Property Valuation and Financing Flashcards
7 cards from real Wisconsin Real Estate License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Valuation and Financing flashcards as text
Which appraisal approach relies most heavily on recently sold comparable properties to estimate value?
Answer: Sales comparison approach
The sales comparison approach values a property by comparing it to similar recently sold properties.
In the cost approach, what is subtracted from the reproduction cost of improvements before adding land value?
Answer: Accrued depreciation
The cost approach subtracts accrued depreciation from the cost of improvements, then adds land value.
A property generates $24,000 net operating income and the market cap rate is 8%. What is its estimated value?
Answer: $300,000
Value equals NOI divided by cap rate: $24,000 / 0.08 = $300,000.
What term describes a loss in value due to outdated features or design that cannot be easily changed?
Answer: Functional obsolescence
Functional obsolescence is a loss in value from outdated or poorly designed features within the property.
Which principle holds that a property's maximum value is set by the cost of acquiring an equally desirable substitute?
Answer: Principle of substitution
The principle of substitution states a buyer will pay no more than the cost of an equally desirable substitute.
In Wisconsin, a comparative market analysis (CMA) prepared by a licensee is:
Answer: Not the same as a formal appraisal
A CMA is an informal estimate of value and is not a substitute for a licensed appraisal.
What does an appraiser call the highest and most profitable legally permitted use of a property?
Answer: Highest and best use
Highest and best use is the legal, physically possible, and financially feasible use that yields the greatest value.