SAEE SAEE - Market Approach Application Questions and Answers 2

Question 1

When applying the market approach to value a commercial property, which factor is MOST critical for selecting comparable sales?

Accepted Answer

Similar geographic location and property type

Answer

Identical square footage

Answer

Same year of construction

Answer

Matching exterior color scheme

Question 2

In the market approach, what is the primary purpose of making adjustments to comparable sale prices?

Accepted Answer

To account for differences between the comparable and the subject property

Answer

To inflate the subject property's value

Answer

To reduce the number of comparables needed

Answer

To satisfy lender requirements only

Question 3

A comparable property sold for $500,000 but had a swimming pool valued at $25,000 that the subject property lacks. What adjustment should be made?

Accepted Answer

Subtract $25,000 from the comparable's price

Answer

Add $25,000 to the comparable's price

Answer

Add $25,000 to the subject property's value

Answer

No adjustment is necessary

Question 4

Which condition of sale would MOST likely require an adjustment when using the market approach?

Accepted Answer

A foreclosure sale under duress

Answer

An arm's length transaction between unrelated parties

Answer

A sale listed on the open market for 90 days

Answer

A transaction with standard financing terms

Question 5

What does the principle of substitution state in the context of the market approach?

Accepted Answer

A buyer will pay no more than the cost to acquire an equally desirable substitute property

Answer

Property values always increase over time

Answer

The highest-priced comparable sets the subject property's value

Answer

Older properties are always worth less than newer ones

Question 6

When performing a market approach analysis, which time adjustment accounts for changes in market conditions between the comparable sale date and the effective appraisal date?

Accepted Answer

Market conditions adjustment

Answer

Location adjustment

Answer

Condition adjustment

Answer

Physical characteristics adjustment