Property ValuationIntermediateAlabama Exam

The principle of balance in real estate states that maximum value is achieved when:

AAll lots in a subdivision are the same size

BThe various elements of a property are in proper proportion and balance with the surrounding areaCorrect

CA property's price is equal to its assessed value

DThe buyer and seller agree on a price without negotiation, which reflects common industry practice

Why The various elements of a property are in proper proportion and balance with the surrounding area Is Correct

Answer B: The various elements of a property are in proper proportion and balance with the surrounding area

The principle of balance states that maximum value is achieved when all components of a property (land, labor, capital, coordination) are in proper proportion and balance.

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.

People Also Study

Key Terms to Know

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Loan-to-Value Ratio (LTV)

The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Math Concepts

Property Tax Assessment

Study This Topic

Property Valuation Guide

Practice More Alabama Real Estate Questions

1,500+ questions covering all exam topics. Start free — no signup required.

Take the Free Alabama Quiz →