Wisconsin Real Estate License Valuing and Financing Property 3

Question 1

The cost approach is MOST appropriate for valuing which type of property?

Accepted Answer

A newly built church or school

Answer

The cost approach works best for special-purpose or new properties that lack comparable sales.

Question 2

In the cost approach, what is subtracted from the cost of improvements?

Accepted Answer

Accrued depreciation

Answer

The cost approach subtracts accrued depreciation from reproduction/replacement cost, then adds land value.

Question 3

Loss in value from an outdated floor plan is an example of:

Accepted Answer

Functional obsolescence

Answer

Functional obsolescence is a loss in value caused by outdated or poor design features within the property.

Question 4

Depreciation caused by factors outside the property boundaries is called:

Accepted Answer

External obsolescence

Answer

External (economic) obsolescence results from negative influences outside the property, such as neighborhood decline.

Question 5

The income approach is primarily used to value:

Accepted Answer

Income-producing rental properties

Answer

The income approach values properties based on the income they generate, ideal for rentals and commercial buildings.

Wisconsin Real Estate License Practice Test