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Perry Real Estate College
National Appraisal Exam
2026 Practice Questions and
Verified Answers
National test 6: economics; appraisal 6.1 if the price of an item is increasing, one can usually assume that a. Demand for the item is decreasing in relation to supply of the item. B. Demand for the item is increasing in relation to supply of the item. C. Supply of the item is increasing. D. Demand for the item and supply of the item are increasing. 6.1 (b) demand for the item is increasing in relation to supply of the item. In a market economy, the primary interactions between supply, demand and price are: if supply increases relative to demand, price decreases; if supply decreases relative to demand, price increases; if demand increases relative to supply, price increases; and if demand decreases relative to supply, price decreases. 6.2 when the market for an item has achieved market equilibrium, which of the following statements is true? A. New suppliers will enter the market and drive the price down. B. Demand will slowly taper off, driving the price down. C. Unmet demand for the item is directed toward demand for some other item. D. Supply and demand are equal, and price and value are equal. 6.2 (d) supply and demand are equal, and price and value are equal.
A market tends toward a state of equilibrium in which supply equals demand, and price, cost, and value are identical. According to this principle, market demand moves to meet supply, and supply moves to meet demand. If there is an extreme shortage of an item for which there is normally a strong demand, suppliers will rush to increase production to close the gap. If inventories of an item are very high, suppliers will stop production until the oversupply has been depleted. 6.3 as an economic product, real estate is distinguished by a. Its homogeneity. B. Its variety. C. The uniqueness of every parcel. D. Its ability to appreciate in value. 6.3 (c) the uniqueness of every parcel. In comparison with other economic products and services, real estate has certain unique traits. Traits of real estate include: inherent product value; uniqueness of every property; demand must come to the supply; illiquidity; slow to respond to changes; and a decentralized local market. 6.4 the city of stevensville has declared a moratorium on new construction. If demand is increasing, what will be the likely effect on real estate prices in the area? A. Prices level off. B. Prices continue to follow the trend that preceded the moratorium. C. Prices fall. D. Prices rise. 6.4 (d) prices rise. If demand is increasing and a moratorium slows supply, demand will begin to
6.7 when vacancies are declining in a real estate market, it is common for the market to experience a. Rising prices. B. Falling prices. C. Falling construction activity. D. Falling absorption. 6.7 (a) rising prices. Within the business cycle of real estate, declining vacancy indicates a combination of increasing demand which "fills up" supply which in turn decreases. As space becomes scarcer, rents for available space increase. 6.8 the price for any product is a function of four fundamental determinants of value. These are a. Durability, feasibility, mobility, and location. B. Desire, utility, scarcity, and purchasing power. C. Popularity, recognizability, promotion, and rebate. D. Fungibility, costs, convenience, and uniqueness. 6.8 (b) desire, utility, scarcity, and purchasing power. The value of something is based on the answers to four questions: how much do i desire it; how useful is it; how scarce is it; and am i able to pay for it. 6.9 a town is rapidly growing, but all the buildable vacant lots in the most desirable area have already been occupied. In this case, it is likely that the price of existing homes in that area a. Will stabilize, since the population must stabilize. B. Will increase. C. Will decline, since no further building can take place. D. Will not show any predictable movement.
6.9 (b) will increase. If there is no longer a supply to meet the increasing demand of a growing population, prices for existing supply will rise. 6.10 if there is a significant undersupply of homes in a market, construction will tend to increase. This is an example of a. Supply outstripping demand. B. Demand outstripping value. C. Consumer optimism. D. The market tending toward equilibrium. 6.10 (d) the market tending toward equilibrium. A market tends toward a state of equilibrium in which supply equals demand, and price, cost, and value are identical. Thus if supply is scarce, construction will increase to stabilize the imbalance. 6.11 if commercial real estate rental prices are falling in a market, it is likely that a. Demand has outstripped supply of space. B. The market is in equilibrium. C. The market is over-supplied. D. Employment is increasing. 6.11 (c) the market is over-supplied. Falling prices indicate an oversupply of commercial properties in relation to demand. In this case, construction of new supply will also slow down. 6.12 a construction boom in a market is an indication that prices a. Have been increasing. B. Have been declining.
of total employment, which includes secondary and support industries, and which creates demand for all types of real estate. 6.15 what is "vacancy" in real estate market economics? A. A property that has no owner-occupant b. The total number of properties of a certain type that are on the market at a given time c. The absence of certain types of users in a given market area d. The total existing space of a certain type that is unoccupied at a given time 6.15 (d) the total existing space of a certain type that is unoccupied at a given time vacancy is the amount of total real estate inventory of a certain type that is unoccupied at a given time. It is often stated as a percentage of total inventory, the vacancy rate for that property type. 6.16 a moratorium on new construction is an example of a. Local government influencing the real estate market, regardless of demand. B. The natural result of demand exceeding supply in a local market. C. Government promotion of the free market concept in the local real estate market. D. A government policy that aims to restrain a trend of rising prices in the local real estate market. 6.16 (a) local government influencing the real estate market, regardless of demand. Local governments sometimes declare a moratorium on new construction because of present or projected inadequacies of the infrastructure—water, sewer, power, roads, etc.—or because of the desire to conform to a master plan. The result may be to drive up prices, as supply cannot freely increase to meet demand.
