A capitalization rate decreasing over time in a market generally indicates:
Why Investor confidence is growing and property values are rising relative to income Is Correct
Answer B: Investor confidence is growing and property values are rising relative to income
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
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Related Alabama Questions
- In a declining market, a time adjustment to comparable sales would generally be:Property Valuation
- When market data indicates that comparable sales prices are increasing, a time adjustment to a sale from 6 months ago would be:Property Valuation
- Capitalization rate (cap rate) is calculated as:Property Valuation
- An appraiser using the income approach divides the net operating income by the capitalization rate to determine:Property Valuation
Key Terms to Know
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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