An Arizona appraiser who uses only 2 comparables in the sales comparison approach is:
Why Potentially providing an inadequate analysis—USPAP and lender guidelines typically require a minimum of 3 closed sales and may require more Is Correct
Answer B: Potentially providing an inadequate analysis—USPAP and lender guidelines typically require a minimum of 3 closed sales and may require more
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
Key Property Valuation Terms in This Question
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Key Terms to Know
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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