6.17 of the following potential influences on a local real estate market, which one would be considered local, rather than regional, national, or global? A. Changes in money supply b. Federal reserve interest rates c. In- and out-migrations of major employers d. Trade imbalances with foreign trading partners 6.17 (c) in- and out-migrations of major employers changes in employment numbers in a local market area, especially in major industries, have a direct impact on real estate demand in the area. Money supply, interest rates, and trade imbalances also have an impact, but they are regional or national factors rather than strictly local. 6.18 there is a lot of new construction going on in the town of florence. Which of the following would most likely be the immediate effect on the real estate market? A. Demand increases and prices rise. B. Vacancy rises and prices fall. C. Absorption and vacancy decrease. D. Supply decreases relative to demand. 6.18 (b) vacancy rises and prices fall. New construction generally occurs to meet an excess of demand. By adding supply, it tends to increase vacancy and lower prices until supply-demand equilibrium is achieved. 6.19 what kind of real estate users are most concerned with neighborhood quality, access to services, property amenities, and quality of life in their demand for real estate? A. Retail
C. Supply and demand. D. Utility. 6.21 (b) anticipation. Anticipation is the value principle that a buyer will pay a price based on the benefits the buyer expects to derive from a property over a holding period. For example, if an investor anticipates an annual rental income from a leased property to be one million dollars, this expected sum has a direct bearing on what the investor will pay for the property. 6.22 which of the following situations illustrates the principle of contribution? A. A homebuyer makes a down payment of 20% instead of the 10% the lender requires. B. A homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,000. C. The appraised value of a house goes up by $20,000 over a two-year period because of the prices recently paid for other houses in the neighborhood. D. Because of a decline in mortgage interest rates, a homeowner in a certain market is able to list her house at a higher price. 6.22 (b) a homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,000. The principle of contribution focuses on the degree to which a particular improvement affects market value of the overall property. In essence, the contribution of the improvement is equal to the change in market value that the addition of the improvement causes. For example, adding a bathroom to a house may contribute an additional $15,000 to the appraised value. Thus the contribution of the bathroom is $15,000.
6.23 when a property owner combines two adjacent properties to create a single property with a higher value than the sum of the values of the two separate properties, the applicable principle of value is called a. Assemblage. B. Accretion. C. Progression. D. Subdivision. 6.23 (a) assemblage. Assemblage, or the conjoining of adjacent properties, sometimes creates a combined value that is greater than the values of the unassembled properties. The excess value created by assemblage is called plottage value. 6.24 what is the difference between market value and market price, if any? A. There is no difference. B. Market value is a broker's estimate; market price is a precise number derived by a licensed appraiser. C. Market value is an average price derived from comparable sales; market price is a price based on the cost of creating the property. D. Market value is an estimate; market price is the price at which a property sold. 6.24 (d) market value is an estimate; market price is the price at which a property sold. Market value is an estimate of the price at which a property will sell at a particular time. The market price, as opposed to market value, is what a property actually sells for. Market price should theoretically be the same as market value if all the conditions essential for market value are present. Market price, however, may not reflect the analysis of comparables and of investment value that an estimate of market value includes.
make dollar adjustments to the listing prices to account for competitive differences with the subject. D. Apply an appreciation factor to the price at which the subject property most recently sold and make dollar adjustments to account for competitive differences with comparable properties currently for sale. 6.27 (b) make dollar adjustments to the sale prices of comparable properties to account for competitive differences with the subject. The sales comparison approach consists of comparing sale prices of recently sold properties that are comparable with the subject, and making dollar adjustments to the price of each comparable to account for competitive differences with the subject. After identifying the adjusted value of each comparable, the appraiser weights the reliability of each comparable and the factors underlying how the adjustments were made. The weighting yields a final value range based on the most reliable factors in the analysis. 6.28 one of the strengths of the sales comparison approach is that it a. Takes into account the subject property's investment value. B. Reveals the profit margin of the builder or developer of the subject property. C. Discovers the underlying value of the subject property apart from the influence of competing properties. D. Takes into account the competitive value of specific amenities of the subject property. 6.28 (d) takes into account the competitive value of specific amenities of the subject property. The sales comparison approach is widely used because it takes into account the subject property's specific amenities in relation to competing properties. In addition, because of the currency of its data, the approach incorporates present market realities.
