1 | Page
IAAO 112|2026 QUESTIONS
WITH 100% CORRECT
SOLUTIONS.
In order to pass a Water Safety Course, a participant
Potential Gross Income - answer -Annual gross income
Market rent - answer -The rental income a property would most
probably command in the open market
Balance - answer -The principle that real property value is created
and sustained when contrasting, opposing, or interacting
elements are in a state of equilibrium. (Value is maximized when
the 4 agents of production are in their proper allocation.)
Conformity - answer -States that overall,the prices of an area will
be maximized if structures are conforming
,2 | Page
Progression - answer -(Under conformity) Is the concept that the
value of an inferior property is enhanced by its association with
better properties.
Regression - answer -(Under conformity) Is the concept that the
value of a superior property is adversely affected by its
association with an inferior property of the same type.
Opportunity cost - answer -The cost of options foregone or
opportunities not chosen. The selection of an investment means
an alternative was not selected.
Substitution - answer -The appraisal principle that states when
several similar or alternative commodities, goods, or services are
available, the one with the lowest price will attract the greatest
demand
H&BU fact - answer -As long as the value of the property "as
improved" is greater than the value of the site "as vacant"; the
highest and best use is usually the current use. If the highest and
best use of the site as improved is not the same as the highest
, 3 | Page
and best use as though vacant, the highest and best use as
improved is referenced to as the highest and best 'interim' or
'transitional' use of the property.
4 tests of highest and best use - answer -Physically possible,
legally permitted, financially feasible, maximally productive.
Physically possible - answer -(Under 4 tests of h&bu).
Topography, soil conditions, subsurface water, land area, land
shape.
Legally permitted - answer -(Under 4 tests of h&bu): setbacks,
subdivision restrictions, easements, building heights, area allowed
to be occupied by structures, density, the above are subject to
change making judgments difficult.
Financially feasible - answer -(Under 4 tests of h&bu): rents,
expenses, absorption rates, construction costs, discount rates,
profit levels (models should be made for each use to estimate the
residual land value, after considering the costs to construct the
ideal improvement.
IAAO 112|2026 QUESTIONS
WITH 100% CORRECT
SOLUTIONS.
In order to pass a Water Safety Course, a participant
Potential Gross Income - answer -Annual gross income
Market rent - answer -The rental income a property would most
probably command in the open market
Balance - answer -The principle that real property value is created
and sustained when contrasting, opposing, or interacting
elements are in a state of equilibrium. (Value is maximized when
the 4 agents of production are in their proper allocation.)
Conformity - answer -States that overall,the prices of an area will
be maximized if structures are conforming
,2 | Page
Progression - answer -(Under conformity) Is the concept that the
value of an inferior property is enhanced by its association with
better properties.
Regression - answer -(Under conformity) Is the concept that the
value of a superior property is adversely affected by its
association with an inferior property of the same type.
Opportunity cost - answer -The cost of options foregone or
opportunities not chosen. The selection of an investment means
an alternative was not selected.
Substitution - answer -The appraisal principle that states when
several similar or alternative commodities, goods, or services are
available, the one with the lowest price will attract the greatest
demand
H&BU fact - answer -As long as the value of the property "as
improved" is greater than the value of the site "as vacant"; the
highest and best use is usually the current use. If the highest and
best use of the site as improved is not the same as the highest
, 3 | Page
and best use as though vacant, the highest and best use as
improved is referenced to as the highest and best 'interim' or
'transitional' use of the property.
4 tests of highest and best use - answer -Physically possible,
legally permitted, financially feasible, maximally productive.
Physically possible - answer -(Under 4 tests of h&bu).
Topography, soil conditions, subsurface water, land area, land
shape.
Legally permitted - answer -(Under 4 tests of h&bu): setbacks,
subdivision restrictions, easements, building heights, area allowed
to be occupied by structures, density, the above are subject to
change making judgments difficult.
Financially feasible - answer -(Under 4 tests of h&bu): rents,
expenses, absorption rates, construction costs, discount rates,
profit levels (models should be made for each use to estimate the
residual land value, after considering the costs to construct the
ideal improvement.
