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
The economic life of a building refers to:
Answer: The period during which the improvements contribute positively to the overall property value
Economic life is the period during which an improvement contributes to the value of the property; it ends when the cost of maintaining the building exceeds the value it adds.
In the Sales Comparison Approach, an adjustment is made when:
Answer: A comparable sale differs from the subject property in some feature or characteristic
Adjustments in the Sales Comparison Approach compensate for differences between a comparable sale and the subject property; if the comparable is superior to the subject, a negative adjustment is made to the comparable.
A Comparative Market Analysis (CMA) is:
Answer: An informal estimate of market value prepared by a real estate agent to help set a listing price
A CMA is an informal analysis prepared by a real estate agent using recent comparable sales to help a seller determine an appropriate listing price; it is not a formal appraisal and cannot be used for mortgage lending.
The principle of conformity states that:
Answer: Property values are best maintained when a property conforms to the character and uses of surrounding properties
The principle of conformity holds that property values are maximized and maintained when properties conform in style, design, and use to the characteristics of the surrounding neighborhood.
Effective age differs from actual (chronological) age because:
Answer: Effective age reflects the condition and utility of the property relative to similar properties, not just years since construction
Effective age is based on the condition and usefulness of a building relative to comparable properties; a well-maintained older building may have a lower effective age than its chronological age, while a neglected newer building may have a higher effective age.
Net Operating Income (NOI) in the Income Approach is calculated as:
Answer: Effective Gross Income minus Operating Expenses (excluding debt service)
NOI is calculated by subtracting all operating expenses (excluding mortgage payments/debt service) from Effective Gross Income (potential income minus vacancy and credit losses).
Which type of depreciation is typically considered incurable?
Answer: External (economic) obsolescence caused by factors outside the property
External (economic) obsolescence is almost always considered incurable because it results from factors outside the property — such as neighborhood decline or a nearby nuisance — that the owner cannot control or correct.