TEXAS PRINCIPLES OF REAL ESTATE II MAIN EXAM TEST
2025/2026 QUESTIONS WITH ANSWERS GRADED A+
✔✔Allocation - ✔✔a typical ratio of land value to total value is derived from comparable
properties and applied to the subject
✔✔Extraction - ✔✔land value is estimated by deducting the depreciated cost of
improvements on a property from the total sale price of the property.
✔✔Subdivision development analysis - ✔✔costs and profit are deducted from estimated
gross sale prices of subdivided and finished lots, and net sales proceeds are discounted
to present value
✔✔Land residual - ✔✔net operating income attributable to the land is capitalized at
market rates to obtain land value
✔✔Ground rent capitalization - ✔✔ground rent of subject is capitalized at market rates
✔✔In the cost approach to value - ✔✔the appraiser estimates a property's value by
adding the land value to the depreciated value of any improvements to the property
✔✔The income approach - ✔✔(sometimes called the "income capitalization approach")
is used by appraisers who need to value commercial and investment properties
✔✔In the sales comparison approach - ✔✔an appraiser examines the price (or price per
unit area) of similar properties recently sold or currently being sold in the marketplace to
come up with comparable value assessments
✔✔In the reconciliation step - ✔✔the appraiser looks at each approach to value and all
the data used to determine
✔✔Communicating the Appraisal - ✔✔1. Short- or Long-Form Narrative Reports
2. Reports
3. Letter or Oral Reports
✔✔Valuation - ✔✔is the process of estimating the value of an identified interest in
specific property as of a given date
✔✔Types of Value - ✔✔Investment Value
Insured Value
Use Value
✔✔Investment value - ✔✔is the amount of the return on an investment that an income-
producing property will produce
,✔✔Insured value - ✔✔is the face amount a casualty or hazard insurance policy will pay
in case a property is deemed unusable
✔✔Use value - ✔✔(also known as value-in-use) of a property is the value the property
holds for the owner. Several factors contribute to this value
✔✔Mortgage value - ✔✔is the value the lender places on a property as collateral for the
loan, especially in the event of a foreclosure when the lender must recover the debt
through the sale of the property
✔✔Market value - ✔✔The amount you could realistically sell an asset for today
✔✔Explain the difference between market value and market price - ✔✔Market value is
an opinion of the value of a property based on analyzing data collected about the
property. The market price of a property is the actual sales price and can in some
circumstances be greater or lesser than market value
✔✔What does the term anticipation mean as it relates to property value? - ✔✔The
benefits a buyer expects to receive over the period of time he or she holds the property
✔✔Explain the principle of substitution - ✔✔says a buyer will not pay more for a home
than what he or she would pay for another home that is equally desirable and available
✔✔Sales Comparison Approach - ✔✔is based on the principle of substitution - which
says that a buyer will not pay more for the subject property than he or she would pay for
a property that is similar in characteristics and amenities
✔✔Cost approach steps - ✔✔Step 1 - Estimate Land Value
Step 2 - Estimate Cost of Improvements
Step 3 - Estimate Depreciation
✔✔Income Approach Steps - ✔✔Step 1: Estimate the potential gross income
Step 2: Estimate the effective gross income
Step 3: Estimate the net operating income
Step 4: Select a capitalization rate
Step 5: Apply the capitalization rate
✔✔What's the difference between reproduction cost and replacement cost? -
✔✔Reproduction cost is the cost at today's prices of producing an exact duplicate of the
current building, including its improvements and its flaws. Replacement cost is the
construction cost at today's prices of producing a similar or equivalent structure.
, ✔✔The income approach is based on which two principles of value? - ✔✔Anticipation
and substitution
✔✔The formula for determining the gross rent multiplier (GRM) is - ✔✔Sales Price ÷
Gross Rent = Gross Rent Multiplier
✔✔The formula for determining the gross income multiplier (GIM) is - ✔✔Sales Price ÷
Gross Annual Income = Gross Income Multiplier
✔✔5 levels of real property appraisal classification - ✔✔Appraiser Trainee
Provisional Licensed Real Estate Appraiser
Licensed Real Estate Appraiser
Certified Residential Real Estate Appraiser
Certified General Real Estate Appraiser
✔✔For what types of property would an appraiser use a gross rent multiplier? -
✔✔single-family homes and duplexes that could produce income, but are not primarily
income-producing properties
✔✔What is the Uniform Standards of Professional Appraisal Practice (USPAP)? -
✔✔The Uniform Standards of Professional Appraisal Practice (USPAP) is a set of
standards, guidelines and provisions for the appraisal industry
✔✔Who may perform appraisals in Texas? - ✔✔Only persons who are licensed or
certified appraisers or who are approved as appraiser trainees
✔✔What is the major component of the total property value that does not depreciate? -
✔✔The land value
✔✔Comparative Market Analysis - ✔✔is an estimate of the value of a seller's property
in comparison to nearby properties with similar features that are for sale or have
recently sold
✔✔When getting ready to do a Comparative Market Analysis (CMA), a licensee will do
the following: - ✔✔1. Collect and analyze information about the seller's property.
2. Choose comparable properties in the area.
3. Compare the seller's property to the comparables and do some adjusting to the value
of the comparables.
