Real Estate License Property Valuation and Appraisal 3

Question 1

Highest and best use analysis requires that the use be legally permissible, physically possible, financially feasible, and:

Accepted Answer

Maximally productive

Answer

The four tests of highest and best use conclude with the use that is maximally productive.

Question 2

An appraiser observes that homes lose value because a busy highway was built behind them. This is best classified as:

Accepted Answer

External (economic) obsolescence

Answer

External obsolescence is a loss in value caused by factors outside the property boundaries.

Question 3

In the cost approach, what must be subtracted from the reproduction cost of improvements?

Accepted Answer

Accrued depreciation

Answer

Accrued depreciation is deducted from improvement cost, then land value is added back to reach the estimate.

Question 4

A four-unit building rents each unit for $1,200 per month. Using a GRM of 90, what is the indicated value?

Accepted Answer

$432,000

Answer

Annual gross rent is 4 × $1,200 × 12 = $57,600; multiplied by 90 the GRM here uses monthly rent: $4,800 × 90 = $432,000.

Question 5

Which principle states that maximum value is achieved when a property conforms with surrounding properties?

Accepted Answer

Conformity

Answer

The principle of conformity holds that uniformity among nearby properties supports maximum value.

Real Estate License Practice Test