Arizona Real Estate License Property Valuation and Appraisal 2 — Questions and Answers
Question 1: In Arizona, the 'sales comparison approach' to value relies primarily on:
- Replacement cost of improvements
- Net operating income of the property
- Recent sales of similar nearby properties (Correct answer)
- The original purchase price
Correct answer: Recent sales of similar nearby properties
The sales comparison approach bases value on recent sales of comparable properties in the same market area, adjusted for differences.
Question 2: What is 'gross rent multiplier' (GRM) used to estimate?
- The value of vacant land
- The value of income-producing property using gross rental income (Correct answer)
- The cost of improvements
- The loan-to-value ratio
Correct answer: The value of income-producing property using gross rental income
The GRM estimates property value by multiplying gross annual or monthly rental income by a multiplier derived from comparable sales.
Question 3: Which Arizona agency oversees the licensing of real property appraisers?
- Arizona Department of Real Estate (ADRE)
- Arizona Board of Appraisal (Correct answer)
- Arizona Department of Financial Institutions
- Arizona State Land Department
Correct answer: Arizona Board of Appraisal
The Arizona Board of Appraisal is the state agency responsible for licensing and regulating real property appraisers in Arizona.
Question 4: What is 'functional obsolescence' in real estate appraisal?
- Value loss due to physical wear and tear
- Value loss due to an outdated or poor design feature within the property (Correct answer)
- Value loss due to external neighborhood factors
- Value loss due to foundation cracks
Correct answer: Value loss due to an outdated or poor design feature within the property
Functional obsolescence is a loss in value caused by an outmoded or inadequate design feature within the property itself, such as a home with only one bathroom.
Question 5: An appraiser is estimating the value of an Arizona apartment complex. Which approach would typically be given the most weight?
- Cost approach
- Sales comparison approach
- Income capitalization approach (Correct answer)
- Gross rent multiplier only
Correct answer: Income capitalization approach
For income-producing properties like apartment complexes, the income capitalization approach is typically given the most weight because buyers focus on the income the property generates.
Question 6: Which term describes the most probable price a property would sell for in a competitive and open market under normal conditions?
- Assessed value
- Appraised value
- Market value (Correct answer)
- Replacement cost
Correct answer: Market value
Market value is defined as the most probable price a property would sell for in a competitive, open market between a willing buyer and seller under normal conditions.
Arizona Real Estate License Property Valuation and Appraisal 2
In Arizona, the 'sales comparison approach' to value relies primarily on: