CMC Property Appraisal and Valuation 2

Question 1

The sales comparison approach to value is MOST appropriate for which type of property?

Accepted Answer

Single-family residential properties in active markets with sufficient comparable sales

Answer

Income-producing commercial office buildings

Answer

New construction properties with no comparable sales

Answer

Special-use properties like churches or schools

Question 2

In the cost approach to appraisal, which of the following correctly describes 'depreciation'?

Accepted Answer

The total loss in value from any cause, including physical deterioration, functional obsolescence, and external obsolescence

Answer

The annual decrease in property taxes due to age

Answer

The reduction in mortgage balance over time through amortization

Answer

The decline in rental income from a property over its useful life

Question 3

What is 'functional obsolescence' in property appraisal?

Accepted Answer

Loss in value due to outdated, inadequate, or superadequate features within the property itself

Answer

Loss in value due to external factors like neighborhood decline

Answer

Physical deterioration of the property's structural components

Answer

Decrease in value from environmental contamination on or near the site

Question 4

In the income approach to property valuation, what is the capitalization rate (cap rate) used to determine?

Accepted Answer

The ratio of net operating income to property value, used to convert income into a value estimate

Answer

The interest rate used to finance the income property purchase

Answer

The maximum loan-to-value ratio allowed by a lender on investment property

Answer

The percentage of gross income a borrower must allocate to mortgage payments

Question 5

What is a 'comparable sale' (comp) in the sales comparison approach?

Accepted Answer

A recently sold property with characteristics similar to the subject that is used as a value benchmark

Answer

A property currently listed for sale at a price similar to the subject property

Answer

Any property located within the same zip code as the subject property

Answer

A property that was appraised within the past twelve months by the same appraiser

Question 6

When applying adjustments in the sales comparison approach, which situation requires a POSITIVE (upward) adjustment to the comparable's sale price?

Accepted Answer

When the comparable is inferior to the subject property in a given feature

Answer

When the comparable is superior to the subject property in a given feature

Answer

When the comparable sold more recently than other comps being used

Answer

When the comparable is located in a more desirable neighborhood than the subject

Question 7

What is 'external obsolescence' in the cost approach to appraisal?

Accepted Answer

Loss in value caused by factors outside the property's boundaries, such as neighborhood decline or nearby nuisances

Answer

Loss in value caused by physical deterioration of the building's exterior walls or roof

Answer

The depreciation of building materials due to prolonged weather exposure

Answer

Value reduction due to an outdated or undesirable architectural style