Valuation and Market Analysis Exam Questions
Valuation and Market Analysis covers the three approaches to determining property value: the Sales Comparison Approach, the Cost Approach, and the Income Approach, along with the appraisal process, CMA preparation, and depreciation concepts. At 10% of the exam, this topic requires both conceptual understanding and calculation ability, particularly for cap rate, GRM, and adjustment problems. Understanding when to apply each valuation method is essential — the Sales Comparison Approach for residential properties, Income Approach for investment properties, and Cost Approach for unique or new construction. Practice questions frequently test the adjustment process, types of depreciation, and the distinction between appraiser and agent responsibilities.
What You Need to Know About Valuation and Market Analysis
Valuation and Market Analysis is a critical topic that covers how property value is determined. Every real estate agent needs to understand the three approaches to value and when each is most appropriate: the Sales Comparison Approach for residential properties, the Cost Approach for unique or new properties, and the Income Approach for investment properties.
The Sales Comparison Approach is the most commonly used method for residential properties. Master the adjustment process — you always adjust comparable properties to the subject, adding value for features the comparable lacks and subtracting for features the subject lacks. Remember: "CBS" — Comparable Better, Subtract; Comparable Worse, Add (or the more intuitive "CIA" — Comparable Inferior, Add).
Understanding depreciation is essential for the Cost Approach: physical deterioration (wear and tear), functional obsolescence (outdated design), and economic/external obsolescence (caused by factors outside the property). Know that physical deterioration can be curable or incurable, while economic obsolescence is always incurable. For the Income Approach, master the cap rate formula (Cap Rate = NOI ÷ Value) and the GRM formula (GRM = Price ÷ Gross Rent).
- Remember CBS: Comparable Better, Subtract; or CIA: Comparable Inferior, Add
- Physical depreciation can be curable or incurable; economic obsolescence is always incurable
- Practice cap rate and GRM calculations until they become automatic
- Sales Comparison is most common for residential; Income Approach for commercial
Sample Valuation Questions
200+ in bankThe appraisal principle of substitution states that:
Physical deterioration, functional obsolescence, and external obsolescence are the three types of:
Highest and best use means the use that is:
In the sales comparison approach, adjustments are always made to the:
The sales comparison approach to appraisal is most commonly used for which type of property?
Which formula best represents the cost approach to appraisal?
Which appraisal method is most commonly used for residential properties and relies on recent sales of comparable properties?
The sales comparison approach to appraisal is most commonly used for which type of property?
The sales comparison approach to appraisal is most appropriate for which type of property?
A West Virginia property with 4 bedrooms but only 1 bathroom suffers from:
A Comparative Market Analysis (CMA) is best described as:
James owns a farm in rural Tennessee that qualifies for the Greenbelt Law. Under Tennessee's Greenbelt Law, how is agricultural land assessed for property tax purposes?
Which of the following correctly identifies the three types of depreciation recognized in real estate appraisal?
Which four criteria must a use satisfy to qualify as the highest and best use of a property?
Highest and best use:
Frequently Asked Questions
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