PSI Services LLC Certified General Appraiser 2026/2027 |
PSI Certified General Real Property Appraiser (CG) Exam
Study Guide & Practice Questions | Certified General
Appraiser Licensing Exam Prep, USPAP, Real Estate
Markets, Property Description, Valuation, Highest & Best
Use, Sales Comparison, Cost Approach, Income
Capitalization, Market Analysis, Investment Analysis,
Financial Calculations, Appraisal Report Writing, Ethics &
Detailed Rationales
Question 1: Which of the following best defines the concept of
"utility" in the context of real estate value?
A. The physical durability of a property's improvements.
B. The capacity of a property to satisfy human wants or needs.
C. The legal right to occupy and use a property.
D. The scarcity of available land in a market area.
CORRECT ANSWER: B. The capacity of a property to satisfy human
wants or needs.
Rationale: Utility refers to a property's ability to satisfy human needs and
desires, which is one of the four essential elements of value. Without utility,
a property has no value regardless of its scarcity or legal status.
Question 2: According to appraisal principles, which four economic
factors create value?
A. Amenities, plottage, desire, and supply.
B. Utility, scarcity, desire, and effective purchasing power.
C. Utility, assemblage, scarcity, and demand.
D. Desire, plottage, supply, and demand.
CORRECT ANSWER: B. Utility, scarcity, desire, and effective
purchasing power.
Rationale: The four interdependent economic factors that create value are
utility, scarcity, desire, and effective purchasing power. All four must be
present simultaneously for value to exist.
Question 3: In highest and best use analysis, which test must a use
pass FIRST before the other tests are applied?
A. Financially feasible.
B. Maximally productive.
,C. Legally permissible.
D. Physically possible.
CORRECT ANSWER: C. Legally permissible.
Rationale: The four tests of highest and best use must be applied in order:
legally permissible, physically possible, financially feasible, and maximally
productive. A use that is not legally permissible cannot be considered
regardless of its other merits.
Question 4: A property's current use is legally permissible and
physically possible but produces less return than another legally
permissible use supported by the market. Which highest and best
use test has the current use failed?
A. Legal permissibility.
B. Physical possibility.
C. Maximum productivity.
D. Financial feasibility.
CORRECT ANSWER: C. Maximum productivity.
Rationale: Maximum productivity is the final test in highest and best use
analysis. A use that passes the first three tests but produces less return than
another feasible use fails the maximum productivity test.
Question 5: Which type of depreciation is considered incurable
because it originates outside the property boundaries?
A. Physical deterioration.
B. Functional obsolescence.
C. External obsolescence.
D. Curable physical deterioration.
CORRECT ANSWER: C. External obsolescence.
Rationale: External obsolescence is caused by influences outside the
property boundaries, such as neighborhood deterioration or proximity to an
expressway. Because it is beyond the property owner's control, it is typically
considered incurable.
Question 6: In the age-life method of depreciation, accrued
depreciation is calculated by dividing which two figures?
,A. Effective age by chronological age.
B. Effective age by total economic life.
C. Chronological age by effective age.
D. Total economic life by effective age.
CORRECT ANSWER: B. Effective age by total economic life.
Rationale: The age-life method calculates accrued depreciation by dividing
effective age by total economic life, then multiplying by reproduction cost
new. This ratio reflects the portion of the structure's useful life that has
been consumed.
Question 7: When a comparable sale is superior to the subject
property in a particular feature, how should the appraiser adjust
the comparable's sale price?
A. Add value to the comparable.
B. Subtract value from the comparable.
C. Make no adjustment.
D. Multiply the comparable by a factor.
CORRECT ANSWER: B. Subtract value from the comparable.
Rationale: In the sales comparison approach, if the comparable is superior
to the subject in a feature, the appraiser subtracts value from the
comparable's sale price to make it more similar to the subject property.
Question 8: In the cost approach, which method estimates
depreciation as a single amount based on the ratio of effective age
to economic life?
A. Breakdown method.
B. Market extraction method.
C. Age-life method.
D. Sales comparison method.
CORRECT ANSWER: C. Age-life method.
Rationale: The age-life method estimates total accrued depreciation as a
single figure using the ratio of effective age to total economic life. It is the
most commonly used depreciation method in residential appraisals.
Question 9: What is the primary purpose of the sales comparison
approach?
, A. To estimate value based on the cost to replace the property.
B. To derive a value indication by comparing the subject to similar
properties that have sold.
C. To capitalize the property's net operating income.
D. To estimate the value of the land as though vacant.
CORRECT ANSWER: B. To derive a value indication by comparing
the subject to similar properties that have sold.
Rationale: The sales comparison approach estimates value by analyzing
recent sales of comparable properties and adjusting for differences between
the comparables and the subject property.
Question 10: When using a cost service's figures, the appraiser
should verify whether the quoted base cost includes or excludes
which items?
A. The names of subcontractors used on comparable projects.
B. Site work and contractor overhead and profit.
C. The property's assessed value for tax purposes.
D. The buyer's anticipated financing costs.
CORRECT ANSWER: B. Site work and contractor overhead and
profit.
Rationale: Cost services differ in what is included in their base cost figures.
Verifying inclusions prevents double-counting or omission of items such as
site work and contractor overhead and profit, which can cause significant
valuation errors.
Question 11: Which of the following is considered a fixed expense
in an operating statement for income-producing property?
A. Management fees.
B. Property taxes.
C. Utilities.
D. Maintenance.
CORRECT ANSWER: B. Property taxes.
Rationale: Fixed expenses are those that do not vary with the level of
occupancy or income. Property taxes are a fixed expense because they are
levied regardless of the property's occupancy level.
