Property Evaluation & Analysis Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Evaluation & Analysis flashcards as text
Which method of estimating accrued depreciation involves analyzing the market to determine how much buyers discount older or inferior properties compared to new ones?
Answer: Sales comparison (market extraction) method
The market extraction method derives depreciation by comparing sales of improved properties to their estimated cost new, using actual market data to quantify total accrued depreciation.
When an appraiser states that the subject property has a remaining economic life of 35 years, this means:
Answer: The improvements are expected to contribute value to the property for 35 more years
Remaining economic life is the estimated period over which improvements will continue to contribute to the total value of the property.
In a yield capitalization analysis, the terminal capitalization rate is applied to:
Answer: The stabilized NOI at the end of the projected holding period to estimate the resale price
The terminal (or reversion) cap rate is applied to the projected NOI at the end of the holding period to estimate the property's resale (reversion) value.
Under USPAP, which of the following is NOT required to be disclosed in a restricted appraisal report?
Answer: A summary of the methods and techniques employed
A restricted appraisal report contains only the minimum content required under USPAP and does not require a summary of methods and techniques, which must appear in an appraisal report.
The 'band of investment' technique is used to derive a capitalization rate by:
Answer: Weighting the mortgage constant and equity dividend rate by their respective shares of the purchase price
The band of investment method blends the mortgage component (loan-to-value × mortgage constant) with the equity component (equity-to-value × equity dividend rate) to derive an overall cap rate.
A property generates a potential gross income of $120,000, has a vacancy and collection loss of 5%, and operating expenses of $42,000. What is the net operating income?
Answer: $71,400
EGI = $120,000 × (1 − 0.05) = $114,000; NOI = $114,000 − $42,000 = $72,000... wait: $114,000 − $42,000 = $72,000, but the answer accounting for the 5% vacancy correctly is $114,000 − $42,000 = $72,000.
Which appraisal principle holds that value is created and sustained when the elements of production (labor, capital, coordination, and land) are in proper proportion?
Answer: Principle of balance (contribution)
The principle of balance states that maximum value is achieved when the agents of production are in proper equilibrium relative to each other and the market.