Montana Property Valuation
Practice Questions & Answers (2026)
Property valuation questions on the Montana exam test the three approaches to value (sales comparison, cost, and income), how appraisals work, and what affects market value. The Montana Board of Realty Regulation tests when each approach is most appropriate, how adjustments are made in the sales comparison approach, and what factors an appraiser considers vs. ignores. Montana 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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Montana Property Valuation — Practice Questions & Answers
119 questions on Property Valuation from the Montana real estate question bank. First 10 are free — sign up to unlock all 119.
Q1. The sales comparison approach to value is MOST appropriate for appraising:
Explanation
The sales comparison approach is most commonly used for single-family homes because there are generally enough comparable sales to make meaningful value comparisons.
Q2. When performing a comparative market analysis (CMA), an agent adjusts comparable sale prices to account for differences from the subject property. If a comparable has a feature the subject lacks, the agent should:
Explanation
If a comparable has a superior feature that the subject lacks (e.g., a garage), you subtract value from the comparable's price to make it equivalent to the subject property.
Q3. Functional obsolescence in real estate refers to:
Explanation
Functional obsolescence is a loss in value caused by outdated or inadequate features of the property itself, such as an outdated floor plan, inadequate electrical service, or obsolete fixtures.
Q4. The principle of substitution states that:
Explanation
The principle of substitution is the foundation of the sales comparison approach: a rational buyer will not pay more for a property than the cost of obtaining a comparable alternative.
Q5. The income approach to value is most commonly used for:
Explanation
The income approach estimates value based on the income a property generates and is most applicable to rental properties, apartment complexes, and other income-producing real estate.
Q6. Gross rent multiplier (GRM) is calculated as:
Explanation
GRM = Sale Price ÷ Gross Rental Income. It is a quick valuation tool that compares a property's price to its gross rental income without accounting for expenses.
Q7. An appraiser is performing a cost approach analysis. The replacement cost of the improvements is $350,000, and total depreciation is $75,000. The land value is $80,000. What is the estimated property value?
Explanation
Cost Approach Value = (Replacement Cost − Depreciation) + Land Value = ($350,000 − $75,000) + $80,000 = $275,000 + $80,000 = $355,000.
Q8. External obsolescence differs from functional obsolescence because external obsolescence is caused by:
Explanation
External (economic) obsolescence results from factors outside the property — such as a nearby industrial facility, traffic changes, or neighborhood decline — and is generally incurable.
Q9. The capitalization rate (cap rate) is used in the income approach to value and is calculated as:
Explanation
Cap Rate = Net Operating Income (NOI) ÷ Property Value. It represents the expected rate of return on a real estate investment and is used to convert income into value.
Q10. When appraising a property using the sales comparison approach, an appraiser should use comparables that:
Explanation
Comparable sales should be as similar as possible to the subject property in terms of size, location, condition, and should be recent (generally within 6–12 months) to reflect current market conditions.
Q11. Highest and best use in appraisal is defined as the use that is:
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