The market value of real estate is:

A. the highest price that a property should bring in a fair sale.

B. the lowest price that a property should bring in a fair sale.

C. the most probable price that a property should bring in a fair sale.

D. the average price that a property should bring in a fair sale.

Which of the following statements is NOT a condition of market value?

A. Payment is made in terms of cash in U.S. dollars.

B. Both parties are well informed and acting without undue pressure.

C. The property is exposed to the market for a reasonable time.

D. The market value is the average price of several comparable properties. 

The market price of a parcel of real estate is:

A. the price it sold for.

B. the price it should have sold for.

C. the cost of the improvements.

D. based on its assessed value.

The purpose of an appraisal is to:

A. determine the cost of a comparable property.

B. estimate the market value.

C. determine the value.

D. predict the sales price

The four characteristics necessary for a property to have value are:

A. supply, transferability, utility, and demand.

B. scarcity, supply, demand, and money.

C. depreciation, utility, supply, and transferability.

D. scarcity, transferability, utility, and demand.

The first step in the appraisal process is:

A. gather, record and verify the necessary data.

B. determine the highest and best use.

C. state the problem.

D. reconciliation. 

An appraisal of a rental property would NOT be used for which of the following?

A. To set rental rates.

B. To determine the property's insurance value.

C. To estimate the practicality of remodeling.

D. To assure compliance with health and safety codes.

When gathering information on the neighborhood during the appraisal process, which of the following would NOT be considered an appraisal factor?

A. External depreciation caused by economic or social forces.

B. The race and racial composition of the neighborhood.

C. The demand for homes in the neighborhood.

D. The proximity to employment and appeal to the market

Which statement BEST describes why neighborhood analysis is important to the informed real estate licensee? A. Buyers want to know if a neighborhood racial balance exists.

B. It can help determine an estimation of value.

C. The licensee is often required to testify before zoning boards as to such matters.

D. The licensee must include details of such an analysis in the listing contract.

All of the following would be considered specific data EXCEPT:

A. the dimensions of the subject property.

B. the employment opportunities in the area.

C. the sales data for comparable properties.

D. the gross rent multipliers for the area.

B. the employment opportunities in the area.

note: Specific Data= covers the type and features of improvements to the subject property as well as comparable properties that are similar to and competitive with the subject property

Which of the following is the most important in the appraisal process?

A. Asking price of the property.

B. Highest and best use of the property.

C. Original cost of the property.

D. Selling prices of similar properties.

Which of the following situations would NOT require an appraisal by a certified appraiser?

A. A $1 million residential transaction.

B. A $500,000 residential transaction.

C. A $250,000 residential transaction.

D. A $260,000 nonresidential transaction.

The value of a home is increased because of its proximity to transportation, schools, and shopping areas. These enhancements are referred to as:

A. improvements.

B. amenities.

C. common areas.

D. curb appeal.

 In the appraisal process, which of the following reflects the stages through which a neighborhood passes?

A. Growth, stability, decline, and renewal.

B. Growth, renewal, decline, and stability.

C. Renewal, decline, growth, and stability.

D. Stability, growth, decline, and renewal.

It is necessary to calculate a dollar value for depreciation when using which of the following?

A. The sales comparison approach to value.

B. The cost approach to value.

C. The income approach to value.

D. The gross rent multiplier. 

Which of the following would require the value of the land to be calculated separately from the value of the improvements?

