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AL Real Estate practice questions

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Question 1Real Property Characteristics, Legal Descriptions, and Property Use

Which of these items installed in a house is most likely to be classified as a fixture?

  1. A freestanding refrigerator plugged into a wall outlet
  2. A built-in dishwasher Correct answer.
  3. A potted plant on the windowsill
  4. A portable microwave on the counter

Explanation

A fixture is personal property that has been annexed to and become part of the realty. A built-in dishwasher is set into the cabinetry and adapted to the use of the home, so it normally conveys with the house. Items that can be unplugged or carried away without damage usually remain personal property.

Question 2Real Property Characteristics, Legal Descriptions, and Property Use

How many acres are contained in one section of land under the U.S. government survey system?

  1. 160 acres
  2. 36 acres
  3. 640 acres Correct answer.
  4. 1,280 acres

Explanation

A section is a one-square-mile block of land containing 640 acres. Thirty-six sections make up a full township. Smaller aliquot parts are carved out by repeatedly halving the section.

Question 3Real Property Characteristics, Legal Descriptions, and Property Use

A township in the rectangular government survey is how large?

  1. 640 square miles
  2. 36 square miles Correct answer.
  3. 6 square miles
  4. 12 square miles

Explanation

A township measures six miles on each side, so it covers 36 square miles. It is divided into 36 sections of one square mile each. Townships are located by reference to a base line and a principal meridian.

Question 4Real Property Characteristics, Legal Descriptions, and Property Use

A deed begins at a stated point of beginning and then gives a series of compass bearings and distances before returning to that point. Which type of legal description is this?

  1. Metes and bounds Correct answer.
  2. Monument record
  3. Government survey
  4. Lot and block

Explanation

A metes and bounds description measures the parcel by courses (bearings) and distances beginning at a point of beginning, and it must close back on that point. It is commonly used where parcels are irregular. Lot and block and government survey descriptions rely on plats and section lines instead.

Question 5Real Property Characteristics, Legal Descriptions, and Property Use

Rights that belong to an owner whose land borders a lake, sea, or other large body of standing water are known as:

  1. Riparian rights
  2. Prescriptive rights
  3. Easement rights
  4. Littoral rights Correct answer.

Explanation

Littoral rights attach to land bordering a sea, lake, or pond, while riparian rights attach to land bordering a flowing stream or river. Both concern access to and use of the water.

Question 6Real Property Characteristics, Legal Descriptions, and Property Use

Which statement about using a street address as a property description in a deed is accurate?

  1. It becomes sufficient once a buyer occupies the property
  2. It is not a sufficient legal description for a deed Correct answer.
  3. It is acceptable if the county tax records match the address
  4. It is sufficient once the post office assigns the address

Explanation

A deed must contain a description that allows the parcel to be located with reasonable certainty. A street address alone is too indefinite because addresses change and do not define boundaries. A metes and bounds, lot and block, or government survey description is required.

Question 7Real Property Characteristics, Legal Descriptions, and Property Use

In the government survey system, which section of a township lies in the northeast corner?

  1. Section 31
  2. Section 6
  3. Section 1 Correct answer.
  4. Section 36

Explanation

Section numbering starts with section 1 in the northeast corner and runs west across the top row, then east across the next row, in a serpentine pattern. The numbering ends with section 36 in the southeast corner.

Question 8Real Property Characteristics, Legal Descriptions, and Property Use

A parcel is described as the SW 1/4 of the NE 1/4 of a section. How many acres does the parcel contain?

  1. 10 acres
  2. 80 acres
  3. 20 acres
  4. 40 acres Correct answer.

Explanation

A section has 640 acres, so each quarter section contains 160 acres. One quarter of that quarter section contains 40 acres. Halving a quarter section again would produce 20 acres.

Question 9Real Property Characteristics, Legal Descriptions, and Property Use

A deed calls for a boundary running 200 feet to a large oak tree, but a survey shows the tree is only 190 feet away. Which controls the boundary location?

  1. The oak tree as the natural monument Correct answer.
  2. The lot lines shown on the tax assessor's map
  3. The stated distance of 200 feet
  4. The average of the distance and the monument

Explanation

In the order of calls used to resolve conflicting description elements, natural monuments rank above courses and distances. The tree is the more certain and original marker, so the measured distance yields to it.

Question 10Real Property Characteristics, Legal Descriptions, and Property Use

A retail tenant installs trade fixtures in a leased store. Under the usual rule, the tenant:

  1. Must obtain a variance before removing the shelving
  2. Loses ownership of the shelving when the lease begins
  3. Must leave the shelving because it is a fixture
  4. May remove the shelving before the lease ends Correct answer.

