Chapter 9 - Market Data Approach Flashcards

Chapter 9 - Market Data Approach Flashcards When an analysis of residential properties is made, what can one use to come up with a dollar adjustment for location of properties of similar value?A.) RevisionB.) ConversionC.) ExchangeD.) Discounting D.) Discounting What principle states that when several commodities, products, or services offer or provide the same basic uses, then the one priced the lowest will be in the most demand, and consequently, receive the widest distribution?A.) The principle of demandB.) The principle of substitutionC.) The principle of supplyD.) The principle of replacement B.) The principle of substitution what is data collectiona key component of using the sales comparison approach to value.What impact does a special assessment have on an appraisal When a property is sold subject to a special assessment, an adjustment must be made if comparable properties are not subject to the same special assessment.Buyers often base their value conclusions primarily on which of these?A.) Closed listingsB.) Closed salesC.) Expired listingsD.) Properties that are currently being offered for sale D.) Properties that are currently being offered for sale The technique that is used when more than one set of matched pairs is used to extract adjustment factors is known as what?A.) ReconciliationB.) Matched pair adjustmentC.) Regression analysisD.) The extraction method C.) Regression analysis Substitution is based on what assumption Based on the assumption that there will not be any costly delay in making the substitution (in other words, it will not have to be built from the ground up, or other significant -- and expensive -- delay).Dollar adjustments are needed to complete which documents (1) The Uniform Residential Appraisal Report (URAR) form(2) The Small Income Property Report form(3) The Condominium-PUD Appraisal Report form To arrive at the most accurate appraisal, the appraiser should do what Try to make the fewest adjustments possible to the estimate.The five steps of the sales comparison approach are:(1) Study the market.(2) Collect and verify data.(3) Analyze and compare properties.(4) Adjust the prices of the comparables.(5) Reconcile the newly adjusted prices.Define special assessmentstaxes that are levied by a specific taxing authority.They apply only for a specific period of time as a way to pay for specific improvements, including sidewalk construction, sewers, street paving, etc.

How can a market adjustment for the differences between a subject property and comparable sales be expressed.(1) As a dollar amount(2) As a percentage In which of the following is the sequence of adjustments most important?A.) EstimatesB.) Replacement costsC.) Percentage adjustmentsD.) Dollar adjustments C.) Percentage adjustments What is the purpose of math equations, computer programs, and other calculations in the course of an appraisal?A.) To narrow a range of possible numbersB.) To provide the exact numbers in an appraisalC.) To determine the appraised property's adjustmentsD.) To determine the appraised property's final value A.) To narrow a range of possible numbers If a subject property and a comparable property are equal, what type of adjustment is necessary There is no adjustment required.Regarding data collection, name three places this data is collected (1) Comparable property sales(2) listings and offerings(3) appraisers' files.When is the "matched pairs" technique the most reliableIf there is only one difference present between the matched pairs.the technique to extract the amount of the adjustment from the market is calledA.) elements of similarity.B.) comparable sales.C.) exact comparables.D.) matched pairs.D.) matched pairs.What are the two primary factors where calculations would rarely work in a matched pairs technique?A.) Cost and comparison factorsB.) The adjustment for one item of difference may already include a partial adjustment for another item of difference and that there can be a range of prices considered reasonable for the applicable market because buyers and sellers have different opinions of the value of each comparable itemC.) Abstractions for lot size and floor planD.) Similar homes with the same floor plan where home 1 has a 1 car attached garage and home 2 has a 2 car attached garage B.) The adjustment for one item of difference may already include a partial adjustment for another item of difference and that there can be a range of prices considered reasonable for the applicable market because buyers and sellers have different opinions of the value of each comparable item In an actual sales analysis, why do adjustment calculations rarely work out precisely The adjustment for one item of difference may already include a partial adjustment for another item of difference.For each property, there can be a range of prices (to apply to adjustments) that are considered reasonable for the applicable market.Percentage adjustments are generally used to expressthe differences between a subject property and a comparable sale Can appraisers apply the sales comparison approach to income properties Yes.Which approach has the best indication of market valueSales comparison approach.What does the sales comparison approach require an appraiser to do It requires an appraiser to make direct comparisons between the subject property (the one being appraised) and other sold or listed (for sale) properties.

