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Real Estate Salesperson Exam — National Portion

Valuation and appraisal: practice questions

Our Real Estate (National) bank has 17 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

Who regulates appraisal standards in the U.S.?

  1. Real estate brokers
  2. USPAP sets standards; states license appraisers under federal oversight (FIRREA)
  3. The MLS
  4. The IRS
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B. USPAP sets standards; states license appraisers under federal oversight (FIRREA) — Appraisers must be independent.

Question 2

What is the principle of substitution?

  1. Buyers prefer new homes
  2. A buyer won't pay more for a property than the cost of an equally desirable substitute
  3. Value depends on the owner
  4. Prices always rise
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B. A buyer won't pay more for a property than the cost of an equally desirable substitute — It underlies the sales comparison approach.

Question 3

What is external (economic) obsolescence?

  1. Loss in value caused by factors outside the property
  2. Worn-out roof
  3. Loss in value caused by an outdated floor plan or features
  4. Peeling paint
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A. Loss in value caused by factors outside the property — It is generally incurable by the owner.

Question 4

In the sales comparison approach, if a comparable has a feature the subject lacks, how is it adjusted?

  1. Ignore it
  2. Add the feature's value to the comparable's sale price instead
  3. Add the value to the subject
  4. Subtract the feature's value from the comparable's sale price
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D. Subtract the feature's value from the comparable's sale price — Adjustments are always made to the comparable.

Question 5

What is 'highest and best use'?

  1. The tallest building possible
  2. The current use always
  3. The legally permitted, physically possible, financially feasible use that produces the highest value
  4. The use the owner likes most
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C. The legally permitted, physically possible, financially feasible use that produces the highest value — Appraisers analyse it for land.

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