Real Estate Valuation & Appraisal 2

Question 1

The cost approach to value is most reliable for:

Accepted Answer

Unique or special-use properties with few comparables

Answer

Income-producing apartment buildings

Answer

Owner-occupied single-family resales

Answer

Commercial retail centers

Question 2

The income approach to value is most commonly used for:

Accepted Answer

Income-producing investment properties

Answer

Single-family owner-occupied homes

Answer

Vacant land only

Answer

New construction only

Question 3

Capitalization rate (cap rate) is calculated as:

Accepted Answer

Net operating income ÷ property value

Answer

Gross rent ÷ purchase price

Answer

Effective gross income ÷ vacancy rate

Answer

Mortgage payment ÷ rent

Question 4

The Gross Rent Multiplier (GRM) is calculated by dividing the:

Accepted Answer

Sale price by the annual gross rental income

Answer

Net operating income by the cap rate

Answer

Monthly rent by the mortgage payment

Answer

Vacancy rate by occupancy rate

Question 5

Functional obsolescence in real estate is caused by:

Accepted Answer

Outdated design, layout, or features within the property itself

Answer

Physical wear and tear over time

Answer

Factors external to the property

Answer

Deferred maintenance

Question 6

Economic obsolescence (external obsolescence) is generally considered:

Accepted Answer

Incurable because the cause is beyond the owner's control

Answer

Curable because the owner can fix it

Answer

A form of physical deterioration

Answer

Relevant only to commercial properties