Property Valuation & Appraisal Flashcards
7 cards from real CRM 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 Valuation & Appraisal flashcards as text
In the cost approach, what does 'reproduction cost' mean as opposed to 'replacement cost'?
Answer: Reproducing an exact replica using original materials vs. building with modern equivalent materials
Reproduction cost estimates the expense to build an exact duplicate; replacement cost estimates the expense to build a functionally equivalent structure with modern materials.
What is the primary purpose of a Uniform Residential Appraisal Report (URAR)?
Answer: To provide a standardized format for appraising single-family residential properties for lending purposes
The URAR (Fannie Mae Form 1004) is the standard appraisal form required by most lenders for conventional single-family mortgage transactions.
Which economic principle explains why a property's value may rise when it is located near properties of higher value?
Answer: Principle of progression
The principle of progression states that the value of a lesser property is enhanced by its proximity to more valuable properties.
What is 'functional obsolescence' in the context of property appraisal?
Answer: A loss of value due to deficiencies or superadequacies in the property's design or features
Functional obsolescence results from outmoded design elements such as insufficient closet space, outdated floor plans, or features no longer desired by the market.
A property's assessed value is $180,000, and the assessment ratio in the jurisdiction is 60%. What is the indicated market value?
Answer: $300,000
Market Value = Assessed Value ÷ Assessment Ratio = $180,000 ÷ 0.60 = $300,000.
Which of the following best describes 'arm's length transaction' in appraisal practice?
Answer: A sale between unrelated parties under no duress, each acting in their own best interest
An arm's length transaction involves independent parties acting without compulsion, making it a reliable indicator of market value.
The age-life method of estimating depreciation requires the appraiser to calculate:
Answer: Effective age divided by total economic life
The age-life method computes depreciation as effective age ÷ total economic life, then applies that percentage to the reproduction or replacement cost.