Certified General Appraiser Exam
Practice Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which principle best explains the relationship between supply,
demand, and property value in real estate markets?
A. Principle of conformity
B. Principle of progression
C. Principle of supply and demand
D. Principle of substitution
The principle of substitution states that a rational buyer will not pay
more for a property than the cost of acquiring a similar substitute,
reflecting how market value is influenced by available alternatives.
2. Which appraisal approach is most appropriate for valuing a new
special-purpose property with limited market comparables?
A. Sales comparison approach
B. Income capitalization approach
C. Cost approach
D. Gross rent multiplier approach
The cost approach is most appropriate for unique or special-purpose
properties because it estimates value based on land value plus
replacement cost minus depreciation.
,3. In the income capitalization approach, Net Operating Income (NOI) is
calculated as:
A. Effective gross income minus debt service
B. Gross income minus operating expenses and taxes
C. Effective gross income minus operating expenses
D. Gross income minus vacancy losses only
NOI is derived by subtracting all operating expenses from effective
gross income, excluding financing and income taxes.
4. What type of depreciation refers to a loss in value caused by factors
outside the property itself?
A. Physical deterioration
B. Curable functional obsolescence
C. Physical obsolescence
D. External obsolescence
External obsolescence is a loss in value due to negative influences
from outside the property, such as environmental or economic
factors.
5. Which of the following is NOT included in effective gross income?
A. Rental income
B. Miscellaneous income
C. Other property income
D. Debt service payments
Debt service is a financing cost and is not included in effective gross
income, which only accounts for income generated by the property.
6. Highest and best use analysis must be:
A. Legally permissible only
B. Financially feasible only
C. Maximally productive only
D. Legally permissible, physically possible, financially feasible, and
, maximally productive
Highest and best use requires all four criteria to ensure the property
is used in its most productive and lawful manner.
7. Which rate is most commonly used in direct capitalization?
A. Discount rate
B. Mortgage constant
C. Yield rate
D. Capitalization rate
The capitalization rate converts a single year’s NOI into an estimate
of property value in direct capitalization.
8. Which type of lease requires the tenant to pay property taxes,
insurance, and maintenance?
A. Gross lease
B. Percentage lease
C. Net lease
D. Triple net lease
A triple net lease shifts operating expenses such as taxes, insurance,
and maintenance to the tenant.
9. Which depreciation method allocates equal expense over the useful
life of an asset?
A. Declining balance
B. Sum-of-the-years-digits
C. Units of production
D. Straight-line depreciation
Straight-line depreciation spreads cost evenly across the asset’s
useful life.
10. The sales comparison approach relies primarily on:
A. Replacement cost
B. Income potential
Practice Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which principle best explains the relationship between supply,
demand, and property value in real estate markets?
A. Principle of conformity
B. Principle of progression
C. Principle of supply and demand
D. Principle of substitution
The principle of substitution states that a rational buyer will not pay
more for a property than the cost of acquiring a similar substitute,
reflecting how market value is influenced by available alternatives.
2. Which appraisal approach is most appropriate for valuing a new
special-purpose property with limited market comparables?
A. Sales comparison approach
B. Income capitalization approach
C. Cost approach
D. Gross rent multiplier approach
The cost approach is most appropriate for unique or special-purpose
properties because it estimates value based on land value plus
replacement cost minus depreciation.
,3. In the income capitalization approach, Net Operating Income (NOI) is
calculated as:
A. Effective gross income minus debt service
B. Gross income minus operating expenses and taxes
C. Effective gross income minus operating expenses
D. Gross income minus vacancy losses only
NOI is derived by subtracting all operating expenses from effective
gross income, excluding financing and income taxes.
4. What type of depreciation refers to a loss in value caused by factors
outside the property itself?
A. Physical deterioration
B. Curable functional obsolescence
C. Physical obsolescence
D. External obsolescence
External obsolescence is a loss in value due to negative influences
from outside the property, such as environmental or economic
factors.
5. Which of the following is NOT included in effective gross income?
A. Rental income
B. Miscellaneous income
C. Other property income
D. Debt service payments
Debt service is a financing cost and is not included in effective gross
income, which only accounts for income generated by the property.
6. Highest and best use analysis must be:
A. Legally permissible only
B. Financially feasible only
C. Maximally productive only
D. Legally permissible, physically possible, financially feasible, and
, maximally productive
Highest and best use requires all four criteria to ensure the property
is used in its most productive and lawful manner.
7. Which rate is most commonly used in direct capitalization?
A. Discount rate
B. Mortgage constant
C. Yield rate
D. Capitalization rate
The capitalization rate converts a single year’s NOI into an estimate
of property value in direct capitalization.
8. Which type of lease requires the tenant to pay property taxes,
insurance, and maintenance?
A. Gross lease
B. Percentage lease
C. Net lease
D. Triple net lease
A triple net lease shifts operating expenses such as taxes, insurance,
and maintenance to the tenant.
9. Which depreciation method allocates equal expense over the useful
life of an asset?
A. Declining balance
B. Sum-of-the-years-digits
C. Units of production
D. Straight-line depreciation
Straight-line depreciation spreads cost evenly across the asset’s
useful life.
10. The sales comparison approach relies primarily on:
A. Replacement cost
B. Income potential