Explanation

Trade fixtures are items a tenant attaches to carry on a business, and the tenant may remove them before the lease expires. Removal must be done in a way that avoids substantial damage to the premises. Anything left behind generally becomes the landlord's property.

Question 11Real Property Characteristics, Legal Descriptions, and Property Use

A flood suddenly cuts a new channel across a riverside farm, leaving the old channel dry. The boundary of the affected owners generally:

  1. Shifts gradually as the water recedes
  2. Is set by the state's record title
  3. Moves with the new channel
  4. Remains at the old channel Correct answer.

Explanation

A sudden, perceptible change in a stream's course is avulsion. Because the change is not gradual, boundary lines stay where the old channel ran. Boundaries move only through slow processes such as accretion and reliction.

Question 12Real Property Characteristics, Legal Descriptions, and Property Use

A building used as a small shop was lawfully operating before the surrounding area was zoned for residential use only. The shop may continue to operate as:

  1. A variance
  2. A zone change
  3. A conditional use
  4. A legal nonconforming use Correct answer.

Explanation

A use that existed lawfully before a zoning ordinance took effect may continue as a legal nonconforming use. It is typically protected so long as it is not abandoned or enlarged beyond what the ordinance allows.

Question 13Real Property Characteristics, Legal Descriptions, and Property Use

A homeowner's lot is too narrow to satisfy the current side-yard setback. The owner asks for permission to build closer to the side line than the ordinance allows. The proper request is for:

  1. A conditional use permit
  2. Rezoning of the parcel
  3. A special exception
  4. A variance Correct answer.

Explanation

A variance grants relief from the literal terms of a zoning ordinance when strict application would cause unnecessary hardship. Setback and lot-width rules are dimensional requirements, so the appropriate remedy is a variance.

Question 14Real Property Characteristics, Legal Descriptions, and Property Use

A lot and block legal description depends primarily on:

  1. A plat map recorded in the county records Correct answer.
  2. Monuments set by the original surveyor
  3. Township, range, and section numbers
  4. A point of beginning and courses

Explanation

A lot and block description identifies a lot by its number and block on a subdivision plat that has been surveyed, approved, and recorded. Once recorded, the plat itself supplies the boundary detail.

Question 15Real Property Characteristics, Legal Descriptions, and Property Use

In the government survey system, range lines are the north-south lines that are numbered:

  1. East and west from the base line
  2. North and south from the principal meridian
  3. North and south from the base line
  4. East and west from the principal meridian Correct answer.

Explanation

Range lines run north and south and are counted east and west from a principal meridian. Township lines run east and west and are counted north and south from a base line.

Question 16Real Property Characteristics, Legal Descriptions, and Property Use

When the mineral rights to a parcel are conveyed separately from the surface, the mineral owner generally:

  1. Keeps a right of reasonable access to extract the minerals Correct answer.
  2. Loses any right to reach the minerals
  3. Must sell the minerals back within one year
  4. Owns the surface estate as well

Explanation

Severing the mineral estate creates a separate ownership interest, and the mineral owner may enter the surface to extract the minerals using reasonable methods. The surface owner retains the surface estate but cannot block necessary access entirely.

Question 17Real Property Characteristics, Legal Descriptions, and Property Use

A tract is described as the north half of the southwest quarter of the northeast quarter of Section 12. How many acres does the tract contain?

  1. 20 acres Correct answer.
  2. 40 acres
  3. 10 acres
  4. 80 acres

Explanation

Start with 640 acres in the section and halve or quarter as the description directs. The northeast quarter is 160 acres, its southwest quarter is 40 acres, and the north half of that is 20 acres.

Question 18Real Property Characteristics, Legal Descriptions, and Property Use

An owner's land is bounded by a non-navigable stream that is not described by metes and bounds in the deed. The owner's boundary generally extends:

  1. To the far bank of the stream
  2. To the ordinary high-water mark on the near bank
  3. Only to the low-water mark of the stream
  4. To the center, or thread, of the stream Correct answer.

Explanation

An owner of land bordering a non-navigable stream is presumed to own to the thread, or center, of the stream, subject to the public's right to use the water. On navigable waters the state holds the bed, and the upland owner's boundary is generally the ordinary high-water mark.

Question 19Real Property Characteristics, Legal Descriptions, and Property Use

Why are sections along the north and west sides of a township sometimes smaller than 640 acres?

