RES Valuation & Appraisal 3

Question 1

The economic life of a building refers to:

Accepted Answer

The period during which the improvements contribute positively to the overall property value

Answer

The total number of years since the building was originally constructed

Answer

The number of years remaining until the building becomes physically unusable

Answer

The depreciation schedule the IRS allows for income tax reporting purposes

Question 2

In the Sales Comparison Approach, an adjustment is made when:

Accepted Answer

A comparable sale differs from the subject property in some feature or characteristic

Answer

The subject property's assessed value differs from the county average

Answer

The appraiser disagrees with the listing price set by the seller's agent

Answer

A comparable property has been on the market for more than 90 days

Question 3

A Comparative Market Analysis (CMA) is:

Accepted Answer

An informal estimate of market value prepared by a real estate agent to help set a listing price

Answer

A formal appraisal performed by a licensed appraiser for mortgage underwriting purposes

Answer

A government assessment of property value conducted for ad valorem taxation

Answer

A detailed cost analysis used by appraisers applying the Cost Approach

Question 4

The principle of conformity states that:

Accepted Answer

Property values are best maintained when a property conforms to the character and uses of surrounding properties

Answer

A property's value is maximized when it is developed to its highest and best use

Answer

The market determines value purely based on the interaction of supply and demand

Answer

A buyer will not pay more than the cost of acquiring a comparable substitute

Question 5

Effective age differs from actual (chronological) age because:

Accepted Answer

Effective age reflects the condition and utility of the property relative to similar properties, not just years since construction

Answer

Effective age is determined solely by the date of construction recorded in property tax records

Answer

Effective age is always less than actual age for any well-maintained property

Answer

Effective age is a concept used only for commercial properties under the Income Approach

Question 6

Net Operating Income (NOI) in the Income Approach is calculated as:

Accepted Answer

Effective Gross Income minus Operating Expenses (excluding debt service)

Answer

Gross Potential Income minus Vacancy and Credit Loss Allowance only

Answer

Gross Scheduled Income minus Mortgage Payments and Property Taxes

Answer

Total Rental Income minus Property Taxes and Insurance only

Question 7

Which type of depreciation is typically considered incurable?

Accepted Answer

External (economic) obsolescence caused by factors outside the property

Answer

Physical deterioration from deferred maintenance such as peeling paint

Answer

Functional obsolescence from a poor floor plan that could be remodeled at reasonable cost

Answer

Physical deterioration of short-lived components such as roof shingles