CA Real Estate Property Valuation and Appraisal 2

Question 1

The principle of substitution states that a buyer will pay no more for a property than:

Accepted Answer

The cost of an equally desirable substitute property

Answer

The principle of substitution holds that value is capped at the cost of acquiring a comparable substitute.

Question 2

Which type of depreciation refers to a loss in value due to outdated or inefficient design features within the property?

Accepted Answer

Functional obsolescence

Answer

Functional obsolescence is a loss in value caused by outdated design, layout, or equipment within the property.

Question 3

A property generates a net operating income of $50,000 per year and has a capitalization rate of 5%. What is the estimated value?

Accepted Answer

$1,000,000

Answer

Value = NOI ÷ Cap Rate = $50,000 ÷ 0.05 = $1,000,000.

Question 4

In California, who is licensed to perform federally related real property appraisals?

Accepted Answer

A licensed or certified appraiser

Answer

Only licensed or certified appraisers may perform federally related real estate appraisals under FIRREA requirements.

Question 5

The income approach to value is MOST appropriate for which type of property?

Accepted Answer

Income-producing investment properties

Answer

The income approach is most suitable for investment properties where investors base value on income-generating potential.

CA Real Estate - California Real Estate Exam Practice Test