NY Real Estate Exam NY Property Valuation & Appraisal 2

Question 1

What is the cost approach to valuation?

Accepted Answer

Estimating value by calculating the cost to rebuild the property at current prices, minus depreciation, plus land value

Answer

Using historical purchase prices

Answer

Comparing rental rates in the area

Answer

Averaging all approach results

Question 2

What is the cap rate and how is it used?

Accepted Answer

Capitalization rate: the ratio of net operating income to property value, used to compare investment property returns

Answer

The maximum interest rate on a mortgage

Answer

A limit on property tax increases

Answer

The rate at which a building depreciates

Question 3

What is depreciation in real estate appraisal?

Accepted Answer

Loss in property value from any cause, including physical deterioration, functional obsolescence, and external (economic) obsolescence

Answer

Only physical wear and tear

Answer

An accounting term with no appraisal application

Answer

An increase in property value over time

Question 4

What is a broker's price opinion (BPO)?

Accepted Answer

An estimate of property value prepared by a real estate broker, less detailed than a formal appraisal, often used by lenders for REO properties

Answer

A formal appraisal

Answer

A property tax assessment

Answer

A home inspection report

Question 5

What is highest and best use analysis?

Accepted Answer

Determining the most profitable, legally permissible, physically possible, and financially feasible use of a property

Answer

Finding the tallest building that could be built

Answer

Identifying the cheapest renovation option

Answer

Determining the maximum number of tenants

Question 6

How do NY property taxes affect real estate valuation?

Accepted Answer

High property taxes reduce net income for investment properties, lowering value; they also affect affordability for residential buyers

Answer

Property taxes have no effect on value

Answer

Higher taxes always increase property value

Answer

Taxes only affect commercial properties