CERTIFIED GENERAL APPRAISER EXAMINATION NEWEST EVALUATED EXAM
PRACTICE 120 QUESTIONS 2026-2027|ORIGINAL QUESTIONS & ANSWERS
|DETAILED RATIONALES |*HINTED* COMPLETE EXAM PREP GRADED
A+**INSTANT DOWNLOAD PDF**
1. An appraiser is valuing a property based on the most probable price that a
property should bring in a competitive and open market under conditions
requisite to a fair sale. Which valuation concept is primarily being
described?
A. Investment value
B. Use value
C. Market value
D. Assessed value
Answer: C. Market value
Market value reflects the type of value commonly required in real property
appraisal assignments and assumes specified market conditions.
2. A property's current use is legal but produces less value than an alternative
legally permissible use. Which principle indicates that the alternative use
may represent the property's highest and best use?
A. Contribution
B. Change
C. Anticipation
D. Competition
Answer: A. Contribution
The contribution principle recognizes that the value of a component depends on
how much it contributes to the value of the whole property. In highest and best
use analysis, the legally permissible and financially feasible use producing the
greatest value is selected.
3. Which sequence correctly represents the four tests of highest and best use
of a vacant site?
,A. Legally permissible, physically possible, financially feasible, maximally
productive
B. Physically possible, legally permissible, maximally productive, financially
feasible
C. Financially feasible, physically possible, legally permissible, maximally
productive
D. Legally permissible, financially feasible, physically possible, maximally
productive
Answer: A. Legally permissible, physically possible, financially feasible,
maximally productive
Highest and best use analysis progresses through legal permissibility, physical
possibility, financial feasibility, and maximum productivity.
4. An appraiser concludes that a proposed commercial development is legally
permissible and physically possible but would generate a return below the
cost of development. Which test has failed?
A. Legal permissibility
B. Physical possibility
C. Financial feasibility
D. Maximum productivity
Answer: C. Financial feasibility
An alternative use must generate sufficient economic return to justify its
development before it can qualify as financially feasible.
5. A comparable sold for $900,000. Its sale included personal property
estimated at $40,000 that was not included in the subject property. What is
the indicated real-property component of the comparable sale?
A. $860,000
B. $900,000
C. $940,000
D. $40,000
,Answer: A. $860,000
The non-real-property component is deducted: $900,000 − $40,000 = $860,000.
6. Which approach to value is generally most applicable when estimating the
value of an income-producing property from its anticipated future benefits?
A. Cost approach
B. Sales comparison approach
C. Income capitalization approach
D. Allocation approach
Answer: C. Income capitalization approach
The income approach converts anticipated future economic benefits into an
indication of present value.
7. A property produces net operating income of $180,000 annually. If the
appropriate overall capitalization rate is 9%, what is the indicated value?
A. $1,620,000
B. $2,000,000
C. $2,220,000
D. $20,000,000
Answer: B. $2,000,000
Value = NOI ÷ capitalization rate = $180,000 ÷ 0.09 = $2,000,000.
8. Which statement best distinguishes direct capitalization from yield
capitalization?
A. Direct capitalization uses a capitalization rate to convert one period's income
into value
B. Direct capitalization requires a complete discounted cash-flow analysis
C. Yield capitalization ignores changes in income and property value
D. Yield capitalization is limited to owner-occupied properties
Answer: A. Direct capitalization uses a capitalization rate to convert one period's
income into value
, Direct capitalization converts a representative single-period income into value,
whereas yield capitalization explicitly considers changing income and investment
returns over multiple periods.
9. A property's effective gross income is $500,000 and operating expenses are
$200,000. What is the net operating income?
A. $200,000
B. $300,000
C. $500,000
D. $700,000
Answer: B. $300,000
NOI = effective gross income − operating expenses = $500,000 − $200,000 =
$300,000.
10.Which item is generally excluded from net operating income?
A. Property insurance
B. Property taxes
C. Replacement reserves
D. Mortgage principal and interest
Answer: D. Mortgage principal and interest
NOI is calculated before debt service. Mortgage payments are financing expenses
rather than property operating expenses.
11.An investor purchases a property for $2,500,000 and expects annual NOI of
$175,000. What is the indicated overall capitalization rate?
A. 5.0%
B. 6.0%
C. 7.0%
D. 8.0%
Answer: C. 7.0%
Capitalization rate = NOI ÷ value = $175,000 ÷ $2,500,000 = 0.07, or 7%.
