IAAO 102 Exam with Complete Solutions
Question: What is Anticipation in real estate valuation?
Correct answer: Value is created by the expectation of
benefits to be derived in the future.
Question: What is the principle of Substitution in real estate?
Correct answer: The prices, rents, and rates of return of
property tend to be set by the current prices, rents, and rates of return for equally desirable substitute properties.
Question: What is the principle of Contribution in real estate?
Correct answer: The value of a component of real estate can
be measured by the amount it contributes to net operating income because net operating income can be capitalized into value.
Question: What is Market Value?
Correct answer: The most probable price which a property
should bring in a competitive and open market under all conditions.
Question: What are the five analysis questions for investors?
Correct answer: 1. How much does it cost? 2. How much will
I get back? 3. When will I get it back? 4. What are the risks?
- What are some comparable ROI compared to my interested
property?
Question: What is Leverage in real estate?
Correct answer: Borrowing of funds in hopes of earning a
greater return than the cost of the borrowed funds. This amount can be negative, positive, or neutral.
Question: What is a Mortgage?
Correct answer: The most common type of financing for real
estate.
Question: What is a Junior Mortgage?
Correct answer: Typically a second mortgage.
Question: What is a Chattel Mortgage?
Correct answer: A mortgage only on personal property.
Question: What is an Amortized Mortgage?
Correct answer: Fixed rate mortgage permanent loan in which
the sum of the principal and interest payments remains fixed throughout the term of the loan.
Question: What are the four factors to capture the overall
yield rate (Yô)?
Correct answer: 1. Safe rate, 2. Risk rate, 3. Rate for non-
liquidity, 4. Rate for management.
Question: What is the Recapture Rate?
Correct answer: Provides for the return of the investment in
the wasting portion of the assets.
Question: What is the Effective Tax Rate (ETR)?
Correct answer: Reflects the relationship between the real
estate taxes and the value of the property.
Question: What is the Income Approach?
Correct answer: One of the three approaches to value in
which the appraiser derives a value indication by converting anticipated benefits through ownership of income-producing property.
Question: What is a lease?
Correct answer: Considered both a contract and conveyance.
Question: What is a Month-to-Month Lease?
Correct answer: Short-term lease that may or may not be in
written form. This type of lease provides no security for the tenant or landlord.
Question: What is a Percentage Lease?
Correct answer: A contract which calls for a fixed minimum
base rent and a variable rent.