  1. Because the numbering of sections begins in those locations
  2. Because those sections are reserved for school purposes
  3. Because correction lines adjust for the convergence of meridian lines Correct answer.
  4. Because public roads are dedicated from those sections

Explanation

Meridians converge as they run north, so survey lines cannot remain perfectly square over long distances. Correction lines are used to absorb the error, which leaves the sections along the north and west boundaries of a township fractional, often under 640 acres.

Question 20Real Property Characteristics, Legal Descriptions, and Property Use

A city rezones one small lot in the middle of a stable residential neighborhood to permit a commercial use that mainly benefits that lot's owner. This action is best characterized as:

  1. A planned unit development approval
  2. A valid conditional use approval
  3. A lawful area variance
  4. Spot zoning, which is generally invalid Correct answer.

Explanation

Rezoning a single small parcel in a way that is inconsistent with the surrounding area and serves primarily a private interest is spot zoning. Courts generally set such amendments aside as arbitrary because they are not made in accordance with a comprehensive plan.

Question 21Forms of Ownership, Transfer, and Recording of Title

Two unrelated investors take title to a parcel as tenants in common, each contributing equal cash. Which statement best describes their ownership?

  1. Each owns a physically divided portion of the parcel to the exclusion of the other.
  2. Each owns an undivided interest with a right of survivorship.
  3. Each owns a separate undivided interest that passes to their heirs at death. Correct answer.
  4. Each owns the whole parcel jointly, and neither may convey an interest without consent.

Explanation

A tenancy in common gives each co-tenant a separate undivided interest in the whole property, with no right of survivorship. When a tenant in common dies, that interest passes by will or intestate succession to the owner's heirs rather than to the other co-tenants. Each co-tenant may also convey or encumber his or her own interest without the others' consent.

Question 22Forms of Ownership, Transfer, and Recording of Title

Creation of a joint tenancy with right of survivorship requires four unities. Which set correctly identifies them?

  1. Title, value, consent, and occupancy
  2. Possession, payment, notice, and intent
  3. Time, title, interest, and possession Correct answer.
  4. Seisin, conveyance, warranty, and recording

Explanation

A joint tenancy requires unity of time, unity of title, unity of interest, and unity of possession. If any of these unities is missing, the co-ownership is generally treated as a tenancy in common. The right of survivorship flows from the presence of all four unities.

Question 23Forms of Ownership, Transfer, and Recording of Title

In Alabama, which circumstance is required for a tenancy by the entirety to arise?

  1. The co-owners must be married to each other at the time of conveyance. Correct answer.
  2. The co-owners must contribute equal amounts of purchase money.
  3. The co-owners must record a written survivorship agreement.
  4. The co-owners must be business partners who take title in a single deed.

Explanation

A tenancy by the entirety can be created only between a husband and wife who are legally married when title is taken. Each spouse then holds an undivided interest in the whole with a right of survivorship, and neither spouse can unilaterally convey or encumber the property. Equal contributions and separate survivorship agreements are irrelevant to its creation.

Question 24Forms of Ownership, Transfer, and Recording of Title

A buyer purchases shares of a corporation and receives a long-term proprietary lease for a specific apartment. Which form of ownership has the buyer acquired?

  1. A tenancy in common
  2. Condominium ownership
  3. A timeshare interest
  4. A cooperative interest Correct answer.

Explanation

In a cooperative, a corporation owns the building and the resident buys stock in that corporation together with a proprietary lease to a particular unit. The buyer does not receive a deed to the unit itself. Condominium ownership, by contrast, involves fee title to a unit plus a share of the common elements.

Question 25Forms of Ownership, Transfer, and Recording of Title

In a condominium form of ownership, what does the unit owner hold?

  1. A right to occupy the unit for a fixed recurring period each year
  2. Fee simple title to the unit plus an undivided share of the common elements Correct answer.
  3. Fee simple title to the unit with no interest whatsoever in the common areas
  4. A proprietary lease and shares of stock in the building's corporation

Explanation

Condominium ownership combines individual fee simple title to the unit with an undivided interest, held as a tenant in common with the other owners, in the common elements. The owner may typically sell or mortgage the unit independently. The common elements are owned collectively rather than by the association alone.

