PSI Real Estate Appraisal 2

Question 1

In the income approach, net operating income (NOI) is calculated as:

Accepted Answer

Effective gross income minus operating expenses (excluding debt service)

Answer

Gross scheduled income minus vacancy and collection loss only

Answer

Gross income minus mortgage payments and taxes

Answer

Potential gross income minus all expenses including depreciation

Question 2

Direct capitalization converts a single year's income into a value estimate by:

Accepted Answer

Dividing NOI by the overall capitalization rate

Answer

Multiplying NOI by the projection period in years

Answer

Adding NOI to the estimated resale proceeds

Answer

Subtracting the vacancy rate from gross scheduled income

Question 3

The cost approach is generally most reliable when appraising:

Accepted Answer

Properties with little or no depreciation, such as newly constructed buildings

Answer

Older income-producing properties in declining markets

Answer

Vacant land with multiple potential uses

Answer

Single-family homes in active resale markets

Question 4

Reproduction cost in the cost approach refers to:

Accepted Answer

The cost to construct an exact replica of the existing structure using current materials and techniques

Answer

The cost to build a structure of equal utility using modern materials and design standards

Answer

The depreciated value of the building after deducting all forms of obsolescence

Answer

The insured replacement value established by the property owner's insurer

Question 5

Functional obsolescence in a residential property is best illustrated by:

Accepted Answer

A four-bedroom home with only one bathroom

Answer

Roof damage caused by a recent hailstorm

Answer

Declining property values due to neighborhood blight

Answer

Foundation settling caused by soil movement

Question 6

Effective gross income (EGI) is defined as:

Accepted Answer

Potential gross income minus vacancy and collection loss, plus other income

Answer

Potential gross income plus miscellaneous income

Answer

Net operating income before operating expenses

Answer

Gross rental income multiplied by the gross rent multiplier

Question 7

The capitalization rate (cap rate) reflects:

Accepted Answer

The required rate of return on an investment property relative to its value

Answer

The ratio of annual mortgage payments to purchase price

Answer

The percentage of gross income retained after vacancy losses

Answer

The annual appreciation rate expected for the property