IAAO TEST VERSION 3 EXAM 2025/2026 WITH
ACTUAL CORRECT QUESTIONS AND
VERIFIED DETAILED ANSWERS
|FREQUENTLY TESTED QUESTIONS AND
SOLUTIONS|ALREADY GRADED
A+|NEWEST|BRAND NEW VERSION!!|LATEST
UPDATE
Which method of estimating depreciation is the most detailed? Its use is required in the writing
of demonstration appraisal reports.
Observed condition (breakdown) method
An item classified as a short-lived item has a cost new of $5,000. Its actual age is 5 years, and its
total useful life is 20 years. The dollar amount of depreciation would be ________.
$1,250
A two-story residence has only one bath, which is located on the second floor. If a second bath
had been included on the first floor when the residence was originally constructed, RCN would
be $11,500. The cost to install (cure) the second bath today would be $13,500.
The amount of functional obsolescence would be _______.
$2,000
A residence is located on a street that has become a very busy thoroughfare. It rents for $800
per month. Residences not located on the busy street rent for $825 per month. The GRM for
this area is 150, and the land-to-building ratio is 1:4.
The indicated amount of external obsolescence is ______.
$3,000
A residence has an RCN of $200,000. Items classified as curable physical deterioration have an
RCN of $10,000 and a cost to cure of $12,000. Incurable physical deterioration (short-lived
items) have an RCN of $40,000 and a depreciation amount of $18,000. The actual age for the
residence is 6 years, and the total useful life is 60 years.
1|Page
,The total amount of physical deterioration for the residence would be ________.
$45,000
If the cost to cure a functional deficiency within a residence exceeds the increase in value added
to the property, it is called _______ functional obsolescence.
incurable
The Principle of ___________ holds that the value of a property tends to be set by the price
that would be paid to acquire a property of similar utility and desirability within a reasonable
amount of time.
Substitution
The Prince of _____________ is the underlying principle in the adjustment process in the sales
comparison approach.
Contribution
A major principle in the sales comparison approach holds that the relationship between a
property and its environment must be in ________ for a property to reflect its optimum market
value.
balance
A major advantage to the sales comparison approach is that it reflects the actions of ________
and _________ in the market.
buyers
sellers
A unit of comparison that would be applicable to single-family residential property is the
____________________________ or __________________.
price per square foot of gross living area
total property price
A unit of comparison that would be applicable to agricultural farmland or larger rural residential
tracts would be the ______________.
price per acre
In the selection of comparable properties in the sales comparison approach, list four
comparability items that should be considered.
2|Page
, Financing
Current market conditions (date of sale)
Similar in location
Similar in size, age, condition
Similar in design type
Similar in construction type
Affected by the same four forces that influence value
Similar physical attributes
List the order of adjustments in the sales comparison approach.
Financing
Market conditions (time of sale)
Location and other physical characteristics
Which method of determining adjustments in the sales comparison approach cannot be used to
determine market conditions (changes in value over time)?
Depreciated cost
The first step in the sales comparison approach is to define the appraisal problem. List the five
items that need to be included in defining the appraisal problem.
Identify the property to be appraised
Determine the property rights to be appraised
Define the purpose and function of the appraisal
Specify the date of appraisal
Define the type of value
A cardinal rule in the sales comparison approach holds that all adjustments are made to the
______ property, and never to the ______.
subject
The Principle of _________ states that market value is never constant because physical
(environmental), governmental, social and economic forces are at work, affecting the property.
Change
When the four forces-physical (environmental), governmental, social and economic - are in
balance, the market achieves a temporary state of _____________.
equilibrium
3|Page
ACTUAL CORRECT QUESTIONS AND
VERIFIED DETAILED ANSWERS
|FREQUENTLY TESTED QUESTIONS AND
SOLUTIONS|ALREADY GRADED
A+|NEWEST|BRAND NEW VERSION!!|LATEST
UPDATE
Which method of estimating depreciation is the most detailed? Its use is required in the writing
of demonstration appraisal reports.
Observed condition (breakdown) method
An item classified as a short-lived item has a cost new of $5,000. Its actual age is 5 years, and its
total useful life is 20 years. The dollar amount of depreciation would be ________.
$1,250
A two-story residence has only one bath, which is located on the second floor. If a second bath
had been included on the first floor when the residence was originally constructed, RCN would
be $11,500. The cost to install (cure) the second bath today would be $13,500.
The amount of functional obsolescence would be _______.
$2,000
A residence is located on a street that has become a very busy thoroughfare. It rents for $800
per month. Residences not located on the busy street rent for $825 per month. The GRM for
this area is 150, and the land-to-building ratio is 1:4.
The indicated amount of external obsolescence is ______.
$3,000
A residence has an RCN of $200,000. Items classified as curable physical deterioration have an
RCN of $10,000 and a cost to cure of $12,000. Incurable physical deterioration (short-lived
items) have an RCN of $40,000 and a depreciation amount of $18,000. The actual age for the
residence is 6 years, and the total useful life is 60 years.
1|Page
,The total amount of physical deterioration for the residence would be ________.
$45,000
If the cost to cure a functional deficiency within a residence exceeds the increase in value added
to the property, it is called _______ functional obsolescence.
incurable
The Principle of ___________ holds that the value of a property tends to be set by the price
that would be paid to acquire a property of similar utility and desirability within a reasonable
amount of time.
Substitution
The Prince of _____________ is the underlying principle in the adjustment process in the sales
comparison approach.
Contribution
A major principle in the sales comparison approach holds that the relationship between a
property and its environment must be in ________ for a property to reflect its optimum market
value.
balance
A major advantage to the sales comparison approach is that it reflects the actions of ________
and _________ in the market.
buyers
sellers
A unit of comparison that would be applicable to single-family residential property is the
____________________________ or __________________.
price per square foot of gross living area
total property price
A unit of comparison that would be applicable to agricultural farmland or larger rural residential
tracts would be the ______________.
price per acre
In the selection of comparable properties in the sales comparison approach, list four
comparability items that should be considered.
2|Page
, Financing
Current market conditions (date of sale)
Similar in location
Similar in size, age, condition
Similar in design type
Similar in construction type
Affected by the same four forces that influence value
Similar physical attributes
List the order of adjustments in the sales comparison approach.
Financing
Market conditions (time of sale)
Location and other physical characteristics
Which method of determining adjustments in the sales comparison approach cannot be used to
determine market conditions (changes in value over time)?
Depreciated cost
The first step in the sales comparison approach is to define the appraisal problem. List the five
items that need to be included in defining the appraisal problem.
Identify the property to be appraised
Determine the property rights to be appraised
Define the purpose and function of the appraisal
Specify the date of appraisal
Define the type of value
A cardinal rule in the sales comparison approach holds that all adjustments are made to the
______ property, and never to the ______.
subject
The Principle of _________ states that market value is never constant because physical
(environmental), governmental, social and economic forces are at work, affecting the property.
Change
When the four forces-physical (environmental), governmental, social and economic - are in
balance, the market achieves a temporary state of _____________.
equilibrium
3|Page
