Sample Q & A

SAMPLE OF TYPICAL QUESTIONS AND ANSWERS

CRA/DAR:

What is your responsibility when co-signing a report?
You are responsible for everything in the report, including the final estimate of value the same as if you completed the report yourself.

Under what circumstances are you allowed to disclose information received from a client on a confidential basis?
There are three circumstances:

1. With the clients written permission.
2. If required to by the Complaints Investigating Committee in conjunction with a specific inquiry.
3. By a subpoena issued by a duly constituted court of law.

What is CUSPAP/USPAP?

A set of standards developed by the appraisal profession for appraisers and the users of appraisal services. These standards include an Ethics Provision setting forth the requirements for integrity, objectivity, independent judgment and ethical conduct. In addition these standards deal with the procedures to be followed in performing an appraisal review or consulting service and the manner in which these are communicated.

To maintain the highest level of professional practice, appraisers must observe these standards. The users of appraisal services should demand work performed in conformance with these standards.

What is the Competency Provision in CUSPAP/USPAP?
Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently; or alternatively:

Disclose the lack of knowledge and/or experience to the client before accepting the assignment; and
Take all steps necessary or appropriate to complete the assignment competently; and
Describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.

Define Highest and Best Use.
"The reasonably probable and legal use of vacant land or an improved property which is physically possible, appropriately supported, financially feasible and results in the highest value."

Describe the Cost Approach.
The Cost Approach to value is based on the principle of substitution which considers that where a property is replaceable, its value tends to be set by the cost of acquiring one equally desirable assuming there is no unreasonable time delay. This approach is more reliable when used in conjunction with special purpose properties or when improvements are new and suffering from little or no depreciation.

What are sources of expense data?
Operating expense history of the subject (at least 3 years if available).
Market data on competitive, comparable properties.
Published studies of comparable standards

AACI/DAC:

What is the difference between Leased Fee Interest and Leasehold Interest?
Leased Fee is the lessor's interest. The lessor's interest; the right to receive the rent stipulated by the lease and the reversion of the property at the expiration of the lease.

The Leasehold is the lessee's interest. A leasehold estate is the right to use and occupy real estate for a specified period of time. The leasehold may include rights to develop, alter, sublease etc. A leasehold interest usually has value when contract rent is less than market rent.

What is an overall capitalization rate(R0)?
An overall capitalization rate R0 reflects the relationship between its annual net income expectancy, and total property value; it is used to convert net operating income into an indication of overall property value.

What is Net Present Value?
Net Present Value Method is an application of the Discounted Cash Flow Concept. In this procedure, future net cash receivables of income, plus the equity reversion are discounted to an expression of present value, using the minimum acceptable rate of return as the discount rate. The difference between this expression present value and cost of investment is known as Net Present Value.

Updated September 2015

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New Brunswick Association of Real Estate Appraisers
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Fredericton, NB E3B 3X6

Email: nbarea@nb.aibn.com
Phone: 506-450-2016
Fax: 506-450-3010
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