4. Estimate a reasonable and realistic selling price for the seller's property.
✔✔When collecting information about the seller's property for analysis, the licensee
should focus on: - ✔✔The neighborhood
The home site
Existing property improvements
2025/2026 QUESTIONS WITH ANSWERS GRADED A+
✔✔Allocation - ✔✔a typical ratio of land value to total value is derived from comparable
properties and applied to the subject
✔✔Extraction - ✔✔land value is estimated by deducting the depreciated cost of
improvements on a property from the total sale price of the property.
✔✔Subdivision development analysis - ✔✔costs and profit are deducted from estimated
gross sale prices of subdivided and finished lots, and net sales proceeds are discounted
to present value
✔✔Land residual - ✔✔net operating income attributable to the land is capitalized at
market rates to obtain land value
✔✔Ground rent capitalization - ✔✔ground rent of subject is capitalized at market rates
✔✔In the cost approach to value - ✔✔the appraiser estimates a property's value by
adding the land value to the depreciated value of any improvements to the property
✔✔The income approach - ✔✔(sometimes called the "income capitalization approach")
is used by appraisers who need to value commercial and investment properties
✔✔In the sales comparison approach - ✔✔an appraiser examines the price (or price per
unit area) of similar properties recently sold or currently being sold in the marketplace to
come up with comparable value assessments
✔✔In the reconciliation step - ✔✔the appraiser looks at each approach to value and all
the data used to determine
✔✔Communicating the Appraisal - ✔✔1. Short- or Long-Form Narrative Reports
2. Reports
3. Letter or Oral Reports
✔✔Valuation - ✔✔is the process of estimating the value of an identified interest in
specific property as of a given date
✔✔Types of Value - ✔✔Investment Value
Insured Value
Use Value
✔✔Investment value - ✔✔is the amount of the return on an investment that an income-
producing property will produce
,✔✔Insured value - ✔✔is the face amount a casualty or hazard insurance policy will pay
in case a property is deemed unusable
✔✔Use value - ✔✔(also known as value-in-use) of a property is the value the property
holds for the owner. Several factors contribute to this value
✔✔Mortgage value - ✔✔is the value the lender places on a property as collateral for the
loan, especially in the event of a foreclosure when the lender must recover the debt
through the sale of the property
✔✔Market value - ✔✔The amount you could realistically sell an asset for today
✔✔Explain the difference between market value and market price - ✔✔Market value is
an opinion of the value of a property based on analyzing data collected about the
property. The market price of a property is the actual sales price and can in some
circumstances be greater or lesser than market value
✔✔What does the term anticipation mean as it relates to property value? - ✔✔The
benefits a buyer expects to receive over the period of time he or she holds the property
✔✔Explain the principle of substitution - ✔✔says a buyer will not pay more for a home
than what he or she would pay for another home that is equally desirable and available
✔✔Sales Comparison Approach - ✔✔is based on the principle of substitution - which
says that a buyer will not pay more for the subject property than he or she would pay for
a property that is similar in characteristics and amenities
✔✔Cost approach steps - ✔✔Step 1 - Estimate Land Value
Step 2 - Estimate Cost of Improvements
Step 3 - Estimate Depreciation
✔✔Income Approach Steps - ✔✔Step 1: Estimate the potential gross income
Step 2: Estimate the effective gross income
Step 3: Estimate the net operating income
Step 4: Select a capitalization rate
Step 5: Apply the capitalization rate
✔✔What's the difference between reproduction cost and replacement cost? -
✔✔Reproduction cost is the cost at today's prices of producing an exact duplicate of the
current building, including its improvements and its flaws. Replacement cost is the
construction cost at today's prices of producing a similar or equivalent structure.
, ✔✔The income approach is based on which two principles of value? - ✔✔Anticipation
and substitution
✔✔The formula for determining the gross rent multiplier (GRM) is - ✔✔Sales Price ÷
Gross Rent = Gross Rent Multiplier
✔✔The formula for determining the gross income multiplier (GIM) is - ✔✔Sales Price ÷
Gross Annual Income = Gross Income Multiplier
✔✔5 levels of real property appraisal classification - ✔✔Appraiser Trainee
Provisional Licensed Real Estate Appraiser
Licensed Real Estate Appraiser
Certified Residential Real Estate Appraiser
Certified General Real Estate Appraiser
✔✔For what types of property would an appraiser use a gross rent multiplier? -
✔✔single-family homes and duplexes that could produce income, but are not primarily
income-producing properties
✔✔What is the Uniform Standards of Professional Appraisal Practice (USPAP)? -
✔✔The Uniform Standards of Professional Appraisal Practice (USPAP) is a set of
standards, guidelines and provisions for the appraisal industry
✔✔Who may perform appraisals in Texas? - ✔✔Only persons who are licensed or
certified appraisers or who are approved as appraiser trainees
✔✔What is the major component of the total property value that does not depreciate? -
✔✔The land value
✔✔Comparative Market Analysis - ✔✔is an estimate of the value of a seller's property
in comparison to nearby properties with similar features that are for sale or have
recently sold
✔✔When getting ready to do a Comparative Market Analysis (CMA), a licensee will do
the following: - ✔✔1. Collect and analyze information about the seller's property.
2. Choose comparable properties in the area.
3. Compare the seller's property to the comparables and do some adjusting to the value
of the comparables.
4. Estimate a reasonable and realistic selling price for the seller's property.
✔✔When collecting information about the seller's property for analysis, the licensee
should focus on: - ✔✔The neighborhood
The home site
Existing property improvements