A. the income approach.

B. the cost approach.

C. the sales comparison approach.

D. the gross rent multiplier.

When estimating the value of property using the cost approach, all of the following would be considered by the appraiser EXCEPT the:

A. loss of value due to uncollected delinquent rent.

B. estimated loss attributable to an outdated heating system.

C. quality of materials and workmanship in the original structure.

D. excessive amount of traffic noise outside the property.

The period during which a property is expected to remain useful and profitable for its original intended purpose is known as its:

A. economic life.

B. physical life.

C. effective age.

D. actual age. 

 In a real estate appraisal, loss in value due to any cause is called:

A. appreciation.

B. depreciation.

C. deterioration.

D. obsolescence.

A house that needs to be painted is an example of:

A. physical deterioration.

B. functional obsolescence.

C. external obsolescence.

D. regression.

A house with outdated plumbing is suffering from:

A. functional obsolescence.

B. curable physical deterioration.

C. incurable physical deterioration.

D. external depreciation

A. functional obsolescence.

note: Functional obsolescence. Obsolescence means a loss in value from the market’s response to the item. Outmoded or unacceptable physical or design features that are no longer considered desirable by purchasers are considered curable if they can be replaced or redesigned at a cost that would be offset by the anticipated increase in ultimate value. ex outdated plumbing

Which of the following types of depreciation is generally considered incurable?

A. Functional obsolescence.

B. Physical deterioration.

C. External (economic) obsolescence.

D. Accrued depreciation

In determining the replacement cost of a commercial warehouse, an appraiser would MOST 

LIKELY be interested in:

A. square footage of the improvement.

B. cubic footage of the improvement.

C. front footage of the lot.

D. square footage of the lot.

In the appraisal of an office building, which of the following would be classified as external 

depreciation?

A. Termite damage to the outside structural components of the building.

B. A poor architectural design resulting in a cluttered floor plan.

C. An inadequate number of elevators and antiquated restroom facilities.

D. A high crime rate in the neighborhood

D. A high crime rate in the neighborhood

note: external obsolescence

External obsolescence. If depreciation is caused by negative factors not on the subject property, such as environmental, social, or economic forces, it is always incurable. The loss in value cannot be reversed by spending money on the property. For example, close proximity to a polluting factory is a factor that cannot be cured by the owner of the subject property.

Defined as a loss in value from any cause, depreciation is generally divided into three categories. 

The loss of value due to the normal wear and tear on a property is called:

A. external obsolescence.

B. physical deterioration.

C. functional obsolescence.

D. economic obsolescence

In the cost approach to value, the appraiser makes use of:

A. the owner’s original cost of the building.

B. the estimated replacement cost of the building.

C. the sales prices of similar buildings in the area.

D. the assessed value of the building.

In an old retail building, which of the following would most likely be a source of incurable 

functional obsolescence?

A. Deficient and inadequate lighting.

B. Closely-spaced internal support columns.

C. An unattractive storefront.

D. A decrease in the area’s population

 The appraisal value of a residence with four bedrooms and one bathroom would probably be 

reduced because of:

A. external obsolescence.

B. functional obsolescence.

C. curable physical deterioration.

D. incurable physical deterioration

In the cost approach, one method an appraiser can use to determine a building’s reproduction or replacement cost new involves the estimated cost of the materials needed to build the structure, plus labor and indirect costs. This is called the:

A. square-foot method.

B. quantity-survey method.

C. cubic-foot method.

D. unit-in-place method

An appraiser computing depreciation would NOT consider the:

A. roof.

B. land.

C. plumbing.

D. electrical wiring

B. land.

note: land doesn't depreciate

A new airport was built near a residential subdivision. The loss in value caused by the airplane noise would be described as:

A. curable physical depreciation.

B. incurable external obsolescence.

C. functional obsolescence.

D. progression.

 Which of the following is an example of external obsolescence?

A. A commercial property next to a residential property.

B. A poor floor plan.

C. Termite damage.

D. Outdated kitchens and bathrooms.

A. A commercial property next to a residential property.

note: external obsolescence includes environmental or economic factors. 

 Which of the following is an example of physical deterioration?

A. A poor floor plan.

B. Dry rot.

C. Outdated plumbing.

D. Address zoning change.

Depreciation would NOT apply to:

A. the condition of the building.

B. the condition of the neighborhood.

C. the land.

D. outdated plumbing fixtures

Which of the following is NOT a type of depreciation?

