FREE SRA Property Valuation Principles & Methodologies Questions and Answers

Question 1

What is the primary purpose of the sales comparison approach in property valuation?

Accepted Answer

To estimate market value based on comparable sales.

Answer

To assess the property's insurance value.

Answer

To determine the cost of construction.

Answer

To evaluate the owner's investment returns.

Question 2

Which method is best suited for valuing new construction using current material and labor costs?

Accepted Answer

Cost Approach

Answer

Sales Comparison Approach

Answer

Income Capitalization Approach

Answer

Gross Rent Multiplier

Question 3

What is functional obsolescence in property valuation?

Accepted Answer

A loss in value due to outdated design or layout.

Answer

A physical defect caused by age.

Answer

An economic change affecting the neighborhood.

Answer

A reduction in value from poor market demand.

Question 4

In the income capitalization approach, what does the capitalization rate (cap rate) represent?

Accepted Answer

Ratio of net operating income to property value.

Answer

Annual property tax rate.

Answer

The rate of depreciation.

Answer

Property appreciation rate.

Question 5

What is external obsolescence?

Accepted Answer

Loss in value due to external factors like zoning or location issues.

Answer

Wear and tear due to aging.

Answer

Outdated appliances within the property.

Answer

Depreciation due to poor maintenance.