Property Valuation and Appraisal Flashcards
7 cards from real Real Estate License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Valuation and Appraisal flashcards as text
Which appraisal approach is most appropriate for valuing a newly constructed school building with no comparable sales?
Answer: Cost approach
The cost approach is best for special-purpose or unique properties where comparable sales and income data are scarce.
An appraiser deducts $15,000 from a comparable's sale price because it has a finished basement the subject lacks. What is this adjustment based on?
Answer: The contributory value of the feature
Adjustments in the sales comparison approach reflect the contributory value a feature adds to market value, not its cost.
In the sales comparison approach, if the comparable is superior to the subject, the appraiser should:
Answer: Subtract value from the comparable
When a comparable is superior, you subtract from its price to make it equivalent to the inferior subject.
A property's net operating income is $48,000 and the capitalization rate is 8%. What is its indicated value?
Answer: $600,000
Value equals NOI divided by cap rate: $48,000 / 0.08 = $600,000.
Which of the following is an example of functional obsolescence?
Answer: An outdated single bathroom in a four-bedroom house
Functional obsolescence is a loss in value from outdated design or features within the property itself.
The principle that a property's value is influenced by the cost of acquiring an equally desirable substitute is the principle of:
Answer: Substitution
The principle of substitution holds that a buyer will pay no more than the cost of an equally desirable alternative.
What does the gross rent multiplier (GRM) relate?
Answer: Sale price to gross rental income
The GRM is the ratio of a property's sale price to its gross rental income, used to estimate value quickly.