Certified Valuation Analyst (CVA) Practice Exam

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Prepare for the Certified Valuation Analyst (CVA) Test. Study with flashcards and multiple choice questions. Each question includes hints and explanations to help you get ready for your exam!

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True or False: Knowledge of relevant facts is essential for establishing fair market value.

True
False
Its importance varies by situation
Not necessary in all cases

The correct answer is: True

Knowledge of relevant facts is indeed essential for establishing fair market value. Fair market value is defined as the price at which property would change hands between a willing buyer and a willing seller, both of whom are informed and acting voluntarily. To accurately determine this value, understanding all pertinent information is crucial. This includes details such as market conditions, the characteristics of the asset being valued, potential income generation, costs, risks, and other factors that can influence the value. Gathering and analyzing relevant facts ensures that the valuation reflects a realistic and accurate assessment of the asset in question. Without this foundational knowledge, any valuation could be misleading or inaccurate, potentially resulting in adverse consequences for negotiations, financial reporting, or investment decisions. Therefore, the assertion that knowledge of relevant facts is essential is fundamentally sound, as it forms the basis upon which fair market value is assessed and justified.