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

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.

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

The capitalization rate converts the property's net operating income (NOI) into an estimate of market value using the formula: Value = NOI ÷ Cap Rate.

Question 3

The Income Approach to value is most appropriate for:

Accepted Answer

Investment or income-producing properties such as apartment buildings

Answer

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.

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

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.

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

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.

RES - Real Estate Salesperson Exam Practice Test

RES - Real Estate Salesperson Exam Practice Test

RES Valuation & Appraisal 2