Wisconsin Real Estate License FREE Wisconsin Real Estate License Property Valuation and Financing Questions and Answers 2

Question 1

In Wisconsin, which appraisal approach estimates value by calculating the cost to rebuild a structure minus depreciation plus land value?

Accepted Answer

Cost approach

Answer

The cost approach estimates value by determining current replacement or reproduction cost, subtracting depreciation, and adding the land value.

Question 2

A Wisconsin property generates $48,000 in annual net operating income and the capitalization rate is 8%. What is the estimated property value using the income approach?

Accepted Answer

$600,000

Answer

Dividing the net operating income of $48,000 by the cap rate of 0.08 yields an estimated value of $600,000.

Question 3

Under Wisconsin law, which type of mortgage clause allows the lender to demand full repayment if the property is sold without lender approval?

Accepted Answer

Due-on-sale clause

Answer

A due-on-sale clause, also called an alienation clause, lets the lender accelerate the loan balance upon transfer of the property.

Question 4

What does the loan-to-value (LTV) ratio represent in a Wisconsin real estate financing transaction?

Accepted Answer

The percentage of the property's appraised value that is financed by the mortgage

Answer

The LTV ratio compares the mortgage loan amount to the appraised value or purchase price of the property, whichever is lower.

Question 5

Which form of property depreciation in an appraisal refers to loss of value caused by factors outside the property boundaries?

Accepted Answer

External obsolescence

Answer

External or economic obsolescence is caused by factors outside the property, such as nearby environmental hazards or zoning changes.

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License FREE Wisconsin Real Estate License Property Valuation and Financing Questions and Answers 2