Valuation & Appraisal Flashcards
7 cards from real RES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Valuation & Appraisal flashcards as text
External obsolescence (also called economic obsolescence) is best described as:
Answer: Loss in value caused by negative factors located outside the property boundaries
External (economic) obsolescence is caused by factors outside the property boundaries, such as nearby nuisances, rezoning of surrounding land, or economic downturns, and is typically considered incurable.
In the Income Approach, the capitalization rate (cap rate) is used to:
Answer: Convert net operating income into an estimate of property value
The capitalization rate converts the property's net operating income (NOI) into an estimate of market value using the formula: Value = NOI ÷ Cap Rate.
The Income Approach to value is most appropriate for:
Answer: Investment or income-producing properties such as apartment buildings
The Income Approach is most applicable to income-producing properties like apartment complexes, office buildings, and shopping centers, where value is driven by the income stream.
Reconciliation in the appraisal process refers to:
Answer: The final step where the appraiser weighs value indications from each approach to reach a final opinion of value
Reconciliation is the final step in the appraisal process in which the appraiser analyzes and weighs the value indications from each approach applied to arrive at a final estimate of value.
Market value in real estate appraisal is best described as:
Answer: The most probable price a property would bring in a competitive open market under arm's-length conditions
Market value is the most probable price a property would sell for in an arm's-length transaction between a knowledgeable, willing buyer and seller, neither under duress.
The Gross Rent Multiplier (GRM) is calculated by:
Answer: Dividing the sale price of a comparable property by its gross monthly rental income
The GRM is calculated by dividing a comparable property's sale price by its gross monthly (or annual) rent; this multiplier is then applied to the subject property's rent to estimate its value.
An appraisal is formally defined as:
Answer: An unbiased written estimate of a property's market value prepared by a licensed appraiser
An appraisal is a professional, unbiased written estimate of a property's market value prepared by a licensed or certified appraiser using recognized valuation methods.