Real Estate Appraisal test questions
with correct answers
1. Financing terms and cash equivalency - CORRECT ANSWER-offered by builders for new construction or as seller concessions in resale transactions.
fixtures excluded?
1. State the Problem - CORRECT ANSWER-Appraising a commercial warehouse for example, presents a different set of problems than say, a lender wanting to know if a
house is worth what the buyer's agreed to pay for it.
1. State the Problem - CORRECT ANSWER-What is the purpose of this appraisal? What am I trying to solve? By defining the problem, it informs my approach and what
kind of data I need to gather.
2. Conditions of sale: - CORRECT ANSWER-Was it an arm's length transaction? Were personal items included, or
4. Location: - CORRECT ANSWER-Underwriters assume appraisers understand the local marketplace, and will accept comparables that exceed distance, time, or o ther
guidelines, if the appraiser supports the decision with a written, detailed explanation that demonstrates that local expertise
4.Determine the Property's Highest and Best Use - CORRECT ANSWER-look at the property not from how it is right now, but from its highest and best use.
400,000 - CORRECT ANSWER-Properties valued at __ or less are exempt from federal appraisal requirement
5. Physical characteristics: - CORRECT ANSWER-This includes the site, view, construction quality, amenities, size, etc.
5.Estimate the Value of the Land - CORRECT ANSWER-Analyze listings and prior sales to approximate market value
6. Estimate Property Value Using Three Approaches to Value - CORRECT ANSWER-value the property in three different ways: the sales comparison approach, the cost
approach, and the income approach.
7. Reconcile the Data - CORRECT ANSWER-weight one approach more than the other.
A - CORRECT ANSWER-Which of the following statements about appraisal activities is true?
A. Appraisers' activities are highly regulated, especially when a federally related transaction is involved.
B. Appraisers' activities are only regulated when a federally related transaction is involved.
C. Appraisers' activities are not regulated.
D. None of these statements is true.
Adjusting comparable - CORRECT ANSWER-If a comparable is inferior to the subject property (e.g., next to a busy street), adjust upward. If it's superior (e.g., in a
secluded, quiet neighborhood), adjust downward.
Adjusting comparable - CORRECT ANSWER-licensees mIf ust adjust prices for differences in property attributes between the subject property and the selected
comparables.
Adjustments - CORRECT ANSWER-is the dollar value or percentage added to or subtracted from the sales price of a comparable to arrive at an indicated value for the
subject.
Anticipation - CORRECT ANSWER-The value of the property is based on the income that is expected to be received in the future.
Appraisal - CORRECT ANSWER-detailed analysis of market conditions, the property itself, comparables within close proximity to the subject property, recent sales and
listings, land value, construction costs—everything a lender wants to know to value the property as collateral for a loan
Appraisal - CORRECT ANSWER-ensure that the value of a mortgaged property is sufficient to support the loan amount.
Appraisal - CORRECT ANSWER-formal opinion of value that a real estate appraiser assigns, based on supportable evidence, for a specific purpose, party, a nd property,
as of a specific date, and in accordance with Uniform Standards of Professional Appraisal Practice (USPAP).
Appraisal - CORRECT ANSWER-Prepared by a certified appraiser (with a few exceptions in some states).
Prepared for a lender, buyer, or seller.
Multiple methods are used to determine value, particularly sales comparison and cost. Appraisers also use the income approach for income-producing properties.
The appraisal is very detailed.
The cost is $400 or more, depending on the size of the property.
Appraisals - CORRECT ANSWER-Appraisers use recent sales, but don't rely on them exclusively.
Appraisals - CORRECT ANSWER-is the opinion or estimate of value of a particular property as of a particular date:
Using age, square footage, location, recent sales,
The cost to replace the property
Appraisals - CORRECT ANSWER-To determine value for underwriting a mortgage loan.
To price a property for an owner who wants to know what assets are worth. Sometimes it's to figure the worth for a charitable donation, or for an estate
Appraiser Trainee - CORRECT ANSWER-May appraise only under direct supervision of a certified appraiser
Appraisers - CORRECT ANSWER-estimate the value of a building or a piece of land. are typically hired before a property is sold, mortgaged, or taxed.
Appraisers - CORRECT ANSWER-They may specialize in appraising either commercial or residential property.
