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End of Chapter 13 Questions and Answers

End of Chapter 13 Questions and Answers - End of Chapter 13...

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End of Chapter 13 Questions and Answers 1. Define market value. Answer: The maximum price at which buyer will buy and the minimum acceptable price to the seller, both fully informed, acting without duress and with reasonable financing, can be called the market value. 2. Define the market approach to value. Answer: The market approach can be defined as follows: An approach to estimating market value of a subject property by means of examining the transaction prices of recent sales of properties similar to the subject property in the same or similar real estate asset market. 3. Describe how to select comps? Answer: Comps should be as physically similar as possible to the subject property in size, age, quality, location and features as well as the date of sale. Comps should be “arms length”, which means the sales must not be unusual in any way that affects the price of transaction. You start with a large pool of comps and then pare down based on the considerations above until the most similar sales are selected. 4. How many comps does an appraiser need? Answer: The minimum number of comps is 3 on a form report but 5 to 10 would be better. If a multiple regression statistical model is used then the minimum sample size should be 30. 5. What question do appraisers try to answer when adjusting comps? Answer: The analyst is trying to answer the following question while adjusting comps: “What would the comp sell for if it were identical to the subject property?” 6. What is the most important single adjustment for most appraisals?
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