Arkansas Property Valuation
Practice Questions & Answers (2026)
Property valuation questions on the Arkansas exam test the three approaches to value (sales comparison, cost, and income), how appraisals work, and what affects market value. The Arkansas Real Estate Commission (AREC) tests when each approach is most appropriate, how adjustments are made in the sales comparison approach, and what factors an appraiser considers vs. ignores. Arkansas candidates often struggle with income approach calculations — particularly gross rent multiplier (GRM) and net operating income (NOI) — and with the cost approach depreciation calculations. These are high-difficulty math and concept questions where careful study of the explanations pays off significantly on exam day.
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Arkansas Property Valuation — Practice Questions & Answers
146 questions on Property Valuation from the Arkansas real estate question bank. First 10 are free — sign up to unlock all 146.
Q1. Which appraisal approach estimates value by analyzing recent sales of comparable properties?
Explanation
The sales comparison approach (also called the market data approach) estimates a property's value by comparing it to recently sold similar properties in the same market, making adjustments for differences.
Q2. The cost approach to value is MOST appropriate for appraising:
Explanation
The cost approach is most useful for special-purpose properties (churches, schools, government buildings) where there are few comparable sales, or for new construction. It estimates value as land value plus depreciated cost of improvements.
Q3. Depreciation in appraisal refers to:
Explanation
In appraisal, depreciation is any loss in value from any cause — physical deterioration, functional obsolescence, or external (economic) obsolescence. It is not the same as the tax depreciation deduction.
Q4. A comparable property sold for $250,000 but has a garage worth $10,000 that the subject property lacks. The adjusted value of the comparable for comparison to the subject is:
Explanation
When the comparable is superior to the subject (it has a garage the subject lacks), you subtract the adjustment from the comparable's sale price: $250,000 − $10,000 = $240,000.
Q5. The income approach to value is based on the principle that a property's value is related to:
Explanation
The income approach estimates value by capitalizing the property's net operating income (NOI), reflecting the idea that an investor would pay based on the income stream the property generates.
Q6. The principle of 'substitution' in real estate appraisal states that:
Explanation
The principle of substitution holds that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. This principle underpins all three appraisal approaches.
Q7. A property's Gross Rent Multiplier (GRM) is calculated by dividing the:
Explanation
GRM = Sale Price ÷ Gross Monthly Rent. It is a quick, simplified tool used to compare income-producing properties, though it does not account for expenses.
Q8. Which type of depreciation is caused by factors OUTSIDE the property, such as a nearby highway being constructed?
Explanation
Economic or external obsolescence is caused by factors outside the property itself — such as nearby industrial development, highway construction, or neighborhood decline. It is typically incurable because the property owner cannot control the external cause.
Q9. The sales comparison approach to value is most appropriate for:
Explanation
The sales comparison (market data) approach is best suited for residential properties where sufficient recent sales of similar homes exist. It compares the subject to adjusted comparable sales.
Q10. The income approach to value estimates property value based on:
Explanation
The income approach capitalizes the net operating income (NOI) to determine value. It is most appropriate for income-producing properties like apartment buildings and commercial real estate.
Q11. The cost approach to value is most reliable for:
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