Property Valuation and Appraisal Flashcards
6 cards from real CA REAL ESTATE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Property Valuation and Appraisal flashcards as text
Which appraisal approach estimates value by calculating the cost to replace or reproduce a building minus depreciation, plus land value?
Answer: Cost approach
The cost approach estimates value by adding land value to the depreciated cost of improvements.
In California, what is the primary method used by appraisers to value single-family homes?
Answer: Sales comparison approach
The sales comparison approach is preferred for residential properties because it uses recent comparable sales data.
Which type of depreciation is caused by factors outside the property, such as a nearby freeway?
Answer: Economic obsolescence
Economic (external) obsolescence results from negative influences outside the property that reduce its value.
What does the capitalization rate (cap rate) represent in real estate appraisal?
Answer: The ratio of net operating income to property value
The cap rate is calculated by dividing the net operating income (NOI) by the property's value or purchase price.
Which principle of value states that the value of a property is determined by what a buyer would pay in an open and competitive market?
Answer: Principle of supply and demand
The principle of supply and demand states that value is set by the interplay of market supply and buyer demand.
When appraising income property, which term describes the total potential rental income if the property were fully occupied?
Answer: Gross scheduled income
Gross scheduled income (GSI) is the maximum possible rental income assuming 100% occupancy at market rents.