Real Estate Investing Property Valuation Techniques Questions and Answers

Question 1

An appraiser is valuing a single-family home using the Sales Comparison Approach.
A comparable property recently sold for $450,000 but features a finished basement, which the subject property lacks.
The market value of a finished basement is estimated at $35,000.
How should the appraiser adjust the comparable's sale price?

Accepted Answer

Subtract $35,000 from the comparable's price.

Answer

Add $35,000 to the comparable's price.

Answer

Add $35,000 to the subject property's estimated value.

Answer

Make no adjustment because basements are below-grade.

Question 2

An investor is using the Cost Approach to value a property. The estimated cost to build a similar structure today is $600,000. The appraiser calculates total accrued depreciation (physical, functional, and external) to be $100,000. The land value is independently appraised at $150,000. What is the estimated value of the property using this approach?

Accepted Answer

$650,000

Answer

$850,000

Answer

$500,000

Answer

$350,000

Question 3

Which of the following valuation techniques is most focused on forecasting future income streams over a specific holding period and discounting them to determine their present value?

Accepted Answer

Discounted Cash Flow (DCF) Analysis

Answer

Gross Rent Multiplier (GRM)

Answer

Direct Capitalization (using Cap Rate)

Answer

Sales Comparison Approach

Question 4

The Cost Approach to valuation is considered most reliable and applicable for which of the following property types?

Accepted Answer

A newly constructed public school.

Answer

A 40-year-old apartment building with a strong rental history.

Answer

A high-traffic, multi-tenant retail strip mall.

Answer

A portfolio of various single-family rental homes.

Question 5

In the final step of the appraisal process, an appraiser analyzes the values derived from the Sales Comparison, Cost, and Income approaches to arrive at a single estimate of market value. This process is known as:

Accepted Answer

Reconciliation

Answer

Averaging

Answer

Finalization

Answer

Aggregation

Question 6

An investor is analyzing a small multifamily property with a gross annual rental income of $120,000. Comparable properties in the area have recently sold at an average Gross Rent Multiplier (GRM) of 9. Based solely on the GRM, what is the estimated market value of the subject property?

Accepted Answer

$1,080,000

Answer

$1,200,000

Answer

$13,333

Answer

$9,000,000