Approaches for Valuation - CORRECT ANSWER-Gather general and specific data for the three approaches for valuation: sales comparison, cost to reproduce, and
income and expense approach.
arm's length transactions - CORRECT ANSWER-parties to the sale are unrelated and that no one is under duress or pressure to complete the sale
, Assessed value - CORRECT ANSWER-The dollar amount to which the local tax rate is multiplied to determine property tax owed
The value according to the local taxing authorit
B The cost to build a functionally equivalent property like the property Jenning built is replacement cost, making option A i ncorrect. Martin and Ginger build similar homes,
but with different materials in a different area or in a different size; this more likely represents replacement cost as well, which eliminates options C and D. Reproduction
cost, which is usually used to determine the value of historic or one-of-a-kind properties that, in order to achieve the same utility and function, would use the same
materials and have the same deficiencies, is reproduction cost. Option B is correct! - CORRECT ANSWER-Which of these situations represents reproduction cost in the
cost approach to value?
A. Jenning's historic property was mostly destroyed by fire. He rebuilds it with similar materials, square footage, and design. B. Kristina's antebellum mansion in New
Orleans was severely damaged by a hurricane. She spends several years repurposing materials from other similar homes to rebui ld it exactly as it was before the
hurricane. C. Martin sold his beloved family home, then built one just like it, only with newer materials that were more envi ronmentally friendly, in a warmer, drier part of
the country. D. Ginger's parents built a new home when Ginger was just leaving for college. When she graduated, Ginger went back to her home town and hired a builder
to build a similar but smaller house for her and her new husband.
Bracketing - CORRECT ANSWER-Include both superior and inferior units of comparison such as age, transaction price, etc
Bracketing - CORRECT ANSWER-range of values for a property by comparing a group of comparable sales to the subject
broker price opinion (BPO) - CORRECT ANSWER-are estimates of price in case the lender must take over and sell the property
broker price opinion (BPO) - CORRECT ANSWER-is a real estate licensee's estimate that details the potential selling price of a property. It provides details about the
property's condition, market, and neighborhood, as well as comparable sales
broker price opinion (BPO) - CORRECT ANSWER-Lenders frequently order
on foreclosure properties or when determining appropriate market price for a short sale property.
broker price opinion (BPO) - CORRECT ANSWER-often just drive by the property and take photos, then complete paperwork for the lender in exchange for a small fee.
C - CORRECT ANSWER-John's home is up for sale. He originally bought it five years ago for $300,000, and its current value is $350,000. His real estate agent notifies
him that a buyer just made an offer on his home for $365,000, which is the price other similar homes in the neighborhood are selling for, and John accepts. What does the
price of $365,000 represent?
A. The assessed value B. The appraised value C. The market value D. The investment value
C - CORRECT ANSWER-Robin, the appraiser of the Birkenstocks' property, wants to make sure her computations of adjustments on their home are vali d. She's using the
sales comparison approach, so she'll prioritize the ______ first.
A. Location B. Market conditions C. Conditions of sale D. Physical characteristics
C - CORRECT ANSWER-The Richards' farm is located on a 10-acre parcel of land, which is very rare to come by in their area. However, the house is rundown and in
need of many repairs. Buyers in the area looking for a move-in ready home would need to either look elsewhere or wait several months for the home to be renovated.
Which factors are negatively impacting the value of the Richards' property?
A. Utility, scarcity, and transferability B. Utility and transferability C. Demand and utility D. Demand, scarcity, and transferability
C A BPO is a broad opinion of price and not a detailed analysis. - CORRECT ANSWER-In this form of price determination, the real estate professional will often just drive
by the property and take photos, then complete paperwork for the lender.
A. Comparative market analysis B. Competitive market analysis C. Broker's price opinion D. Appraisal
C. Use adjusted prices from sold comparables, refining the price range with data from active listings, expired listings, and possibly pending sales - CORRECT ANSWER-
One month after Max passed his real estate licensing exam, a couple contacted him via referral, asking him to represent them in the sale of their home. Max met with his
clients at their home, did a walk-through, took a drive through the neighborhood, and then headed back into the office to conduct a comparative market analysis on the
property. The sellers have communicated to him that they'd obviously like to make as much off the sale as possible, but they need to complete the sale in the next three
months, in time for the wife to start a new job in another state. To accurately calculate a suggested price range for their p roperty, Max will have to ______.
A. Adjust prices from all properties listed or sold within a one-mile radius to the subject property B. Use the prices of sold comparables and active listings, adjusted for the
amount of time listed C. Use adjusted prices from sold comparables, refining the price range with data from active listings, expired listings, and possibly pending sales D.
Calculate based on data from expired listings and pending sales
Certified General Appraiser - CORRECT ANSWER-May issue appraisal reports for any type of real property
Certified Residential Appraiser - CORRECT ANSWER-May appraise residential real property of one to four residential units, without regard to transaction value or
complexity
comparable property - CORRECT ANSWER--active listings - currently on the market
- expired listings- properties that are listed but not sell
comparable property - CORRECT ANSWER-arm's length transactions
comparable property - CORRECT ANSWER-at least three properties to compare
comparable property - CORRECT ANSWER-is one that's quite similar to the subject property in terms of size, style, condition, number of rooms, and location
Comparative market analysis CMA - CORRECT ANSWER--Prepared by a real estate agent.
-Prepared for the seller or buyer.
-Comparable sales are used to determine value.
-The level of detail is basic to moderate.
-The cost is free or minimal.
Comparative market analysis CMA - CORRECT ANSWER-are not appraisals; instead they're an informal estimate of market value.
Comparative market analysis CMA - CORRECT ANSWER-Real estate licensees help clients make price decisions.
Competition - CORRECT ANSWER-related to supply and demand
Conformity - CORRECT ANSWER-when value is created and maintained based on whether the characteristics of a property conform to the demands of the market. So a
house built in the middle of a commercial zone (due to zoning changes) would be valued differently than a house in the middle of a neighborhood comprised of similar
houses.
Contribution - CORRECT ANSWER-when a change in a property impacts the value as a whole. Does converting a garage into a family room contribute or detract from
value? That would be in the eyes of the buyer.
Cost - CORRECT ANSWER-s what it would cost to recreate a property if it were to be built now. This includes labor, materials, the legal services, zoning and architectural
design, financing and taxes, interest, overhead and profit, etc
Cost depreciation approach - CORRECT ANSWER-replacement cost
site value
reproduction cost
Cost-Depreciation Approach - CORRECT ANSWER-- New construction of both residential and commercial property
- Unique properties, such as highly energy-efficient houses, residential acreage with excess land, and high-dollar houses with many amenities
- Special-purpose commercial uses such as hospitals, some manufacturing plants, hotels, and other single-purpose properties
with correct answers
1. Financing terms and cash equivalency - CORRECT ANSWER-offered by builders for new construction or as seller concessions in resale transactions.
fixtures excluded?
1. State the Problem - CORRECT ANSWER-Appraising a commercial warehouse for example, presents a different set of problems than say, a lender wanting to know if a
house is worth what the buyer's agreed to pay for it.
1. State the Problem - CORRECT ANSWER-What is the purpose of this appraisal? What am I trying to solve? By defining the problem, it informs my approach and what
kind of data I need to gather.
2. Conditions of sale: - CORRECT ANSWER-Was it an arm's length transaction? Were personal items included, or
4. Location: - CORRECT ANSWER-Underwriters assume appraisers understand the local marketplace, and will accept comparables that exceed distance, time, or o ther
guidelines, if the appraiser supports the decision with a written, detailed explanation that demonstrates that local expertise
4.Determine the Property's Highest and Best Use - CORRECT ANSWER-look at the property not from how it is right now, but from its highest and best use.
400,000 - CORRECT ANSWER-Properties valued at __ or less are exempt from federal appraisal requirement
5. Physical characteristics: - CORRECT ANSWER-This includes the site, view, construction quality, amenities, size, etc.
5.Estimate the Value of the Land - CORRECT ANSWER-Analyze listings and prior sales to approximate market value
6. Estimate Property Value Using Three Approaches to Value - CORRECT ANSWER-value the property in three different ways: the sales comparison approach, the cost
approach, and the income approach.
7. Reconcile the Data - CORRECT ANSWER-weight one approach more than the other.
A - CORRECT ANSWER-Which of the following statements about appraisal activities is true?
A. Appraisers' activities are highly regulated, especially when a federally related transaction is involved.
B. Appraisers' activities are only regulated when a federally related transaction is involved.
C. Appraisers' activities are not regulated.
D. None of these statements is true.
Adjusting comparable - CORRECT ANSWER-If a comparable is inferior to the subject property (e.g., next to a busy street), adjust upward. If it's superior (e.g., in a
secluded, quiet neighborhood), adjust downward.
Adjusting comparable - CORRECT ANSWER-licensees mIf ust adjust prices for differences in property attributes between the subject property and the selected
comparables.
