Sales Comparison Approach McKissock
Class UPDATED Exam Questions and
CORRECT Answers
What is created in the mind of an individual or market participant? - Correct Answer- Value
What is the motivation of an individual, group of persons, or business entity involving the
purchase of an item? - Correct Answer- 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) - Correct Answer- True
What does not include physical mobility, but rather the control and possession of all the rights
of ownership? - Correct Answer- Purchasing Power
As it refers to real property appraisal, what word is best used to describe "value"? - Correct
Answer- Opinion
Value is a fact, or an estimate of fact. (T/F) - Correct Answer- False
USPAP cautions appraisers to use the definition of market value that is specified in the
DEFINITIONS section of USPAP. (T/F) - Correct Answer- False
Which statement is TRUE regarding appraisers and value? - Correct Answer- 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) - Correct Answer- True
The rights and benefits inherent in the ownership of a parcel of land would be defined as: -
Correct Answer- 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) - Correct Answer- 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? - Correct Answer- Government Agencies
Which phrase is an example of economic equilibrium? - Correct Answer- The quantity
demanded is equal to the quantity supplied.
What is the loss of income that results from not choosing an alternative? - Correct Answer-
Opportunity Cost
Which principle equally applies to residential and commercial properties? - Correct Answer-
Substitution
The principle of substitution does not apply to non-owner-occupied commercial properties.
(T/F) - Correct Answer- False
What adds the most value to land and the improvements? - Correct Answer- When the
property is used for its highest and best use
Which methods are most appropriate to the sales comparison approach? - Correct Answer-
Economics and Statistics
Why is the real estate market considered inefficient? - Correct Answer- 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? - Correct Answer- 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: - Correct
Answer- Lodging
Residential or multi-family
Commercial or office
Which market is inefficient? - Correct Answer- 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? - Correct Answer- 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? - Correct Answer- 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? - Correct Answer- Commercial
When considering legal permissibility and current land use regulations, an appraiser must
also consider __________. - Correct Answer- Reasonably probable modifications of land use
regulations
Which statement is FALSE regarding highest and best use analysis? - Correct Answer- 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? - Correct Answer- Cannot
determine from the information provided
, The criteria for highest and best use include all of the following EXCEPT: - Correct Answer-
No undue stimulus
Harry is preparing a real property appraisal report for his client. Which USPAP Standard must
he follow when preparing this report? - Correct Answer- 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 ____________. - Correct
Answer- 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? - Correct Answer- 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. - Correct Answer- market analysis
Which value characteristic implies the presence of a need or demand, which considers the
monetary power to fill that need? - Correct Answer- 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 __________. - Correct Answer- 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. - Correct Answer- 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? - Correct Answer- Contribution
Class UPDATED Exam Questions and
CORRECT Answers
What is created in the mind of an individual or market participant? - Correct Answer- Value
What is the motivation of an individual, group of persons, or business entity involving the
purchase of an item? - Correct Answer- 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) - Correct Answer- True
What does not include physical mobility, but rather the control and possession of all the rights
of ownership? - Correct Answer- Purchasing Power
As it refers to real property appraisal, what word is best used to describe "value"? - Correct
Answer- Opinion
Value is a fact, or an estimate of fact. (T/F) - Correct Answer- False
USPAP cautions appraisers to use the definition of market value that is specified in the
DEFINITIONS section of USPAP. (T/F) - Correct Answer- False
Which statement is TRUE regarding appraisers and value? - Correct Answer- 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) - Correct Answer- True
The rights and benefits inherent in the ownership of a parcel of land would be defined as: -
Correct Answer- 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) - Correct Answer- 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? - Correct Answer- Government Agencies
Which phrase is an example of economic equilibrium? - Correct Answer- The quantity
demanded is equal to the quantity supplied.
What is the loss of income that results from not choosing an alternative? - Correct Answer-
Opportunity Cost
Which principle equally applies to residential and commercial properties? - Correct Answer-
Substitution
The principle of substitution does not apply to non-owner-occupied commercial properties.
(T/F) - Correct Answer- False
What adds the most value to land and the improvements? - Correct Answer- When the
property is used for its highest and best use
Which methods are most appropriate to the sales comparison approach? - Correct Answer-
Economics and Statistics
Why is the real estate market considered inefficient? - Correct Answer- 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? - Correct Answer- 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: - Correct
Answer- Lodging
Residential or multi-family
Commercial or office
Which market is inefficient? - Correct Answer- 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? - Correct Answer- 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? - Correct Answer- 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? - Correct Answer- Commercial
When considering legal permissibility and current land use regulations, an appraiser must
also consider __________. - Correct Answer- Reasonably probable modifications of land use
regulations
Which statement is FALSE regarding highest and best use analysis? - Correct Answer- 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? - Correct Answer- Cannot
determine from the information provided
, The criteria for highest and best use include all of the following EXCEPT: - Correct Answer-
No undue stimulus
Harry is preparing a real property appraisal report for his client. Which USPAP Standard must
he follow when preparing this report? - Correct Answer- 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 ____________. - Correct
Answer- 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? - Correct Answer- 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. - Correct Answer- market analysis
Which value characteristic implies the presence of a need or demand, which considers the
monetary power to fill that need? - Correct Answer- 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 __________. - Correct Answer- 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. - Correct Answer- 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? - Correct Answer- Contribution