PRACTICE 120 QUESTIONS 2026-2027|ORIGINAL QUESTIONS & ANSWERS
|DETAILED RATIONALES |*HINTED* COMPLETE EXAM PREP GRADED
A+**INSTANT DOWNLOAD PDF**
1. An appraiser is valuing a property based on the most probable price that a
property should bring in a competitive and open market under conditions
requisite to a fair sale. Which valuation concept is primarily being
described?
A. Investment value
B. Use value
C. Market value
D. Assessed value
Answer: C. Market value
Market value reflects the type of value commonly required in real property
appraisal assignments and assumes specified market conditions.
2. A property's current use is legal but produces less value than an alternative
legally permissible use. Which principle indicates that the alternative use
may represent the property's highest and best use?
A. Contribution
B. Change
C. Anticipation
D. Competition
Answer: A. Contribution
The contribution principle recognizes that the value of a component depends on
how much it contributes to the value of the whole property. In highest and best
use analysis, the legally permissible and financially feasible use producing the
greatest value is selected.
3. Which sequence correctly represents the four tests of highest and best use
of a vacant site?
,A. Legally permissible, physically possible, financially feasible, maximally
productive
B. Physically possible, legally permissible, maximally productive, financially
feasible
C. Financially feasible, physically possible, legally permissible, maximally
productive
D. Legally permissible, financially feasible, physically possible, maximally
productive
Answer: A. Legally permissible, physically possible, financially feasible,
maximally productive
Highest and best use analysis progresses through legal permissibility, physical
possibility, financial feasibility, and maximum productivity.
4. An appraiser concludes that a proposed commercial development is legally
permissible and physically possible but would generate a return below the
cost of development. Which test has failed?
A. Legal permissibility
B. Physical possibility
C. Financial feasibility
D. Maximum productivity
Answer: C. Financial feasibility
An alternative use must generate sufficient economic return to justify its
development before it can qualify as financially feasible.
5. A comparable sold for $900,000. Its sale included personal property
estimated at $40,000 that was not included in the subject property. What is
the indicated real-property component of the comparable sale?
A. $860,000
B. $900,000
C. $940,000
D. $40,000
,Answer: A. $860,000
The non-real-property component is deducted: $900,000 − $40,000 = $860,000.
6. Which approach to value is generally most applicable when estimating the
value of an income-producing property from its anticipated future benefits?
A. Cost approach
B. Sales comparison approach
C. Income capitalization approach
D. Allocation approach
Answer: C. Income capitalization approach
The income approach converts anticipated future economic benefits into an
indication of present value.
7. A property produces net operating income of $180,000 annually. If the
appropriate overall capitalization rate is 9%, what is the indicated value?
A. $1,620,000
B. $2,000,000
C. $2,220,000
D. $20,000,000
Answer: B. $2,000,000
Value = NOI ÷ capitalization rate = $180,000 ÷ 0.09 = $2,000,000.
8. Which statement best distinguishes direct capitalization from yield
capitalization?
A. Direct capitalization uses a capitalization rate to convert one period's income
into value
B. Direct capitalization requires a complete discounted cash-flow analysis
C. Yield capitalization ignores changes in income and property value
D. Yield capitalization is limited to owner-occupied properties
Answer: A. Direct capitalization uses a capitalization rate to convert one period's
income into value
, Direct capitalization converts a representative single-period income into value,
whereas yield capitalization explicitly considers changing income and investment
returns over multiple periods.
9. A property's effective gross income is $500,000 and operating expenses are
$200,000. What is the net operating income?
A. $200,000
B. $300,000
C. $500,000
D. $700,000
Answer: B. $300,000
NOI = effective gross income − operating expenses = $500,000 − $200,000 =
$300,000.
10.Which item is generally excluded from net operating income?
A. Property insurance
B. Property taxes
C. Replacement reserves
D. Mortgage principal and interest
Answer: D. Mortgage principal and interest
NOI is calculated before debt service. Mortgage payments are financing expenses
rather than property operating expenses.
11.An investor purchases a property for $2,500,000 and expects annual NOI of
$175,000. What is the indicated overall capitalization rate?
A. 5.0%
B. 6.0%
C. 7.0%
D. 8.0%
Answer: C. 7.0%
Capitalization rate = NOI ÷ value = $175,000 ÷ $2,500,000 = 0.07, or 7%.
