RPA Property Valuation Principles & Methods 4

Question 1

Which principle states that value is created by the expectation of future benefits, and is particularly relevant to income-producing properties?

Accepted Answer

Anticipation

Answer

The principle of anticipation holds that present value is the present worth of all anticipated future benefits, which is the foundation of the income approach.

Question 2

An appraiser is using the income approach and determines that a property's potential gross income is $200,000, vacancy and collection loss is 5%, and operating expenses are $80,000. What is the NOI?

Accepted Answer

$110,000

Answer

EGI = $200,000 × (1 − 0.05) = $190,000; NOI = $190,000 − $80,000 = $110,000.

Question 3

Which of the following is NOT deducted when calculating net operating income (NOI)?

Accepted Answer

Mortgage debt service

Answer

NOI is calculated before debt service (mortgage payments); debt service is a financing cost, not an operating expense, and is excluded from the NOI calculation.

Question 4

A residential property appraiser identifies three comparable sales. After adjustments, the values are $315,000, $318,000, and $321,000. The appraiser reconciles to $317,500. This is an example of:

Accepted Answer

Reconciling within a narrow range by judgment

Answer

When adjusted comparable values cluster in a tight range, the appraiser uses professional judgment to reconcile within that range, which differs from mechanical averaging or selecting a single number.

Question 5

In appraisal, 'highest and best use' must meet four criteria. Which of the following correctly lists all four?

Accepted Answer

Legal, physical, financial, and maximally productive

Answer

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive—all four criteria must be satisfied simultaneously.

(RPA) Real Property Appraiser Certification Practice Test

(RPA) Real Property Appraiser Certification Practice Test

RPA Property Valuation Principles & Methods 4