Sales Comparison Approach McKissock Class 2023
Questions and Answers 100% Verified
What is created in the mind of an individual or market participant?
Value
What is the motivation of an individual, group of persons, or business entity
involving the purchase of an item?
Desire
As the term applies to appraisal, transferability refers to the number of goods and
services that can be purchased with a unit of currency. (T/F)
True
What does not include physical mobility, but rather the control and possession of
all the rights of ownership?
Purchasing Power
As it refers to real property appraisal, what word is best used to describe
"value"?
Opinion
Value is a fact, or an estimate of fact. (T/F)
False
USPAP cautions appraisers to use the definition of market value that is specified
in the DEFINITIONS section of USPAP. (T/F)
False
Which statement is TRUE regarding appraisers and value?
Market value is only one type of value; appraisers estimate other types of value as well.
It is important for appraisers to consider the specific definition of value that is
appropriate for the appraisal assignment being undertaken. (T/F)
True
The rights and benefits inherent in the ownership of a parcel of land would be
defined as:
Real Property - It is commonly understood that real estate is the land and everything
permanently attached thereto, while real property consists of the rights and benefits
inherent in ownership. (Chapter 1 - The Importance of Value)
USPAP cautions appraisers to use the definition of market value that is specified
in the DEFINITIONS section of USPAP. (T/F)
False - In its DEFINITIONS section, USPAP does not set forth a specific definition of
market value; instead it provides a somewhat generic overview of the concept. Instead
of providing a specific market value definition, USPAP cautions appraisers to identify
the exact definition of value and its authority, in every market value appraisal. (Chapter
1 - USPAP and Value Definition)
If an appraiser is valuing real property by sales comparison, whose actions is he
or she LEAST likely to consider?
Government Agencies
Which phrase is an example of economic equilibrium?
The quantity demanded is equal to the quantity supplied.
What is the loss of income that results from not choosing an alternative?
,Opportunity Cost
Which principle equally applies to residential and commercial properties?
Substitution
The principle of substitution does not apply to non-owner-occupied commercial
properties. (T/F)
False
What adds the most value to land and the improvements?
When the property is used for its highest and best use
Which methods are most appropriate to the sales comparison approach?
Economics and Statistics
Why is the real estate market considered inefficient?
The real estate market is complex. -
Because of the lack of readily available information during many of the various levels of
a transaction. -
It takes a relatively long time to improve a parcel of real estate.
The growth rate is higher in Community A than Community B, because
Community A has public water and sewage available. As a result, property values
are higher in Community A. This is an example of what force affecting the
market?
Environmental - Environmental or physical factors include transportation, open space,
availability of public utilities, among other factors. (Chapter 1 - The Four Great Forces)
Market segmentation separates the market for different types of properties such
as:
Lodging
Residential or multi-family
Commercial or office
Which market is inefficient?
Real estate market
A large, old, dilapidated commercial building sits in an economically depressed
section of the city. There are no market participants who have the financial
capability to renovate and use such a large building. This is an example of what
force?
Economic
Dave is completing a market value appraisal on a property that is currently
improved with an office building. Which statement will most likely be TRUE
regarding his highest and best use analysis?
He will have to develop two highest and best use opinions.
Annette is appraising a five-acre vacant parcel of land, in an area where there is
no zoning. As a residential home site, the property is worth $225,000. For
commercial purposes, it is worth $1.25 per square foot. For industrial purposes, it
is worth $50,000 per acre. What is the highest and best use of the property?
Commercial
When considering legal permissibility and current land use regulations, an
appraiser must also consider __________.
Reasonably probable modifications of land use regulations
Which statement is FALSE regarding highest and best use analysis?
, It does not help in selecting comparable sales.
Carole is appraising a vacant land parcel which can be used for residential,
commercial, or industrial use. What is the highest and best use of the property?
Cannot determine from the information provided
The criteria for highest and best use include all of the following EXCEPT:
No undue stimulus
Harry is preparing a real property appraisal report for his client. Which USPAP
Standard must he follow when preparing this report?
STANDARD 2
A property is improved with a building and is valued at $425,000. It would cost
$50,000 to raze and remove the building, and the value of the vacant site would be
$500,000. Under this scenario, razing and removing the building would be
considered ____________.
Financially Feasible - Razing and removing the building would be considered financially
feasible, because it produces a positive return. This is not necessarily the highest and
best use, though, because there may be other alternative uses which would produce a
greater return. (Chapter 1 - As Improved)
What is the appraisal or valuation process?
A sequence of steps used by the appraiser to develop a value conclusion
A _________ includes supply and demand analysis along with the collection of
market data, analyses, and recommendations.
market analysis
Which value characteristic implies the presence of a need or demand, which
considers the monetary power to fill that need?
Desire - In order to have value, an item must fulfill a need or satisfy a desire. Someone
has to want to purchase the item. Wishful thinking is indicative of desire. However,
purchasing power is required to translate that desire into value. (Chapter 1 - Desire)
When considering legal permissibility and current land use regulations, an
appraiser must also consider __________.
Reasonably probable modifications of land use regulations
In a competitive market, ________ will function to equalize the quantity demanded
by consumers and the quantity supplied by producers.
Price
A building owner installs a new "green" roof on the structure at a cost of
$300,000. The value of the building only increases by $200,000 as a result of the
new roof. This demonstrates which economic principle?
Contribution
The sales comparison approach is based primarily on the principle of
___________, which states that a prudent purchaser will pay no more for a
property than he or she would pay for a similar or comparable property.
Substitution
An appraiser takes secondary data on a sale from the local MLS, and personally
verifies elements of the transaction and the physical characteristics of the
property with the purchaser. This sale would now be considered what type of
data?
