Arkansas Real Estate License Property Valuation and Financing 3

Question 1

A VA loan benefit available to eligible veterans in Arkansas does NOT require which of the following?

Accepted Answer

Private mortgage insurance (PMI)

Answer

VA loans do not require PMI regardless of the down payment amount, which is a key advantage for veterans.

Question 2

When using the cost approach, an appraiser estimates a building's replacement cost at $180,000 and total depreciation at $45,000. The land value is $40,000. What is the property's estimated value?

Accepted Answer

$175,000

Answer

Value = (Replacement cost − Depreciation) + Land = ($180,000 − $45,000) + $40,000 = $175,000.

Question 3

Which term describes the interest rate used to convert future income into a present value estimate?

Accepted Answer

Capitalization rate

Answer

The capitalization rate converts a property's net operating income into an estimate of current market value.

Question 4

In Arkansas real estate, a 'buydown' is a financing technique where:

Accepted Answer

The buyer pays discount points upfront to reduce the interest rate

Answer

A buydown involves paying discount points at closing to obtain a lower interest rate over the loan term.

Question 5

Which type of depreciation is typically considered incurable because it stems from factors outside the property?

Accepted Answer

External obsolescence

Answer

External obsolescence arises from factors outside the property (such as nearby industrial zoning) and is generally incurable by the owner.

Arkansas Real Estate License Practice Test

Arkansas Real Estate License Practice Test

Arkansas Real Estate License Property Valuation and Financing 3