A. Physical deterioration.

B. Functional obsolescence.

C. Plottage.

D. External obsolescence.

A report prepared by a salesperson that compares the prices of recently sold homes to a listing seller's home is called:

A. an appraisal.

B. a competitive market analysis.

C. reconciliation.

D. plottage. 

The sales comparison (market data) approach is a good example of the principle of:

A. anticipation.

B. conformity.

C. substitution.

D. plottage.

In the sales comparison approach, the property being appraised is the:

A. subject property.

B. comparable property.

C. replacement property.

D. similar property.

The sales comparison/market data approach to value is based on the premise that many people buy a real property:

A. on an emotional impulse.

B. after determining its future income as value.

C. after comparing it to others.

D. after determining the cost of reproducing the property

C. after comparing it to others.

An appraiser finds a similar property that was listed for $125,000 but sold for only $100,000 due to bankruptcy. Would this be considered a good comparable property?

A. Yes, it was similar to the subject property.

B. Yes, it sold in the market place.

C. No, the seller was under undue pressure and it would not be considered an "arm’s length transaction."

D. No, if the property sells for less than the listed price, it cannot be considered as a comparable property.

When using the sales comparison approach, which of the following would NOT be an adjustment to the comparable properties?

A. Date of sale.

B. Location.

C. Size of lot.

D. Real estate taxes.

The subject property has a deck and the comparable properties do not. When adjusting for the deck, an appraiser would:

A. add to the subject property.

B. subtract from the subject property.

C. add to the comparable properties.

D. subtract from the comparable properties.

. An appraiser doing a sales comparison approach on a subject property finds similar comparable properties that have sold recently. When estimating the value of the subject property, the appraiser would MOST LIKELY give the most consideration to:

A. the highest priced comparables.

B. the lowest priced comparables.

C. the average price of the comparables.

D. the comparables most similar to the subject property. 

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would include reference to:

A. the highest and best use of the parcel.

B. the listed price of the parcel.

C. taxes on the property.

D. income from the property

All of the following factors would be important in comparing properties under the sales comparison approach to value EXCEPT differences in:

A. dates of sale.

B. financing terms.

C. appearance and condition.

D. original cost.

In the market/data (sales comparison) approach, adjustments are made for:

A. original cost.

B. property taxes.

C. depreciation.

D. the date of sale

In the market/data (sales comparison) approach, which of the following is NOT an adjustment to a comparable property’s sales price?

A. Date of sale.

B. Location.

C. Physical characteristics.

D. Property taxes. 

Which of the following statements about a CMA is INCORRECT?

A. A CMA is a formal appraisal.

B. A CMA considers expired or withdrawn listings.

C. A CMA considers comparables that have sold or are currently listed for sale.

D. A CMA is used by brokers and salespeople in determining a property’s sale price.

A. A CMA is a formal appraisal.

note: A CMA analysis is based on:

1.recently closed properties (solds)

2. properties currently on the market (competition for the subject property)

3. properties that did not sell (expired listings in the area)

Which of the following would be considered an “arm’s length” transaction?

A. A foreclosure sale.

B. An auction sale for delinquent taxes.

C. A sale to a relative.

D. A normal market transaction involving a willing buyer and seller.

In the income approach, the appraiser makes use of:

A. reproduction cost.

B. capitalization rate.

C. depreciation schedules.

D. replacement cost. 

To find the value of a property using the income approach to value, if the net operating income and the capitalization rate were known, the appraiser would:

A. multiply the net operating income by the capitalization rate.

B. multiply the effective gross income by the capitalization rate.

C. divide the net operating income by the capitalization rate.

D. divide the capitalization rate by the net operating income.

An investor wishes to determine the market relationship between the rental values and the sales prices of comparable multi-unit properties. Which of the following methods would be the MOST helpful?