Question 26Forms of Ownership, Transfer, and Recording of Title

A grantor who is unsure whether she owns any interest in a lot signs a deed containing no covenants and conveying only whatever interest she may hold. This instrument is best described as:

  1. A quitclaim deed Correct answer.
  2. A deed of trust
  3. A special warranty deed
  4. A general warranty deed

Explanation

A quitclaim deed contains no covenants of title and simply releases whatever interest, if any, the grantor may have in the property. It offers the grantee no assurance that the grantor actually owns anything. Warranty deeds, by contrast, contain promises about the state of the title.

Question 27Forms of Ownership, Transfer, and Recording of Title

Which covenant found in a general warranty deed is a future covenant that runs with the land?

  1. Covenant of quiet enjoyment Correct answer.
  2. Covenant of right to convey
  3. Covenant against encumbrances
  4. Covenant of seisin

Explanation

The future covenants in a general warranty deed are quiet enjoyment, warranty, and further assurance; they are breached, if at all, after the conveyance and benefit later grantees. Seisin, right to convey, and freedom from encumbrances are present covenants that can only be breached at the time of delivery.

Question 28Forms of Ownership, Transfer, and Recording of Title

Owen deeds his lot to Priya, who does not record. Owen then deeds the same lot to Rafael, who pays value with no notice of Priya's deed and records at once. Under Alabama's recording statute, who holds superior title?

  1. Priya, because her deed was executed and delivered first
  2. Rafael, a subsequent purchaser for value without notice Correct answer.
  3. Owen, because neither deed was recorded before the second sale
  4. Priya, because the first grantee in time always prevails in Alabama

Explanation

Alabama's recording statute protects a later purchaser who pays value and takes without notice of a prior unrecorded conveyance, even if that purchaser is second in time. Priya's unrecorded deed gave Rafael no constructive notice, so his recorded deed prevails. Recording is what converts a conveyance into notice to the world.

Question 29Forms of Ownership, Transfer, and Recording of Title

A grantor signs a valid deed, acknowledges it, and hands it to the grantee, who accepts it. The deed is never recorded. What is the effect on title?

  1. Title passes only when the deed is entered in the probate records.
  2. Title stays with the grantor until the deed is both acknowledged and recorded.
  3. Title passes only after the grantee also signs the instrument.
  4. Title passes on delivery and acceptance; recording affects only priority. Correct answer.

Explanation

A deed becomes effective to transfer title upon delivery by the grantor and acceptance by the grantee. Recording does not create the transfer; it protects the grantee against later purchasers and gives constructive notice. Acknowledgment is likewise a recording prerequisite rather than a requirement of validity.

Question 30Forms of Ownership, Transfer, and Recording of Title

Which element is essential to a valid Alabama deed?

  1. A statement of the property's assessed value
  2. Acknowledgment before a notary public
  3. The grantee's signature on the instrument
  4. A legal description of the property Correct answer.

Explanation

A valid deed must be in writing, identify the parties, contain words of conveyance, describe the land sufficiently to locate it, be signed by the grantor, and be delivered. Acknowledgment and assessed value statements relate to recording or taxation rather than to validity. The grantee generally need not sign.

Question 31Forms of Ownership, Transfer, and Recording of Title

A grantor conveys property by a deed in which she warrants title only against defects arising by, through, or under her own acts. This instrument is a:

  1. Deed of trust
  2. Special warranty deed Correct answer.
  3. Quitclaim deed
  4. General warranty deed

Explanation

A special warranty deed limits the grantor's promises to defects that arose during the grantor's own period of ownership. It does not warrant against defects created by earlier owners. A general warranty deed, by contrast, covers the entire chain of title.

Question 32Forms of Ownership, Transfer, and Recording of Title

A properly recorded deed in the county where the land lies gives which type of notice?

  1. Actual notice only to those who read the record
  2. No notice at all unless the purchaser examines the deed
  3. Inquiry notice only to immediate neighbors
  4. Constructive notice to the world Correct answer.

Explanation

Recording in the county where the property is located gives constructive notice of the instrument's contents to everyone, whether or not they actually examine the records. Actual notice arises from what a party really knows, and inquiry notice arises from facts that would prompt a reasonable investigation. Constructive notice is what makes the recording system work.

Question 33Forms of Ownership, Transfer, and Recording of Title

An Alabama deed conveys a parcel "to Alice and Ben and their heirs and assigns" with no further language. Alice and Ben are not married. How do they hold title?

  1. As joint tenants with right of survivorship, because they were named together in one deed
  2. As tenants in common, because joint tenancy must be expressly stated Correct answer.
  3. As tenants by the entirety, because they acquired title by the same instrument
  4. As joint tenants, but only once the deed is recorded

Explanation

Alabama presumes that a conveyance to two or more persons creates a tenancy in common unless a joint tenancy is expressly declared in the instrument. Naming grantees together in one deed does not by itself create survivorship. A tenancy by the entirety requires a valid marriage between the grantees.

