RES Valuation & Appraisal 2

Question 1

External obsolescence (also called economic obsolescence) is best described as:

Accepted Answer

Loss in value caused by negative factors located outside the property boundaries

Answer

Loss in value due to deferred maintenance on the subject property

Answer

Loss in value due to outdated interior features within the property

Answer

Loss in value resulting from structural defects in the foundation

Question 2

In the Income Approach, the capitalization rate (cap rate) is used to:

Accepted Answer

Convert net operating income into an estimate of property value

Answer

Calculate the gross rent multiplier for a rental property

Answer

Adjust comparable sales for differences from the subject property

Answer

Estimate the physical depreciation of improvements over time

Question 3

The Income Approach to value is most appropriate for:

Accepted Answer

Investment or income-producing properties such as apartment buildings

Answer

Single-family residential properties in suburban neighborhoods

Answer

Vacant land parcels awaiting residential development

Answer

Historic properties where reproduction cost is the primary concern

Question 4

Reconciliation in the appraisal process refers to:

Accepted Answer

The final step where the appraiser weighs value indications from each approach to reach a final opinion of value

Answer

Adjusting comparable sales for differences from the subject property

Answer

Calculating the net operating income of an investment property

Answer

Verifying the accuracy of the property's legal description in public records

Question 5

Market value in real estate appraisal is best described as:

Accepted Answer

The most probable price a property would bring in a competitive open market under arm's-length conditions

Answer

The price the current owner originally paid for the property

Answer

The assessed value assigned by the county tax assessor

Answer

The insured replacement value listed on the homeowner's insurance policy

Question 6

The Gross Rent Multiplier (GRM) is calculated by:

Accepted Answer

Dividing the sale price of a comparable property by its gross monthly rental income

Answer

Dividing the property's net operating income by the capitalization rate

Answer

Multiplying the monthly rent by 12 to convert it to annual income

Answer

Dividing annual net income by the total property value

Question 7

An appraisal is formally defined as:

Accepted Answer

An unbiased written estimate of a property's market value prepared by a licensed appraiser

Answer

A real estate agent's informal estimate of a property's recommended listing price

Answer

The assessed value determined by the local tax authority for property tax purposes

Answer

A bank's internal calculation of the maximum loan amount for a given property