Louisiana Property Valuation
Practice Questions & Answers (2026)
Property valuation questions on the Louisiana exam test the three approaches to value (sales comparison, cost, and income), how appraisals work, and what affects market value. The Louisiana Real Estate Commission (LREC) tests when each approach is most appropriate, how adjustments are made in the sales comparison approach, and what factors an appraiser considers vs. ignores. Louisiana 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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Louisiana Property Valuation — Practice Questions & Answers
123 questions on Property Valuation from the Louisiana real estate question bank. First 10 are free — sign up to unlock all 123.
Q1. A property's gross rent multiplier (GRM) is calculated by dividing:
Explanation
GRM = Sales price ÷ Gross monthly rent. It is a quick valuation tool for income properties, though it does not account for expenses.
Q2. In Louisiana, who is authorized to perform a formal real estate appraisal for a federally related transaction?
Explanation
Federal regulations require that federally related transactions use a state-certified or state-licensed appraiser. Real estate agents may perform a competitive market analysis (CMA) but not a formal appraisal.
Q3. The principle of 'contribution' in real estate valuation states that:
Explanation
The principle of contribution states that the value of any component of a property is equal to the amount it contributes to the total value of the property, not its cost.
Q4. What does 'highest and best use' mean in real estate appraisal?
Explanation
Highest and best use is the use that is legally permissible, physically possible, financially feasible, and maximally productive — producing the highest present value of the property.
Q5. Which appraisal approach estimates value by calculating the cost to rebuild the structure plus the land value, minus depreciation?
Explanation
The cost approach estimates property value as: land value + cost to rebuild the improvements – depreciation. It is most useful for new construction, special-use properties, and insurance purposes.
Q6. In the income capitalization approach, a property with a net operating income (NOI) of $36,000 and a capitalization rate of 8% has an estimated value of:
Explanation
Value = NOI ÷ Cap Rate = $36,000 ÷ 0.08 = $450,000.
Q7. What is 'economic obsolescence' as a form of depreciation in real estate appraisal?
Explanation
Economic (or external) obsolescence is a loss in value caused by factors outside the property, such as neighborhood decline, proximity to nuisances, or broader economic downturns. It is typically incurable.
Q8. What is 'functional obsolescence' in real estate appraisal?
Explanation
Functional obsolescence is a loss in value resulting from deficiencies in design, style, or layout — such as outdated floor plans, poor bedroom-to-bathroom ratios, or features that no longer appeal to buyers.
Q9. In the sales comparison approach, 'comparables' (comps) should be:
Explanation
Comparables (comps) in the sales comparison approach are recently sold properties that are similar to the subject property in key characteristics such as size, location, age, and condition.
Q10. A property is appraised at $280,000. The assessment ratio in the parish is 10%. What is the assessed value?
Explanation
Assessed value = Appraised (market) value × Assessment ratio = $280,000 × 0.10 = $28,000.
Q11. The 'principle of substitution' in real estate appraisal states that:
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