SAEE SAEE - Core Valuation Principles Questions and Answers 5

Question 1

The four agents of production in real estate value theory are:

Accepted Answer

Land, labor, capital, and entrepreneurial coordination

Answer

Classical economic theory identifies land, labor, capital, and entrepreneurial coordination as the four agents that combine to create value.

Question 2

An apartment complex generates $120,000 in potential gross income annually. Vacancy and collection losses are 8%. What is the effective gross income?

Accepted Answer

$110,400

Answer

$120,000 × (1 − 0.08) = $110,400 effective gross income after accounting for vacancy and collection loss.

Question 3

The concept of 'balance' in appraisal theory holds that value is maximized when:

Accepted Answer

The four agents of production are in proper proportion

Answer

Balance means the agents of production — land, labor, capital, and entrepreneurship — are optimally combined to produce maximum value.

Question 4

Which statement correctly describes the relationship between price and value in real estate?

Accepted Answer

Price is what is paid; value is an estimate of worth based on analysis

Answer

Price is the amount actually exchanged in a transaction, while value is an appraiser's informed estimate of worth under defined conditions.

Question 5

When a neighborhood transitions from residential to commercial use, early-stage properties may be undervalued because the market has not yet fully recognized the change. This reflects the principle of:

Accepted Answer

Change

Answer

The principle of change holds that real estate values are in constant flux due to economic, physical, social, and governmental forces.

SAEE Test Practice Test

SAEE Test Practice Test

SAEE SAEE - Core Valuation Principles Questions and Answers 5