24 JUN 2026 : PRINCIPLES AND CONCEPT OF VALUE: ASSESSMENT

Which principle states that the value of a property is influenced by the cost of producing a similar property?

• Competition

• Conformity

• Substitution
  
  
  

• Balance

Which term represents the amount a buyer is willing to pay and a seller is willing to accept?

• Cost
  

• Price

• Value

• Worth

What is the primary determinant of market value in real estate?

• Historical ownership

• Supply and demand

• Government regulations

• Construction cost

The principle of substitution states that a property’s value is determined by:

• A) The cost of building an identical property

• B) The amount spent on renovations

• C) The cost of an equivalent substitute property

• D) Its location

In valuation, the term "depreciation" refers to:

• A) The decline in market value due to wear and tear or obsolescence

• B) An increase in property value over time

• C) The cost of construction adjustments

• D) A tax deduction on property income

Which of the following is NOT a type of depreciation?

• A) Physical deterioration

• B) Functional obsolescence

• C) Economic obsolescence

• D) Structural appreciation

What does "fair market value" assume?

• A) A buyer under duress

• B) A willing buyer and seller acting without pressure

• C) A seller in financial difficulty

• D) A buyer with limited market knowledge

What is the main difference between price and value?

• A) Price reflects market demand, while value reflects actual cost.

• B) Price is what is paid, while value is what it’s worth.

• C) Value is fixed, while price fluctuates.

• D) Price depends on the property’s location, while value doesn’t.

Which of the following represents the "highest and best use" of a property?

• A) The current use of the property

• B) The use that maximizes the property’s value under legal, physical, and financial constraints

• C) The most affordable use of the property

• D) The use that minimizes environmental impact

What type of cost includes expenses related to materials, labor, and overhead?

• A) Soft costs

• B) Hard costs

• C) Replacement costs

• D) Opportunity costs