Real Estate Appraisal Flashcards
7 cards from real PSI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Appraisal flashcards as text
Which of the following best describes the three traditional approaches to real estate value used by appraisers?
Answer: Sales comparison, cost, and income approaches
Appraisers use the sales comparison approach (comparable sales), cost approach (land plus depreciated improvements), and income approach (capitalized income stream) to estimate market value.
Market value in real estate appraisal is best defined as:
Answer: The most probable price a property would bring in a competitive and open market under fair sale conditions
Market value is the most probable price a property would sell for in a competitive, open market where both buyer and seller are knowledgeable, acting in their own interest, and not under undue duress.
The principle of highest and best use requires that use to be:
Answer: Legally permissible, physically possible, financially feasible, and maximally productive
Highest and best use is the use that is legally permissible, physically possible, financially feasible, and maximally productive — all four criteria must be met.
In the sales comparison approach, an upward adjustment is made to a comparable sale when:
Answer: The comparable is inferior to the subject property in that feature
When a comparable is inferior to the subject in a given feature, you add value to the comparable to make it equal the subject — an upward (positive) adjustment.
The gross rent multiplier (GRM) is calculated by dividing:
Answer: Sale price by gross monthly rental income
GRM equals the sale price divided by the gross monthly (or annual) rental income, providing a quick ratio to compare income-producing properties.
Which type of depreciation is caused by factors outside the property itself, such as a nearby industrial facility?
Answer: Economic (external) obsolescence
Economic (external) obsolescence results from negative influences outside the property boundaries, such as nearby nuisances, declining neighborhoods, or adverse zoning changes.
The principle of substitution states that:
Answer: A buyer will pay no more for a property than the cost to obtain an equally desirable substitute
The principle of substitution holds that a prudent buyer will pay no more for a property than the cost to acquire an equally desirable and functional substitute in the open market.