REE 3043 FSU EXAM 2 QUESTIONS AND ANSWERS
2026
list several types of real estate decisions that often require formal real estate appraisals
- Answers - a few examples of real estate decisions that require an appraisal include a
judge attempting to determine the appropriate division of assets in a divorce, lenders
contemplating a mortgage loan on a property, government officials estimating the costs
of acquiring the right-of-way to construct roadways, or local tax officials determining the
appropriate property tax on a property
Assume you are appraising a single-family home. Recently, a home directly across the
street was sold by the owners to their daughter. Why should the appraiser exclude this
transaction from the set of comparable sales? If included, what kind of adjustment
probably needs to be made? - Answers - under these circumstances, an appraiser
would typically exclude the sale because the sale was not at arm's length. More the
likely, the daughter paid a price below market value. If included an upward adjustment
of the comparable sale price would likely be required, though such an adjustment would
be difficult to quantify
The final price for each comparable property reached after all adjustments have been
made is termed the: - Answers - Final adjusted sale price
In the sales comparison approach, the value obtained after reconciliation of the final
adjusted sales prices from the comparable sales is termed the - Answers - Indicated
opinion of value.
What is the difference between market value and investment value? - Answers -
Investment value is the value a particular investor places on a property
Market value of a property is its most probable selling price
In the sales comparison approach, if the comparable property is superior to the subject
property in some way, is an upward or downward adjustment to the sale price of the
comparable required? - Answers - a downward adjustment must be made to the sale
price of the comparable to account for this difference.
If the only physical difference between the subject property and the comparable is that
the comparable has a fireplace and the subject does not, which of the following
adjustments should take place?
A. The transaction price of the comparable property should be adjusted downward
B. The transaction price of the comparable property should be adjusted upward
C. The transaction price of the subject property should be adjusted downward
D. The transaction price of the subject property should be adjusted upward - Answers -
A. The transaction price of the comparable property should be adjusted downward
, A comparable property sold 15 months ago for $105,000. If property values are
increasing at a rate of 0.25% per month (no compounding), what would be the
adjustment amount to the sale price of the comparable property? (Adj amt, not ASP)
A. $262.50
B. $393.80
C. $3,937.50
D. $39,375.00 - Answers - C: $105,000(0.0025)15 = $3,937.50
Which of the following statements best describes the concept of market value?
A. It is an estimate of the most probable selling price of a property in a competitive
market
B. It is the value a particular investor places on a property
C. It is the price we observe when a property is sold
D. It is the maximum amount that a seller would be willing to accept - Answers - A. It is
an estimate of the most probable selling price of a property in a competitive market
Which approach would receive the most weight when considering the valuation of a
Single-family residential
A. Income approach
B. Sales comparison approach
C. Cost approach
D. Investment approach - Answers - B. Sales comparison approach
A comparable property sold 10 months ago for $200,000. If the appropriate adjustment
for market conditions is 3.6% per year (without compounding), what would be the time
adjustment in the sale comparison grid? - Answers - 3.6%/12 = 0.3% per month
$200,000(0.003)10 = $6,000.
List three important ways in which DCF valuation models differ from direct capitalization
models. - Answers - Direct capitalization models require an estimate of stabilized
income for one year. DCF models require estimates of net cash flows over the entire
expected holding period. In addition, the cash flow forecast must include the net cash
flow expected to be produced by the sale of the property at the end of the expected
holding period. Finally, the appraiser must select the appropriate yield (required IRR) at
which to discount all future cash flows or to use as the hurdle rate in an IRR analysis.
Distinguish between contract rent and market rent - Answers - Contract rent refers to
the actual rent paid under existing lease contracts executed between owners and
tenants.
Market rent refers to the potential rental income a property could receive on the open
market as of the effective date of an appraisal.
how is an operating expense distinguishable from a capital expenditure - Answers -
Operating expenses include the ordinary and necessary expenditures associated with
operating an income producing property. They keep the property competitive in its
market, but they do not prolong the useful life of the asset or increase its market value.
