Wyoming Real Estate Broker Exam — All Questions

An apartment building produces annual net operating income of $48,000, and comparable sales indicate an 8% capitalization rate. Using the income approach, the indicated value is:

• a.$384,000
• b.$540,000
• c.$600,000✓
• d.$960,000

The income approach uses Value = Net Operating Income / capitalization rate. Here $48,000 / 0.08 = $600,000. Note that a lower cap rate would produce a higher value and a higher cap rate a lower value, so cap rate and value move inversely. Net operating income is income after operating expenses but before debt service and income taxes, which is why financing terms do not change this calculation.

A lender asks a broker to estimate the likely selling price of a home the lender may take back. The broker prepares a broker price opinion (BPO). Which statement is correct?

• a.A BPO is not a certified appraisal and must not be presented as one✓
• b.A BPO carries the same legal weight as a licensed appraisal
• c.Only a BPO, not an appraisal, may be used for a foreclosure sale
• d.A BPO must always be higher than any appraised value

A broker price opinion is an estimate of likely price that a broker may provide where state law allows, often to lenders or asset managers. It is not a certified appraisal, and a licensee must never present it as one or imply appraiser certification. A BPO does not carry the legal weight of an appraisal, is not the exclusive tool for foreclosure valuation, and has no rule requiring it to exceed an appraisal. Clear labeling protects the broker and the office from misrepresentation claims.

A home's floor plan requires walking through one bedroom to reach another, which buyers dislike. This loss in value from an outdated design is an example of:

• a.Physical deterioration
• b.Functional obsolescence✓
• c.External obsolescence
• d.Economic appreciation

Functional obsolescence is a loss in value caused by a feature or design that is outdated or poorly laid out, such as walk-through bedrooms, too few bathrooms, or an awkward floor plan. Physical deterioration is wear and tear on the improvements. External (economic) obsolescence comes from forces outside the property, such as a new highway or a declining neighborhood, and is generally incurable. Recognizing the type of depreciation guides both appraisers and brokers in adjusting value.

In the income approach, which figure represents effective gross income minus operating expenses, before deducting mortgage payments?

• a.Gross rent multiplier
• b.Effective gross income
• c.Cash flow after financing
• d.Net operating income✓

Net operating income (NOI) is effective gross income (potential income less vacancy and collection loss, plus other income) minus operating expenses, but before debt service (mortgage payments) and income taxes. NOI is the figure capitalized to estimate value. Cash flow after financing subtracts the mortgage payment from NOI and is a different measure. The gross rent multiplier is a shortcut that relates price to gross rent and ignores expenses entirely.