Real Estate Sales Exam Property Valuation and Appraisal 3

Question 1

What is the primary purpose of a Comparative Market Analysis (CMA) performed by a real estate agent?

Accepted Answer

To estimate a listing price or offer price based on recent sales

Answer

A CMA helps agents and clients estimate a competitive market price using recent comparable sales, but it is not a licensed appraisal and cannot be used for mortgage lending.

Question 2

The principle of substitution in appraisal states that:

Accepted Answer

No buyer will pay more for a property than the cost of an equally desirable substitute

Answer

The principle of substitution holds that a rational buyer will not pay more for a property than the cost to acquire a comparable substitute, forming the foundation of the sales comparison approach.

Question 3

Which of the following best describes 'effective age' in property appraisal?

Accepted Answer

The age indicated by the property's condition and utility relative to similar properties

Answer

Effective age reflects the building's condition and functionality rather than its chronological age — a well-maintained older home may have a lower effective age than its actual age.

Question 4

When using the sales comparison approach, an appraiser should give the most weight to comparables that:

Accepted Answer

Are most similar to the subject in size, location, and condition

Answer

The best comparables require the fewest and smallest adjustments, meaning they closely match the subject property in key characteristics.

Question 5

A building has a replacement cost of $300,000 and accrued depreciation of $60,000. The land value is $80,000. What is the indicated value using the cost approach?

Accepted Answer

$320,000

Answer

Cost approach value = (Replacement cost − Depreciation) + Land = ($300,000 − $60,000) + $80,000 = $320,000.

Real Estate Sales Exam Practice Test

Real Estate Sales Exam Practice Test

Real Estate Sales Exam Property Valuation and Appraisal 3