Question 34Forms of Ownership, Transfer, and Recording of Title

In Alabama, a married person dies testate and leaves all real property to someone other than the surviving spouse. What protection does the surviving spouse generally have?

  1. A right to elect a share of the estate against the will Correct answer.
  2. A common law dower right of one-third for life in all real property
  3. A curtesy right in every parcel the couple ever occupied
  4. No interest, because a valid will controls the entire estate

Explanation

Alabama has abolished common law dower and curtesy and instead gives a surviving spouse the right to elect a statutory share of the decedent's estate in lieu of the will's provisions. The election must generally be made within the statutory period after the will is admitted to probate. A will cannot defeat a timely election.

Question 35Forms of Ownership, Transfer, and Recording of Title

Three siblings inherit a farm as tenants in common. Two want to sell; one refuses. What remedy best fits the two who want to sell?

  1. Bring an ejectment action against the refusing sibling
  2. Deliver a quitclaim deed to one another and abandon the property
  3. File a partition action, which may end in a sale of the land Correct answer.
  4. Record a lis pendens and wait out a statutory redemption period

Explanation

A tenant in common has the right to demand partition, and a court may divide the property in kind or, when fair division is impractical, order it sold and the proceeds divided. Co-tenants are not locked in by one owner's refusal to sell. Ejectment and lis pendens do not resolve a dispute among co-owners over sale of the property.

Question 36Forms of Ownership, Transfer, and Recording of Title

A deed grants "a perpetual right of way across Lot 1 for the benefit of Lot 2." A later purchaser of Lot 2:

  1. Takes the right of way automatically because it runs with the land Correct answer.
  2. Holds the right only if the original grantee still owns Lot 1
  3. Loses the right of way, because easements end when the benefited land is sold
  4. Must record a new easement to keep using the way

Explanation

An easement appurtenant benefits a particular parcel (the dominant estate) and passes automatically with a transfer of that parcel, even if the deed is silent. Buyers of the benefited land take the benefit because the easement runs with the land. No new instrument or recording is needed for that result.

Question 37Property Valuation and Appraisal

In appraisal practice, market value is best described as which of the following?

  1. the price paid in the most recent recorded transfer
  2. the assessed value set by the county tax assessor
  3. the most probable price in an open, competitive market Correct answer.
  4. the highest price any buyer could be persuaded to pay

Explanation

Market value is an opinion of the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with both parties acting prudently and without undue stimulus. It is a forecast of a typical transaction, not a record of any single past sale or an assessed figure.

Question 38Property Valuation and Appraisal

A subject house has three bedrooms. A comparable house with four bedrooms sold for $300,000, and the appraiser estimates each bedroom contributes $10,000 to value. What is the adjusted sale price of the comparable?

  1. $300,000
  2. $280,000
  3. $290,000 Correct answer.
  4. $310,000

Explanation

Adjustments are always made to the comparable's price to make it equivalent to the subject. Because the comparable is superior to the subject in bedroom count, its price is adjusted downward by $10,000, yielding $290,000.

Question 39Property Valuation and Appraisal

A duplex sells for $240,000 and rents for $2,000 per month. What is the indicated gross rent multiplier?

  1. 8.33
  2. 12
  3. 0.0083
  4. 120 Correct answer.

Explanation

The gross rent multiplier equals sale price divided by gross monthly rent. Dividing $240,000 by $2,000 gives 120.

Question 40Property Valuation and Appraisal

A property produces net operating income of $36,000, and the market capitalization rate is 9%. What is the indicated value by direct capitalization?

  1. $324,000
  2. $400,000 Correct answer.
  3. $36,000
  4. $450,000

Explanation

Direct capitalization converts income into value by dividing net operating income by the capitalization rate. $36,000 divided by 0.09 equals $400,000.

Question 41Property Valuation and Appraisal

The principle of substitution holds that which of the following is true?

  1. value is created by the expectation of future benefits to be derived from ownership
  2. the value of an improvement is measured by what it originally cost to build
  3. a property's value is fixed by the price paid by its first owner
  4. a buyer will pay no more than the cost of an equally desirable substitute Correct answer.

Explanation

Substitution states that a prudent buyer will pay no more for a property than the amount required to acquire an equally desirable substitute with similar utility. It is the foundation of the sales comparison and cost approaches.

