RPA Property Valuation Principles & Methods 2

Question 1

An appraiser is valuing a property in a neighborhood where most homes have three bedrooms but the subject has five bedrooms. Which appraisal principle explains why the extra bedrooms may add little value?

Accepted Answer

Principle of contribution

Answer

The principle of contribution states that a component's value is measured by how much it adds to the whole, not its cost—extra bedrooms beyond market norms typically add diminishing marginal value.

Question 2

When using the sales comparison approach, an appraiser finds a comparable sale that is superior to the subject in terms of condition. How should this adjustment be applied?

Accepted Answer

Subtract from the comparable's sale price

Answer

If a comparable is superior to the subject in a given characteristic, a negative (downward) adjustment is made to the comparable's sale price to reflect what it would have sold for if it matched the subject.

Question 3

The income capitalization approach divides net operating income by which factor to produce a value indication?

Accepted Answer

Overall capitalization rate

Answer

Value = NOI ÷ Overall Capitalization Rate (OAR) is the direct capitalization formula used in the income approach.

Question 4

Which type of depreciation results from factors external to the property, such as a new highway built adjacent to a residential neighborhood?

Accepted Answer

External obsolescence

Answer

External (economic) obsolescence arises from conditions outside the property boundaries and is typically incurable by the property owner.

Question 5

In the cost approach, what term describes the difference between the reproduction cost of a building and its current depreciated value?

Accepted Answer

Accrued depreciation

Answer

Accrued depreciation is the total loss in value from all causes (physical, functional, external) measured from the reproduction or replacement cost new.

(RPA) Real Property Appraiser Certification Practice Test

(RPA) Real Property Appraiser Certification Practice Test

RPA Property Valuation Principles & Methods 2