FHA Property Valuation Methods & Techniques 2

Question 1

When using the income capitalization approach for a single-family residence, what is the most common method FHA appraisers use to estimate market rent?

Accepted Answer

Gross rent multiplier analysis

Answer

The gross rent multiplier (GRM) is the standard method for single-family residences because it is simple, market-derived, and appropriate for properties where investors typically think in terms of rent multiples rather than cap rates.

Question 2

In the sales comparison approach, a comparable sale requires a negative dollar adjustment for a feature it has that the subject property lacks. This means the comparable is:

Accepted Answer

Superior to the subject in that feature

Answer

When a comparable is superior to the subject, it sold for more because of that feature, so you subtract value from the comparable to make it equal to the subject.

Question 3

Under FHA guidelines, which cost approach method typically yields the most reliable replacement cost estimate for a standard residential property?

Accepted Answer

Comparative unit method (square-foot method)

Answer

The comparative unit (square-foot) method is most commonly used for residential appraisals because it is practical, market-derived, and supported by published cost services such as Marshall & Swift.

Question 4

An appraiser estimates accrued depreciation using the age-life method. The effective age is 10 years and the total economic life is 50 years. What percentage of depreciation has accrued?

Accepted Answer

20%

Answer

Accrued depreciation under the age-life method = effective age ÷ total economic life = 10 ÷ 50 = 20%.

Question 5

Which type of depreciation is considered incurable when the cost to cure exceeds the value added by curing the item?

Accepted Answer

Physical deterioration — incurable long-lived

Answer

Incurable physical deterioration refers to long-lived structural components where the cost to cure exceeds the contributory value gained, making repair economically unsound.

(FHA) Federal Housing Administration Appraiser Certification Practice Test

(FHA) Federal Housing Administration Appraiser Certification Practice Test

FHA Property Valuation Methods & Techniques 2