Real Estate Sales Exam Real Estate Sales Financing and Valuation Questions and Answers 3 — Questions and Answers
Question 1: An appraiser determines a building's replacement cost is $500,000, with accrued depreciation of $125,000 and a land value of $150,000. What is the property's estimated value using the cost approach?
- $375,000
- $525,000 (Correct answer)
- $625,000
- $475,000
Correct answer: $525,000
Cost approach formula: Replacement Cost - Depreciation + Land Value = $500,000 - $125,000 + $150,000 = $525,000.
Question 2: A borrower's monthly gross income is $8,000. If the lender uses a 28% front-end ratio, what is the maximum allowable monthly housing expense?
- $2,560
- $2,240 (Correct answer)
- $1,920
- $2,800
Correct answer: $2,240
The front-end ratio limits housing costs to 28% of gross monthly income: $8,000 x 0.28 = $2,240.
Question 3: Which type of mortgage loan features payments that increase over time according to a predetermined schedule?
- Reverse mortgage
- Graduated payment mortgage (Correct answer)
- Blanket mortgage
- Package mortgage
Correct answer: Graduated payment mortgage
A graduated payment mortgage starts with lower payments that increase at set intervals, designed for borrowers who expect rising income.
Question 4: In reconciliation during the appraisal process, the appraiser gives most weight to which factor?
- The approach that yields the highest value
- The approach most appropriate for the property type and purpose of the appraisal (Correct answer)
- The average of all three approaches
- The approach that uses the most recent data
Correct answer: The approach most appropriate for the property type and purpose of the appraisal
During reconciliation, the appraiser assigns greatest weight to the approach most relevant to the property type and the purpose of the appraisal.
Question 5: What is the primary difference between a purchase money mortgage and a conventional mortgage?
- A purchase money mortgage has no interest charges
- A purchase money mortgage is financing provided directly by the seller (Correct answer)
- A purchase money mortgage requires no down payment
- A purchase money mortgage is only available for commercial properties
Correct answer: A purchase money mortgage is financing provided directly by the seller
A purchase money mortgage is seller financing where the seller acts as the lender and carries back a note from the buyer.
Question 6: A property's gross rent multiplier (GRM) is 8 and its monthly gross rent is $2,500. What is the estimated property value?
- $20,000
- $240,000 (Correct answer)
- $200,000
- $300,000
Correct answer: $240,000
GRM uses annual gross rent: $2,500 x 12 = $30,000 annual rent x 8 GRM = $240,000 estimated value.
Real Estate Sales Exam Real Estate Sales Financing and Valuation Questions and Answers 3
An appraiser determines a building's replacement cost is $500,000, with accrued depreciation of $125,000 and a land value of $150,000.
What is the property's estimated value using the cost approach?