A. Unit in place.

B. Comparison approach.

C. Gross rent multiplier.

D. Quantity survey.

To determine the gross rent multiplier (GRM) on a residential property, you would:

A. divide the property's sales price by net monthly rental income.

B. divide the property's sales price by the gross monthly rental income.

C. divide the property's sales price by the monthly expenses.

D. divide the property's sales price by the annual gross rental income.

In the income approach, all of the following are considered when calculating net operating income EXCEPT:

A. real estate taxes.

B. management fees.

C. debt service.

D. utilities

C. debt service

p.319

When appraising a commercial property, the appraiser is MOST concerned with the:

A. accrued depreciation on the property.

B. income generated by the property.

C. sales prices of comparable properties.

D. total debt service on the property.

Which of the following is NOT used by an appraiser using the income approach to value?

A. Annual net operating income.

B. Capitalization rate.

C. Accrued depreciation.

D. Annual gross income.

Capitalization is the process by which annual net operating income is used to:

A. determine cost.

B. estimate value.

C. establish depreciation.

D. determine potential tax value.

Which of the following appraisal methods uses a rate of investment return?

A. Sales comparison approach.

B. Cost approach.

C. Income approach.

D. Gross income multiplier method.

C. Income approach

Gross

Income

Vacancy

Expenses

Net Operating Income

When using the income approach, the first step an appraiser would take to arrive at an estimated value would be to:

A. determine the effective gross income.

B. deduct the annual operating expenses.

C. estimate the annual potential gross income.

D. apply the capitalization rate.

C. estimate the annual potential gross income.

Gross

Income

Vacancy

Expenses

Net Operating Income

The gross rent multiplier (GRM) is generally used as a substitute for the income approach when appraising:

A. shopping centers.

B. residential rental properties.

C. apartment buildings.

D. farms. 

When using the income approach to estimate the value of an apartment building, the appraiser determines the annual gross income from the rents. After deducting the vacancies and rent loss from the gross income, the appraiser arrives at the:

A. effective gross income.

B. annual net operating income.

C. capitalization rate.

D. operating expenses.

The income approach to value would be MOST important in the appraisal of a(n):

A. condominium.

B. office building.

C. single-family residence.

D. vacant residential lot.

B. office building.

Note: The income approach is used for valuation of income-producing properties

1. apartment buildings

2. office buildings

3.retail stores

4. shopping centers and is based on anticipation

Reconciliation is an appraisal term used to describe:

A. the appraiser’s determination of a property’s highest value.

B. an average of real estate values for properties similar to the subject property.

C. the appraiser’s analysis and comparison of the results of all three appraisal approaches.

D. the method used to determine the most appropriate capitalization rate for a property

In appraising a special-purpose property such as a school or church, the most reliable approach to value would be:

A. sales comparison approach.

B. income approach.

C. cost approach.

D. gross income multiplier (GIM).

C. cost approach

note: Cost Approach is most useful in the appraisal of newer or special-purpose buildings such as schools, churches, and public buildings. Such properties are difficult to appraise using other methods because there are seldom enough local sales to use as comparables and because the properties do not ordinarily generate income. (p.318)

Effectively weighing the approaches and arriving at a final estimate of market value, is called:

A. anticipation.

B. progression.

C. reconciliation.

D. regression

In the reconciliation of the value estimates on vacant land, which approach would MOST LIKELY be given the most consideration?

A. Sales comparison approach.

B. Cost approach.

C. Income Approach.

D. Gross rent multiplier

Which of the following approaches to value would be given the most weight in the valuation of a large apartment complex?

A. The cost approach.

B. The income approach.

C. The sales comparison approach.

D. All approaches are equally weighted.

B. The income approach.

note: The income approach is used for valuation of income-producing properties such as

1. apartment buildings

2. office buildings

3. retail stores

4. shopping centers and is based on anticipation

An appraiser asked to determine the value of an existing strip shopping center would probably

give the most weight to which of the following approaches to value?

