When is qualitative analysis the appropriate technique in the sales comparison approach?
Correct Answer
D) When the market provides too few sales to extract dollar adjustments
Why this is correct: a dollar adjustment has to be extracted from sales, and where the sales do not exist a ranking the data does support is better than a number it does not. Why the other choices are wrong: preference is not a reason, since the technique is driven by what the data can support; value has no bearing on which technique the data permits; and nothing requires a quantitative adjustment that the market cannot supply.
Why This Is the Correct Answer
Why this is correct: a dollar adjustment has to be extracted from sales, and where the sales do not exist a ranking the data does support is better than a number it does not. Why the other choices are wrong: preference is not a reason, since the technique is driven by what the data can support; value has no bearing on which technique the data permits; and nothing requires a quantitative adjustment that the market cannot supply.
More Sales Comparison Questions
A property generates $85,000 in Net Operating Income and sells for $1,062,500. What is the overall capitalization rate?
A property has potential gross income of $180,000, vacancy and collection loss of $15,000, and operating expenses of $65,000. What is the Net Operating Income?
A comparable sale occurred 8 months ago for $425,000. Market conditions indicate property values have increased 0.5% per month since that time. What is the adjusted sale price?
A property generates $150,000 in potential gross income. Market data indicates a 7% vacancy rate and operating expenses of 35% of effective gross income. If the cap rate is 9.5%, what is the indicated value?
A property sold for $320,000 one year ago. If market conditions have improved by 6% since that sale, what is the time-adjusted sale price for comparison purposes?
A commercial building cost $2,500,000 to construct. The land value is $600,000. If the building has suffered 15% physical deterioration and 8% functional obsolescence, what is the depreciated cost of the improvements?
A building's gross rent multiplier (GRM) is 120. If the monthly rent is $2,500, what is the indicated value?
In the cost approach, economic obsolescence is characterized as:
The concept of regression in property values means that:
A commercial property has potential gross income of $120,000, vacancy and collection loss of 8%, and operating expenses of $35,000. Using a cap rate of 9.5%, what is the indicated value?
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Five comparables produce adjusted indications of $301,000, $304,000, $306,000, $309,000 and $412,000. The appraiser determines the fifth is not comparable and discards it. What is the mean of the remaining four?
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In the cost approach, reproduction cost differs from replacement cost in that reproduction cost: