CHAMPIONS PRINCIPLES OF REAL
ESTATE 2 CORRECT QUESTIONS &
SOLUTIONS
Appraisal - ANSWER an appraiser's opinion of value
Loan to Value (LTV) - ANSWER the percentage of an asset's market value that a lender
is willing to finance
Principle of Contribution - ANSWER value of a part is determined by its contribution to
the total value of the property rather than by its cost
Principle of Substitution - ANSWER The maximum value of a property tends to be set
by the cost of purchasing an equally desirable substitute property.
Characteristics of Value (DUST) - ANSWER Demand
Utility
Scarcity
Transferability
Market Value - ANSWER the most probable price a property should bring in a
competitive and open market under all conditions requisite to a fair sale, under
guidelines published by federal lending institution (Fannie Mae, Freddie Mac)
ad valorem - ANSWER according to value
Market Data Approach - ANSWER A means of estimating value by comparing similar
properties. Used when there is an active market and where comparables can be
identified. Also called comparable sales approach.
subject property - ANSWER The property being appraised
Depreciation - ANSWER reduction in value of property from causes such as
deterioration or obsolescence
Principal of Regression - ANSWER The Value of more expensive home placed in a
neighborhood of less expensive homes will drop in value
Functional Obsolescence - ANSWER The loss in desirability of the style, layout, or
function of an element of a property over time.
External Obsolescence - ANSWER Loss in value due to factors outside of the property
(such as near airport).
ESTATE 2 CORRECT QUESTIONS &
SOLUTIONS
Appraisal - ANSWER an appraiser's opinion of value
Loan to Value (LTV) - ANSWER the percentage of an asset's market value that a lender
is willing to finance
Principle of Contribution - ANSWER value of a part is determined by its contribution to
the total value of the property rather than by its cost
Principle of Substitution - ANSWER The maximum value of a property tends to be set
by the cost of purchasing an equally desirable substitute property.
Characteristics of Value (DUST) - ANSWER Demand
Utility
Scarcity
Transferability
Market Value - ANSWER the most probable price a property should bring in a
competitive and open market under all conditions requisite to a fair sale, under
guidelines published by federal lending institution (Fannie Mae, Freddie Mac)
ad valorem - ANSWER according to value
Market Data Approach - ANSWER A means of estimating value by comparing similar
properties. Used when there is an active market and where comparables can be
identified. Also called comparable sales approach.
subject property - ANSWER The property being appraised
Depreciation - ANSWER reduction in value of property from causes such as
deterioration or obsolescence
Principal of Regression - ANSWER The Value of more expensive home placed in a
neighborhood of less expensive homes will drop in value
Functional Obsolescence - ANSWER The loss in desirability of the style, layout, or
function of an element of a property over time.
External Obsolescence - ANSWER Loss in value due to factors outside of the property
(such as near airport).
