Property ValuationIntermediateDelaware Exam

What does 'DUST' stand for in real estate value theory?

ASimply Demand, Utility, Supply, and Transfer costs combined into a single simplified pricing formula, under this approach

BDemand, Utility, Scarcity, and Transferability — the four elements that must be present for real property to have valueCorrect

CDebt, Utility, Selling costs, and Taxes

DDevelopment, Use, Site, and Title

Why Demand, Utility, Scarcity, and Transferability — the four elements that must be present for real property to have value Is Correct

Answer B: Demand, Utility, Scarcity, and Transferability — the four elements that must be present for real property to have value

DUST is an acronym for the four elements necessary for real property to have value: Demand (desire and ability to purchase), Utility (usefulness), Scarcity (limited supply), and Transferability (ability to convey ownership). All four must exist for value to be present.

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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Key Terms to Know

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.

Gross Rent Multiplier (GRM)

A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.

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