Valuation & Appraisal Flashcards
6 cards from real Real Estate practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Valuation & Appraisal flashcards as text
The cost approach to value is most reliable for:
Answer: Unique or special-use properties with few comparables
The cost approach is most applicable for unique properties (schools, churches, government buildings) where comparable sales data is scarce.
The income approach to value is most commonly used for:
Answer: Income-producing investment properties
The income approach estimates value by capitalizing or discounting the property's income stream, making it ideal for rental and commercial properties.
Capitalization rate (cap rate) is calculated as:
Answer: Net operating income ÷ property value
Cap rate = NOI ÷ property value; it expresses the relationship between a property's income and its value, used to compare investment properties.
The Gross Rent Multiplier (GRM) is calculated by dividing the:
Answer: Sale price by the annual gross rental income
GRM = sale price ÷ annual gross rents; it provides a quick, rough estimate of value by comparing price to rental income without accounting for expenses.
Functional obsolescence in real estate is caused by:
Answer: Outdated design, layout, or features within the property itself
Functional obsolescence results from features within the property that are outdated, inadequate, or no longer desired by the market, such as a single bathroom in a large home.
Economic obsolescence (external obsolescence) is generally considered:
Answer: Incurable because the cause is beyond the owner's control
Economic obsolescence stems from factors outside the property, such as neighborhood decline or nearby nuisances, which the owner cannot control or cure.