15 free questions from the Cinna RE valuation and appraisal bank (104 in the app). Tap an answer to check it. The rationale opens right away.
A property has potential gross income of $100,000, a vacancy and collection loss of 5%, and operating expenses of $40,000. What is the net operating income?
Answer: B. $55,000
Effective gross income is $100,000 minus 5% ($5,000) = $95,000; subtracting $40,000 in operating expenses leaves an NOI of $55,000.
In the sales-comparison approach, when a comparable property is SUPERIOR to the subject in some feature, the appraiser adjusts the comparable's sale price by:
Answer: B. Subtracting from the comparable's price
Adjustments are always made to the comparable. If the comparable is superior, its price is reduced to estimate what it would have sold for if it were like the subject.
A buyer purchases a home expecting a planned light-rail station nearby to raise its value within two years. This buyer's reasoning reflects the principle of:
Answer: B. Anticipation
Buying based on the expectation of future benefits (here, increased value from the rail station) is the principle of anticipation.
When the demand for housing in an area increases while the supply remains limited and relatively fixed in the short term, prices typically:
Answer: C. Increase
Real estate supply is relatively inelastic in the short term, so rising demand against a fixed supply pushes prices upward.
If the market-derived GRM for an area is 125 and a subject property rents for $1,600 per month, what value does the GRM method indicate?
Answer: C. $200,000
Value equals monthly rent times GRM: $1,600 x 125 = $200,000.
The cost approach to value is generally considered MOST reliable when appraising which type of property?
Answer: A. A newly built single-purpose property such as a school or library
The cost approach is most reliable for new or special-purpose properties where few comparable sales exist and depreciation is minimal, such as schools, churches, and libraries.
Which statement correctly distinguishes a GRM analysis from a full income (direct capitalization) analysis?
Answer: B. GRM uses gross rental income, while direct capitalization uses net operating income
A GRM applies a multiplier to gross rent and ignores expenses, while direct capitalization divides net operating income by a cap rate, accounting for operating expenses.
When reconciling value indications from the cost, sales comparison, and income approaches, the appraiser should:
Answer: B. Weigh each approach by its relevance and reliability for the subject property
Reconciliation requires judgment: the appraiser gives more weight to the approach most appropriate and reliable for the property type, rather than mechanically averaging.
A comparable sold for $200,000 four months ago. The market has appreciated 0.5% per month. What is the time-adjusted price, rounded to the nearest dollar?
Answer: B. $204,000
0.5% x 4 months = 2% appreciation; $200,000 x 1.02 = $204,000.
An appraiser estimates a building's effective age at 10 years against a total economic life of 50 years. Using the straight-line (age-life) method, the accrued depreciation percentage is:
Answer: B. 20%
Straight-line depreciation equals effective age divided by total economic life: 10 / 50 = 0.20, or 20%.
Which type of depreciation is ALWAYS considered incurable because the cause lies outside the property and cannot be fixed by the owner?
Answer: C. External obsolescence
External obsolescence is caused by factors outside the property, such as neighborhood decline or proximity to a nuisance, so the owner cannot cure it and it is treated as incurable.
A well-maintained home loses value because a new sewage-treatment plant is built next door. This loss is classified as:
Answer: C. External obsolescence
External (economic) obsolescence is a loss in value caused by negative factors OUTSIDE the property boundaries, such as a nearby nuisance, and is generally incurable.
An owner builds the most expensive, elaborate home in a neighborhood of modest houses. The likely effect on its value is best explained by the principle of:
Answer: C. Regression
Regression holds that the value of a superior property is dragged down by surrounding lower-value properties (the over-improvement problem).
A comparable home sold for $180,000 and rents for $1,500 per month. What is its gross rent multiplier?
Answer: B. 120
GRM equals sale price divided by monthly gross rent: $180,000 / $1,500 = 120.
A comparable sold six months ago when the market was rising about 1% per month. To account for the change in market conditions, the appraiser would make a:
Answer: B. Time (market conditions) adjustment
A time or market-conditions adjustment accounts for price changes between the comparable's sale date and the effective appraisal date.
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