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Valuation Practice Questions Preview

This focused set tests Valuation at salesperson level. Answer first, then use the rule and explanation to diagnose why each option wins or fails. Answer this 5-question public preview here, then continue the complete experience in Pass Georgia.

Facts checked against the current PSI Candidate Information Bulletin and GREC sources.

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1 / 5Study mode: Valuation and Market Analysis

Which approach to value is MOST appropriate for a resale single-family home in an established subdivision with many recent sales?

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34% of the real exam is Georgia law. 52 of 152 questions.

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1. Which approach to value is MOST appropriate for a resale single-family home in an established subdivision with many recent sales?Valuation and Market Analysis. Open choices and explanation.
  1. A.Cost approach
  2. B.Income approach
  3. C.Sales comparison approach
  4. D.Gross rent multiplier

Answer C: Sales comparison approach

Sales comparison relies on recent sales of similar nearby homes, which an active subdivision supplies. The cost approach suits new or special-purpose buildings, and the income approach suits rental property.

Why each choice works or fails

  • A. Cost suits new or special-purpose buildings.
  • B. Income suits property bought for its rental income.
  • C. An active subdivision supplies many recent comparable sales.
  • D. GRM is an income technique, not the primary approach for a home.

Rule to remember: Houses use sales comparison. Income property uses income. Unique buildings use cost.

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2. A rental house sells for $280,000 and rents for $2,000 monthly. Using monthly rent, its gross rent multiplier is:Valuation and Market Analysis. Open choices and explanation.
  1. A.0.007
  2. B.11.7
  3. C.140
  4. D.1,680

Answer C: 140

Gross rent multiplier is sale price divided by monthly gross rent: $280,000 / $2,000 = 140. Dividing by annual rent of $24,000 gives 11.7, which is an annual gross income multiplier, not the monthly GRM the stem asks for.

Why each choice works or fails

  • A. 0.007 divides rent by price, inverting the formula.
  • B. 11.7 uses annual rent, giving an annual gross income multiplier.
  • C. Correct. $280,000 divided by $2,000 monthly rent is 140.
  • D. 1,680 multiplies the monthly GRM by 12 instead of keeping one period.

Work it through

  1. $280,000 / $2,000 = 140

Rule to remember: Monthly gross rent multiplier equals sale price divided by monthly gross rent.

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3. A property has $72,000 in gross income and $48,000 in net operating income. It sells for $600,000. What is the capitalization rate?Valuation and Market Analysis. Open choices and explanation.
  1. A.8%
  2. B.12%
  3. C.12.5%
  4. D.80%

Answer A: 8%

Cap rate is net operating income divided by value: $48,000 / $600,000 = 0.08, or 8 percent. Gross income is a distractor, because operating expenses must come out before capitalizing.

Why each choice works or fails

  • A. Correct. $48,000 / $600,000 = 8%.
  • B. 12% uses gross income instead of NOI.
  • C. 12.5 is the inverse ratio, value divided by NOI.
  • D. 80% misplaces the decimal.

Work it through

  1. $48,000 / $600,000 = 0.08
  2. 0.08 = 8%

Rule to remember: Cap rate is NOI divided by value.

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4. Market value assumes a transaction in which the buyer and seller are:Valuation and Market Analysis. Open choices and explanation.
  1. A.Under pressure to complete the sale quickly
  2. B.Related parties settling a private family arrangement
  3. C.Using special seller financing below market rates
  4. D.Typically motivated, informed, and acting freely

Answer D: Typically motivated, informed, and acting freely

Market value describes a hypothetical arm's length sale: both parties informed, neither under duress, with the property exposed to the market for a reasonable time. Take away any of those and what you observe is a price, not market value.

Why each choice works or fails

  • A. Duress produces a distressed price rather than market value.
  • B. A family arrangement is not an arm's length sale.
  • C. Market value assumes cash or equivalent terms; special financing distorts price.
  • D. Correct. Informed, unpressured parties dealing at arm's length.

Rule to remember: Market value assumes an arm's-length sale between informed, typically motivated parties under no duress.

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5. A home with a badly outdated floor plan that buyers dislike suffers from:Valuation and Market Analysis. Open choices and explanation.
  1. A.Functional obsolescence within the property itself
  2. B.External obsolescence caused by nearby conditions
  3. C.Physical deterioration from ordinary wear and tear
  4. D.Curable physical deterioration from deferred maintenance

Answer A: Functional obsolescence within the property itself

Functional obsolescence is a loss in value from a defect in the design or utility of the building, such as a poor floor plan, a bedroom reached only through another bedroom, or too few bathrooms. Nothing is worn out or broken, which separates it from physical deterioration, and the cause is inside the property, which separates it from external obsolescence.

Why each choice works or fails

  • A. An outdated floor plan is a design defect inside the property.
  • B. External obsolescence comes from conditions outside the property lines.
  • C. Physical deterioration means wear, damage, or decay, not poor design.
  • D. Deferred maintenance is physical deterioration, not a layout problem.

Rule to remember: Functional obsolescence is a loss from poor design or layout inside the property.

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What does this assessment cover?

Appraisal purpose and process, value principles, sales comparison, cost and income approaches, CMA, BPO, AVM, and unauthorized appraisal practice.
Question coverage in this assessment
Official content areaPublished weightQuestions hereComplete lesson
Valuation and Market Analysis8% of the national portion5Study Valuation

The Georgia-specific distinction

A Georgia licensee may prepare brokerage pricing work within permitted practice, but must not present it as a licensed or certified appraisal when that credential and assignment are required.

Worked result example

For an owner-occupied house with several recent comparable sales, choose sales comparison. For a unique new structure, consider cost. For an income-producing investment, test whether income analysis best matches buyer behavior.

Common exam traps

  • Using reproduction cost when replacement cost is asked.
  • Capitalizing gross income instead of NOI.
  • Calling a CMA an appraisal.
  • Adjusting the subject instead of the comparable.

Ready to move on?

  1. Score the set before opening notes.
  2. Explain the winning rule without repeating the answer choice.
  3. Classify every miss as knowledge, distinction, wording, math setup, or timing.
  4. Repair the weakest official area, then answer a fresh set on another day.
  5. Move on only when the result is stable and guesses are being marked as gaps.

Recommended next lesson

Open the complete lesson hub. Use the result above to choose the first lesson or drill rather than following a generic order.

Assessment integrity

The questions are original and mapped to the current PSI outline. This preview introduces the assessment; the complete version is in Pass Georgia. PSI says practice exams help candidates become familiar with general question types, but they do not replace education and a good practice score does not guarantee an examination outcome. This page reports evidence, not a pass probability.

About this practice set

Facts checked against the current PSI Candidate Information Bulletin and GREC sources.

Are these actual PSI exam questions?

No. Every item is original, written from the current published outline and primary sources. No question is copied, recalled, reconstructed, or represented as a live PSI item.

Does this score predict whether I will pass?

No. One practice result is evidence about this question sample. Use the area breakdown, review guesses as well as misses, and confirm improvement with fresh questions on another day.

What should I do after the result?

Open the explanation for every miss and guess, restate the rule, use the linked repair lesson, then continue with the next lesson: Open the complete lesson hub.

Is the assessment free?

Yes. This 5-question preview has no email gate, account requirement, or card. The complete assessment, saved mastery, spaced review, and adaptive recommendations are in Pass Georgia.