RPA Property Valuation Principles & Methods 3

Question 1

A parking lot in a central business district generates $120,000 NOI annually. If the market-derived capitalization rate for similar properties is 8%, what is the indicated value?

Accepted Answer

$1,500,000

Answer

$120,000 ÷ 0.08 = $1,500,000 using the direct capitalization formula.

Question 2

The effective gross income (EGI) of an income property is calculated by:

Accepted Answer

Subtracting vacancy and collection loss from potential gross income

Answer

EGI = Potential Gross Income − Vacancy and Collection Loss, representing the income actually expected to be collected.

Question 3

Which of the following best describes the 'effective age' of a building?

Accepted Answer

The age indicated by the building's condition and utility relative to new construction

Answer

Effective age reflects how old a building appears based on its condition and maintenance, which may differ significantly from its actual (chronological) age.

Question 4

Under USPAP, an appraiser performing a market value appraisal must assume which type of motivation for both buyer and seller?

Accepted Answer

Typical (arm's-length) motivations with neither under duress

Answer

Market value by definition assumes both buyer and seller are typically motivated and acting in their own best interests in an arm's-length transaction.

Question 5

The gross rent multiplier (GRM) is most appropriately used when appraising:

Accepted Answer

Single-family residential rentals and small income properties

Answer

GRM is a simplified income measure (sales price ÷ gross rent) best suited to residential and small income properties where detailed expense data may be unavailable.

(RPA) Real Property Appraiser Certification Practice Test

(RPA) Real Property Appraiser Certification Practice Test

RPA Property Valuation Principles & Methods 3