Real Estate License Property Valuation and Appraisal 4

Question 1

Which of the following best defines market value?

Accepted Answer

The most probable price a property should bring in a competitive open market

Answer

Market value is the most probable price under typical, arm's-length conditions in an open and competitive market.

Question 2

An appraiser is hired by a lender for a mortgage. The borrower's desired loan amount should:

Accepted Answer

Not influence the appraiser's value opinion

Answer

An appraiser must remain independent and cannot let a target loan amount bias the value opinion.

Question 3

Physical deterioration that is economically feasible to repair is referred to as:

Accepted Answer

Curable physical deterioration

Answer

Curable physical deterioration is wear and tear whose repair cost is justified by the value it restores.

Question 4

Land that is valued separately in the cost approach is typically valued using:

Accepted Answer

The sales comparison approach

Answer

Site value is usually established through comparison with sales of similar vacant parcels.

Question 5

A property generates $90,000 in potential gross income with a 5% vacancy and $30,000 in operating expenses. What is the NOI?

Accepted Answer

$55,500

Answer

Effective gross income is $90,000 − $4,500 vacancy = $85,500; minus $30,000 expenses equals $55,500 NOI.

Real Estate License Practice Test