Question 63

``` “A neighborhood characterized by homogeneous land use, e.g., apartment, commercial, industrial, agricultural” is the definition of ____________. neighborhood district market area market ```

Answer 63

district

Question 64

Which analysis technique employs only plusses and minuses? quantitative analysis comparison analysis paired data analysis relative comparison analysis

Answer 64

relative comparison analysis

Question 65

``` “A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises” is the definition of neighborhood district market area market ```

Answer 65

neighborhood

Question 66

``` Paired data analysis is an example of _______________ analysis. quantitative statistical cost-benefit comparative ```

Answer 66

quantitative

Question 67

``` The principle of _________________ is used when determining how much to adjust for differences between various components of a property. change contribution anticipation increasing and decreasing returns ```

Answer 67

contribution

Question 68

``` Adjustments should be made for __________ differences between the subject property and a comparable property. all at least three significant no more than three ```

Answer 68

significant

Question 69

The last step in the sales comparison approach is verify the information research the market reconcile the value indicators identify differences and make adjustments

Answer 69

reconcile the value indicators

Question 70

``` Which of these is NOT another name for the sales comparison approach? direct sales comparison approach sales capitalization approach market approach market data approach ```

Answer 70

sales capitalization approach