Question 42Property Valuation and Appraisal

An owner spends $60,000 installing a swimming pool that adds only $25,000 to the property's market value. This outcome best illustrates which principle?

  1. anticipation
  2. plottage
  3. conformity
  4. contribution Correct answer.

Explanation

The principle of contribution holds that the value of a component is measured by how much it adds to the whole, not by its cost. The pool contributes $25,000 of value regardless of its $60,000 price.

Question 43Property Valuation and Appraisal

Under federal requirements for federally related transactions, an appraisal must be performed by which of the following?

  1. a certified public accountant engaged by the lender
  2. any real estate broker holding an active license
  3. the lender's own loan production officer
  4. a state-certified or state-licensed appraiser Correct answer.

Explanation

Federal law requires that appraisals used in federally related transactions be performed by individuals who are state-certified or state-licensed appraisers. Brokers, accountants, and loan officers do not qualify unless they separately hold an appraiser credential.

Question 44Property Valuation and Appraisal

A building has a reproduction cost new of $400,000, physical deterioration of $60,000, functional obsolescence of $25,000, and external obsolescence of $15,000. Land value is $100,000. What is the value indicated by the cost approach?

  1. $340,000
  2. $500,000
  3. $400,000 Correct answer.
  4. $440,000

Explanation

The cost approach subtracts all forms of depreciation from cost new and then adds land value. Total depreciation is $100,000, leaving $300,000 for the improvements, which plus $100,000 of land equals $400,000.

Question 45Property Valuation and Appraisal

A residence backs onto a newly built elevated freeway, and traffic noise has reduced its market value. The loss is best classified as which of the following?

  1. functional obsolescence
  2. external obsolescence Correct answer.
  3. physical deterioration
  4. curable deferred maintenance

Explanation

External obsolescence is a loss in value caused by factors outside the property itself, such as adverse neighborhood or environmental influences. Because the freeway is off-site, the loss is external and generally incurable by the owner.

Question 46Property Valuation and Appraisal

The four tests of highest and best use are physical possibility, legal permissibility, financial feasibility, and maximum productivity. Which test is applied last?

  1. physically possible
  2. maximum productivity Correct answer.
  3. financially feasible
  4. legally permissible

Explanation

The tests are applied in sequence: physically possible, legally permissible, financially feasible, and finally maximum productivity. Only uses that survive the first three tests are compared to determine which produces the highest value.

Question 47Property Valuation and Appraisal

Replacement cost differs from reproduction cost in which respect?

  1. it includes the developer's entrepreneurial profit and full overhead
  2. it is based on land value plus the depreciated site improvements
  3. it estimates the cost of a building of equal utility using current methods Correct answer.
  4. it may be used only when the subject building is new construction

Explanation

Reproduction cost estimates the cost to duplicate the subject exactly with the same materials and design, while replacement cost estimates the cost of a building with equivalent utility built to current standards. Replacement cost is the more common estimate for older improvements.

Question 48Property Valuation and Appraisal

In reconciling value indications for a typical single-family residence, an appraiser gives the greatest weight to the sales comparison approach mainly because it does which of the following?

  1. measures the current cost of reproducing the improvements
  2. reflects the actions of typical buyers and sellers in that market Correct answer.
  3. is the only approach permitted for owner-occupied residences
  4. capitalizes the property's net operating income into value

Explanation

Reconciliation weighs the indications according to their relevance and reliability for the property type. For owner-occupied housing, buyers and sellers are guided by prices of competing homes, making the sales comparison approach the most persuasive indicator.

Question 49Property Valuation and Appraisal

A building is 40 years old but has been extensively renovated and now performs like a 10-year-old building. What is its effective age?

  1. 30 years
  2. 40 years
  3. 50 years
  4. 10 years Correct answer.

Explanation

Effective age reflects the condition and utility of a building as of the appraisal date, not its chronological age. Because the renovation restored the building to near-new condition, its effective age is 10 years while its actual age remains 40 years.

Question 50Property Valuation and Appraisal

An investor purchases two adjoining lots for $80,000 and $90,000, assembles them into one parcel, and the combined site appraises at $200,000. The $30,000 increase is known as which of the following?

  1. conformity
  2. surplus productivity
  3. plottage value Correct answer.
  4. progression

Explanation

Plottage is the increase in value created when two or more parcels are combined into a single larger site with greater utility. The $200,000 value exceeds the $170,000 sum of the individual prices by the plottage value.