Question: Match each principle of value with its example.

Answer Options: Highest and best use Substitution Anticipation Contribution Progression small home among larger homes cheaper comparable alternative conversion to office expected value decline pool costs more than value added.

Answer: Progression — small home among larger homes; Substitution — cheaper comparable; Highest and best use — conversion to office; Anticipation — expected future decline; Contribution — pool adds less value than cost. 92

Question: Match each property with its most useful valuation approach.

Answer Options: Cost approach Sales comparison Income approach high-turnover condominium four-unit investment property new house.

Answer: Sales comparison — condominium; Income — four-unit apartment; Cost — new house. 93

Question: Which valuation method considers operating expenses?

Answer Options: A. Capitalization rate B. Cost approach C. Gross income multiplier D. Gross rent multiplier.

Answer: A. Capitalization rate. 94

Question: When would a lender most likely accept an AVM?

Answer Options: A. Unique luxury construction B. HELOC application C. Extensively damaged home D. Rural home with few comparables.

Answer: B. A HELOC application. 95

Question: What is the most common use of a CMA?

Answer Options: A. Insurance depreciation B. Commission determination C. Refinancing appraisal D. Suggesting a probable selling-price range.

Answer: D. Suggesting a probable selling-price range. 96

Question: As the capitalization rate decreases, what generally happens?

Answer Options: A. Risk decreases and value decreases B. Risk decreases and value increases C. Risk increases and value decreases D. Risk and value increase.

Answer: B. Risk decreases and value increases. 97

Question: What is the primary difference between an appraisal and a CMA?

Answer Options: A. Only appraisals consider markets B. Only appraisals make adjustments C. Only CMAs use comparables D. Only licensed appraisers may perform appraisals.

Answer: D. Only licensed appraisers may perform appraisals. 98

Question: When should an appraiser and client agree on the appraisal fee?

Answer Options: A. Before work begins B. After the value is determined C. After report approval D. After an acceptable offer.

Answer: A. Before work begins. 99

Question: How are comparables adjusted in the sales-comparison approach?

Answer Options: A. Add superior features to comp and subtract inferior ones B. Adjust the subject C. Subtract superior features from comp and add inferior ones D. Subtract superior features from subject.

Answer: C. Subtract superior features from the comparable and add inferior ones. 100

Question: If a comparable feature is inferior to the subject, the appraiser:

Answer Options: A. Adds to the comparable B. Adds to the subject C. Subtracts from the comparable D. Subtracts from the subject.

Answer: A. Adds to the comparable. 101

Question: Why do uniqueness and scarcity support real-estate value?

Answer Options: A. Buyers can never find what they want B. No two properties are exactly alike C. Real estate is difficult to locate D. Real estate is unlimited.

Answer: B. No two properties are exactly alike. 102

Question: A property has NOI of $14,400 and sells for $200,000. What is the capitalization rate?

Answer Options: A. 2.9% B. 7.2% C. 8.6% D. 13.8%.

Answer: B. 7.2%. 103

Question: Which homes should be used as comps?

Answer Options: A. Currently listed homes B. Expired listings C. Recently sold homes in the subject’s area D. All homes.

Answer: C. Recently sold homes in the subject’s area. 104

Question: For which property is the cost approach least useful?

Answer Options: A. Unique home B. New subdivision home C. Older home in a high-turnover neighborhood D. School building.

Answer: C. Older home in a high-turnover neighborhood. 105

Question: Which appraiser classification may appraise all types of real property?

Answer Options: A. Certified general appraiser B. FHA-approved appraiser C. Licensed general appraiser D. State-licensed universal appraiser.

Answer: A. Certified general appraiser. 106

Question: A former mansion has been divided into three apartments. What valuation approach is best?

Answer Options: A. Cost B. Income C. Reconciliation D. Sales comparison.

Answer: B. Income approach. 107

Question: What is an advantage of an AVM over a traditional appraisal?

Answer Options: A. Physical inspection B. Full property-condition assessment C. Lower cost and faster valuation D. Better analysis of unique features.

Answer: C. Lower cost and faster valuation. Title, deeds, and settlement 108