NAR Property Valuation & Market Analysis 5

Question 1

Which statement best describes the principle of anticipation in real estate valuation?

Accepted Answer

Value reflects the present worth of future benefits the property will produce

Answer

The principle of anticipation holds that value is created by expected future benefits such as income, amenity, or resale proceeds, discounted to present value.

Question 2

A paired sales analysis is used in the sales comparison approach primarily to:

Accepted Answer

Isolate and quantify the market value of a single property feature

Answer

Paired sales analysis compares two otherwise similar sales that differ in only one feature to extract a market-supported dollar or percentage adjustment for that feature.

Question 3

An absorption rate study in a market analysis measures:

Accepted Answer

The rate at which listed properties are sold or removed from the market over a given period

Answer

Absorption rate measures how quickly available inventory is being sold or absorbed by the market, expressed as units per month or months of supply.

Question 4

When using the income capitalization approach for a residential rental property, which income figure is most relevant?

Accepted Answer

Net operating income after operating expenses but before debt service

Answer

Net Operating Income (NOI) — income after operating expenses but before debt service — is the income figure used in the direct capitalization formula: Value = NOI ÷ Cap Rate.

Question 5

Economic life of a building refers to:

Accepted Answer

The period during which improvements contribute positively to property value

Answer

Economic life is the period over which improvements contribute value to the property; once operating costs exceed income benefits, the economic life has ended.

(NAR) National Association of Realtors Certification Practice Test

(NAR) National Association of Realtors Certification Practice Test

NAR Property Valuation & Market Analysis 5