FREE Real Estate Sales Property Valuation and Appraisal Questions and Answers

Question 1

An appraiser is tasked with determining the value of a newly constructed, special-purpose property, such as a public library.
Due to the unique nature of the property, there are no recent comparable sales and it does not generate income.
Which approach to value would be most appropriate and heavily weighted in this appraisal?

Accepted Answer

Cost Approach

Answer

Sales Comparison Approach

Answer

Income Approach

Answer

Gross Rent Multiplier Method

Question 2

The principle of value that states a property's maximum value is established by the cost of acquiring a similar, equally desirable substitute property is known as:

Accepted Answer

Substitution

Answer

Conformity

Answer

Contribution

Answer

Highest and Best Use

Question 3

A residential property is located in a well-maintained neighborhood. However, a large industrial factory was recently built a quarter-mile away, resulting in a noticeable decline in property values for the entire area due to noise and traffic. This loss of value is an example of:

Accepted Answer

External Obsolescence

Answer

Physical Deterioration

Answer

Functional Obsolescence

Answer

Curable Depreciation

Question 4

A real estate agent prepares a report for a seller that analyzes recently sold properties, current listings, and expired listings in the neighborhood to help establish a competitive asking price. What is this report called?

Accepted Answer

A Comparative Market Analysis (CMA)

Answer

A formal appraisal

Answer

A statement of market value

Answer

A Broker's Price Opinion (BPO)

Question 5

An investor is analyzing a commercial property that generates a Net Operating Income (NOI) of $90,000 per year. If the prevailing capitalization rate for similar properties in the market is 7.5%, what is the estimated value of the property using the income approach?

Accepted Answer

$1,200,000

Answer

$675,000

Answer

$1,500,000

Answer

$975,000

Question 6

Which of the following BEST defines the appraisal concept of 'Highest and Best Use'?

Accepted Answer

The most profitable, legally permissible, physically possible, and financially feasible use of a property.

Answer

The current use of the property, provided it is generating a positive cash flow.

Answer

The use that results in the highest property tax assessment for the municipality.

Answer

The use that requires the most expensive construction and materials to complete.