: APPRAISAL PRINCIPLES AND METHODS FOR
TEXAS REAL ESTATES WITH VERIFIED
QUESTIONS AND ANSWERS
**1. Q: What are the four characteristics a property must have to
possess value?**
A: DUST - Demand, Utility, Scarcity, and Transferability
**2. Q: What is Market Value?**
A: The most probable price a property should bring in a competitive
and open market under all conditions requisite to a fair sale, with
buyer and seller acting prudently and knowledgeably
**3. Q: What are the three approaches to value?**
A: (1) Sales Comparison Approach, (2) Cost Approach, (3) Income
Approach
**4. Q: Which appraisal approach is considered the best indicator of
value for existing properties?**
A: Sales Comparison Approach (also known as Market Data
Approach)
**5. Q: What methods are used in the Cost Approach?**
,A: Square-foot method, unit-in-place method, and quantity-survey
method
**6. Q: What is the Principle of Substitution?**
A: A commodity's value is influenced by the cost of acquiring a
substitute or comparable item
**7. Q: What is the Principle of Progression?**
A: The value of a subject property is increased by the value of
surrounding higher-priced properties
**8. Q: What is the Principle of Regression?**
A: The presence of lower-priced properties in the area will cause a
decline in the value of the subject property
**9. Q: What is the Principle of Anticipation?**
A: Purchase price is affected by the expectation of future appeal and
benefits
**10. Q: What is the Principle of Competition?**
A: The absence of competition will cause prices to increase;
increased competition brings prices down
**11. Q: What is Functional Obsolescence?**
A: Loss in desirability of the style, layout, or function of an element of
a property over time
, **12. Q: What is External Obsolescence?**
A: Loss in value caused by factors outside the property itself
**13. Q: What are the four classifications of appraisers ranked by
experience?**
A: (1) Appraiser Trainee, (2) State Licensed Real Estate Appraiser, (3)
Certified Residential Appraiser, (4) Certified General Real Estate
Appraiser
**14. Q: What are the six steps in the appraisal process?**
A: (1) State the problem, (2) List data needed and sources, (3)
Gather/record/verify data, (4) Determine highest and best use, (5)
Estimate value by each method, (6) Reconciliation
**15. Q: What is the difference between Insured Value, Book Value,
Assessed Value, and Market Value?**
A: Insured Value = replacement cost for insurance; Book Value =
original cost plus additions minus depreciation; Assessed Value =
valuation for tax purposes; Market Value = probable sale price in
open market
**16. Q: What is the Highest and Best Use?**
A: The legal use for property that gives the greatest return in money
and/or amenities
**17. Q: What is Gross Rent Multiplier (GRM)?**
TEXAS REAL ESTATES WITH VERIFIED
QUESTIONS AND ANSWERS
**1. Q: What are the four characteristics a property must have to
possess value?**
A: DUST - Demand, Utility, Scarcity, and Transferability
**2. Q: What is Market Value?**
A: The most probable price a property should bring in a competitive
and open market under all conditions requisite to a fair sale, with
buyer and seller acting prudently and knowledgeably
**3. Q: What are the three approaches to value?**
A: (1) Sales Comparison Approach, (2) Cost Approach, (3) Income
Approach
**4. Q: Which appraisal approach is considered the best indicator of
value for existing properties?**
A: Sales Comparison Approach (also known as Market Data
Approach)
**5. Q: What methods are used in the Cost Approach?**
,A: Square-foot method, unit-in-place method, and quantity-survey
method
**6. Q: What is the Principle of Substitution?**
A: A commodity's value is influenced by the cost of acquiring a
substitute or comparable item
**7. Q: What is the Principle of Progression?**
A: The value of a subject property is increased by the value of
surrounding higher-priced properties
**8. Q: What is the Principle of Regression?**
A: The presence of lower-priced properties in the area will cause a
decline in the value of the subject property
**9. Q: What is the Principle of Anticipation?**
A: Purchase price is affected by the expectation of future appeal and
benefits
**10. Q: What is the Principle of Competition?**
A: The absence of competition will cause prices to increase;
increased competition brings prices down
**11. Q: What is Functional Obsolescence?**
A: Loss in desirability of the style, layout, or function of an element of
a property over time
, **12. Q: What is External Obsolescence?**
A: Loss in value caused by factors outside the property itself
**13. Q: What are the four classifications of appraisers ranked by
experience?**
A: (1) Appraiser Trainee, (2) State Licensed Real Estate Appraiser, (3)
Certified Residential Appraiser, (4) Certified General Real Estate
Appraiser
**14. Q: What are the six steps in the appraisal process?**
A: (1) State the problem, (2) List data needed and sources, (3)
Gather/record/verify data, (4) Determine highest and best use, (5)
Estimate value by each method, (6) Reconciliation
**15. Q: What is the difference between Insured Value, Book Value,
Assessed Value, and Market Value?**
A: Insured Value = replacement cost for insurance; Book Value =
original cost plus additions minus depreciation; Assessed Value =
valuation for tax purposes; Market Value = probable sale price in
open market
**16. Q: What is the Highest and Best Use?**
A: The legal use for property that gives the greatest return in money
and/or amenities
**17. Q: What is Gross Rent Multiplier (GRM)?**
