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25 questions from the real estate salesperson (national) practice test.
10 questions, graded as you go, with the reason for every answer. No sign-up.
A buyer will not pay more for a house than the cost of an equally desirable house nearby. This is the principle of:
D. Substitution
Substitution sets the upper limit of value at the cost of acquiring an equally desirable substitute, and it is the foundation of the sales comparison approach. Contribution deals with the value a single component adds.
Reference: Principle of substitution
An owner spends $40,000 on a swimming pool, and the appraiser finds that it adds $15,000 to the property's market value. Which principle is the appraiser applying?
D. Contribution
Under the principle of contribution, an improvement is worth what it adds to the market value of the whole property, not what it cost. Substitution compares the whole property with other available properties.
Reference: Principle of contribution
The highest and best use of a parcel is the legally permitted, physically possible and financially feasible use that:
B. Produces the greatest value for the land
Highest and best use must pass four tests: legally permissible, physically possible, financially feasible and maximally productive. The present use, the cheapest use and the most similar use may or may not be the one that produces the highest value.
Reference: Principle of highest and best use