Illinois Property Valuation
Practice Questions & Answers (2026)
Property valuation questions on the Illinois exam test the three approaches to value (sales comparison, cost, and income), how appraisals work, and what affects market value. The Illinois Department of Financial & Professional Regulation (IDFPR) tests when each approach is most appropriate, how adjustments are made in the sales comparison approach, and what factors an appraiser considers vs. ignores. Illinois 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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Illinois Property Valuation — Practice Questions & Answers
120 questions on Property Valuation from the Illinois real estate question bank. First 10 are free — sign up to unlock all 120.
Q1. A competitive market analysis (CMA) is typically prepared by a:
Explanation
A Competitive Market Analysis (CMA) is typically prepared by a real estate agent to help clients price a property for listing or make an offer. It is not a formal appraisal and is based on comparable sales data from the MLS.
Q2. Economic (external) obsolescence is best described as a loss in value due to:
Explanation
Economic (external) obsolescence is caused by factors outside the property, such as proximity to a noisy highway, industrial use nearby, declining neighborhood, or adverse economic conditions. It is generally incurable because the owner cannot control external factors.
Q3. Which of the following BEST describes the concept of 'highest and best use' in real estate?
Explanation
Highest and best use is the most probable use that is legally permissible, physically possible, financially feasible, and maximally productive. It represents the use that produces the greatest value and is a foundation of the appraisal process.
Q4. A property earns $48,000 in annual net operating income. An appraiser uses a 7.5% capitalization rate. What is the estimated value?
Explanation
Value = NOI ÷ Cap Rate. $48,000 ÷ 0.075 = $640,000. The income capitalization approach estimates the property's value at $640,000.
Q5. The sales comparison approach to value is MOST reliable when:
Explanation
The sales comparison approach is most reliable when there are multiple recent, arm's-length (market) sales of similar properties in the same area. It is the most common approach used for residential properties and requires good comparable sales data.
Q6. Which appraisal approach is most commonly used for special-purpose properties such as churches and schools?
Explanation
The cost approach is typically used for special-purpose properties (churches, schools, government buildings) because they rarely sell and generate no income. It estimates value by calculating the land value plus the depreciated cost to replace the improvements.
Q7. Functional obsolescence differs from physical deterioration in that functional obsolescence is caused by:
Explanation
Functional obsolescence is a loss in value due to outdated design, floor plan deficiencies, or lack of modern features (e.g., only one bathroom in a large home, inadequate electrical capacity). Physical deterioration is caused by wear, tear, and deferred maintenance.
Q8. If a comparable property sold for $310,000 and had an extra full bathroom that the subject property lacks, the appraiser would make what kind of adjustment?
Explanation
When a comparable has a feature that the subject lacks, the appraiser subtracts value from the comparable (making it less valuable on paper to match the subject). The adjustment is always made to the comparable, not the subject property.
Q9. A gross rent multiplier (GRM) of 120 is applied to a property with monthly rent of $2,500. What is the estimated value?
Explanation
Value = GRM × Monthly Rent. Value = 120 × $2,500 = $300,000. The GRM is a quick valuation tool that divides the property's value by its monthly (or annual) gross rent.
Q10. Which principle of value states that the value of a property is determined by what it would cost to acquire an equally desirable substitute property?
Explanation
The principle of substitution holds that the maximum value of a property is set by the cost of acquiring an equally desirable substitute. This principle underlies all three appraisal approaches: a buyer will not pay more for a property when a comparable one can be had for less.
Q11. Plottage (or assemblage) is a concept in real estate that refers to:
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