Certified General Appraiser Latest Exam
Prep Test Bank 1 Questions and Correct
Verified Answers with Rationales/ Most
Recent Prep Test Bank for Certified
General Appraiser Exam GRADED A+
SECTION 1: APPRAISAL PRINCIPLES AND VALUE
THEORY
Question 1: Which appraisal principle states that a property's value is
created and sustained when contrasting, opposing, or interacting
elements are in balance?
A) Principle of substitution
B) Principle of balance
C) Principle of change
D) Principle of anticipation
Answer: B
Rationale: The principle of balance states that maximum value is achieved
when land uses, production factors, and economic forces are in equilibrium.
An imbalance among these factors can reduce property value and
economic productivity .
Question 2: What interdependent economic factors create value?
,A) Amenities, assemblage, scarcity, and effective purchasing power
B) Utility, scarcity, desire, and plottage
C) Amenities, plottage, desire, and supply/demand
D) Utility, scarcity, desire, and effective purchasing power
Answer: D
Rationale: The four interdependent economic factors that create value are
utility (ability to satisfy a need), scarcity (limited supply), desire (willingness
to acquire), and effective purchasing power (ability to pay) .
Question 3: The principle of substitution assumes that:
A) Value is based on historical cost
B) Buyers will pay no more than the cost of a comparable substitute
C) Market value always increases
D) Land value cannot exceed improvement value
Answer: B
Rationale: The principle of substitution is fundamental to appraisal theory.
Rational buyers seek alternatives and generally will not pay more for a
property than the cost of acquiring a comparable substitute property with
the same utility .
SECTION 2: HIGHEST AND BEST USE ANALYSIS
Question 4: What are the four criteria, in chronological order, that an
appraiser must apply when analyzing the Highest and Best Use of a
property?
,A) Legally permissible, Financially feasible, Physically possible, Maximally
productive
B) Physically possible, Legally permissible, Financially feasible, Maximally
productive
C) Financially feasible, Physically possible, Legally permissible, Maximally
productive
D) Maximally productive, Legally permissible, Physically possible, Financially
feasible
Answer: B
Rationale: The four tests of Highest and Best Use must be applied
sequentially: 1) Physically possible (based on site constraints), 2) Legally
permissible (zoning and regulations), 3) Financially feasible (profitable), and
4) Maximally productive (highest return) .
Question 5: Which of the following is NOT one of the four tests of
highest and best use?
A) Legal Permissibility
B) Physical Possibility
C) Marketability
D) Financial Feasibility
Answer: C
Rationale: Marketability is important but is not one of the four core tests;
the four are legal permissibility, physical possibility, financial feasibility, and
maximum productivity .
, Question 6: A new building representing the highest and best use of its
site can be constructed at a total cost of $12,000,000. The building
capitalization rate is 11% and the land capitalization rate is 7%. The
property will generate a net operating income of $1,500,000. What is
the indicated value of the site, rounded to the nearest $1,000?
A) $6,750,000
B) $1,636,000
C) $2,571,000
D) $4,667,000
Answer: C
Rationale: Using the land residual technique: Income attributable to
building = Building Value × Building Cap Rate = $12,000,000 × 11% =
$1,320,000. Residual income to land = $1,500,000 - $1,320,000 = $180,000.
Land Value = $180,000 ÷ 7% = $2,571,428 ≈ $2,571,000 .
SECTION 3: INCOME APPROACH & CAPITALIZATION
Question 7: In the income capitalization approach, effective gross
income is calculated by subtracting vacancy and collection loss from:
A) Net operating income
B) Potential gross income
C) Gross rent multiplier
D) Effective gross rent
Answer: B
Rationale: Effective gross income equals potential gross income minus
vacancy and collection losses plus miscellaneous income .
Prep Test Bank 1 Questions and Correct
Verified Answers with Rationales/ Most
Recent Prep Test Bank for Certified
General Appraiser Exam GRADED A+
SECTION 1: APPRAISAL PRINCIPLES AND VALUE
THEORY
Question 1: Which appraisal principle states that a property's value is
created and sustained when contrasting, opposing, or interacting
elements are in balance?
A) Principle of substitution
B) Principle of balance
C) Principle of change
D) Principle of anticipation
Answer: B
Rationale: The principle of balance states that maximum value is achieved
when land uses, production factors, and economic forces are in equilibrium.
An imbalance among these factors can reduce property value and
economic productivity .
Question 2: What interdependent economic factors create value?
,A) Amenities, assemblage, scarcity, and effective purchasing power
B) Utility, scarcity, desire, and plottage
C) Amenities, plottage, desire, and supply/demand
D) Utility, scarcity, desire, and effective purchasing power
Answer: D
Rationale: The four interdependent economic factors that create value are
utility (ability to satisfy a need), scarcity (limited supply), desire (willingness
to acquire), and effective purchasing power (ability to pay) .
Question 3: The principle of substitution assumes that:
A) Value is based on historical cost
B) Buyers will pay no more than the cost of a comparable substitute
C) Market value always increases
D) Land value cannot exceed improvement value
Answer: B
Rationale: The principle of substitution is fundamental to appraisal theory.
Rational buyers seek alternatives and generally will not pay more for a
property than the cost of acquiring a comparable substitute property with
the same utility .
SECTION 2: HIGHEST AND BEST USE ANALYSIS
Question 4: What are the four criteria, in chronological order, that an
appraiser must apply when analyzing the Highest and Best Use of a
property?
,A) Legally permissible, Financially feasible, Physically possible, Maximally
productive
B) Physically possible, Legally permissible, Financially feasible, Maximally
productive
C) Financially feasible, Physically possible, Legally permissible, Maximally
productive
D) Maximally productive, Legally permissible, Physically possible, Financially
feasible
Answer: B
Rationale: The four tests of Highest and Best Use must be applied
sequentially: 1) Physically possible (based on site constraints), 2) Legally
permissible (zoning and regulations), 3) Financially feasible (profitable), and
4) Maximally productive (highest return) .
Question 5: Which of the following is NOT one of the four tests of
highest and best use?
A) Legal Permissibility
B) Physical Possibility
C) Marketability
D) Financial Feasibility
Answer: C
Rationale: Marketability is important but is not one of the four core tests;
the four are legal permissibility, physical possibility, financial feasibility, and
maximum productivity .
, Question 6: A new building representing the highest and best use of its
site can be constructed at a total cost of $12,000,000. The building
capitalization rate is 11% and the land capitalization rate is 7%. The
property will generate a net operating income of $1,500,000. What is
the indicated value of the site, rounded to the nearest $1,000?
A) $6,750,000
B) $1,636,000
C) $2,571,000
D) $4,667,000
Answer: C
Rationale: Using the land residual technique: Income attributable to
building = Building Value × Building Cap Rate = $12,000,000 × 11% =
$1,320,000. Residual income to land = $1,500,000 - $1,320,000 = $180,000.
Land Value = $180,000 ÷ 7% = $2,571,428 ≈ $2,571,000 .
SECTION 3: INCOME APPROACH & CAPITALIZATION
Question 7: In the income capitalization approach, effective gross
income is calculated by subtracting vacancy and collection loss from:
A) Net operating income
B) Potential gross income
C) Gross rent multiplier
D) Effective gross rent
Answer: B
Rationale: Effective gross income equals potential gross income minus
vacancy and collection losses plus miscellaneous income .
