CA Real Estate Property Valuation and Appraisal

Question 1

Which appraisal approach estimates value by calculating the cost to replace or reproduce a building minus depreciation, plus land value?

Accepted Answer

Cost approach

Answer

The cost approach estimates value by adding land value to the depreciated cost of improvements.

Question 2

In California, what is the primary method used by appraisers to value single-family homes?

Accepted Answer

Sales comparison approach

Answer

The sales comparison approach is preferred for residential properties because it uses recent comparable sales data.

Question 3

Which type of depreciation is caused by factors outside the property, such as a nearby freeway?

Accepted Answer

Economic obsolescence

Answer

Economic (external) obsolescence results from negative influences outside the property that reduce its value.

Question 4

What does the capitalization rate (cap rate) represent in real estate appraisal?

Accepted Answer

The ratio of net operating income to property value

Answer

The cap rate is calculated by dividing the net operating income (NOI) by the property's value or purchase price.

Question 5

Which principle of value states that the value of a property is determined by what a buyer would pay in an open and competitive market?

Accepted Answer

Principle of supply and demand

Answer

The principle of supply and demand states that value is set by the interplay of market supply and buyer demand.

CA Real Estate - California Real Estate Exam Practice Test