Assignment 5 Chapter 5 : CAMA Systems

Question 1

Mac Donald, an appraiser, has created a mass appraisal model to estimate values of residential properties in a neighbourhood of new and fairly similar residences. He is now carrying out his model testing and quality control.

He is using the coefficient of dispersion, with respect to the medial ratio, to measure uniformity. He is aiming for a target coefficient of dispersion of 20 percent. Which of the following statement is TRUE?

1. Mac’s calculation of uniformity is correct because in areas of newer and fairly similar residences, the coefficient of dispersion should be 20 percent or less.
2. Mac’s calculation of uniformity is incorrect because for newer and fairly similar residential properties, the coefficient of dispersion should be 10 percent or less.
3. Mac’s calculation of uniformity is correct because in urban areas, income-producing properties require a coefficient of dispersion of 20 percent, and these are income-producing properties.
4. Coefficient of dispersion is not a measure of uniformity.

Answer 1

Answer : (2). Mac’s calculation of uniformity is incorrect because for newer and fairly similar residential properties, the coefficient of dispersion should be 10 percent or less.

For residential properties, uniformity, as measured by the coefficient of dispersion, with respect to the median ratio, should be 15 percent or less generally, and 10 percent or less in areas of newer and fairly similar residences. Mac is correct to use the coefficient of dispersion to measure uniformity, but his target should be 10 percent or less.

Question 2

The two statement below describe an aspect of either single-property appraisal, mass appraisal, neither or both.

1. The output is an appraisal report with one statement of value.
2. Statistical methods are relied on for quality control.

Question : Statement A most accurately describes a component of :

1. Single-property appraisal
2. mass appraisal
3. both single-property appraisal and mass appraisal
4. None of the above

Answer 2

Answer: (1) single-property appraisal.

A single-property appraisal has one appraisal report with one statement of value, whereas the output for mass appraisal will have several statements of value for various properties.

Question 3

The two statement below describe an aspect of either single-property appraisal, mass appraisal, neither or both.

1. The output is an appraisal report with one statement of value.
2. Statistical methods are relied on for quality control.

Question : Statement B most accurately describes a component of :

1. Single-property appraisal
2. mass appraisal
3. both single-property appraisal and mass appraisal
4. None of the above

Answer 3

Answer: (2) mass appraisal.

Mass appraisal uses statistical methods for gauging accuracy and consistency of valuations.

Question 4

An appraiser has just finished an appraisal and is about to perform the reconciliation of values, model testing, and quality control. Which of the following statements concerning the reconciliation is FALSE?

1. The appraiser will review the data developed and used
2. The appraiser will check the work performed in each of the three approaches.
3. The appraiser will consider the quality and quantity of data
4. The appraiser will consider the relative strengths and weaknesses of each approach for valuation of the type of property.

Answer 4

Answer: (2) The appraiser will check the work performed in each of the three approaches.

The appraiser should check the work performed in each of the three approaches before performing a final reconciliation; this check should be done as part of each approach, until the appraiser is sure that everything reported within that particular approach is as correct as it can be.

Question 5

One of the basic functions of a mass appraisal system is revaluation. Required activities of revaluation include; performance analysis, revaluation decision, and so on.

With regards to these activities, which statement is FALSE?

1. System development occurs before the pilot study.
2. The appraiser conducts a final ratio study to measure accuracy and uniformity.
3. A jurisdiction should first define its goals before taking stock of its resources.
4. A performance analysis determines whether values are equitable and consistent with the market.

Answer 5

Answer (3). A jurisdiction should first define its goals before taking stock of its resources.

Option (3) is false because a jurisdiction should take stock of its resources, before it sets goals; thus enabling the jurisdiction to set realistic goals.

Option (1) is true, as system development occurs before a pilot study.

Option (2) is true because an assessor conducts a final ratio study to measure accuracy and uniformity in the final performance analysis.

Option (4) is also true.

Question 6

After much hard work, Mia Hutch is about to be promoted to Data Maintenance Manager. As the new manager, Mia has to learn a lot about data maintenance.

Which of the following statement is FALSE?

1. One component of the maintenance program focuses on building permits and subdivision plats.
2. A periodic reinspection of all properties in the jurisdiction is important because undetected changes do occur.
3. Verifying existing information using a drive-by inspection in order to compare the property with the property record is unacceptable, as it will give false and inaccurate results.
4. Subdivision activity can create substantial value and should be inspected and maintained as soon as possible.

Answer 6

Answer (3) Verifying existing information using a drive-by inspection in order to compare the property with the property record is unacceptable, as it will give false and inaccurate results.

Option (3) is false because drive-by inspections when the property and property record are being compared is usually adequate, as you are only verifying existing information.

Options (1), (2), and (4) are correct statements concerning data maintenance.

Question 7

Which of the following is NOT a step in performing single-property appraisal using the direct comparison approach?

1. Discover and analyze the data
2. Determine the units of comparison and determinants of value
3. Analyze the adjusted comparable sales to arrive at adjusted sales prices for the comparable properties
4. Compute value by capitalization

Answer 7

Answer (4) Compute value by capitalization.

Computing the value by capitalization is used in the income approach.

Question 8

Karen is shopping for hardware to support her new CAMA system. She realizes that she has four options: outright purchasing, leasing, using a service bureau, and sharing of facilities.

Which of the following is NOT a correct consideration to take into account before she decides?

1. For low-volume use, service bureaus are efficient.
2. Leasing will provide her with a fixed cost solution.
3. Purchasing will give her a modest annual cost, but a large initial cost.
4. Maintenance and modification using shared facilities may be difficult.

Answer 8

Answer (2). Leasing will provide her with a fixed cost solution.

Option (2) is incorrect: leasing will not provide her with a fixed cost solution. The other statements are all correct.

Question 9

Jim Duncan has a cabin in the woods that he wants to rent out in order to make some extra income. He estimates that the cabin will provide a perpetual income of $15,000 per year. The rate of return on similar investments of similar risk is 12 percent. Using this information, Jim calculates the value of the property to be:

1. $124,500
2. $125,000
3. $128,000
4. $140,000

Answer 9

Answer : (2) $125,000

Using the capitalization formula, we can calculate the value of a property that provides a perpetual income, using a given rate of return for investments that have a similar level of risk. The formula is V = I ÷ R.

V = 15,000 ÷ 12%

V= 125,000

Question 10

When performing a city and regional analysis, an appraiser must consider many economic forces that affect property values through both the demand and supply sides of the market.

Which of the following is NOT a factor that affects the supply side of the market?

1. Availability of vacant land
2. Construction trends and costs
3. General trends in real property prices and rents
4. Building codes

Answer 10

Answer (3). General trends in real property prices and rents.

General trends in real property prices and rents are macroeconomic factors affecting the demand side of the market, not the supply side.