2026
list several types of real estate decisions that often require formal real estate appraisals
- Answers - a few examples of real estate decisions that require an appraisal include a
judge attempting to determine the appropriate division of assets in a divorce, lenders
contemplating a mortgage loan on a property, government officials estimating the costs
of acquiring the right-of-way to construct roadways, or local tax officials determining the
appropriate property tax on a property
Assume you are appraising a single-family home. Recently, a home directly across the
street was sold by the owners to their daughter. Why should the appraiser exclude this
transaction from the set of comparable sales? If included, what kind of adjustment
probably needs to be made? - Answers - under these circumstances, an appraiser
would typically exclude the sale because the sale was not at arm's length. More the
likely, the daughter paid a price below market value. If included an upward adjustment
of the comparable sale price would likely be required, though such an adjustment would
be difficult to quantify
The final price for each comparable property reached after all adjustments have been
made is termed the: - Answers - Final adjusted sale price
In the sales comparison approach, the value obtained after reconciliation of the final
adjusted sales prices from the comparable sales is termed the - Answers - Indicated
opinion of value.
What is the difference between market value and investment value? - Answers -
Investment value is the value a particular investor places on a property
Market value of a property is its most probable selling price
In the sales comparison approach, if the comparable property is superior to the subject
property in some way, is an upward or downward adjustment to the sale price of the
comparable required? - Answers - a downward adjustment must be made to the sale
price of the comparable to account for this difference.
If the only physical difference between the subject property and the comparable is that
the comparable has a fireplace and the subject does not, which of the following
adjustments should take place?
A. The transaction price of the comparable property should be adjusted downward
B. The transaction price of the comparable property should be adjusted upward
C. The transaction price of the subject property should be adjusted downward
D. The transaction price of the subject property should be adjusted upward - Answers -
A. The transaction price of the comparable property should be adjusted downward
, A comparable property sold 15 months ago for $105,000. If property values are
increasing at a rate of 0.25% per month (no compounding), what would be the
adjustment amount to the sale price of the comparable property? (Adj amt, not ASP)
A. $262.50
B. $393.80
C. $3,937.50
D. $39,375.00 - Answers - C: $105,000(0.0025)15 = $3,937.50
Which of the following statements best describes the concept of market value?
A. It is an estimate of the most probable selling price of a property in a competitive
market
B. It is the value a particular investor places on a property
C. It is the price we observe when a property is sold
D. It is the maximum amount that a seller would be willing to accept - Answers - A. It is
an estimate of the most probable selling price of a property in a competitive market
Which approach would receive the most weight when considering the valuation of a
Single-family residential
A. Income approach
B. Sales comparison approach
C. Cost approach
D. Investment approach - Answers - B. Sales comparison approach
A comparable property sold 10 months ago for $200,000. If the appropriate adjustment
for market conditions is 3.6% per year (without compounding), what would be the time
adjustment in the sale comparison grid? - Answers - 3.6%/12 = 0.3% per month
$200,000(0.003)10 = $6,000.
List three important ways in which DCF valuation models differ from direct capitalization
models. - Answers - Direct capitalization models require an estimate of stabilized
income for one year. DCF models require estimates of net cash flows over the entire
expected holding period. In addition, the cash flow forecast must include the net cash
flow expected to be produced by the sale of the property at the end of the expected
holding period. Finally, the appraiser must select the appropriate yield (required IRR) at
which to discount all future cash flows or to use as the hurdle rate in an IRR analysis.
Distinguish between contract rent and market rent - Answers - Contract rent refers to
the actual rent paid under existing lease contracts executed between owners and
tenants.
Market rent refers to the potential rental income a property could receive on the open
market as of the effective date of an appraisal.
how is an operating expense distinguishable from a capital expenditure - Answers -
Operating expenses include the ordinary and necessary expenditures associated with
operating an income producing property. They keep the property competitive in its
market, but they do not prolong the useful life of the asset or increase its market value.
