1.Define the sales comparison method and the cost approach. | Sales comparison
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| Cost approach |
A) uses a discounted cash flow model to estimate the present value of the future income produced by the property
links the value of a property to an investor's specific marginal tax rate B) uses a discounted cash flow model to estimate the present value of the future income produced by the property
The value of real estate is determined by the replacement cost of improvements, plus an estimate for the value of the land C) uses the price of a similar property or properties from recent transactions to value real estate
links the value of a property to an investor's specific marginal tax rate D) uses the price of a similar property or properties from recent transactions to value real estate
The value of real estate is determined by the replacement cost of improvements, plus an estimate for the value of the land The correct answer was D) The sales comparison method values property relative to similar properties that have been recently sold. The cost approach values a property at the cost it would be to rebuild it. 2.Which of the following least likely affects a property’s investment potential? A) Structure of the financing mechanisms used to buy the property. B) The legal rights associated with the property. C) The holding period necessary to realize the return on the property. D) The activity around the property, both commercial and non-commercial. The correct answer was A) The financing and investing decisions are made separately. Market value analysis does not consider how the asset will be financed. 3.Which of the following statements regarding real estate valuation is TRUE? A) The estimated market value of a property depends upon the particular investor. B) The most reliable real estate valuation method is the cost approach. C) Because real estate is immobile and indivisible, its value is relatively stable and easy to determine. D) Each property is unique, so the investment value may be dependent upon the particular use planned for the property. The correct answer was D) The market value is completely independent of any considerations based upon the investor or potential investor. There is not a “most reliable” valuation method – all have their advantages and disadvantages. There are four widely accepted real estate valuation methods used worldwide: cost approach, sales comparison approach, income approach, and the discounted after-tax approach. The investment value may be dependent upon the planned use of the property—remember that market value and investment value are two different things.
[此贴子已经被cfaeclass于2008-4-4 13:37:06编辑过] | 
发表于 2008-4-4 13:31
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