Pennsylvania Real Estate Salesperson Exam — All Questions
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An appraiser valuing a single-family home in an established residential neighborhood would rely most heavily on which approach to value?
- a.Cost approach
- b.Income capitalization approach
- c.Gross rent multiplier approach
- d.Sales comparison approach✓
The sales comparison approach analyzes recent sales of similar nearby properties, adjusting for differences, and is the most reliable method for owner-occupied homes. The income approach fits rental or investment property, while the cost approach is best for new or special-purpose buildings.
The principle that a property's maximum value tends to be set by the cost of acquiring an equally desirable substitute is known as:
- a.Conformity
- b.Substitution✓
- c.Contribution
- d.Anticipation
The principle of substitution holds that a buyer will pay no more for a property than the cost of an equally desirable alternative. It underlies the sales comparison approach. Conformity, contribution, and anticipation are separate valuation principles.