PA RE Practice Quiz
#8 Questions and
Complete Solutions
Graded A+
For appraisers performing appraisals for federally related transactions, all states are required to
establish uniform certification procedures.
a. True
b. False - Answer: A. TRUE
All states are required to establish uniform certification procedures for appraisers performing appraisals
for federally related transactions. The Board of Certified Real Estate Appraisers has been created and
the Real Estate Appraisers Certification Act has been adopted in Pennsylvania. Today, this board governs
all appraisal activities (not just those for federally related financial transactions), and activities of
appraisers and real estate licensees are separate and independently regulated.
County assessors who value properties are certified by the Appraisers Certification Act for ad valorem
tax purposes in Pennsylvania.
a. True
b. False - Answer: A. TRUE.
The Appraisers Certification Act certifies county assessors who value properties for ad valorem tax
purposes in Pennsylvania. Certified Pennsylvania Evaluator (CPE) certificates are issued to individuals
who meet certain education requirements and pass an exam.
Generally, the purpose of an appraisal is to estimate market value.
,a. True
b. False - Answer: A. TRUE.
Generally, the purpose of an appraisal is to estimate market value. The market value of real estate is the
most probable price that a property should bring in a fair sale. This definition makes three assumptions.
First, it presumes a competitive and open market. Second, the buyer and the seller are both assumed to
be acting prudently and knowledgeably. Finally, market value depends on the price not being affected
by unusual circumstances.
Highest and best use is the MOST profitable single use to which the property may be adapted or the use
that is likely to be in demand in the near future.
a. True
b. False - Answer: A. TRUE.
The most profitable single use to which the property may be adapted or the use that is likely to be in
demand in the near future is the property's highest and best use. The use must be legally permitted,
financially feasible, physically possible, and maximally productive.
To arrive at an accurate estimate of value, appraisers traditionally use the cost approach.
a. True
b. False - Answer: B. FALSE.
To arrive at an accurate estimate of value, appraisers traditionally use three basic valuation techniques:
the sales comparison approach, the cost approach, and the income capitalization approach. The three
methods serve as checks against each other. Using them narrows the range within which the final
estimate of value falls. Each method is generally considered most reliable for specific types of property.
The income capitalization approach is MOST helpful in the appraisal of newer buildings or special-
purpose buildings such as schools.
, a. True
b. False - Answer: B. FALSE.
The cost approach is most helpful in the appraisal of newer buildings or special-purpose buildings such
as schools, churches, and public buildings. Some properties are difficult to appraise using other methods
because there are seldom enough local sales to use as comparables and because the properties do not
ordinarily generate income.
Reproduction cost and replacement cost are two ways to look at the construction cost of a building for
appraisal purposes.
a. True
b. False - Answer: A. TRUE.
There are two ways to look at the construction cost of a building for appraisal purposes: reproduction
cost and replacement cost. Reproduction cost is the construction cost at current prices of an exact
duplicate of the subject improvement, including both the benefits and the drawbacks of the property.
Replacement cost is cost at current prices to construct improvements similar to the subject property,
but not necessarily an exact duplicate.
Depending on the contribution of the expenditure to the value of the property, depreciation is
considered to be curable or incurable.
a. True
b. False - Answer: A. TRUE.
Depreciation is considered to be curable or incurable, depending on the contribution of the expenditure
to the value of the property. For appraisal purposes, depreciation is divided into three classes, according
to its cause: physical deterioration; functional obsolescence; and external depreciation.
Determining the appropriate replacement cost for the property is the MOST difficult step in the income
approach to value.
#8 Questions and
Complete Solutions
Graded A+
For appraisers performing appraisals for federally related transactions, all states are required to
establish uniform certification procedures.
a. True
b. False - Answer: A. TRUE
All states are required to establish uniform certification procedures for appraisers performing appraisals
for federally related transactions. The Board of Certified Real Estate Appraisers has been created and
the Real Estate Appraisers Certification Act has been adopted in Pennsylvania. Today, this board governs
all appraisal activities (not just those for federally related financial transactions), and activities of
appraisers and real estate licensees are separate and independently regulated.
County assessors who value properties are certified by the Appraisers Certification Act for ad valorem
tax purposes in Pennsylvania.
a. True
b. False - Answer: A. TRUE.
The Appraisers Certification Act certifies county assessors who value properties for ad valorem tax
purposes in Pennsylvania. Certified Pennsylvania Evaluator (CPE) certificates are issued to individuals
who meet certain education requirements and pass an exam.
Generally, the purpose of an appraisal is to estimate market value.
,a. True
b. False - Answer: A. TRUE.
Generally, the purpose of an appraisal is to estimate market value. The market value of real estate is the
most probable price that a property should bring in a fair sale. This definition makes three assumptions.
First, it presumes a competitive and open market. Second, the buyer and the seller are both assumed to
be acting prudently and knowledgeably. Finally, market value depends on the price not being affected
by unusual circumstances.
Highest and best use is the MOST profitable single use to which the property may be adapted or the use
that is likely to be in demand in the near future.
a. True
b. False - Answer: A. TRUE.
The most profitable single use to which the property may be adapted or the use that is likely to be in
demand in the near future is the property's highest and best use. The use must be legally permitted,
financially feasible, physically possible, and maximally productive.
To arrive at an accurate estimate of value, appraisers traditionally use the cost approach.
a. True
b. False - Answer: B. FALSE.
To arrive at an accurate estimate of value, appraisers traditionally use three basic valuation techniques:
the sales comparison approach, the cost approach, and the income capitalization approach. The three
methods serve as checks against each other. Using them narrows the range within which the final
estimate of value falls. Each method is generally considered most reliable for specific types of property.
The income capitalization approach is MOST helpful in the appraisal of newer buildings or special-
purpose buildings such as schools.
, a. True
b. False - Answer: B. FALSE.
The cost approach is most helpful in the appraisal of newer buildings or special-purpose buildings such
as schools, churches, and public buildings. Some properties are difficult to appraise using other methods
because there are seldom enough local sales to use as comparables and because the properties do not
ordinarily generate income.
Reproduction cost and replacement cost are two ways to look at the construction cost of a building for
appraisal purposes.
a. True
b. False - Answer: A. TRUE.
There are two ways to look at the construction cost of a building for appraisal purposes: reproduction
cost and replacement cost. Reproduction cost is the construction cost at current prices of an exact
duplicate of the subject improvement, including both the benefits and the drawbacks of the property.
Replacement cost is cost at current prices to construct improvements similar to the subject property,
but not necessarily an exact duplicate.
Depending on the contribution of the expenditure to the value of the property, depreciation is
considered to be curable or incurable.
a. True
b. False - Answer: A. TRUE.
Depreciation is considered to be curable or incurable, depending on the contribution of the expenditure
to the value of the property. For appraisal purposes, depreciation is divided into three classes, according
to its cause: physical deterioration; functional obsolescence; and external depreciation.
Determining the appropriate replacement cost for the property is the MOST difficult step in the income
approach to value.
