NY Real Estate Exam NY Property Valuation & Appraisal — Questions and Answers
Question 1: What are the three approaches to property valuation?
- Sales comparison (market) approach, cost approach, and income capitalization approach (Correct answer)
- Only the sales comparison approach
- Only the cost approach
- The tax assessment approach only
Correct answer: Sales comparison (market) approach, cost approach, and income capitalization approach
Appraisers use three approaches: the sales comparison approach (comparing recent similar sales), the cost approach (replacement cost minus depreciation), and the income approach (capitalized net income for investment properties).
Question 2: What is the sales comparison approach to valuation?
- Estimating value by comparing the subject property to recently sold similar properties, adjusting for differences (Correct answer)
- Calculating the cost to rebuild the property
- Estimating value based on rental income
- Using the tax assessed value as market value
Correct answer: Estimating value by comparing the subject property to recently sold similar properties, adjusting for differences
The sales comparison approach uses recent sales of comparable properties (comps), making adjustments for differences in size, condition, location, and features to estimate the subject property's market value.
Question 3: What factors affect property value in New York?
- Location, property condition, size, local market conditions, zoning, transportation access, school district, and economic factors (Correct answer)
- Only the number of bedrooms
- Only the property's age
- Only the neighborhood crime rate
Correct answer: Location, property condition, size, local market conditions, zoning, transportation access, school district, and economic factors
Property value in NY is influenced by numerous factors: location (Manhattan vs. upstate), proximity to transit, school quality, building condition, market supply/demand, interest rates, zoning, and economic trends.
Question 4: What is a Comparative Market Analysis (CMA) in NY real estate?
- An analysis prepared by a real estate agent using comparable sales to estimate a property's market value for listing or purchasing purposes (Correct answer)
- A formal appraisal performed by a licensed appraiser
- A government tax assessment
- A building inspection report
Correct answer: An analysis prepared by a real estate agent using comparable sales to estimate a property's market value for listing or purchasing purposes
A CMA is prepared by real estate agents (not appraisers) to help sellers set listing prices and buyers make offers, using recent sales, pending sales, and active listings of comparable properties.
Question 5: What is the income approach to valuation?
- A method estimating property value based on the income it produces, using net operating income divided by the capitalization rate (Correct answer)
- A method based on the owner's personal income
- A tax calculation method
- A method using construction costs
Correct answer: A method estimating property value based on the income it produces, using net operating income divided by the capitalization rate
The income approach divides net operating income (gross income minus operating expenses) by a capitalization rate derived from market data, estimating the value an investor would pay for the income stream.
Question 6: What is the difference between market value and assessed value in NY?
- Market value is what a property would sell for; assessed value is the value assigned by the tax assessor for property tax purposes, often lower than market value (Correct answer)
- They are always equal
- Assessed value is always higher
- Market value is set by the government
Correct answer: Market value is what a property would sell for; assessed value is the value assigned by the tax assessor for property tax purposes, often lower than market value
Market value reflects what willing buyers would pay. Assessed value is determined by municipal assessors for taxation, often using assessment ratios that result in assessed values below market value.
NY Real Estate Exam NY Property Valuation & Appraisal
What are the three approaches to property valuation?