Property ValuationIntermediateArizona Exam

In Arizona, when appraising a property in a 'declining market,' the appraiser must:

AApply a minimum downward adjustment of 10% to all comparable sales under USPAP's declining market guidelines for properties in markets with negative price trends

BGive special attention to the trend of values, typically giving more weight to very recent sales and making adjustments to reflect the declining market conditionsCorrect

CUse the property's most recent assessed value as the floor for the concluded value, per FNMA guidelines requiring a floor in declining market conditions

DExclude all sales that occurred more than 60 days before the effective appraisal date, using only current active listings as primary market value indicators

Why Give special attention to the trend of values, typically giving more weight to very recent sales and making adjustments to reflect the declining market conditions Is Correct

Answer B: Give special attention to the trend of values, typically giving more weight to very recent sales and making adjustments to reflect the declining market conditions

In a declining market, appraisers must adjust for market conditions (time adjustments). More recent sales receive greater weight, and adjustments are applied to older comparables to reflect the downward trend.

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

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

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Key Terms to Know

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

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