Loan Officer Exam Loan Officer Appraisal and Property Valuation 2

Question 1

Which of the three appraisal approaches estimates value by calculating land value plus the cost to replace improvements minus accrued depreciation?

Accepted Answer

Cost approach

Answer

The cost approach estimates value by adding the land value to the depreciated cost of reproducing or replacing the improvements on the property.

Question 2

The sales comparison approach to value is primarily based on which of the following?

Accepted Answer

Recent sales prices of comparable properties adjusted for differences

Answer

The sales comparison approach establishes value by analyzing recent sales of similar properties and making adjustments for differences between the comparables and the subject property.

Question 3

In the income approach to value, the capitalization rate represents:

Accepted Answer

The rate of return an investor expects from an income-producing property

Answer

The capitalization rate (cap rate) converts a property's net operating income into a value estimate by reflecting the return investors expect from that type of income-producing property.

Question 4

What type of depreciation is 'external obsolescence' in real estate appraisal?

Accepted Answer

A loss in value caused by negative factors located outside the property

Answer

External obsolescence is depreciation caused by adverse factors outside the property boundaries, such as nearby industrial use, heavy traffic, or economic decline in the area, and it is generally incurable.

Question 5

When an appraiser makes a positive adjustment to a comparable sale, it means the comparable is:

Accepted Answer

Inferior to the subject property in that feature, so value is added to the comparable

Answer

A positive adjustment is added to a comparable's sale price when the comparable is inferior to the subject in a particular feature, bringing the comparable's adjusted value up to reflect what it would have sold for if equal to the subject.

Loan Officer Exam Practice Test

Loan Officer Exam Practice Test

Loan Officer Exam Loan Officer Appraisal and Property Valuation 2