National / General cheat sheet
Property Value and Appraisal Texas Real Estate Exam Cheat Sheet
Appraisal questions test the meaning of value, the appraisal process, and when to use the sales comparison, cost, or income approach. They also test CMA and BPO distinctions.
Choose the valuation method before doing arithmetic. The property type and the reason for the valuation usually identify the right approach.
What Pearson tests
- Market value, market price, highest and best use, and the principles and elements of value
- Sales comparison, cost, and income approaches, including depreciation and multipliers
- Appraisal, comparative market analysis, broker price opinion, assessed value, and tax implications
Three traps to catch
- Market price is what was paid. Market value is an opinion under stated market conditions.
- In the sales comparison approach, adjust the comparable, not the subject.
- Physical deterioration, functional obsolescence, and external obsolescence describe different causes of lost value.
Essential vocabulary
Property Value and Appraisal terms to know
- Market value
- The most probable price under the conditions stated in the definition of value.
- Highest and best use
- The legally permitted, physically possible, financially feasible use that produces the greatest value.
- Sales comparison approach
- An approach that compares the subject with recently sold comparable properties.
- Cost approach
- Land value plus replacement or reproduction cost, less depreciation.
- Income approach
- An approach that converts a property's income into an indication of value.
- Depreciation
- Loss in value from physical, functional, or external causes.
- Net operating income
- Effective gross income minus operating expenses, before debt service and income taxes.
- DUST
- Demand, utility, scarcity, and transferability, the four elements commonly used to remember value.
Check your recall
Can you answer these without notes?
1Which approach is usually strongest for a typical owner-occupied home?
The sales comparison approach.
2Which approach starts with land value and construction cost?
The cost approach.
3Does NOI subtract mortgage payments?
No. Debt service is not an operating expense in the standard exam formula.
Use the sheet, then retrieve
Test the rules while they are still fresh.
Read the full lesson when a definition is fuzzy. Then answer the topic questions without looking back at this sheet.
Primary sources
This is exam-prep education, not legal, tax, or transaction advice. Confirm the current law, form, and official exam materials before relying on a rule in practice.