20 Questions
What is the most probable selling price of a property under 'normal' sale conditions?
Market value
Who uses market value appraisals according to the text?
Government agencies
In markets with perfect competition and investment value revelation, where do all transactions take place?
At true market value
What is the value to a particular individual or investor referred to as?
Investment value
When is valuation calculation required according to the text?
When a property is abandoned
What is the purpose of USPAP?
To provide a standardized process for real estate appraisal
Why is it important to value land separately from improvements?
Improvements cannot be sold separately from the land
What is the first step in the process of complying with USPAP?
Identify the appraisal problem
What is the key consideration in determining the 'highest and best use' of a property?
Legally permissible use
Why is reconciling values from multiple approaches important in real estate appraisal?
To weigh each approach based on its reliability
What is the primary reason for using the income approach to valuation?
To consider the property’s income-producing potential
What measure of income is generally sought by property valuers for income valuation?
Annual net operating income (NOI)
What is the next step after estimating the net income in the income approach?
Converting NOI forecast into an estimate of property value
What additional factor needs to be considered in income valuation if the owner has borrowed funds to the mortgage lenders?
Income taxes
Why is it important to consider income taxes in income valuation?
To account for additional expenses affecting net income
What is the main similarity between direct capitalization and valuing a stock using a price/earnings multiple?
Both find value as a multiple of first year net income
In DCF valuation models, what does the appraiser need to estimate?
Typical buyer's expected holding period
What does potential gross income (PGI) represent?
Rental income assuming 100% occupancy
Why might the estimation of potential gross income include contract rent of long-term leases?
To account for the actual rent being paid under contractual commitments
What is market rent in the context of potential gross income estimation?
The rental income the property would most probably command if placed for lease on the open market
Test your understanding of valuation using the sale comparison and cost approaches in commercial real estate. Learn about valuation calculations for property acquisition, modernization, renovation, and more. Explore concepts like market value and investment value.
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