Arizona Real Estate License Property Valuation and Appraisal 1 — Questions and Answers
Question 1: Which appraisal approach estimates value by calculating the cost to replace a structure minus depreciation plus land value?
- Sales comparison approach
- Income capitalization approach
- Cost approach (Correct answer)
- Gross rent multiplier approach
Correct answer: Cost approach
The cost approach estimates value by determining the cost to replace the improvements, subtracting accrued depreciation, and adding the land value.
Question 2: In Arizona, who is legally authorized to perform a federally related real estate appraisal?
- Any licensed real estate agent
- A certified or licensed appraiser under the Arizona Board of Appraisal (Correct answer)
- A real estate broker only
- Any notary public
Correct answer: A certified or licensed appraiser under the Arizona Board of Appraisal
Federally related appraisals in Arizona must be performed by a certified or licensed appraiser regulated by the Arizona Board of Appraisal.
Question 3: What does 'capitalization rate' measure in real estate valuation?
- The ratio of mortgage payments to property value
- The rate of return expected on an income-producing property (Correct answer)
- The percentage of appreciation over time
- The cost to build per square foot
Correct answer: The rate of return expected on an income-producing property
The capitalization rate (cap rate) measures the expected rate of return on an income-producing property by dividing net operating income by the property's value.
Question 4: Which type of depreciation is caused by factors outside the property itself, such as a noisy highway nearby?
- Physical deterioration
- Functional obsolescence
- Economic obsolescence (Correct answer)
- Structural depreciation
Correct answer: Economic obsolescence
Economic (external) obsolescence is caused by factors outside the property, like nearby nuisances or neighborhood decline, and is generally incurable.
Question 5: An appraiser adjusts comparable sales to account for differences from the subject property. If a comparable has a feature the subject lacks, the appraiser should:
- Add value to the subject property
- Subtract value from the comparable (Correct answer)
- Add value to the comparable
- Make no adjustment
Correct answer: Subtract value from the comparable
When a comparable has a superior feature the subject lacks, the appraiser subtracts value from the comparable to make it equivalent to the subject.
Question 6: What is the primary purpose of the Uniform Standards of Professional Appraisal Practice (USPAP)?
- To set Arizona property tax rates
- To establish ethical and performance standards for appraisers (Correct answer)
- To regulate real estate agent commissions
- To define zoning classifications
Correct answer: To establish ethical and performance standards for appraisers
USPAP establishes the ethical and performance standards that licensed and certified appraisers must follow when performing appraisals.
Arizona Real Estate License Property Valuation and Appraisal 1
Which appraisal approach estimates value by calculating the cost to replace a structure minus depreciation plus land value?