Washington Real Estate Broker Exam — All Questions
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An investor is valuing an apartment building. The appraiser divides the building's net operating income by a capitalization rate. This reflects the:
- a.Cost approach
- b.Income approach✓
- c.Sales comparison approach
- d.Assessed value method
The income approach values income-producing property by capitalizing net operating income (NOI divided by cap rate equals value). It is the primary approach for investment property such as apartments, where income potential drives value.
Which of the following would an appraiser consider a form of external (economic) obsolescence?
- a.An outdated kitchen inside the home
- b.A cracked foundation
- c.Peeling interior paint
- d.A new landfill built next to the property✓
External (economic) obsolescence is a loss in value from factors outside the property, such as a nearby landfill or highway. It is generally incurable by the owner. An outdated kitchen is functional obsolescence, and a cracked foundation is physical deterioration.