Adjustments - CORRECT ANSWER-is the dollar value or percentage added to or subtracted from the sales price of a comparable to arrive at an indicated value for the
subject.
Anticipation - CORRECT ANSWER-The value of the property is based on the income that is expected to be received in the future.
Appraisal - CORRECT ANSWER-detailed analysis of market conditions, the property itself, comparables within close proximity to the subject property, recent sales and
listings, land value, construction costs—everything a lender wants to know to value the property as collateral for a loan
Appraisal - CORRECT ANSWER-ensure that the value of a mortgaged property is sufficient to support the loan amount.
Appraisal - CORRECT ANSWER-formal opinion of value that a real estate appraiser assigns, based on supportable evidence, for a specific purpose, party, a nd property,
as of a specific date, and in accordance with Uniform Standards of Professional Appraisal Practice (USPAP).
Appraisal - CORRECT ANSWER-Prepared by a certified appraiser (with a few exceptions in some states).
Prepared for a lender, buyer, or seller.
Multiple methods are used to determine value, particularly sales comparison and cost. Appraisers also use the income approach for income-producing properties.
The appraisal is very detailed.
The cost is $400 or more, depending on the size of the property.
Appraisals - CORRECT ANSWER-Appraisers use recent sales, but don't rely on them exclusively.
Appraisals - CORRECT ANSWER-is the opinion or estimate of value of a particular property as of a particular date:
Using age, square footage, location, recent sales,
The cost to replace the property
Appraisals - CORRECT ANSWER-To determine value for underwriting a mortgage loan.
To price a property for an owner who wants to know what assets are worth. Sometimes it's to figure the worth for a charitable donation, or for an estate
Appraiser Trainee - CORRECT ANSWER-May appraise only under direct supervision of a certified appraiser
Appraisers - CORRECT ANSWER-estimate the value of a building or a piece of land. are typically hired before a property is sold, mortgaged, or taxed.
Appraisers - CORRECT ANSWER-They may specialize in appraising either commercial or residential property.
Approaches for Valuation - CORRECT ANSWER-Gather general and specific data for the three approaches for valuation: sales comparison, cost to reproduce, and
income and expense approach.
arm's length transactions - CORRECT ANSWER-parties to the sale are unrelated and that no one is under duress or pressure to complete the sale
, Assessed value - CORRECT ANSWER-The dollar amount to which the local tax rate is multiplied to determine property tax owed
The value according to the local taxing authorit
B The cost to build a functionally equivalent property like the property Jenning built is replacement cost, making option A i ncorrect. Martin and Ginger build similar homes,
but with different materials in a different area or in a different size; this more likely represents replacement cost as well, which eliminates options C and D. Reproduction
cost, which is usually used to determine the value of historic or one-of-a-kind properties that, in order to achieve the same utility and function, would use the same
materials and have the same deficiencies, is reproduction cost. Option B is correct! - CORRECT ANSWER-Which of these situations represents reproduction cost in the
cost approach to value?
A. Jenning's historic property was mostly destroyed by fire. He rebuilds it with similar materials, square footage, and design. B. Kristina's antebellum mansion in New
Orleans was severely damaged by a hurricane. She spends several years repurposing materials from other similar homes to rebui ld it exactly as it was before the
hurricane. C. Martin sold his beloved family home, then built one just like it, only with newer materials that were more envi ronmentally friendly, in a warmer, drier part of
the country. D. Ginger's parents built a new home when Ginger was just leaving for college. When she graduated, Ginger went back to her home town and hired a builder
to build a similar but smaller house for her and her new husband.
Bracketing - CORRECT ANSWER-Include both superior and inferior units of comparison such as age, transaction price, etc
Bracketing - CORRECT ANSWER-range of values for a property by comparing a group of comparable sales to the subject
broker price opinion (BPO) - CORRECT ANSWER-are estimates of price in case the lender must take over and sell the property
broker price opinion (BPO) - CORRECT ANSWER-is a real estate licensee's estimate that details the potential selling price of a property. It provides details about the
property's condition, market, and neighborhood, as well as comparable sales
broker price opinion (BPO) - CORRECT ANSWER-Lenders frequently order
on foreclosure properties or when determining appropriate market price for a short sale property.
broker price opinion (BPO) - CORRECT ANSWER-often just drive by the property and take photos, then complete paperwork for the lender in exchange for a small fee.