PSI Certified General Real Property Appraiser (CG) Exam
Study Guide & Practice Questions | Certified General
Appraiser Licensing Exam Prep, USPAP, Real Estate
Markets, Property Description, Valuation, Highest & Best
Use, Sales Comparison, Cost Approach, Income
Capitalization, Market Analysis, Investment Analysis,
Financial Calculations, Appraisal Report Writing, Ethics &
Detailed Rationales
Question 1: Which of the following best defines the concept of
"utility" in the context of real estate value?
A. The physical durability of a property's improvements.
B. The capacity of a property to satisfy human wants or needs.
C. The legal right to occupy and use a property.
D. The scarcity of available land in a market area.
CORRECT ANSWER: B. The capacity of a property to satisfy human
wants or needs.
Rationale: Utility refers to a property's ability to satisfy human needs and
desires, which is one of the four essential elements of value. Without utility,
a property has no value regardless of its scarcity or legal status.
Question 2: According to appraisal principles, which four economic
factors create value?
A. Amenities, plottage, desire, and supply.
B. Utility, scarcity, desire, and effective purchasing power.
C. Utility, assemblage, scarcity, and demand.
D. Desire, plottage, supply, and demand.
CORRECT ANSWER: B. Utility, scarcity, desire, and effective
purchasing power.
Rationale: The four interdependent economic factors that create value are
utility, scarcity, desire, and effective purchasing power. All four must be
present simultaneously for value to exist.
Question 3: In highest and best use analysis, which test must a use
pass FIRST before the other tests are applied?
A. Financially feasible.
B. Maximally productive.
,C. Legally permissible.
D. Physically possible.
CORRECT ANSWER: C. Legally permissible.
Rationale: The four tests of highest and best use must be applied in order:
legally permissible, physically possible, financially feasible, and maximally
productive. A use that is not legally permissible cannot be considered
regardless of its other merits.
Question 4: A property's current use is legally permissible and
physically possible but produces less return than another legally
permissible use supported by the market. Which highest and best
use test has the current use failed?
A. Legal permissibility.
B. Physical possibility.
C. Maximum productivity.
D. Financial feasibility.
CORRECT ANSWER: C. Maximum productivity.
Rationale: Maximum productivity is the final test in highest and best use
analysis. A use that passes the first three tests but produces less return than
another feasible use fails the maximum productivity test.
Question 5: Which type of depreciation is considered incurable
because it originates outside the property boundaries?
A. Physical deterioration.
B. Functional obsolescence.
C. External obsolescence.
D. Curable physical deterioration.
CORRECT ANSWER: C. External obsolescence.
Rationale: External obsolescence is caused by influences outside the
property boundaries, such as neighborhood deterioration or proximity to an
expressway. Because it is beyond the property owner's control, it is typically
considered incurable.
Question 6: In the age-life method of depreciation, accrued
depreciation is calculated by dividing which two figures?
,A. Effective age by chronological age.
B. Effective age by total economic life.
C. Chronological age by effective age.
D. Total economic life by effective age.
CORRECT ANSWER: B. Effective age by total economic life.
Rationale: The age-life method calculates accrued depreciation by dividing
effective age by total economic life, then multiplying by reproduction cost
new. This ratio reflects the portion of the structure's useful life that has
been consumed.
Question 7: When a comparable sale is superior to the subject
property in a particular feature, how should the appraiser adjust
the comparable's sale price?
A. Add value to the comparable.
B. Subtract value from the comparable.
C. Make no adjustment.
D. Multiply the comparable by a factor.
CORRECT ANSWER: B. Subtract value from the comparable.
Rationale: In the sales comparison approach, if the comparable is superior
to the subject in a feature, the appraiser subtracts value from the
comparable's sale price to make it more similar to the subject property.
Question 8: In the cost approach, which method estimates
depreciation as a single amount based on the ratio of effective age
to economic life?
A. Breakdown method.
B. Market extraction method.
C. Age-life method.
D. Sales comparison method.
CORRECT ANSWER: C. Age-life method.
Rationale: The age-life method estimates total accrued depreciation as a
single figure using the ratio of effective age to total economic life. It is the
most commonly used depreciation method in residential appraisals.
Question 9: What is the primary purpose of the sales comparison
approach?
, A. To estimate value based on the cost to replace the property.
B. To derive a value indication by comparing the subject to similar
properties that have sold.
C. To capitalize the property's net operating income.
D. To estimate the value of the land as though vacant.
CORRECT ANSWER: B. To derive a value indication by comparing
the subject to similar properties that have sold.
Rationale: The sales comparison approach estimates value by analyzing
recent sales of comparable properties and adjusting for differences between
the comparables and the subject property.
Question 10: When using a cost service's figures, the appraiser
should verify whether the quoted base cost includes or excludes
which items?
A. The names of subcontractors used on comparable projects.
B. Site work and contractor overhead and profit.
C. The property's assessed value for tax purposes.
D. The buyer's anticipated financing costs.
CORRECT ANSWER: B. Site work and contractor overhead and
profit.
Rationale: Cost services differ in what is included in their base cost figures.
Verifying inclusions prevents double-counting or omission of items such as
site work and contractor overhead and profit, which can cause significant
valuation errors.
Question 11: Which of the following is considered a fixed expense
in an operating statement for income-producing property?
A. Management fees.
B. Property taxes.
C. Utilities.
D. Maintenance.
CORRECT ANSWER: B. Property taxes.
Rationale: Fixed expenses are those that do not vary with the level of
occupancy or income. Property taxes are a fixed expense because they are
levied regardless of the property's occupancy level.
