Question

1. Cautions that should be made for sales comparison approach is: A. Selling prices should come...

1. Cautions that should be made for sales comparison approach is:

A. Selling prices should come from unrelated individuals

B. Selling prices should represent normal market transactions with no unusual circumstances, such as foreclosure

C. Adjustment must be made to compensate differences in quality of construction

D. All of the above

2. Pro forma is best described with:

A. Proposed financial statement

B. Aggregated financial statement

C. Historical financial statement

D. Actual financial statement

3. Cap rate is best described with:

A. Rate of return of real estate investment based on total revenue and selling price of a property

B. Rate of return of real estate investment based on net operating income and selling price of a property

C. Rate of return of real estate investment based on total revenue and net operating income

D. Rate of return of real estate investment based on total revenue and gross operating income

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Answer:

1)

All the above - Option D

All the mentioned above options are cautions that should be made for sales comparison.

  • Selling prices should represent normal market transactions with no unusual circumstances, such as foreclosure
  • Adjustment must be made to compensate differences in quality of construction
  • Selling prices should come from unrelated individuals

2)

Pro forma statements are projected future financial statements

Hence Option A

3)

Cap rate is the relationship between net operating income and estimated value or cost.

Hence Option B

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