Property Valuation
In the income approach, 'reserves for replacement' (replacement reserves) represent:
AFunds set aside for mortgage payments
BAn allowance for future replacement of short-lived components (roof, HVAC, appliances)✓ Correct
CVacancy and credit loss provisions
DProperty management fee estimates
Explanation
Reserves for replacement are an operating expense allowance for future replacement of building components that have shorter lives than the building (roof, HVAC, water heater, appliances). They ensure the NOI calculation reflects true economic operating costs.
Related Arkansas Property Valuation Questions
- Effective age differs from actual (chronological) age in that effective age:
- A cap rate of 5% versus a cap rate of 10% on the same NOI would indicate:
- Market value is defined as:
- A property's highest and best use is defined as the use that is:
- Which type of depreciation is caused by factors OUTSIDE the property, such as a nearby highway being constructed?
- The principle of REGRESSION states that:
- A property's Gross Rent Multiplier (GRM) is calculated by dividing the:
- An appraiser is required to be an 'independent, disinterested third party.' This means the appraiser:
Practice More Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →