Wisconsin Real Estate License Wisconsin Real Estate License Valuing and Financing Property Questions and Answers 2

Question 1

A buyer is purchasing a home for $250,000 with a 20% down payment. What is the loan-to-value (LTV) ratio?

Accepted Answer

80%

Answer

75%

Answer

85%

Answer

90%

Question 2

Which appraisal approach estimates value by calculating the cost to rebuild the structure minus depreciation, then adding land value?

Accepted Answer

Cost approach

Answer

Sales comparison approach

Answer

Income capitalization approach

Answer

Gross rent multiplier approach

Question 3

Under Wisconsin law, what is the primary purpose of a property appraisal in a real estate transaction?

Accepted Answer

To establish an opinion of market value for the lender

Answer

To determine the property tax assessment

Answer

To set the listing price for the seller

Answer

To calculate the buyer's closing costs

Question 4

Which type of depreciation is caused by factors external to the property and is generally incurable?

Accepted Answer

Economic obsolescence

Answer

Physical deterioration

Answer

Functional obsolescence

Answer

Deferred maintenance

Question 5

In Wisconsin, a conventional loan that exceeds 80% LTV typically requires which of the following?

Accepted Answer

Private mortgage insurance (PMI)

Answer

A second appraisal

Answer

Seller concessions

Answer

A land contract arrangement

Question 6

What does the capitalization rate represent in the income approach to property valuation?

Accepted Answer

The rate of return an investor expects on a real estate investment

Answer

The annual percentage rate of the mortgage

Answer

The rate of property value appreciation

Answer

The percentage of gross income allocated to expenses