A. Cost approach.

B. Sales comparison approach.

C. Income approach.

D. Gross Rent Multiplier (GRM).

C. Income approach.

note: income approach is associated with (4)
1. Apartment buildings

2. Retail stores
3. Office buildings

4. Shopping centers

A buyer purchased vacant land in a growth area thinking the land might be subdivided and would 

increase the value. This BEST describes the principle of:

A. anticipation.

B. change.

C. competition.

D. supply and demand

Apartment rents in a city have recently been increased to the point where apartment owners have 

been making substantial profits. The principle of competition primarily recognizes that which of 

the following will LIKELY happen next in the city?

A. Unemployment rates in the city will begin to rise.

B. Builders and investors will be discouraged from building more apartment buildings.

C. Builders and investors will be encouraged to build more apartment buildings.

D. Property tax rates in the city will begin to rise

C. Builders and investors will be encouraged to build more apartment buildings.

Note:competition states that The interaction of supply and demand creates competition. Profitable businesses tend to attract competition p.312

A property's maximum value is generally realized when it is in a neighborhood of similar homes. 

This principle is called:

A. change.

B. conformity.

C. contribution.

D. substitution

B. conformity.

note: conformity means that maximum value is created when a property is in harmony with its surroundings

The appreciation in value from the consolidation of two or more adjacent lots into one large lot is 

referred to as:

A. assemblage.

B. plottage.

C. progression.

D. substitution.

B. plottage

Note: Plottage: the individual value of two adjacent properties may be greater if they are combined in an as-semblage than if each is sold separately p.314

A buyer looked at several houses that were comparable to each other. He would MOST 

LIKELY not pay more for one house than the other based on the principle of:

A. anticipation.

B. competition.

C. plottage.

D. substitution.

D. substitution.

note: According to the principle of substitution, the maximum value of a property tends to be set by how much it would cost to purchase an equally desirable and valuable substitute property!

When demand for homes decreases and supply remains the same:

A. price tends to rise.

 B. price tends to fall.

C. price is not affected.

D. the market becomes stagnant

Which principle of value indicates that a developer’s very profitable real estate project will

attract others to engage in similar activity in the same area and thus drive down profits?

A. Anticipation.

B. Competition.

C. Value.

D. Progression.

A homeowner constructs an eight-bedroom brick house with a tennis court, a greenhouse, and an 

indoor pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on 

narrow lots. The value of this house is likely to be affected by what principle?

A. Progression.

B. Assemblage.

C. Change.

D. Regression

D. Regression

note: In general, the worth of a better-quality property is adversely affected by the presence of a lesser-quality property. This is known as the principle of regression

457 and 459 Tarpepper Street are adjacent vacant lots, each worth approximately $50,000. If 

their owner sells them as a single lot, however, the combined parcel will be worth $120,000.

What principle does this illustrate?

A. Substitution.

B. Plottage.

C. Regression.

D. Progression.

B. Plottage

note: Plottage: the individual value of two adjacent properties may be greater if they are combined in an as-semblage than if each is sold separately.

Change, contribution, plottage and substitution are some of the basic principles that affect what

aspect of real estate?

A. Demand.

B. Depreciation.

C. Value.

D. Supply

The last home in a very desirable subdivision sold for a much higher price than the first home 

sold. This example illustrates the principle of:

A. highest and best use.

B. supply and demand.

C. change.

D. competition.

B. supply and demand.

A buyer looked at three similar houses for sale in the same neighborhood and bought the lowest-

priced house. They are probably basing their decision on the principle of:

A. conformity.

B. progression.

C. substitution.

D. supply and demand.

C. substitution.

note: The principle of substitution is the foundation of the sales comparison approach. A buyer will not want to pay more for a property than it would cost to purchase an equally desirable and suitable property

It would be a violation of the Georgia license law for a licensee to indicate that an opinion given 

to a potential seller, purchaser, landlord or tenant regarding a listing, lease, rental or price is an 

appraisal unless such licensee holds:

A. a real estate salesperson.

B. a real estate broker.

C. an appraiser classification.

D. a community association manager’s license