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depreciation is essential for the Cost Approach: physical deterioration (wear and tear), functional obsolescence (outdated design), and economic/external obsolescence (caused by factors outside the property).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 bankExample of economic obsolescence in real estate?
Who typically hires the appraiser in a real estate transaction?
Which appraisal report type do California lenders commonly rely on for single-family residence financing?
Return of an investor’s investment is provided for through:
All of the following are one of the four important elements of value, except:
Under the replacement cost approach of appraisal, an appraiser is least interested in:
The appraisal process which allocates a percentage of a property’s total value to the land and a percentage to the improvements is known as:
Which Tennessee government body is primarily responsible for appraising real property for ad valorem tax purposes at the local level?
A property's value decreased because a noisy highway was built nearby. This is an example of:
Which of the following is the least important factor used to determine the market value of a property?
In Texas, a comparative market analysis (CMA) can be prepared by:
All of the following have a specific dollar value, except:
In which appraisal approach to value would the value for the land be calculated separately?
In Texas, functional obsolescence includes:
A capitalization rate of 8% on a property with $40,000 NOI indicates a value of:
Frequently Asked Questions
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