National portion

Free Property Value & Appraisal practice questions

10 original questions with full explanations. 11 of the 80 scored national-portion questions (about 14%) come from this area.

This is national-portion content — identical whichever state you're licensing in, and scored separately from your state-law portion.

1. 1

   Which appraisal approach is generally most reliable for an owner-occupied single-family home in an active market?

   • A. Cost approach
   • B. Income approach
   • C. Sales comparison approach
   • D. Gross rent multiplier
   Show answer & explanation

   Answer: C

   With plentiful comparable sales, the sales comparison (market data) approach best reflects what buyers actually pay. Cost suits new/special-use buildings; income suits investment property.

2. 2

   A modest home's value rises because it sits among larger, higher-value homes. This illustrates the principle of:

   • A. Regression
   • B. Progression
   • C. Substitution
   • D. Conformity
   Show answer & explanation

   Answer: B

   Progression: a lesser property is pulled up in value by superior neighbors. Regression is the reverse; substitution caps value at the cost of an equivalent alternative.

3. 3

   A commercial property's market value is determined by which of the following?

   • A. The sales comparison approach only
   • B. The cost approach only
   • C. The income approach only
   • D. A combination of the sales comparison, cost, and income approaches
   Show answer & explanation

   Answer: D

   The market value of a commercial property is typically determined by considering all three approaches to value: sales comparison, cost, and income.

4. 4

   What type of depreciation occurs when a property's design or layout is no longer functional or efficient?

   • A. Physical depreciation
   • B. Functional depreciation
   • C. External depreciation
   • D. Economic depreciation
   Show answer & explanation

   Answer: B

   Functional depreciation occurs when a property's design or layout is no longer functional or efficient, such as an outdated floor plan.

5. 5

   A broker price opinion (BPO) is most commonly used for which of the following purposes?

   • A. To determine the market value of a property for a lender
   • B. To provide a detailed appraisal report for a buyer
   • C. To estimate the value of a property for a potential seller
   • D. To settle an estate
   Show answer & explanation

   Answer: A

   A BPO is often used by lenders to determine the market value of a property, particularly in situations where a full appraisal is not necessary.

6. 6

   Which approach to value estimates the cost to replace or reproduce a property, minus depreciation?

   • A. Sales comparison approach
   • B. Cost approach
   • C. Income approach
   • D. Hybrid approach
   Show answer & explanation

   Answer: B

   The cost approach estimates the cost to replace or reproduce a property, minus depreciation, to determine its value.

7. 7

   What is the term for the principle that a property's value is highest and best when it is used for its most profitable purpose?

   • A. Highest and best use
   • B. Most valuable use
   • C. Greatest and best use
   • D. Optimum use
   Show answer & explanation

   Answer: A

   The principle of highest and best use states that a property's value is highest and best when it is used for its most profitable purpose, which is also legally permissible, physically possible, and financially feasible.

8. 8

   Appraiser independence is important because it ensures that the appraiser's opinion of value is

   • A. Based on the client's desired outcome
   • B. Influenced by the client's interests
   • C. Unbiased and objective
   • D. Subject to revision by the client
   Show answer & explanation

   Answer: C

   Appraiser independence is crucial to ensure that the appraiser's opinion of value is unbiased and objective, free from any external influence or pressure.

9. 9

   The principle of conformity states that a property's value is maximized when it is similar in design, age, and condition to neighboring properties.

   • A. This statement is true
   • B. This statement is false, as it describes the principle of progression
   • C. This statement is false, as it describes the principle of regression
   • D. This statement is false, as it is not a recognized principle of value
   Show answer & explanation

   Answer: A

   The principle of conformity states that a property's value is maximized when it is similar in design, age, and condition to neighboring properties, which helps to maintain property values and avoid negative externalities.

10. 10

    What is the primary difference between market value and price?

    • A. Market value is the price paid at a foreclosure sale, while price is the amount agreed upon by the buyer and seller
    • B. Market value is an opinion of value, while price is the actual amount paid
    • C. Market value is the value of the property after depreciation, while price is the original purchase price
    • D. Market value is an estimate of what a property would sell for, while price is the amount actually paid
    Show answer & explanation

    Answer: D

    Market value is an estimate of what a property would sell for in a normal market transaction, while price is the actual amount paid