Certified Property Appraiser Exam cheat sheet

Market value definition: most probable price in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller acting prudently and knowledgeably, price not affected by undue stimulus.

Sales comparison approach: value = adjusted price of comparables; adjust for differences in property rights, financing, conditions of sale, market conditions (time), location, physical characteristics, and use.

Cost approach: value = land value + replacement or reproduction cost new − depreciation (physical deterioration, functional obsolescence, external obsolescence).

Income approach: value = net operating income ÷ capitalization rate; for uneven income, discount each cash flow to present value using a yield rate.

Gross rent multiplier (GRM) = sale price ÷ gross monthly rent; use for quick income-property valuation when comparables are similar.

Highest and best use test: legally permissible, physically possible, financially feasible, and maximally productive; determines the use that yields the highest land value.

Principle of substitution: a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute.

Contribution: the value of a component is measured by its effect on the whole property value, not its cost.

External obsolescence is measured by capitalization of rent loss or by paired sales analysis; it is usually incurable.

Bundle of rights: possession, use, enjoyment, exclusion, disposition; taxation may attach to any ownership interest unless exempt.

Real property includes land, attachments (fixtures), and appurtenant rights; personal property is movable and taxed separately unless classified otherwise by statute.

Fixture test: annexation, adaptation, and intention of the parties; trade fixtures remain personal property of the tenant.

Easements, covenants, and restrictions are encumbrances that may affect value and are considered in appraisal.

Ad valorem tax lien attaches to the property, not the owner; priority and enforcement vary by statute.

Deed types: warranty, special warranty, quitclaim; each conveys different title warranties affecting marketability.

Leasehold and leased fee estates are separate taxable interests in some jurisdictions; appraise the rights conveyed.

Zoning and land-use regulations are police power exercises; nonconforming uses may be taxed at existing use value.

Assessment date (lien date) is the statutory date on which taxable value is determined; value may reflect conditions as of that date.

Assessment roll: list of taxable properties with owner, description, and assessed value; public record in most jurisdictions.

Equalization: process to ensure assessed values are uniform within and across jurisdictions; may use state equalization ratios.

Assessment ratio = assessed value ÷ market value; apply to market value to derive assessed value.

Exemptions and abatements reduce taxable value or tax liability; verify statutory eligibility and filing deadlines.

Tax rate (millage) = tax levy ÷ total assessed value; tax bill = assessed value × tax rate.

Appeal process: taxpayer may file protest with local board of review or equalization; burden of proof and deadlines are statutory.

Special assessments fund specific improvements and are levied on benefited properties, not general revenue.

Mass appraisal uses standardized methods, statistical testing, and valuation models to value many properties as of a single date.

Sales ratio study: compare assessed values to sale prices; median ratio indicates central tendency, coefficient of dispersion (COD) measures uniformity.

COD = average absolute deviation from median ratio ÷ median ratio × 100%; lower COD indicates greater uniformity.

Price-related differential (PRD) = mean ratio ÷ weighted mean ratio; tests vertical equity (regressivity/progressivity).

Regression analysis: value = a + b1X1 + b2X2 + ...; coefficients estimate marginal contribution of each variable.

Stratification by location, style, or age improves model homogeneity and reduces dispersion.

Automated valuation models (AVMs) require calibration, ratio testing, and periodic revalidation.

Coefficient of variation (CV) = standard deviation ÷ mean; measures relative variability of ratios.

Uniform Standards of Professional Appraisal Practice (USPAP) requires competency, independence, impartiality, and objectivity.

Scope of work must be determined by the appraiser based on intended use, and must be disclosed in the report.

Report options: appraisal report (written or oral) must state intended use, intended user, purpose, and value definition.

Ethics rule: no acceptance of assignment with contingent fee based on value; no misleading or fraudulent reporting.

Record keeping: retain workfile for at least five years after delivery, or two years after final disposition of appeal, whichever is longer.

Jurisdictional exception: if any USPAP requirement conflicts with law, the law prevails and the exception must be disclosed.

Competency rule: appraiser must have knowledge and experience, or disclose lack and take steps to complete competently.

Land value is derived from sales comparison, allocation, extraction, subdivision development, or ground rent capitalization.

Allocation method: land value ratio = land value ÷ total property value; apply ratio to subject total value.

Extraction method: land value = total sale price − depreciated cost of improvements.

Subdivision development method: value = present value of finished lot sales − development costs − profit.

Ground rent capitalization: land value = annual ground rent ÷ capitalization rate.

Site improvements (grading, utilities, landscaping) add value to land and are included in site value.

Excess land has value; surplus land has no independent value beyond the site's contributory value.

Replacement cost: cost to construct a building of equal utility using current materials and methods; reproduction cost: exact replica using same materials.

Cost new = direct costs (materials, labor, equipment) + indirect costs (permits, financing, overhead, profit).

Depreciation = cost new − market value of improvements; can be measured by age-life, breakdown, or market extraction.

Age-life method: depreciation = effective age ÷ total economic life × cost new.

Physical deterioration: curable (repair cost) and incurable (age-life or observed condition).

Functional obsolescence: deficiency or superadequacy in design, layout, or utility; measure by cost to cure or rent loss capitalization.

External obsolescence: loss from outside the property; measure by paired sales or capitalization of rent loss; usually incurable.

Breakdown method: estimate each depreciation type separately and sum for total depreciation.