Primary Data
Questions and Answers 100% Verified
What is created in the mind of an individual or market participant?
Value
What is the motivation of an individual, group of persons, or business entity
involving the purchase of an item?
Desire
As the term applies to appraisal, transferability refers to the number of goods and
services that can be purchased with a unit of currency. (T/F)
True
What does not include physical mobility, but rather the control and possession of
all the rights of ownership?
Purchasing Power
As it refers to real property appraisal, what word is best used to describe
"value"?
Opinion
Value is a fact, or an estimate of fact. (T/F)
False
USPAP cautions appraisers to use the definition of market value that is specified
in the DEFINITIONS section of USPAP. (T/F)
False
Which statement is TRUE regarding appraisers and value?
Market value is only one type of value; appraisers estimate other types of value as well.
It is important for appraisers to consider the specific definition of value that is
appropriate for the appraisal assignment being undertaken. (T/F)
True
The rights and benefits inherent in the ownership of a parcel of land would be
defined as:
Real Property - It is commonly understood that real estate is the land and everything
permanently attached thereto, while real property consists of the rights and benefits
inherent in ownership. (Chapter 1 - The Importance of Value)
USPAP cautions appraisers to use the definition of market value that is specified
in the DEFINITIONS section of USPAP. (T/F)
False - In its DEFINITIONS section, USPAP does not set forth a specific definition of
market value; instead it provides a somewhat generic overview of the concept. Instead
of providing a specific market value definition, USPAP cautions appraisers to identify
the exact definition of value and its authority, in every market value appraisal. (Chapter
1 - USPAP and Value Definition)
If an appraiser is valuing real property by sales comparison, whose actions is he
or she LEAST likely to consider?
Government Agencies
Which phrase is an example of economic equilibrium?
The quantity demanded is equal to the quantity supplied.
What is the loss of income that results from not choosing an alternative?
,Opportunity Cost
Which principle equally applies to residential and commercial properties?
Substitution
The principle of substitution does not apply to non-owner-occupied commercial
properties. (T/F)
False
What adds the most value to land and the improvements?
When the property is used for its highest and best use
Which methods are most appropriate to the sales comparison approach?
Economics and Statistics
Why is the real estate market considered inefficient?
The real estate market is complex. -
Because of the lack of readily available information during many of the various levels of
a transaction. -
It takes a relatively long time to improve a parcel of real estate.
The growth rate is higher in Community A than Community B, because
Community A has public water and sewage available. As a result, property values
are higher in Community A. This is an example of what force affecting the
market?
Environmental - Environmental or physical factors include transportation, open space,
availability of public utilities, among other factors. (Chapter 1 - The Four Great Forces)
Market segmentation separates the market for different types of properties such
as:
Lodging
Residential or multi-family
Commercial or office
Which market is inefficient?
Real estate market
A large, old, dilapidated commercial building sits in an economically depressed
section of the city. There are no market participants who have the financial
capability to renovate and use such a large building. This is an example of what
force?
Economic
Dave is completing a market value appraisal on a property that is currently
improved with an office building. Which statement will most likely be TRUE
regarding his highest and best use analysis?
He will have to develop two highest and best use opinions.
Annette is appraising a five-acre vacant parcel of land, in an area where there is
no zoning. As a residential home site, the property is worth $225,000. For
commercial purposes, it is worth $1.25 per square foot. For industrial purposes, it
is worth $50,000 per acre. What is the highest and best use of the property?
Commercial
When considering legal permissibility and current land use regulations, an
appraiser must also consider __________.
Reasonably probable modifications of land use regulations
Which statement is FALSE regarding highest and best use analysis?
, It does not help in selecting comparable sales.
Carole is appraising a vacant land parcel which can be used for residential,
commercial, or industrial use. What is the highest and best use of the property?
Cannot determine from the information provided
The criteria for highest and best use include all of the following EXCEPT:
No undue stimulus
Harry is preparing a real property appraisal report for his client. Which USPAP
Standard must he follow when preparing this report?
STANDARD 2
A property is improved with a building and is valued at $425,000. It would cost
$50,000 to raze and remove the building, and the value of the vacant site would be
$500,000. Under this scenario, razing and removing the building would be
considered ____________.
Financially Feasible - Razing and removing the building would be considered financially
feasible, because it produces a positive return. This is not necessarily the highest and
best use, though, because there may be other alternative uses which would produce a
greater return. (Chapter 1 - As Improved)
What is the appraisal or valuation process?
A sequence of steps used by the appraiser to develop a value conclusion
A _________ includes supply and demand analysis along with the collection of
market data, analyses, and recommendations.
market analysis
Which value characteristic implies the presence of a need or demand, which
considers the monetary power to fill that need?
Desire - In order to have value, an item must fulfill a need or satisfy a desire. Someone
has to want to purchase the item. Wishful thinking is indicative of desire. However,
purchasing power is required to translate that desire into value. (Chapter 1 - Desire)
When considering legal permissibility and current land use regulations, an
appraiser must also consider __________.
Reasonably probable modifications of land use regulations
In a competitive market, ________ will function to equalize the quantity demanded
by consumers and the quantity supplied by producers.
Price
A building owner installs a new "green" roof on the structure at a cost of
$300,000. The value of the building only increases by $200,000 as a result of the
new roof. This demonstrates which economic principle?
Contribution
The sales comparison approach is based primarily on the principle of
___________, which states that a prudent purchaser will pay no more for a
property than he or she would pay for a similar or comparable property.
Substitution
An appraiser takes secondary data on a sale from the local MLS, and personally
verifies elements of the transaction and the physical characteristics of the
property with the purchaser. This sale would now be considered what type of
data?
Primary Data
