CH13: NC Real Estate Exam Practice Questions | Property Valuation

Question 1

All of the following characteristics must be present for a property to have value EXCEPT:

a. utility
b. obsolescence
c. transferability
d. effective demand

Answer 1

b. obsolescence

Question 2

the economic principle of supply and demand states that:

a. high supply and low demand = higher value
b. low supply and high demand = lower value
c. high supply and low demand = lower value
d. none of the above

Answer 2

c. high supply and low demand = lower value

Question 3

What economic principle results in maximizing property value?

a. supply and demand

b, substitution

c. conformity
d. competition

Answer 3

c. conformity

Question 4

Value is most closely related to which of the following?

a. price
b. competition
c. cost
d. supply

Answer 4

a. price

Question 5

Which is a curable form of obsolescence?

a. changes in zoning
b. unrepaired roof damage

c, population shifts

d. all of the above

Answer 5

b. unrepaired roof damage

Question 6

The value of a half bath is $1500. The comparable has a half bath, but the subject property does not, Which is correct?

a. subtract $1500 from the subject
b. subtract $1500 from the comparable
c. Add $1500 to the subject
d. Add $1500 to the comparable

Answer 6

b. subtract $1500 from the comparable

Question 7

The basis of market value is most typically which of the following?

a. value in use
b. book value
c. subjective value
d. value in exchange

Answer 7

d. value in exchange

Question 8

Functional obsolescence results from:

a. faulty design and inefficient space
b. changes in the surrounding land-use patterns

c, house on a busy street

d. a broken furnace

Answer 8

a. faulty design and inefficient space

Question 9

All of the following are true about the principle of highest and best use EXCEPT:

a. it must be possible
b. it must be legal
c. there is only one highest and best use of a given property at a given time
d. it is highly speculative

Answer 9

d. it is highly speculative

Question 10

All of the following are approaches to value EXCEPT:

a. cost approach

b, contribution approach

c. income approach

d, direct sales comparison approach

Answer 10

b, contribution approach

Question 11

An appraisal is which of the following:

a. estimate of value
b. appropriation of value
c. correlation of value
d. determination of value

Answer 11

a. estimate of value

Question 12

the cost approach is the primary method for appraisals of a:

a. shopping mall
b. courthouse
c. parking lot
d. condominium

Answer 12

b. courthouse

Question 13

Which of the following is the primary appraisal method for estimating the value of vacant land:

a. cost approach
b. direct sales comparison approach
c. income approach
d. appraisal by capitalization

Answer 13

b. direct sales comparison approach

Question 14

All of the following are important data in the selection of comparables for an owner-occupied single-family house EXCEPT:

a. size
b. income
c. location
d. condition

Answer 14

b. income

Question 15

Which of the following is the income used as a basis for estimating value by the capitalization formula?

a. monthly net operating income
b. annual gross effective income
c. monthly gross effective income
d. annual net operating income

Answer 15

d. annual net operating income

Question 16

If the potential gross income is $580,000 the net operating income is $480,000 and the capitalization rate is 11% which of the following will be the estimate of the property value?

a. $2,290,000
b. $2,990,000
c. $4,363,636
d. $5,280,000

Answer 16

c. $4,363,636

Step #1: $480,000 divided by 11% = 4,363,636

The gross income does not matter in this case

Question 17

Which of the following is described as the cost of constructing a building of comparable utility using modern techniques and materials?

a. reproduction cost
b. operating cost
c. unit cost
d. replacement cost

Answer 17

d. replacement cost

Question 18

The foundation of the direct sales comparison approach is:

a. conformity
b. anticipation
c. contribution
d. substitution

Answer 18

d. substitution

Question 19

The result of a CMA performed by a broker on a property being listed is called the:

a. probable sales price
b. appraisal
c. estimated value
d. projected value

Answer 19

a. probable sales price

Question 20

The first step in the appraisal process is to:

a. define the appraisal problem
b. obtain a complete and accurate description of the subject property
c. determine data required for an estimate of value
d. prepare the appraisal report

Answer 20

a. define the appraisal problem

Question 21

All of the following are deductible from gross effective income to arrive at net operating income for appraisal purposes EXCEPT:

a. maintenance
b. legal fees
c. replacement reserve
d. debt service

Answer 21

d. debt service

Question 22

Which economic principle is used in making adjustments to comparables in an appraisal by the direct sales comparison approach?

a. competition
b. change
c. contribution
d. conformity

Answer 22

c. contribution

Question 23

Adherence to the principle of conformity causes which of the following?

a. depreciation
b. minimizing value
c. maximizing value
d. competition

Answer 23

c. maximizing value

Question 24

Physical deterioration is caused by:

a. poor floor plan
b. outdated heating system

c. unrepaired damages
d. no central heating and cooling

Answer 24

c. unrepaired damages

Question 25

All the following are methods used for estimating replacement cost EXCEPT:

a. quantity survey
b. square foot
c. unit in place
d. quality survey

Answer 25

d. quality survey

Question 26

In the income approach which of the following is deducted from gross potential income to calculate gross effective income?

a. fixed expenses
b. vacancy rate
c. other income
d. replacement reserve

Answer 26

b. vacancy rate

Question 27

A CMA may be legally prepared for compensation by:

a. a provisional broker who is preparing the report for a lender who is using it to make a final determination of whether to approve a short sale request for another broker
b. a broker who is undertaking a project that will require the use of the cost approach
c. a provisional broker who is preparing it for a prospective listing brokerage client
d. a broker who is preparing the report for a lender who is utilizing the purpose of a home equity line of credit

Answer 27

c. a provisional broker who is preparing it for a prospective listing brokerage client

Question 28

An appraisal is considered accurate for:

a. 1-day
b. 30 days
c. 90 days
d. 180 days

Answer 28

a. 1-day

Question 29

The principle of highest and best use for a property:

a. remains the same for the entire life of the property
b. may change with time
c. requires that present use us the same as future use
d. is used to calculate depreciation

Answer 29

b. may change with time

Question 30

Which cause of depreciation is not curable by a property owner?

a. economic obsolescence
b. function obsolescence
c. competitive obsolescence
d. physical deterioration

Answer 30

a. economic obsolescence

Question 31

An appraisal prepared by an appraiser is completed on which form?

a. competitive market analysis
b. uniform residential appraisal report
c. comparative market analysis
d. any of the above

Answer 31

b. uniform residential appraisal report