BC Real Estate Trading Services Course Property Valuation & Appraisal 1 — Questions and Answers
Question 1: In BC, which method of property valuation estimates value by comparing the subject property to recently sold similar properties?
- Income approach
- Cost approach
- Direct comparison (sales comparison) approach (Correct answer)
- Gross rent multiplier method
Correct answer: Direct comparison (sales comparison) approach
The direct comparison (sales comparison) approach estimates value by comparing the subject property to recent sales of comparable properties, making adjustments for differences.
Question 2: The income approach to property valuation is most appropriate for:
- Owner-occupied single family homes
- Income-producing properties such as apartment buildings and commercial properties (Correct answer)
- Vacant land only
- Heritage properties
Correct answer: Income-producing properties such as apartment buildings and commercial properties
The income approach estimates value based on the income the property generates. It is most suited for income-producing properties where buyers are primarily motivated by return on investment.
Question 3: In BC real estate, 'market value' is best defined as:
- The assessed value assigned by BC Assessment
- The most probable price a property would sell for in an open, competitive market between informed, willing parties (Correct answer)
- The replacement cost of the property's improvements
- The price listed on the MLS
Correct answer: The most probable price a property would sell for in an open, competitive market between informed, willing parties
Market value is the most probable price a property would sell for in an open market, with both buyer and seller acting knowledgeably, prudently, and without undue pressure.
Question 4: In a direct comparison approach for a BC residential property, adjustments are made to:
- The subject property's features to match comparables
- The comparable sales prices to reflect the differences compared to the subject property (Correct answer)
- The listing price of the subject property only
- BC Assessment values only
Correct answer: The comparable sales prices to reflect the differences compared to the subject property
In the sales comparison approach, adjustments are made to the comparable sales prices (not the subject) to account for differences. If a comparable has a feature the subject lacks, the comparable price is adjusted downward.
Question 5: BC Assessment values properties for tax purposes as of:
- The current date each year
- July 1 of the previous year (assessment roll date) (Correct answer)
- January 1 of the current year
- The date the property last sold
Correct answer: July 1 of the previous year (assessment roll date)
BC Assessment values properties as of July 1 of the previous year. These values are used to calculate property taxes for the following year's tax roll.
Question 6: Which of the following is NOT a factor that directly affects residential property value in BC?
- Location and neighbourhood
- Property size and features
- The original purchase price paid by the current owner (Correct answer)
- Market supply and demand conditions
Correct answer: The original purchase price paid by the current owner
The original purchase price paid by the current owner does not directly affect current market value. Value is determined by current market conditions, not historical cost.
BC Real Estate Trading Services Course Property Valuation & Appraisal 1
In BC, which method of property valuation estimates value by comparing the subject property to recently sold similar properties?