Question 1

What is the definition of 'market value' in real estate appraisal?

Accepted Answer

Market value is the most probable price a property would bring in a competitive, open market under fair sale conditions, with both buyer and seller acting knowledgeably and without undue pressure.

Question 2

What is the difference between 'value in use' and 'value in exchange'?

Accepted Answer

Value in use is the value a property has to a specific user for a specific purpose, while value in exchange (market value) is the price the property would command in an open, competitive market.

Question 3

Which federal law regulates appraisers and requires state licensing or certification for appraisers involved in federally related transactions?

Accepted Answer

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 requires state-licensed or state-certified appraisers for federally related real estate transactions.

Question 4

What does the term 'reconciliation' mean in the appraisal process?

Accepted Answer

Reconciliation is the final step in the appraisal process where the appraiser reviews and weighs the value estimates from each of the three approaches to arrive at a single, final value opinion.

Question 5

What does the appraisal principle of 'substitution' state?

Accepted Answer

The principle of substitution states that the maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute property, assuming no costly delay.

Valuation & Appraisal – Texas Real Estate Salesperson Exam

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