When sequence adjustments are made to the appraisal, what type of adjustment translates the comparables' transaction price into its cash equivalent?A.) Conditions of salesB.) Property rights conveyedC.) Market conditionsD.) Financing terms D.) Financing terms An appraiser must always personally inspect comparable information and confirm that information with the buyer, seller orA.) lender.B.) builder.C.) HOA.D.) broker.D.) broker.Explain substitutionImportant factor in the market data approach to valuation.States that when several commodities, products or services that offer or provide the same basic uses, then the one priced the lowest will be in the most demand, and consequently, receive the widest distribution.What is the sequence of adjustments recommended by the Appraisal Institute (1) Property rights conveyed(2) Financing terms(3) Condition of sales(4) Market condition (time)(5) Location what is market studyconducted to find the sales/listing data of comparable properties, and because appraisal values are time-sensitive, the more current the comparable information is, the more relevant it is.In general, what is a special assessment based on the specific benefits that improvement adds to the property.

The sales comparison approach is also known as: The market data approach.

Someone who wishes to purchase an investment property generally compares what elements when looking at one

particular property:

The potential return on his investment.Tax shelter possibilities.The burden of management.Numerous additional factors.Those comparable sales upon which the most weight is placed in the final reconciliation is based upon what Comparable sales whose value estimates required the least amount of adjustments.When comparing properties, appraisers must take into

consideration the following adjustments:

(1) If the comparable sale is superior to the subject property, a minus (-) adjustment is made to the comparable sale.(2) If the comparable sale is inferior to the subject property, a plus (+) adjustment is made to the comparable sale.Percentage adjustments are generally used to express what kinds of differences between the subject property and

the comparables:

(1) Time adjustments(2) Location(3) Special conditions When an appraiser analyzes residential properties, what can be used to come up with a dollar adjustment for location of properties of similar value Discounting.How does substitution apply to the theory of market data approach In single-family residential markets, when a residence is considered "replaceable" in the market, that home's value is basically set at whatever it would cost to purchase an equally desirable "substitute" home.The significant aspects of the home -- such as the design, square footage, perhaps the number of bedrooms and bathrooms, and other factors -- are similar enough that they could almost be considered interchangeable.

Define reconciliationFinal resolution.what is regression analysisA technique that is used when more than one set of matched pairs is used to extract adjustment factors.A clear difference between the expression of adjustments in dollar figures versus percentages is seen when The sequence adjustments are made to the appraisal Appraisers commonly use two analytical tools: (1) Elements of comparison: includes the property's location, one or more physical characteristics, sale conditions and sale date, must each be considered(2) Units

of comparison: gives the appraiser the means to make the

consideration for necessary adjustments If an appraiser is using the technique of matched pairs, one sale must contain the item for which the adjustment is being sought and the other saleA.) must have the same item.B.) must have a similar item.C.) must not contain that adjustment item.D.) must have a similar floor plan.C.) must not contain that adjustment item.Which question is not a motivation-specific element in a home sale?A.) Were both parties knowledgeable about the property and the market in which the sale took place?B.) Did each party act without financial pressure?C.) Is the home subject to HOA dues?D.) Was the sale an "arms-length" transaction?C.) Is the home subject to HOA dues?How does the principle of substitution apply to a single-family residence.A home's value is basically set at whatever it would cost to purchase an equally desirable "substitute" home.What are the criteria for using the "matched pairs" technique The appraiser must choose two sales in the market.One sale must contain the item for which the adjustment is being sought.The other must not contain that adjustment item.Percentage adjustments can be converted to what other type of adjustment, if needed Dollar adjustments.