NAR Property Valuation & Market Analysis 3

Question 1

Which economic characteristic of land makes it necessary to consider location as the primary value influence?

Accepted Answer

Immobility

Answer

Because land is immobile (fixed in location), its value is inherently tied to its specific geographic position and surrounding environment.

Question 2

The gross rent multiplier (GRM) is calculated by dividing the:

Accepted Answer

Sale price by the annual gross rent

Answer

GRM = Sale Price ÷ Annual Gross Rent (or monthly rent if using monthly GRM), providing a quick income-based valuation metric.

Question 3

A property appraised using the cost approach shows a land value of $80,000 and improvements valued at $220,000 after depreciation. What is the indicated value?

Accepted Answer

$300,000

Answer

In the cost approach, indicated value equals land value plus depreciated cost of improvements: $80,000 + $220,000 = $300,000.

Question 4

Which market condition is indicated when the months of supply falls below 4–5 months?

Accepted Answer

Seller's market

Answer

Low months of supply (typically under 4–5 months) means limited inventory relative to demand, creating a seller's market with upward price pressure.

Question 5

In the income approach to value, vacancy and collection loss is subtracted from potential gross income to arrive at:

Accepted Answer

Effective gross income

Answer

Effective Gross Income (EGI) = Potential Gross Income minus Vacancy & Collection Loss, representing realistic achievable income.

(NAR) National Association of Realtors Certification Practice Test

(NAR) National Association of Realtors Certification Practice Test

NAR Property Valuation & Market Analysis 3