6.29 in making dollar adjustments in the sales comparison approach, the appraiser a. Adds value to a comparable that is inferior to the subject property. B. Adds value to the subject property if it is inferior to a comparable. C. Subtracts value from a comparable that is inferior to the subject property. D. Subtracts value from the subject property if it is inferior to a comparable. 6.29 (a) adds value to a comparable that is inferior to the subject property. If the comparable is inferior to the subject in some characteristic, an amount is added to the price of the comparable. If the comparable is better than the subject in some characteristic, an amount is deducted from the sale price of the comparable. This neutralizes the comparable's competitive advantage or disadvantage in an adjustment category. For example, a comparable has a swimming pool and the subject does not. To equalize the difference, the appraiser deducts an amount, say $6,000, from the sale price of the comparable. 6.30 the best comparable property for use in the sales comparison approach is the one that a. Requires the most and largest adjustments. B. Requires the fewest and smallest adjustments. C. Sold most recently at the highest price. D. Is located closest to the subject property. 6.30 (b) requires the fewest and smallest adjustments. As a rule, the fewer the total number of adjustments, the smaller the adjustment amounts, and the less the total adjustment amount, the more reliable the comparable. 6.31 a house is being appraised using the sales comparison approach. The house has three bedrooms, two bathrooms, and a patio. The appraiser selects
6.33 one of the strengths of the cost approach is that it a. Takes into account the amount of money required to develop a similar property. B. Is very accurate for a property with new improvements that represent the highest and best use. C. Results in an actual price in dollars instead of an estimated value. D. Reveals the owner's return on money invested in the cost of development. 6.33 (b) is very accurate for a property with new improvements that represent the highest and best use. The strengths of the cost approach are that it: provides an upper limit for the subject's value based on the undepreciated cost of reproducing the improvements. It is also very accurate for valuing a property with new improvements which are the highest and best use of the property. 6.34 the principle underlying depreciation from physical deterioration is that a. Eventually, a property loses all of its value. B. A property loses a portion of its value each year because of economic obsolescence. C. A property loses the same increment of value each year over the economic life of the property. D. The value lost to depreciation is incurable. 6.34 (c) a property loses the same increment of value each year over the economic life of the property. All property improvements have an economic life, which becomes incrementally shorter year after year as physical deterioration takes its toll. The property as a whole does not lose value, since land itself does not depreciate. Similarly, an improvement can regain value if it is repaired or updated. Finally, not all properties lose value from economic obsolescence.
6.35 a property is being appraised by the cost approach. The appraiser estimates that the land is worth $150,000 and the replacement cost of the improvements is $475,000. Total depreciation from all causes is $50,000. What is the indicated value of the property? A. $675,000. B. $650,000. C. $625,000. D. $575,000. 6.35 (d) $575,000. To appraise value using the cost approach, add the land value to the value of the depreciated improvement. Thus you have $150,000 + ($475,000 - 50,000), or $575,000. 6.36 which of the following statements properly describes how to apply the income capitalization approach to appraisal? A. Apply a rate of return to the price paid for an income property. B. Divide the income a property generates by a rate of return. C. Estimate the amount of income a property must generate to return the capital amount invested in it. D. Estimate the rate of return a property owner receives from income generated by the property. 6.36 (b) divide the income a property generates by a rate of return. An appraiser obtains an indication of value from the income capitalization method by dividing the estimated net operating income for the subject by the rate of return, or capitalization rate. The formula is: noi / cap rate = value. 6.37 a strength of the income capitalization approach is that it a. Uses a rate of return that is required for all potential purchasers in a market.
b. .01. C. .08. D. 150. 6.39 (d) 150. The monthly gross rent multiplier for a property is equal to the price divided by the monthly rent. Thus, ($450,000 ÷ $3,000) = 150. 6.40 a rental house has monthly gross income of $2,400. A suitable gross income multiplier derived from market data is 14.1. What estimated sale price (to the nearest $1,000) is indicated? A. $338,000. B. $204,000. C. $406,000. D. $346,000. 6.40 (c) $406,000. Multiply the monthly gross income times 12 to derive annual income. Multiply annual income times the gross income multiplier to derive the estimate of price. Thus, $2,400 times 12 equals $28,800. This times 14.1 equals $406,080, or $406,000 rounded. 6.41 a certified appraiser is one who has received certification by a. A licensed real estate school. B. The appraisal institute. C. The state in which the appraiser operates. D. The appraisal review board. 6.41 (c) the state in which the appraiser operates. A state-certified appraiser is one who has passed the necessary examinations
and competency standards as established by each state in conformance with the federal standards. 6.42 the act that required federally-related appraisals to be conducted by a certified appraiser is known as a. The financial institutions reform, recovery and enforcement act (firrea). B. The uniform standards of professional appraisal practice act (uspapa). C. The appraisal foundation authorization and reform act (afar). D. The federal institution for regulation and enforcement of appraisal act (fireaa). 6.42 (a) the financial institutions reform, recovery and enforcement act (firrea). Title xi of firrea requires that competent individuals whose professional conduct is properly supervised perform all appraisals used in federally-related transactions. As of january 1, 1993, such federally-related appraisals must be performed only by state-certified appraisers. 6.43 as a component of real estate value, the principle of substitution states that a. If two similar properties are for sale, a buyer will purchase the cheaper of the two. B. If one of two adjacent homes is more valuable, the price of the other home will tend to rise. C. If too many properties are built in a market, the prices will tend to go down. D. People will readily move to another home if it is of equal value. 6.43 (a) if two similar properties are for sale, a buyer will purchase the cheaper of the two. According to the principle of substitution, a buyer will pay no more for a property than the buyer would have to pay for an equally desirable and available substitute property. For example, if three houses for sale are