C - CORRECT ANSWER-John's home is up for sale. He originally bought it five years ago for $300,000, and its current value is $350,000. His real estate agent notifies
him that a buyer just made an offer on his home for $365,000, which is the price other similar homes in the neighborhood are selling for, and John accepts. What does the
price of $365,000 represent?
A. The assessed value B. The appraised value C. The market value D. The investment value
C - CORRECT ANSWER-Robin, the appraiser of the Birkenstocks' property, wants to make sure her computations of adjustments on their home are vali d. She's using the
sales comparison approach, so she'll prioritize the ______ first.
A. Location B. Market conditions C. Conditions of sale D. Physical characteristics
C - CORRECT ANSWER-The Richards' farm is located on a 10-acre parcel of land, which is very rare to come by in their area. However, the house is rundown and in
need of many repairs. Buyers in the area looking for a move-in ready home would need to either look elsewhere or wait several months for the home to be renovated.
Which factors are negatively impacting the value of the Richards' property?
A. Utility, scarcity, and transferability B. Utility and transferability C. Demand and utility D. Demand, scarcity, and transferability
C A BPO is a broad opinion of price and not a detailed analysis. - CORRECT ANSWER-In this form of price determination, the real estate professional will often just drive
by the property and take photos, then complete paperwork for the lender.
A. Comparative market analysis B. Competitive market analysis C. Broker's price opinion D. Appraisal
C. Use adjusted prices from sold comparables, refining the price range with data from active listings, expired listings, and possibly pending sales - CORRECT ANSWER-
One month after Max passed his real estate licensing exam, a couple contacted him via referral, asking him to represent them in the sale of their home. Max met with his
clients at their home, did a walk-through, took a drive through the neighborhood, and then headed back into the office to conduct a comparative market analysis on the
property. The sellers have communicated to him that they'd obviously like to make as much off the sale as possible, but they need to complete the sale in the next three
months, in time for the wife to start a new job in another state. To accurately calculate a suggested price range for their p roperty, Max will have to ______.
A. Adjust prices from all properties listed or sold within a one-mile radius to the subject property B. Use the prices of sold comparables and active listings, adjusted for the
amount of time listed C. Use adjusted prices from sold comparables, refining the price range with data from active listings, expired listings, and possibly pending sales D.
Calculate based on data from expired listings and pending sales
Certified General Appraiser - CORRECT ANSWER-May issue appraisal reports for any type of real property
Certified Residential Appraiser - CORRECT ANSWER-May appraise residential real property of one to four residential units, without regard to transaction value or
complexity
comparable property - CORRECT ANSWER--active listings - currently on the market
- expired listings- properties that are listed but not sell
comparable property - CORRECT ANSWER-arm's length transactions
comparable property - CORRECT ANSWER-at least three properties to compare
comparable property - CORRECT ANSWER-is one that's quite similar to the subject property in terms of size, style, condition, number of rooms, and location
Comparative market analysis CMA - CORRECT ANSWER--Prepared by a real estate agent.
-Prepared for the seller or buyer.
-Comparable sales are used to determine value.
-The level of detail is basic to moderate.
-The cost is free or minimal.
Comparative market analysis CMA - CORRECT ANSWER-are not appraisals; instead they're an informal estimate of market value.
Comparative market analysis CMA - CORRECT ANSWER-Real estate licensees help clients make price decisions.
Competition - CORRECT ANSWER-related to supply and demand
Conformity - CORRECT ANSWER-when value is created and maintained based on whether the characteristics of a property conform to the demands of the market. So a
house built in the middle of a commercial zone (due to zoning changes) would be valued differently than a house in the middle of a neighborhood comprised of similar
houses.
Contribution - CORRECT ANSWER-when a change in a property impacts the value as a whole. Does converting a garage into a family room contribute or detract from
value? That would be in the eyes of the buyer.
Cost - CORRECT ANSWER-s what it would cost to recreate a property if it were to be built now. This includes labor, materials, the legal services, zoning and architectural
design, financing and taxes, interest, overhead and profit, etc
Cost depreciation approach - CORRECT ANSWER-replacement cost
site value
reproduction cost
Cost-Depreciation Approach - CORRECT ANSWER-- New construction of both residential and commercial property
- Unique properties, such as highly energy-efficient houses, residential acreage with excess land, and high-dollar houses with many amenities
- Special-purpose commercial uses such as hospitals, some manufacturing plants, hotels, and other single-purpose properties
