NAR Property Valuation & Market Analysis 2

Question 1

Which adjustment is made in the sales comparison approach when a comparable property has a feature that the subject property lacks?

Accepted Answer

A negative adjustment to the comparable

Answer

When a comparable has a superior feature the subject lacks, a negative adjustment is applied to the comparable's sale price to account for the difference.

Question 2

What does a capitalization rate (cap rate) primarily measure in income-producing property analysis?

Accepted Answer

The ratio of net operating income to property value

Answer

The cap rate equals Net Operating Income divided by property value, expressing the rate of return an investor expects from an income-producing property.

Question 3

A neighborhood that is transitioning from residential to commercial use is said to be in which stage of its life cycle?

Accepted Answer

Decline

Answer

A neighborhood undergoing transition from residential to commercial use typically reflects the decline stage, where original land uses are being replaced.

Question 4

In an appraisal, 'effective age' differs from 'actual age' because it reflects:

Accepted Answer

The condition and utility of the structure relative to its peers

Answer

Effective age reflects how old a property appears based on its condition and maintenance, which may be more or less than its chronological actual age.

Question 5

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

Accepted Answer

Physical deterioration — long-lived

Answer

Long-lived physical deterioration affecting the entire structure is typically incurable because the cost to correct it would exceed the value gain.

(NAR) National Association of Realtors Certification Practice Test

(NAR) National Association of Realtors Certification Practice Test

NAR Property Valuation & Market Analysis 2