California · state portion

Free California Property Valuation and Financial Analysis practice questions

10 original questions with full explanations. 21 of the 150 scored exam questions (about 14%) come from this area.

1. 1

   An income property's value rises while its NOI is unchanged. What happened to the implied capitalisation rate?

   • A. It rose
   • B. It is unchanged
   • C. It became negative
   • D. It fell
   Show answer & explanation

   Answer: D

   Rate = income ÷ value; with income fixed and value up, the rate must fall.

2. 2

   A subject has three bedrooms and the comparable has four, with the extra worth $25,000. What is the adjusted comparable price if it sold for $640,000?

   • A. $665,000
   • B. $640,000
   • C. $615,000
   • D. $590,000
   Show answer & explanation

   Answer: C

   The comparable is superior, so it is adjusted downward by $25,000 to $615,000.

3. 3

   A comparable sold with the seller paying unusually large buyer concessions. What adjustment is needed?

   • A. No adjustment, price is price
   • B. An adjustment for conditions of sale
   • C. An adjustment to the subject
   • D. An adjustment for location
   Show answer & explanation

   Answer: B

   Atypical concessions distort the effective price, so a conditions-of-sale adjustment restores comparability.

4. 4

   A property generates $8,000 monthly gross rent and sells for $1,152,000. What is the monthly GRM?

   • A. 120
   • B. 96
   • C. 12
   • D. 144
   Show answer & explanation

   Answer: D

   1,152,000 ÷ 8,000 = 144.

5. 5

   A seller's home has a foundation crack repair estimated at $40,000 and comparable homes without the issue sell for $900,000. The seller lists at $895,000. What does the principle of contribution suggest?

   • A. The home is worth $940,000 because repaired foundations add value
   • B. Buyers will likely discount by the cost to cure or more
   • C. The list price is appropriate because the repair is under 5% of value
   • D. The home is worth the full $900,000 because the crack is not visible
   Show answer & explanation

   Answer: B

   A curable defect reduces value at least by its cost to cure.

6. 6

   An appraiser is asked by the lender to 'hit the number.' What should the appraiser do?

   • A. Comply with the request in order to keep the client
   • B. Decline — appraiser independence rules prohibit value pressure
   • C. Report the lender immediately to the DRE
   • D. Raise the value slightly as a reasonable compromise
   Show answer & explanation

   Answer: B

   Influencing appraisal value violates independence requirements and USPAP ethics.

7. 7

   An investor's property has an adjusted basis of $500,000 after $150,000 of depreciation. It sells for $900,000. How much of the gain is subject to depreciation recapture?

   • A. $250,000
   • B. $350,000
   • C. $150,000
   • D. $400,000
   Show answer & explanation

   Answer: C

   Depreciation previously taken ($150,000) is recaptured; the remaining gain is capital gain.

8. 8

   Which risk does a longer projected holding period most directly add to a discounted cash flow analysis?

   • A. Elimination of the need for a terminal value estimate
   • B. Greater uncertainty in later-year forecasts and the reversion
   • C. A lower present value for the earliest cash flows
   • D. Removal of vacancy assumptions from the model
   Show answer & explanation

   Answer: B

   Distant projections and the resale estimate carry compounding forecast risk.

9. 9

   A building has an estimated useful life of 40 years and cost $400,000. Using straight-line, what is one year of depreciation?

   • A. $8,000
   • B. $10,000
   • C. $16,000
   • D. $40,000
   Show answer & explanation

   Answer: B

   Straight-line depreciation divides cost by useful life. Dividing $400,000 by 40 gives $10,000 a year.

10. 10

    Who is authorised to perform an appraisal for a federally related mortgage transaction?

    • A. The escrow officer
    • B. Any licensed real estate salesperson
    • C. A licensed or certified appraiser
    • D. The lender's loan officer
    Show answer & explanation

    Answer: C

    Federally related transactions require an appraisal by a licensed or certified appraiser, which a real estate licence alone does not authorise.