Free CAE Property Valuation Techniques Questions and Answers

Question 1

Which of the following is a key method used in the cost approach to valuation?

Accepted Answer

Depreciated replacement cost

Answer

The cost approach estimates the value of a property by determining the cost to replace or reproduce the structure, minus depreciation, plus land value.

Question 2

What is the primary principle behind the sales comparison approach?

Accepted Answer

Substitution

Answer

The sales comparison approach is based on the principle of substitution, which suggests that a buyer will not pay more for a property than a similar one.

Question 3

Which factor is NOT typically considered in the income approach to valuation?

Accepted Answer

Property taxes

Answer

The income approach is based on net operating income, capitalization rate, and market rent—not typically property taxes, which are part of operating expenses.

Question 4

What does 'functional obsolescence' refer to in property valuation?

Accepted Answer

Outdated design or inefficiency

Answer

Functional obsolescence refers to a loss in value due to outdated design or features, making the property less desirable.

Question 5

Which valuation method is most appropriate for income-producing properties?

Accepted Answer

Income approach

Answer

The income approach is most suitable for properties like apartment buildings and offices that generate rental income.

CAE - Certified Assessment Evaluator Practice Test

CAE - Certified Assessment Evaluator Practice Test

Free CAE Property Valuation Techniques Questions and Answers