RAA RAA Income Approach & Valuation Methods 2

Question 1

Which income approach method is most commonly applied to single-family residential properties by RAA appraisers?

Accepted Answer

Direct Capitalization using GRM

Answer

Direct capitalization using the Gross Rent Multiplier is the most practical income method for single-family homes.

Question 2

What is 'economic rent' in the context of residential appraisal?

Accepted Answer

The rent a property would command in the open market

Answer

Economic rent (market rent) is the rent a willing tenant would pay a willing landlord in the open market under typical conditions.

Question 3

When contract rent differs significantly from market rent, the RAA appraiser should:

Accepted Answer

Note the difference and use market rent for the income approach valuation

Answer

Appraisers use market rent for the income approach to reflect value to a typical investor, while disclosing the contract rent discrepancy.

Question 4

In a rent survey, the appraiser finds three comparable rentals with monthly rents of $1,800, $1,950, and $2,100. What conclusion would be most appropriate?

Accepted Answer

The subject's market rent falls in the range of $1,800–$2,100 and must be adjusted to subject features

Answer

The appraiser adjusts comparable rents for differences in features, location, and condition to bracket the subject's market rent.

Question 5

Which statement best describes the relationship between cap rates and property value?

Accepted Answer

Lower cap rates indicate higher property values

Answer

Since Value = NOI ÷ Cap Rate, a lower cap rate results in a higher calculated value for the same NOI.

(RAA) Certified Residential Accredited Appraiser Practice Test

(RAA) Certified Residential Accredited Appraiser Practice Test

RAA RAA Income Approach & Valuation Methods 2